Tyco International

Chris Corrado

Scope Supply Chain Conference

12 April 2010

A diverse portfolio of market-leading businesses in electronic security, fire, safety services and products, valves and controls, and other industrial products

2009 annual revenues of more than $17 billion

Present in more than 60 countries

Strong global businesses in attractive market

Strong balance sheet, cash flow generation and financial flexibility

Investing to grow our businesses

– Emerging markets

– Technology and innovation

About Tyco International

Tyco‟s Five Business Segments

World leader fire and life

safety

Fire Protection Services

Flow control products and heat-tracing

solutions

Flow Control

ADT Worldwide

World‟s largest security andalarm monitoring provider

Electrical andMetal Products

Galvanized steel tubes,armored wire & cable and more

Safety Products

Fire Suppression, Electronic Security and Life Safety ol

ADT WW

Fire

Protection

Safety

Products

Flow Control

Electrical &

Metal

Products

$7.0B

$3.4B$1.5B

$3.8B

$1.3B

Market-Leading Businesses in Growing, Global Industries

2009 Revenue = $17B

Industry Growth + Market Share = Growth Opportunities

Strong Positions in Large, Global and Fragmented Industries

Tyco 12%

GE

Honeywell

Siemens

UTC

Thousands of

Others

~75%

$32+B Market

Expected Market

Growth = 3-4%

$40+B Market

Expected Market

Growth = 4-5%

Thousands

of others

~85%

Tyco 5%

EmersonCameron

Flowserve

Global Fire

Industry

$72+B Market

Expected Market

Growth = 5-6%

Siemens

Tyco 11%

UTC

Thousands

of Others

~75%

Secom

Global Electronic

Security Industry

Global Industrial Valves

& Controls Industry

Source: Freedonia, McIlvaine, Industry and Management Estimates

Balanced Geographic Presence

>50% of our revenue is generated outside of the United States

Emerging markets represent ~ 15% of revenue and grew 20% organically in 2009

We operate in more than 60 countries and serve customers in over 100 countries

110,000 employees

Europe

29%

Asia

Pacific

15%

Other

Americas

8%

United States48%

Emerging Markets Provide Revenue and Earnings Diversification

…Have Achieved Market-Leading Positions

Global leader in security alarm monitoring

Global leader in fire suppression systems

U.S. leader in emergency breathing systems

Global leader in anti-theft systems

Global leader in fire alarms and services

Global leader in video and access control

Global leader in industrial valves and controls

U.S. leader in electrical conduit

A Global Market Leader in Most of Our Businesses

Our Business Segments

ADT Worldwide

Global provider of

residential and commercial

security systems

2009 revenue of $7.0B

67% Commercial,

33% Residential

52% recurring revenue

7.2 million customers

globally

Broad geographic reach

55% NA, 30% EMEA

ADT Has Locations and Monitoring Centers for Superior Security Service Worldwide

More than 20,000

Service

Technicians

40+ Monitoring

Centers

Worldwide

Countries with ADT coverage

Countries without ADT coverage

Fire Protection Services

2009 revenue of $3.4B; 46% service revenue

Market-leading industry position

Strong global presence

Diversified customer base

Broad offering of fire products and services

Fire Protection Services

Sprinkler

Electronic

Suppression

Fire alarms, mass notification,

hospital nurse call,

integrated systems

Sprinklers, engineered

solutions, special hazards,

water spray, foam,

gas systems

Fire extinguishers,

specialty systems

End Markets

Institutional Schools/Universities

Hospitals

Defense

Government buildings

Airports

Commercial Hotels

Retailer

Office buildings

Shopping centers

Financial institutions

Industrial Oil & gas

Manufacturing

Marine

Mining

Product Lines

Safety Products

2009 revenue of $1.5B

Market leading provider of Fire Suppression, Electronic Security, Life Safety Products

Strong market position with leading technologies

Attractive markets with good growth

Focus on emerging market growth

Safety Products

Electronic Security

Fire Suppression

Life Safety

Protecting people and

valuable assets from the

threat of fires

Securing homes and

businesses from

unauthorized intrusions

Protecting our

firefighters so they

can protect you

End Markets

Institutional Schools/Universities

Hospitals

Defense

Government buildings

Airports

Commercial Hotels

Retailer

Office buildings

Shopping centers

Financial institutions

Industrial Oil & gas

Manufacturing

Marine

Mining

Product Lines

Electrical & Metal Products

2009 revenue of $1.3B

Market leader in steel tubes and pipes, armored cable and electrical conduit products

Strong, well-known brands

Purchases and processes over one million tons of steel per year

Electrical & Metal Products

Steel Tubular &

Roll Formed

Products

Electrical

Infrastructure

Solutions

Metal Framing

Solutions

Customers

•Electrical Wholesale

Distribution

•Home Improvement

Retailers

•Wholesale

Distribution

•OEMs

•Metal Service Centers

•Wholesale

Distribution

•General Contractor

•OEMs

Business Lines

Tyco Flow Control

2009 revenue of $3.8B

Global leader in valves, controls and related products

Well-known market-leading brands

Geographic and end market diversity

End market diversity –serves a broad range of industries and customers

Tyco Flow Control

Process

Applications

Water

Applications

Energy

Applications

End Markets

•Distribution

•Storage

•Treatment

•Chemical/Pharma

•Food & Beverage

•Mining & Mineral

Processing

•Oil & Gas

•Power

•Generation

Product Lines

Tyco‟s Focus Areas

Technology and innovation

– R&D centers in emerging markets

– Flow Control engineering centers in India, China and Holland

Building service capabilities

– ADT service delivery transformation

– TSP – enhanced customer analytics

– SimplexGrinnell – building a services-led culture

– Flow Control – new service centers near our customers

Expanding in Emerging Markets

Revenue in Emerging Markets

– $2.6B in 2009

15% of Tyco revenue in 2009

Solid growth potential

Investing in products and people

Environment, Health & Safety

Joined Climate RESOLVE program in September 2007

– Set 25% reduction goal of our emissions of greenhouse gasses

– 50% of greenhouse gasses emitted through our fleet

– Introducing hybrid vehicles into the fleet in 2010

– Utilizing GPS to drive savings

• Improved routing

• Reduced idle time

Types of Globalization

Tyco is a global company with a presence in more than 60 countries throughout the world. We are made up of five segments whom all have varying needs from a globalization effort!

Our globalization models include:

–Establishing plants in low-cost countries and utilizing the local and regional supply base to support regional and global customers

–Cross-segment and segment IPO Offices in China and India

–Development of suppliers in LCCs…this includes large multi-national and regional players

–Development of assembly shops in LCCs to leverage labor & skills

–Utilization of top tier contract manufacturers

Global Sourcing

International Procurement Offices (IPOs)

(Offshore Sourcing Teams)

China, India, Eastern Europe, Latin America

Global Sourcing Products & Services

Leverage Global Cost & Capabilities

Products ComponentsIT Enabled

Services

Business

Process

Outsourcing

Make Buy

Decisions

High Level

Assemblies

Finished Goods

OEM Products

Own Plants or

Contract

Manufacturing

Buying

Components

For In-House

Assembly

Localize

Components In

LCC plants

Examples:Resource Plastics parts

From USA to China

Resource Metal parts from

India

IT Software

Development

ERP

Web Applications

Network

Management

Engineering

Services - CAD

Outsource Call

Center To India

Back Office Tasks

To India, Canada,

Philippines

AP/AR/Payroll

Accounting

Service - Help

Desks

Current Focus

OpEx Organization - Sourcing

Warehousing

Distribution

Packaging

Pro Services

e-enablement

Finance & Analysis

Portfolio Mgmt

Facilities

Indirect DirectReal Estate

Tyco Operational Excellence

IT Ops Strategy Logistics

Planning &

Mgmt

Business &

Prog. Mgmt

Corporate IT

Services

Fleet / Fuel

Facilities /

Energy

IT / Telecom /

Office Equip

Temp Labor

HR / Legal

Travel

Marketing /

Print

Office Supply /

MRO

Fleet / Fuel

Facilities /

Energy

HR / Legal

Travel

Electronics

Metals

Plastics

Chemicals

Fleet / Fuel

Facilities /

Energy

Globalization

Outsourcing

Strategic Sourcing / Supply Chain

Contract Mfg

Fleet / Fuel

Facilities /

Energy

Transportation

Trade

Compliance

Transaction

Mgmt

IT Leadership

Council

Strategic Sourcing Philosophy

Sustain the

Results7

Operationali

ze Supplier

Integration6

Negotiate

and Select

Suppliers5

Select

Implementati

on Path4

Generate

Supplier

Portfolio3

Select

Sourcing

Strategy2

Understand

internal spend

and external

market

Open supply

base and

identify all

viable suppliers

Create “go to

market”

approach

Decide most

appropriate

execution

strategy

Conduct

aggressive

negotiations

and select

suppliers

Operationalize

supplier

agreements

Monitor market

and supplier

performance

Profile the

Category1

7-Step Strategic Sourcing Process:

Common Approach Deployed Across Tyco

Focus on Tyco’s Spend

and the Market

Supplier Engagement

& Negotiations

Implementation

Selecting Regions Based on Core Competencies,

Total Cost, Quality, Delivery & Logistics

Mexico / Latin

America

Eastern

Europe

• Metal parts

• Cable Harnesses

• Assemblies

• Raw material

• Metal parts fabrication

• Castings

• ToolingIndia

• Molds & Dies, Molded Parts

• Metal parts / Machining

• Chemicals / Resins

• IT & ITES

• Textiles

• Castings & Forgings

• Electronic components

• Cables/Harnesses

• Stamping

• Molded parts / Tooling

• PCB / PCBA

• Textile

• Contract mfg. - Hi Volume

• Castings

Asia

China

Global Sourcing Regions & Commodities

28

Offshore Sourcing Teams - IPOs

Team

• Development of functional strength

• Focus on major commodities

• Supplier identification

• Global Sourcing only

Process/Tools

• Standardize Sourcing Process

• Standard tools / metrics

• Audit credibility

• Talent development

Supplier Strategy

• Execution

•Optimize supplier base

• Develop strategic alliances

• Consolidate sourcing teams

2004-05 2006-07 2008-09

Developing Leadership Talent and Core Competency

C

H

I

N

A

I

N

D

I

A

‘Pitching’

Leaders In

HCC

‘Catching’

Leaders In Each

LCC

‘Catching’

Commodity Teams

In LCC

•Commodity Expertise

•Price Negotiation

•Supplier Audits / Development

•Project Execution

•Part of Global category

teams

•%LCC by category

•% savings by category

•Delivery, Quality metrics

•Build LCC funnel / Business case

•Cross functional interface

•Ensure cross-functional

resource allocation

•% LCC Spend target

•Total LCC savings target

•Budgeting – Tooling, Switching

cost

•Manage phase out of pitching

suppliers

•Build Country funnel /

Business case

•Ensure supplier capability/

readiness

•Qualification /Phase in/

overlap

•% LCC Spend target

•Total LCC savings target

•Six Sigma / Transfer process

• Program EXECUTION

Common Across Segments Financial Analysis and Report, Logistics Support/management, Support IT,Admin.

Needs, Quality Systems/Support, Supplier Selection / Development, Negotiate

Contracts, Compliance, Six Sigma / Corrective Actions, Part of global category team,

E Auctions – Tools/Training, Supplier Score Card

Accountability & Goal Alignment

LCC Sourcing Organization Roles & Responsibilities

Segment Specific

Project execution

Global Business team

Interface

Drive Savings

Transformation To IPOs

Individual Tyco businesses “doing their own thing”... literally meeting in

supplier‟s lobbies.

Duplicating supplier management

Audit/selection/development

Adding business to suppliers with poor performance

Missing volume leverage

Conflicting priorities – confusing suppliers

Qualification processes , monitoring and management programs ranged from

none to near Best-in-Class.

Created shared service IPOs & Integrated

local teams - similar structure in all IPOs

Developing talent - Career path

Global Best in class processes used by all

IPOs - Developed with the Business

One face to suppliers – Annual Supplier

day

Global linkages - Visibility

Emerging Markets - Organic Growth

engines

IPO Structure

Regional Director

IPO

China / India / EE / LatAM

PM

Flow Control

EMEA & Asia

PM

Flow Control

NA & LA

PM

Safety Products

TEMP

PM

Thermal Control

RCM

Commodity Teams

Supplier Excellence

Quality Team

Logistics Team

Local sourcing Teams

supporting local manufacturing

China

Shanghai, Pudong, Shenzhen

India:

Chennai, Halol, Bangalore

Reporting/Analysis

Services

• Bring Synergy across product line

• Consolidation of Volume across

product line & across plants.

• Common Processes.

Centralized Functions with specific

expertise, Can be dedicated to BU based

on volumePM – Sourcing Transfer Program

Managers

RCM – Regional Commodity managers

Program Managers dedicated

and accountable to business

units

Funded by BU/Programs Local Sourcing Teams

Disbanded /Merged

Sourcing

Quality

Logistics

IPO Services

Transfer Project Management

– Supplier Selection RFP, RFQ, Pilot Run to Production

– Specification review and supplier technical communication

– Drawing review

Commodity Management

– Supplier Rationalization

– New Supplier Development

Supplier Performance

– Quality Systems Auditing (including financial background checks), part inspection etc

– Supplier OTD, quality tracking – expediting etc

– Logistics & planning

IPO Supporting A Global Business Unit

Commodities

Castings / Forgings

Metals / Fab. / Machining

Electronics –

Components, PCBAs

Tooling

Finished Goods /

Assemblies

Quality

Order Management & Logistics

Program Manager in

IPO supporting a

Particular BU

Global Business Unit

Transfer Teams

USA

EMEA

Asia

BU Functional Leaders

Engineering

Manufacturing

Sourcing

Global Suppliers

US/EU/Asia

Functional Leads In IPOs Global Programs / BU Global

Engineering

Support

Global

Quality

Shared Commodity Expertise – Dedicated Program Management

34

Logistics Team Helps Execution !

Ordering & Payment

Confirm, Shipment & Invoice

Providing In Region Support to all Tyco entities

- Weekly order status

- OTD Improvement

- Weekly Con-call

- Physical on-site Check

- Manage Freight Forwarder

- Custom/Tariff issues

- Shipment Consolidation

- Order follow up

- Supplier coaching

- Pre-production status review

- Supplier capacity /Planning

- On time delivery

- Payment Chasing

IPOs

Tyco Plants

Suppliers

Established Technology Centers To Accelerate Sourcing

Shanghai COE opened April „08

– 75 engineers with 100 planned

Bangalore COE opened Nov. ‟08

– All Tyco entities co-located

– Team of 45 now in place

– ADT and TSP working together to identify market opportunities

NPI, Value Engineering, Supplier changes, regulatory approvals and qualification

Accelerating Growth With Centers of Excellence (COE)

36

Core competency in

technology

Global Logistics

- On time delivery

- Warehousing

Cost competitive

Capacity

Financial strength

eSourcing

Six sigma

Lean

Superior Quality

Integrity

IP protection

Global safety &

regulatory compliance

( ISO, CE… )

Trade compliance

Comply with Local

regulations

Capabilities Processes Social Responsibility

World Class Supply Base

Tyco Supplier Expectations

Share & optimize resources – Leverage commodity expertise

and across divisions – Infrastructure COST

Common supplier base - Volume leverage – Product COST

Robust processes with global acceptance – Supplier selection,

audits, quality, transfer processes – Global Credibility

One face to the supplier – Load distribution – Become a key

customer to a fewer suppliers

Monitoring supplier performance – common score card

Leverage regional / co-located technology centers

NPI, Value Engineering, Supplier changes, regulatory

approvals and qualification

Talent development, Training – Create a „best in class‟ team

Global visibility – Career path – Retention

One TYCO team identifying, communicating and addressing

RISKs in the region

Overall Benefits

Initial resistance from business leaders

– „Control‟ and „Credit‟

Accountability - Focus / Priority

Local vs. Global needs – quality /

regulatory

Local supplier relationships – hard to

break

Cost sharing

Hiring & developing talent - Cost

Language

Lack of support : Execution/ speed –

Frustration / retention

Overcoming Challenges

Demonstrate Value / ROI – Credit to business

units

Dedicated program managers accountable &

reporting to the business units

Engage business units in talent selection &

performance reviews

Drive global standards & processes : Avoid

A team/ B team

Global supplier base : Opportunity to

existing suppliers to develop

Fair cost allocations

Hire the best : multi-national /Multi lingual –

Salary adjustments

Global ownership People/Projects – regular

program reviews with all key stakeholders

2007 2008 2009

Most spend to date is in Asia

Growing link with the market growth

Looking beyond China and India in Asia

Exploring E. Europe & Latin AM – in 09

Internal Resistance remains in pockets

EM $ Spend

Growth

$280M

$390M

$450M

Shifting Role - From Global Sourcing / Cost Reductions To Enabler of Regional Market Growth

Global Sourcing Growth

50

68

2007 2008

EM Sourcing

Headcount 81

2009

Shared Service IPO – Most HC in Asia

Adding HC in E. Eur. and Latin AM

Commodity Center of Excellence

Compliance Training

Complimented by Technology Team

India

China

Czech Rep

Mexico

Some of the projects………

40

…..Shipment of 20 Ton Casting

Supplier

Pick-up

Ground Transportation from

PARIS to ITALY

Logistics Support

• Selection/Negotiation with

Freight Forwarder and obtained

cost avoidance of nearly US$

200K

• Developed Packing

requirements

• Optimized the Routing

• Flawless Execution of project.

M/C

Supplier in

ITALY

OFF loading from Aircraft

at Destination Airport

and Custom Clearance

Pick up from

Casting SupplierCustom Clearance and

Loading at Delhi

Airport

Hire the best talent – Coach /mentor and link them to the global

team.

Communication

Leadership

Content

Do not compromise on suppliers - Need to pick technology &

growth partners

Financial readiness

Technology readiness

Execution excellence

Establish a disciplined internal operating mechanism

Shared commodity management – BU dedicated program management

Communication & share best practices

Key Takeaways

Demonstrate Value And Deliver Results

Thank You

Questions?