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 /
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?