bill stankiewicz schneider electric

Supply Chain & Logistics

From Downstream Logistics to Supply Chain

From operations excellence to customer intimacy

JM Fallet – SVP Supply Chain & Logistics

SC&L – JM Fallet - September 2007 2

Schneider ElectricA world leader in Power & Control

“Control and monitor

machines and installations,

protect people”

ElectricalDistribution

# 1 worldwide

“Make power

safe, available

and reliable”

Automation& Control

# 2 worldwide

Energy management“Ensure uninterrupted and high quality power,

optimise energy consumption”


Close to you with strong local operations

Sales and employees by geographical region

*workforce including permanent

and temporary employees

Source: 31/12/2006

Schneider Electric in figures

� €13.7 billionrevenue in 190 countries

� 105,000 employees*

� Local presence in

106 countries

� more than 200 factories

� 6,500 R&D people in

25 countries

31% of revenue in emerging countries

27%

26 000

North America

8%

7 500

Rest of the world

47%

48 500

Europe

18%

23 000

Asia-Pacific


Installation Systems and ControlJean-Pierre CHARDON

Global Human ResourcesKaren FERGUSON (2)

InternationalChristian WIEST (2)

new²Company programAlejandro SOLIS

QualitySerge GOLDENBERG

Strategy, Customers &TechnologyEric PILAUD (2)

Strategic resources and organizationJean-François PILLIARD(2)

Globalization & IndustryHal GRANT (2)

An international leading team

Customized SensorsChuck TREADWAY

AutomationMichel CROCHON (2)

Chairman of the Management Board & CEOJean-Pascal TRICOIRE (1),(2)

Chief Financial OfficerPierre BOUCHUT (1),(2)

Asia-PacificRussell STOCKER (2)

North AmericaDave PETRATIS (2)

PowerEric RONDOLAT (2)

EuropeJulio RODRIGUEZ (2)

Renewable energiesClaude GRAFF (2)

Building AutomationArne FRANK (2)

Services & ProjectsEric PILAUD (2)

(1) Management board

(2) Executive committee

Critical Power & Cooling servicesLaurent VERNEREY (2)

Business units

Operating divisions

Central functions


Industry

food & beverage, automobile, electronic, packaging, pharmaceuticals

productivity, flexibility,

safety, traceability

32% of sales

A unique offer in four markets

Energy & infrastructures

electrical networks,water treatment, airports, tunnels, telecom, data centres

availability, safety,

Cost effective

16% of sales

Buildings

offices, stores, factories, hotels, hospitals, museums, schools, universities

comfort, communication

safety, operating costs

37% of sales

Residential

single-family homes, apartment buildings

safety, comfort,

communication

15% of sales


A unique offerin the management of power and control

Power Control

Industrial

Automation and ControlLow & MediumVoltage

core and historical activities

integrated, communicating and smart products, equipment and systems

Services

new activitiesEnergy management

critical power and cooling services / energy efficiency

Building Automation

Installation systems Home control&


Partnering with & for our customersto serve end-users

Schneider Electric

End user

Wholesaler

installer

panelbuilder

electricianOEM

engineering firm

contractor

systems integrator

power utility

global strategicaccount

prime contractor project owner


MICHAEL DELLLots of work goes on behind the scenes to shape demand and supply,

and adjust to the optimal outcome. There have been disruptions.

We had the West Coast dock strike, which was a big one.

But it caused less of a disruption for us than for our competitors.

That's the opposite of what you'd think, but it's because of our flexibility,

reaction time, planning and anticipation.

The ability to fundamentally alter a lot of outcomes in a dynamic fashionbased on what is going on around us.

In December 2004 the MIT Supply Chain 2020 Industry Advisory Council visited Dell Computers. The Council discussed the future of supply

chains and talked with Michael Dell about his company’s supply chain-

driven success.

SC2020How has the Dell business model contributed to the company’s success?

What is Supply Chain ?Michael Dell definition


What was the situation of the Schneider Electric Supply Chain 3 years ago ?

� Countries independent and managing both Business and

Operations

� No visibility

� Local option & Micro-optimization

� Re-invent permanently the wheel

� No SC organization, only downstream Logistics in countries

� Poor competencies in planning and international transportation

� Silos between Front office, Logistics and Manufacturing

� Low performance

� Service Rate on lines below 93%

� Costs on Logistics 7% of P&L

� 93 days of inventory, no forecast accuracy in place

� Customer surveys pointing Logistics as a main weakness for SE


The first questions I’ve asked to my team

� How many customers have you met ?

� How many suppliers have you met ?

� How many KPI’s for SC&L ?

� What is the cost of transportation ?

� How many DC’s

� How many gates between Plant and

Customers

� How many sku’s

� 1 to 3…. We are process makers

� None… Purchasing responsibility

� 53…. We need to know

� Nobody knows…. Local vision

� Nobody knows…. Local vision

� 2 to 4…. Close to the market

� Nobody knows…. The marketing

decides


� To convert into solutions the customers expectations

� To make sure that the right resources are available all along the

supply chain from suppliers to end user customers delivering the

goods, services & information at the right time in the right location

� To execute operations with optimum level of quality relative to

costs and assets management

� To manage end to end flows of information

� To ensure that our actions fit into the criteria of Sustainable

Development while improving continuously our environmental

health and safety performances

� increase our competencies and develop the Continuous

improvement process with the contribution of all employees

Define a StrategyMissions : a Supply Chain for what ?


Complexity is increasing1st of Jan 2007 figures

� 20% growth a year

� 215 Plants (40 moves in 3 years to support the rebalancing plan)

� 135 DC’s (50 closed in 3 years and 35 new one linked to acquisition)

� 700 applications to run operations

� > 880 000 ref

� 115 Brands (70 brands 3 years ago)

� 16 000 suppliers (of which 856 carriers)

� 36 000 000 lines shipped

� 800 000 tons

� 2,8 Bn€ inventory

� 1,2 Bn€ Spent


� Increase & strengthen Customer satisfaction thanks to accurate

and proactive information to our customers : BOOSTER project

� Simplify & shorten the logistics network

� Organization of Logistic Territories

� Transportation network with end to end visibility : T² Project

� Standardization of execution processes

� Develop Supply Chain Planning & Inventory Control

Management: SLICE project

� Create demand/ supply planning process

� Integration of Product Life Cycle management

� Communication throughout the Supply Chain

StrategyMain orientations & Projects


Strategy Organization

APC-MGEJay GUIMOND

EODBernard PESSO

APODJames KEEGAN

NAODChuck GERARDI

I & I ODGérard JORGE� Strategy

� Design

�Operations

�Projects

Supply Chain ExecutionTransport - Warehousing

Logistics NetworkJean OBERLE

Human ResourcesZita PATONAI

Financial Controller

Hervé LE MAREC

BridgeChristophe GALLET

�Support

�Control

Supply Chain Planning

PlanningHervé GALON

Customer Relationship Management

Customer SatisfactionXavier GAUVAIN

G&IHal GRANT

Supply Chain DesignJean-François GROLLIER

Supply Chain & Logistics

Jean-Michel FALLET


SC&L Corporate and OD’s relationship

� Global strategy and Arbitrage

� Share vision & tactical approaches, Co-design the implementation

� Market intelligence

� Intercontinental Transport Plan

� SC&L Committee 3 times a year with SC&L OD’s VP & Central SC&L

� Networking and community reinforcement

� Main projects review & Transversal processes

� Functional WW People review / Competency development

� SC&L OD’s Business review 2 times a year

� Business Review : results, organization, priorities, action plans

� OD’s best practices

� Skill Network & Program Management

� Main global projects

� Standardization and simplification of processes

� Performance measurement : KPI & Commitments

� Execute missions & projects : do with them

� High level of expertise on specific missions

� Share and deploy best practices


CRM

SCE

SCP

MaterialManagement

Logistic Offer

DemandPlanning

Transport

Warehousing

OTDSOTDC2

LCS

DIN

Strategy KPI’s Projects Skill Networks

CoherencyGlobal vision from strategy to concrete actions

� Simplify and shorten the logistics network

Organization of Logistic Territories

Transportation network : E2E visibility

Standardization of processes

� Develop & deploy Supply Chain Planning

Create demand/supply Planning process

Integration of Product Life Cycle Mgt

Communication throughout the Supply Chain

� Increase & strengthen Customer satisfaction thanks to accurate and proactive information to our customers

T²

(SC

E)

BO

OS

TE

R (C

RM

)

SL

ICE

(S

CP

)


Supply Chain Reengineering Projects Management and KSF

� Be very ambitious

� Raise the bar : service rate from 93% to 97%

� Identify breakthrough opportunities : total redesign of transportation

� Recruit only the best

� Go outside and manage WW people review

� Manage competencies and knowledge as well & as fast the Cie

manage the growth

� Limit the number of priorities : 3 or 4 no more

� Very clear deliverables with limited number of common WW Kpi's

� A project has to be a first step for DNA new structure of the Cie

� Pilots to be launched very soon : test and fail as a best practice


Work on a solid foundationThe golden rules of SE Supply Chain Management

1. The Logistics Offer, part of the Commercial Offer, is the base of the Supply Chain design and performance2. Logistics offer and stocking policy are defined before the launch of the products, and should be revisited during

their lives3. Supply Chain design has to comply with the Logistics territories structure4. Simplify the logistics network and shorten lead-times. Any Supply Chain lengthening must be validated by SC&L5. Supply chain decisions must take into account the desired level of return on capital employed.

SUPPLY CHAIN DESIGN

FORECASTING & PLANNING

FULFILMENT

6. Countries' marketing own the forecast process. They enrich the statistical forecast with their knowledge of market,

customers and products

7. The forecast must be done in quantities to be understood and used by all the stakeholders

8. The Master Production Schedule (MPS) drives plants' ability to respond to demand, and is used to generate supplier forecast

9. Sales Marketing, Product Marketing, Operations and controllers must share formally and regularly assumptions, commitments and financial risks

10. The overall planning process Forecast, DRP, MPS, S&OP should run at least monthly. The outcome must be realistic and feasible

11. Each entity is committed to a service level on first and second delivery date

12. Each entity makes information available prior to the delay

13. A reliable second delivery date must be given before being late

14. Each customer order must go through an approval process before execution

15. Transportation optimizations are to be weighed against inventory and lead-time considerations


One Priority and its global main project Supply Chain Execution : The T² Project - Context

� Ambition

� Set-up best -in class transportation practice at Schneider Electric through a

global Transportation Transformation (T²) initiative

� Reduce energy consumption as well as CO² emission

� Objectives

� Improve significantly customer satisfaction

� Generate €40 million annual savings by end of 2008

� Stakes

� 3,1% of sales (400 M€ in 2005) without customs clearance fees

� An ambassador of =S= for our customers

� A vital link between =S= and our suppliers

� A key input of infrastructure strategy tomorrow (sourcing, plants, warehouses)

� An activity to put under control before any outsourcing decision can be made

� A key activity for best-in-class companies (e.g. Toyota, Walmart, Dell)


Our starting point 18 months ago

DimensionDimension Weaknesses observedWeaknesses observed Assesment of maturity levelAssesment of maturity level

StrategyI

1 2 3 4

OrganizationII

ProcessIII

KPIs & Performance

Management

IV

IT Systems & ToolsV

• Transportation cost-oriented and local approach derived

from strong leadership of purchasing and country

management

• Professional buyers in place

• Almost no transportation mode experts

• Operational role undervalued

• Too many Indians, not enough leaders

• Poor knowledge of supplier market and practices

• Little integration of customs operations

• Too few reviews of flows (competitive bidding,

optimization…)

• Very little consolidation of flows

• Objectives setting and target definition

• No working relationships with transport suppliers

• Service KPIs looked on a monthly basis

• No visibility on costs

• Poor carrier performance

• Many diverse IT systems

• No visibility tools


Transportation costs & service not under control

Schneider Electric transport flows synthesis [2005, M€]

With a total transportation costs of 400M€ (of which 104M€ are not tracked or managed)

External suppliers =S= factory =S= IDC / RDC =S= RDC / LDC Customers

=S= factory =S= LDC

Supplier flows = 85 M€(21%)

Internal flows = 127 M€(32%)

External flows = 187 M€(47%)

85 M€(21%)

74 M€(19%)

53 M€(13%)

127 M€(32%)

60M€(15%)

Road mode represents 73% of spent& 93% of volumes

Air mode for 19% spent & 2% volumes

Sea mode for 8% spent & 5% volumes

And…

Domestic flows represent 62% of spent

Intercontinental flows for 21%

Continental flows for 17%

9 Logistics Territories cover 87% of transportation expenditures

Of which France covers 31%

And US cover 30%


Priorities and main projects Supply Chain Execution : The T² project - Main Deliverables

� Organization

� Federate Schneider Electric transportation community

� Standardize transportation organization

� Staff each logistics territory with dedicated transportation

management and transportation procurement dedicated resources

� Set-up a centralized and dedicated team of project managers and

buyers to manage all air and sea & express flows at group level

� Project Management

� 3-year roadmap (2006-2008) with key tactics, actions planned, roll-

out by geography to manage transportation productivity

� Design under access of a program management tool to manage

more than 150 transportation projects

� Control 100% of transportation invoices through a freight payment

outsourcing project covering 80% of transportation expenditures

� Optimization of EOD road flows (€130 million scope)


454,3

399,7

493,714,0 4,6 12,38,8 13,780,4

27,6

53 M€ annual productivity by EOY 2008...

12% 31% 22% 35%

Transport

cost 2005

% of total productivity earnings

% of total productivity earnings

Volume

effect

Extrapolated

baseline

Local

initiatives

Flow

optimization

Intercon-

tinental

Invoice

control

Impact of

productivity

in spend

Source: Data collection, June 2006 ; OD estimation savings ; Roland Berger analysis

Price effect

Productivity earnings by lever [2005-2008; M€]

Purchasing

Productivity

+6,3% per year

+2,1% per year

Annual Saving 39,4 M€

- - - - -

T2 projects (included purchasing contribution) : reported

in detail in program management

Pure purchasing actions : consolidated

in program

management PROGRAM MANAGEMENT PERIMETER


80% of costs are invoiced by 9% of suppliers

Source: Data collection, June 2006 ; OD estimation savings ; Roland Berger analysis

Transportation suppliers Pareto

Transport

Costs %

8560%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 100 200 300 400 500 600 700 800

80%

77

# Active

Suppliers


How to distribute responsibilities and leverage each available expertise?

� Air and Sea carriers

� Trucking companies

� Fleet Management

� Freight forwarders

� Freight audit and payers'

� Consolidators

� Control Towers

� …


Built internally a “plug & play” 4PL capability

COST VISIBILITY

Freight Audit & Payment

SERVICE VISIBILITY

Global Trade Management Road Tower Control

• Transportation track events• Customs (SKU, order, shipment)• Use of consolidators• Direct negotiations with sea/air carriers

• Route optimizer• GPS localization• Track & Trace• Driving hours and ton.kms

Air & Sea Road


Benefits of a freight audit & payment system

Budget Budget

Transport/ Transport/

salessales

Transport / Transport /

purchasepurchase

Inter sitesInter sites

Freight Freight

payment payment

costcost

Double invoiceDouble invoice

Mistake tariffs & conditionsMistake tariffs & conditions

Non justified shipmentsNon justified shipments

Rate / Ship Rate / Ship

auditaudit

Cost Cost

managementmanagement

--3 3 àà 6%6%

Scan + PODScan + POD

Audit + managementAudit + management

Payment & reportingPayment & reporting+0,5 +0,5 àà 0,7 %0,7 %

SITE & INTRA SITE & INTRA -- DIVISIONSDIVISIONS

Consolidation / GroupConsolidation / Group

Benchmark / TenderBenchmark / Tender

Transport methodologyTransport methodology--2 2 àà 3%3%

Immediate

(3 months)

-- 7 7 àà 12%12%

Cost Cost

managementmanagement

GROUP & INTER GROUP & INTER -- DIVISIONSDIVISIONS

Consolidation / GroupConsolidation / Group

Benchmark / TenderBenchmark / Tender

Transport methodologyTransport methodology--2 2 àà 3%3%

Operations Operations

costscosts--0,5 et 0,7%0,5 et 0,7%

Reallocation of internal resources Reallocation of internal resources

(cost allocation, shipment registration, (cost allocation, shipment registration,

custom & transport invoicing, control) custom & transport invoicing, control)

Price Price

evolutionevolution+1 +1 àà 5%5%

12- 24 months

In place in the US, Starting in France ans Spain, next step Australia


Transportation major cost drivers (1/2)

TRADE AGREEMENTS OIL PRICE POST-PANAMAX

LACK OF GLOBAL VISIBILITY SOCIAL & DEMOGRAPHICS GLOBAL WARMING


Transportation major cost drivers (2/2)

LEAD TIME VARIABILITY SUPPLY CHAIN SECURITYCONGESTION

PACKAGING PAPER WASTELACK OF SYNCHRONIZATION


In short : 3 KKey SSuccess FFactors

� Processes

� Run the supply chain with processes that are clear, well defined and targeted

with Few but global KPI’s

� Focus

� Focus the whole supply Chain on :

– Customers

– Speed

– Profit

� Networking

� Coordinate the SC together with the whole Cie, through clear leadership

� Develop our people : be an emerger

� Benchmark, exchange, enrich permanently your knowledge


TransparencyTime

Trust

Conclusion

� SC is transversal,

addressing global end to

end processes

� SC is focused on customer

satisfaction and asset

management

� SC is strengthening its

professionalism

� SC is becoming a Bridge

between Sales and

Manufacturing

Teamwork

How to transform our Supply Chain and achieve

our Customer satisfaction goals ? … the 4T’s

� From local single initiatives to processes

� From Experts in silos to Professionals in Network

We believe the supply chain must become more than

a series of cost centers, transactions and negotiations

it can and must be and engine for growth itself

A.G. Lafley, Chairman, President and CEO,

Proctor & Gamble


My job

� If you ask me what I’m doing……….

� I will answer : proselytism

� 50% of my time to explain why and how

to change


Supply ChainReplacing inventory

with information

for customer satisfaction

http://logistics.schneider-electric.com

Jean-Michel Fallet

+33608558447+33608558447


Q & A

bill stankiewicz schneider electric

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