Yves Kerstens, Vice President Logistics & Supply Chain Management

Supply-Chain Council European Conference, 11 October 2007

Bridgestone Corporation

Head Office: Tokyo, Japan

Bridgestone America Holding

Regional HQ in Nashville, USA

Bridgestone Europe NV/SA

Regional HQ in Brussels

4 technical centres Tokyo, Japan (2), Rome, Italy & Akron, USA

57 tyre factories worldwide

98 plants for other products

Sales network in more than 150 nations and territories around the world

2006 Key Data:

Employees, worldwide 123,000

Consolidated subs 440 companies

Financial results 25,1 billion US$

Net earnings 714 million US$

Global Organisation Bridgestone

Tyres

(80 % of our total activity) Passenger cars and recreational

vehicles Trucks and buses, heavy and light Commercial vans Agriculture Off-the-road vehicles Motorcycles and scooters Aircraft Subways and monorails Racing, go-karts, motorcycles and

scooters

Activities and Products

Tyre Market Sales - Evolution 1986 – 2005

13 46514 800

16 750

18 333

13 751

6 000

16 150

17 888 17 920

12 300

6 800

13 600

15 150

17 500

6 100

4 796

1 700

5 6006 350

2 6932 000

3 2554 043 4 513

2 717

2 200

2 922 3 1503 616

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

86 88 90 92 94 96 98 99 01 02 03 04 05 06

Bridgestone Michelin Goodyear Continental Pirelli Sumitomo

Millions of US dollars - Source: Tire Business, August 28, 2006

Passenger Car Tyres: Original Equipment Market

Bridgestone basically supplies tyres to all mass market manufacturers in

the world 11,60511,691

13,12913,518 15,249 15,332

15,23815,759 16,687

16,806 17,231

12.9% 13.5%15.0%

15.4%

20.0%19.6%19.3%18.3%18.2%18.2%17.9%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2001 2002 2003 2004 2005 2006 2007 Est 2008 LTP 2009 LTP 2010 LTP 2011 LTP

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Bridgestone evolution in the European OE market

Passenger Car Tyres: Replacement Market

For the replacement market, Bridgestone Europe produces tyres for small city cars up to exclusive super cars. Tyres are sold through retail channels such as: tyre dealers,

auto centres, gas stations, hyper markets and car dealers.

Bridgestone Europe has a market share of around 13% in Europe with a target to reach 15% by 2008.

Bridgestone Europe sells mainly following brands: Bridgestone, Firestone and Dayton, following the multibrand strategy: good-better-best.

A Network structure in line with market requirements, competitors and new European environment

European Borders are fading, supporting cross border business flows

Central control of Finished Goods inventory to improve customer service

Provide a consistent 24 hours service to almost 95 % of the customers in Europe

Implementation of Pan-European strategies in the area of warehousing and distribution resulting in a lower cost base

Consistent measurement of our integrated performance to be able to benchmark and define improvements

A European LSCM organization with people acting on a central, regional and local base

Business plan objectives Customer Service improvements Reduction of Cost To Serve (-10 %) Functional Excellence and

Organisational Synergies Reduced Asset Base and Working

Capital

Minimise costs

Gain Competitive Advantage

ProducesIntegrates supply chain & delivers

Sells & defines

customer needs

Economies of Scale

Differentiation Customer

Focus

Customer Service

Cost to serve

MANUFACTURING

PLANTS

SALES

CUSTOMERS

BSEU LSCM

PLANT

WHS

DISTRIBUTION

WHS

The Supply Chain Management Policy

Our Supply Chain Vision The supply chain division writes the music, directs the

orchestra, but has some musicians being employed by third parties

One of the major drivers: the increasing affordable accessibility of information and communication technology (ICT) that enables the execution of the supply chain

Bridgestone

The How ?

Working Smarter: Process optimalisation Operational excellence Continuous Improvements Standardization

Working Cheaper: Cost optimalisation Creation of Center of Excellences Outsourcing to create synergies Virtual organization

Working Bigger: Scale optimalisation Organic growth Shared operations

Drivers for outsourcing operations and business processes Create visibility and control over service levels and costs Support a flexible network structure to adapt changes in the markets -Variable cost

base Cost reduction via more efficient operations (use 3PL experience/buying power) Lack of local experience Focus on core activities Standardization

Outsourcing components Transport (FTL) Distribution (Milk runs) Warehousing operations Real estate Warehouse & Transportation Systems Planning – Control tower (Track & trace) Invoice control Contract management Inventory management

The How?

Strategy is to outsource operations but keep limited number in-sourced to keep operational experience and internal benchmarking possibilities

Context

Carriers consolidation in Europe (2004-2007)

Central negotiations and standard contracts in place

Ownership of all transportation contracts shifted to BSEU

Compliance follow-up needed (Maverick spend)

Organisation of invoice verification, booking and payment needed to be improved and aligned

Solution

Outsource this process to a third party with automatic control of pricing and posting of invoices into ERP

Avoid invoice duplication Reduce overbilling (2-3%) 100 % Rate check 100 % Execution check Correct accrual setting

Outsource because of Dedicated and experienced team LSCM Focus on service Timely & Accurate reporting Quality / Control / Audit Cost Reductions Visibility improved management

capabilities

Outsourcing of Freight Invoice verification

Business issues

ISSUES BENEFITS OF CENTRALISATION

Difficult to control freight costs and accruals, since automatic accruals have to be made on a line item basis

Based on agreed rates a pre-invoice is checked by the carrier and accruals are automatically uploaded in SAP

Concern that SAP posting are being made by many different people around Europe who have open access to central accounting

Limit access to central accounting as key job is outsourced, which will reduce control risksUpload invoice data electronically

Reluctance by some local operations to perform this duty, therefore we cannot guarantee that invoices are processed on an ‘accurate and timely’ basis

BSEU will pass responsibility to an independent 3rd party & free up local resources

How to control if transporters are over billing ? (we check only a % of invoices)

Potential cost savings for LSCM from stopping over billing via 100% checking and economies of scale / systems use to reduce working hours involved

Time consuming to book numerous freight invoices into SAP (+- 10.000/year)

Potentially save money from economies of scale & systems. Permit staff to focus on their ‘core’ jobs

Waste time when vendors call concerning unpaid invoices

Outsourced & centralised in 1 location where all info is available for quicker response + pro-active control of invoices as they are received

Partner selectionA B C D

Implementation process ++ +++ +++ -

Service Offered Pre-billingInvoice

MatchingInvoice

MatchingInvoice

Matching

IT Innovation +++ ++ + ?

Confidentiality +++ --- +++ +++

Maturity (Experience on the market) ++ +++ + +

Flexibility +++ ++ + -

Communication Flow +++ ++ ++ -

Business knowledge (BSEU requirements)

++ + + -

Main Business (yes=***/ no=*) Yes No No No

Audit Process (Criterias audited) +++ +++ +++ -

Issue resolution Flow +++ ++ ++ -

Continuous Improvements (proactive collaboration)

+++ ++ +++ ?

Location NL / Ukraine NL / Czech India /Europe Europe

Pricing structureTo be

negotiatedPer activity

Headcount based

Per activity

OK

ETOF

Order details

Pre - calculation& account coding

ISD

Match

Execution

Consolidationof orders

Issueresolution

ISDR

ReportingFinal

Invoice

StatementWhat 3 PL

Should invoice

Pre- invoice

Payment

No

Yes

Approved finalinvoice with

coding details

3 PL 3 PL

FSE

(1)

(1)

(2)

(2)

(3)

(4)

(5)

(6)

Integrated process of planning, execution, audit and settlement

(2)

(7)

ControlPay Process overview

Bridgestone Finance

Bridgestone LSCM

Expected Benefits Operational benefits

Central rate database management : Carriers cannot be used without approved rates 100%  invoice line check including special costs like waiting times, gas oil surcharge,… Communication platform with carriers (replacing phone, fax,…) One Point of contact for our European suppliers with full traceability of issue resolution Visibility and Increased compliance Dedicated and experienced team Timely & correct accruals for month end closing

Compliance Sarbanes-Oxley (SOX) Compliance : Segregation of duties VAT will be invoiced as per agreed VAT rules as opposed to being accepted as billed by

carriers Costs Reductions

Elimination of over billing errors (double invoices, 100% rate check, execution check) Administrative tasks no longer required (no extra resources required for growth in

business) Visibility and reporting

Single location providing visibility to all parties (Carriers, BSEU, Claims, …) Improved cost allocation capabilities Share operational status visibility through Transportation Cycle

  Estimate (*):

AreaConservativ

eRealistic

Optimistic

Over billing reduction €1431,850 €1879,510 €2419,750

Headcount Finance

Headcount LSCM

€307,665

€225,000

€356,625

€270,000

€405,000

€360,000

Carrier Selection Compliance €876,000 €1035,500 €1095,000

Total €2,840,515€3,641,6

35€4,279,7

50

Project is self funding after implementation cost

Initial Business Case

(*) Adapted figures

April May June July Aug Sept Oct Nov Dec JanPre

para

tion

Wave 1

Wave 2

Roll out solution to all other sites

Implementation in 3 Pilot Sites•ELC North: Zeebrugge•MDC: Poznan•RDC: France

Site Go live

Prepare Implementation

• Collect Master Data• Develop interfaces• Setup new processes• Carrier Communication

Initial Implementation Planning – 2 sessions

Findings after 1 year operations (1) Full Truck Load business is 100% operational and process is

stable For “secondary business (17 countries) ” situation is

diversified Some markets are 100% operational Still some countries are not live

• Carriers refusing to participate• Facing technical issues with some carriers

Some countries we encountered serious problems• We ended up in paying invoices twice• We had to make pre-payments to carriers• Local people initially opposed, because they lost part of their

power

Learning curve takes time (Table to be updated with YTD figures)

Findings after 1 year of operations (2) Involvement of multiple stakeholders requires strong project

management Carriers Central SCM & Local SCM Finance Invoice verification company

The local organisation needs to be prepared well Clear rules need to be established upfront and communicated Training upfront and afterwards is key The local people are not finance people Realise and foresee at startup, this is not first priority for the people

involved Exception handling is under estimated ( returns, extra costs, …)

Findings after 1 year of operations (3) The process and system prove to be very effective

systematic and full control on the invoices full visibility on the accruals for freight

After having the process effective, our current priority is to become even further efficient by becoming

more pro-active follow the progress via KPI:

Current focus areas Reviewing all new contracts from carriers by the Central Contract

Team Reviewing weekly the status by country and carrier (tracking

report ). Challenging all issues more than 5 days and ensuring that all

issues more than 25 days are closed (CP system used to monitor the issues).

Findings after 1 year of operations (4)

Business case realisation Over billing reduction is clearly achieved but difficult to

measure Headcount Finance is realised, but does not result

in headcount reduction Headcount LSCM is not realized. More focus is still required. Carrier Selection Compliance : 100% Data and accrual accuracy has improved significantly

Would we do it again ?

YES, but lessons learned :

You never communicate enough both external and internal

Thank you for your attention