LiveSource Presentation for NTMA 2013

NTMA Sourcing Fair Pre-Conference

2

MFG.com Qualifications and Experience

50K Buyers

250K Suppliers

MFG.com Fast Facts

Founded 2000

200 Employees

Bezos Expeditions/Fidelity

CNBC Small Business Council

Department of DefenseMarketplace

$116B Sourced

MFG.com (2013)

3

DoD Portal

4

Over 50,000 Sourcing Professionals use MFG.com

5

Roger Blumberg

Vice President, Global Business Development

Strategic Sourcing (15+ years)• IT• Chemical• Distribution• Retail

Enterprise Software Development & Consulting (10+ years)• General Electric• FreeMarkets• Ariba• A.T. Kearney• MFG.com/LiveSource

6

Considerations: Supply Chain Opportunities & Threats

• 68% of global executives responded in a recent McKinsey survey that supply chain risk will increase in the coming 5 years

• 43,546 business bankruptcy filings in 2009 compared to 28,322 in 2008, and 19,322 in 2007

• A recent survey from the Assessment of Excellence in Procurement stated that managing risk is at the top of Chief Executives “value” expectations for procurement

• Single sourced supply and lack of contingency planning for critical parts/components has resulted in lost production and company revenues Japan Tsunami – Paint shortage – Ford F-150 Lightning strikes mobile phone microchip plant – Phone Manufacturer loses $400M Fire at auto parts factory of key supplier forced auto maker to temporarily shut down

productions at its Japanese plants

7

Japan Tsunami

Sony, Panasonic, Toshiba, Canon, General Motors, Caterpillar, Boeing, Intel, Apple, Texas Instruments, Ford, Cisco, Hewlett-Packard, National Semi-conductor

8

Japan Chemical Plant Fire

Nippon Shokubai is one of the world's biggest makers of acrylic acid, the main ingredient of a resin called SAP, which is used in diapers

9

Thailand Floods

Toyota (reduced operating profit by $1.6 billion), Ford (lost production of 30,000 vehicles), Lenovo (shortage of hard disks), Canon and Sharp

10

Hurricane Katrina

Shell Oil Company, ExxonMobile, Valero Energy, ConocoPhillips, Citgo, Colonial Pipeline, Dow, Pinnacle Polymers, Hercules Inc, GE Plastics

11

Volcanic Ash Cloud

Airline Industry, Food Importers/Exporters, Nissan

12

Supplier Risk – Protecting Your Brand

• Peanut Corporation of America 9 deaths and 714 people contracted salmonella Plant did not have a valid state health certificate

• Sony Laptop Batteries Damaged users laptops and caused small fires Impacted Apple, Dell and 8 million batteries

• Unsafe work conditions & child labor Nike – Implemented SHAPE (Safety, Health, Attitude,

People and Environment) Apple – Foxconn factories – unsafe work conditions

13

Supply Chain Risk Categories

• Operational/Technological Machine Failure, component/material shortages, capacity constraints

• Social Strike, accidents, absenteeism, human error, union/labor relations

• Natural/Hazard Fire, wildfire, flood, monsoon, blizzard, ice storm, drought, heat wave,

tornado, hurricane, typhoon, earthquake, tsunami, epidemic

• Economy/Competition Interest rate fluctuation, exchange rate fluctuation, commodity price

fluctuation, bankruptcy, stock market collapse, global recession

• Legal/Political Law suites, new regulations, war, customs risk, political instability

14

Mapping your Risk?

Know your risks and develop your contingency planSource: IBM Global Business Services

15

How does Marketplace Sourcing Help?

• Readily available references and feedback from the buying community

• Better pricing – suppliers in a large marketplace know they need to be competitive

• Reduced research effort – find the right supplier with the right capability and capacity to handle your surge requirements

• Protect your brand – easily collect and maintain critical onboarding documentation such as certifications and classifications (socioeconomic)

• Speed to market – suppliers know they have a very short turnaround for pricing and delivery

16

Rapidly Find Suppliers Who Can Handle Your Requirements

17

Detailed Supplier Profiles Reduces Research Efforts

18

All Certifications are Validated Within the LiveSource Platform

19

Supplier References Readily Available

20

Intellectual Property is Protected

21

Quote Volume is Significant but Manageable

22

Ability to Easily Evaluate Quotes

Sourcing Fair Preparation

24

Preparing for a Sourcing Fair

Pace Yourself

• 345 minutes total Sourcing Fair time• 75 to 80 supplier attending (2:1 ratio)

• 4 minutes 6 seconds per supplier in order to speak with every supplier

• Be aware of the time you spend with an individual supplier. Don’t get drawn into an extended conversation• Utilize lunch as your opportunity to have extended conversations

25

26

Table Top Preparation

27

Establish a Check-List

Geography Certifications (Quality) Diversity Capacity Capability (machines, material, etc) References Company demographics

# of employees Years in businessIf possible, print out the check list and use it as a way to quickly grade the

suppliers and as a place to take notes

28

What is Your Story?

• I am looking for a new supplier for a new product (projected annual volumes)

• I am looking for a new supplier for an existing product line (what is wrong with the current supplier?)

• We are looking to further diversify our supply base (reduce supplier risk)

• We are looking at brining spend back to North America from China (how much?)

Any Others Suggestions ?

29

Survival Guide

• Give yourself 1 minute between suppliers to take notes on the checklist and catch your breath

• You don’t need to sell your opportunities, they need to sell their capabilities, let them do the talking and save your voice

• If someone is clearly not a fit, time is precious, move them along

• Be selective with the distribution of your business cards

• Hydrate and regular bathroom breaks

30

Develop a Code

31

Duckpin Bowling

Location Fountain Square Theater

1105 Prospect Street

Provided Food, Drinks and Duckpin Bowling provided

Networking Meet with buyers and manufacturers attending the NTMA Purchasing Fair

32

Thank You

Roger BlumbergVice PresidentMFG.comrblumberg@mfg.com

33

Robert YohoRegional Director

Conflict Minerals

34

Global Supply Base

35

The LiveSource Solution

• e-Sourcing RFI, RFQs and reverse auctions 150,000 certified and rated

manufacturing suppliers Over 500 industry standard templates Project management

• Supplier Management Supplier discovery, scorecards, document

management and intelligence Supply chain health and risk mitigation Conflict mineral management

Conflict Minerals

Title XV of the Dodd-Frank Wall Street Reform and Consumer Protection Act

“Section 1502 requires persons to disclose annually whether any conflict minerals that are necessary to the functionality or production of a product of the person, as defined in the provision, originated in the Democratic Republic of the Congo or an adjoining country and, if so, to provide a report describing, among other matters, the measures taken to exercise due diligence on the source and chain of custody of those minerals, which must include an independent private sector audit of the report that is certified by the person filing the report…”

36

Solving Conflict Minerals Gap The LiveSource Solution

37

• LiveSource Allows for the collection of your suppliers as well as their

suppliers’ documentation, verifying they are not sourcing from countries that are on the banned supply list

Notifies you and your supply chain organization when any signed or verified document or certification is due to expire, protecting against the use of non-compliant suppliers

Acts as your single supplier communication vehicle to easily communicate your company’s policies regarding Conflict Minerals with acknowledgement records by individual

Provides on-demand reports detailing which suppliers are and are not in compliance with your enforcement of the Conflict Minerals policy

Conflict Minerals Tracking Within LiveSource

38

39

Conflict Minerals Supplier Certifications

40

Discussion

How Kimberly-Clark bridges the gap between engineering and sourcing

42

Patrick Nahm

• Education B.S. Mechanical Engineering from Marquette U.

• K-C Experience Plant Engineer (Baby Care) Global Staff Engineer (Corporate) Plant Project Manager (Child Care) Plant Operations Team Leader (Adult Care) Procurement Consultant (Corporate)

Lead the World in Essentials for a Better Life

57,000 employees worldwide

$21.1 Billion in Net Sales in 2012

Well-known global brands HUGGIES® KLEENEX® SCOTT®

KOTEX® PULL-UPS® DEPEND®

#1 or #2 position in more than 80 countries

1.3 billion consumersuse our products daily

Our Businesses

Personal Care

Health Care

Consumer Tissue

K-C Professional

Our Brands

K-C’s World Class Manufacturing Program delivers bottom-line results through operations in more than 100 manufacturing facilities located in 38 countries worldwide

United States 27

Canada 1

Europe 20

Asia, S. Asia, MEA 24

Latin America

32

Other 8

Manufacturing Facilities

United StatesCanadaEuropeAsia, S. Asia, MEALatin AmericaOther

Source: K-C 2009 Annual Report

World Class Manufacturing Program

Machinery & Equipment Team

47

M&E Director

Parts Supply (30 people)• Provides spare parts to K-C

plants globally

Manufacturing (50 people)• Fabricate and assemble

machines to support global projects and development

Buyers (12 people)• Procurement of machinery,

equipment, and engineering

48

Opportunities/Challenges

• Need to supply the “best value” equipment anywhere in the world to support businesses Primarily used local suppliers Mix of simple and complex machining processes In House vs. Outsource challenges Intellectual Property concerns Hundreds of RFQ’s per year

49

Example – Converting Machine Module

50

Results

• Created a new Machinery & Equipment organization Link Manufacturing, Parts Supply, and Buyer teams Strong ties to engineering organization/project teams Global accountability for machinery purchases

• Utilized MFG.com supplier marketplace and technology Developed new suppliers Used LEAN to optimize and standardize processes Leverage supplier capability – “right part to right shop”

51

Part of the Journey

• We did NOT lose our core capability to manufacture machines

• Learned that suppliers will build per the spec • Communicated to our suppliers what we were

doing• Sourcing example – machine frames

52

Conclusion

• Challenge the status quo• Align objectives with engineers/project teams• Continue to challenge your current suppliers• Constantly test the global markets to

determine best value• Leverage technology when appropriate to

speed up the RFQ/Supplier management process

Purchasing and Supply Chain Management

“Global Purchasing in an Ever Changing World”

Procurement Strategies achieve:

Long-term objectives of the organization Provide geographic localization where applicable Review constraints and policies that restrict, or bog down

activities Action plans and goals expected to help achieve financial

objectives Transparent operational alignment

Define your Purchasing Strategy

Strategy Levels

Departmental Strategies

Functional Strategies

Business Unit Strategies

Strategies require horizontal

and vertical alignment!

Corporate Level Strategies

Resources

• Internet Searches www.transportlink.com www.thomasregister.com www.fabricating.com

• Applied internet global sourcing www.mfg.com• Prior Purchase Files/Assessments• Professional 3rd party sources• Professional industrial affiliations ASTM/SAE/SEMA/SME/MAPP• Discussions with end user, customers, net-

working, commodity leaders• Financial reviews

Portfolio Analysis

Strategic Leverage

Acquisition Multiple

Number of Capable Suppliers

Value toBuyer

Few Many

Low

High

• Insource or outsource?• Cost-vs. market-based approach• Type of suppliers?

High or low technology Full service Niche or distributor

• Local or global supplier?• Single, dual or multiple source?• Percentage of buy to each supplier?• Can the supplier help improve your organization?• What is the true value of the product?

Key Commodity Strategy Questions

Portfolio Analysis

Acquisition Phase Suppliers within a region Priority items Total dollars spent Amount of time and dollars to acquire Developed quality and technology Able to move easily between suppliers--low cost to switch Focus on removing effort and transactions Focus on Value Analysis (Cost Breakdown)

Value Purchasing

• Value in Purchasing

Strategic Leverage

Acquisition Multiple

Number of Capable Suppliers

Value toBuyer

Few Many

Low

High

Value Proposition

Does the supplier provide a strategic deployment plan that reflects a quality product at the lowest

landed price?

Does the supplier provide a strategic deployment plan that reflects a quality product at the lowest

landed price?

Portfolio Analysis

• Portfolio Analysis Quadrant Characteristics: Multiple Greater number of suppliers Low to medium annual dollars Able to move easily between suppliers--low

switching costs Developed quality and technology Focus on price analysis to gain benefit

Portfolio Analysis

• Portfolio Analysis Quadrant Characteristics: Leverage Greater number of suppliers Medium to high annual dollars Focused commodity families Combining contracts across units yields savings Developed quality and technology Able to move easily between suppliers Focus on cost and price analysis

Portfolio Analysis

• Strategy emphasis: Leverage Combine volumes for lower cost May use a longer-term agreement Use target costing Probe for efficiencies or improvements

Portfolio Analysis

• Portfolio Analysis Quadrant Characteristics: Strategic Few capable suppliers Items or services critical to success Unique or customized items Collaborative or interdependent relationships Unable to move between suppliers easily Practice reverse marketing Develop collaborative relationships Pursue annual cost/price/quality/cycle time improvement

goals Use of longer-term agreements

• What are past expenditures by commodity and by supplier?

• What are expenditures as percent of total?• What are the scores for each supplier related to

Q/D/C?• What is the technology roadmap for each

supplier?• What are current & future volume requirements? • Are there opportunities to leverage commodity

expenditures with similar commodities?

Are You Able to Answer the Following Questions?

• Long-term or short-term agreements?• Escape clause?• Degree of risk?• Bailment agreements related to tooling?• Electronic on-line or manual ordering?• Supplier development - degree of difficulty?• Use full-service provider?• Supplier’s ability to support design?• Supplier’s ability to provide cost down

improvement plans?

Key Product Strategy Questions

Translating Objectives into Purchasing Goals

CompanyObjectivesCompanyObjectives

PerformanceMeasurement

Review

PerformanceMeasurement

Review

ContinuousImprovementContinuous

Improvement

Purchasing & Supply Chain

Goals

Purchasing & Supply Chain

Goals

Cross-FunctionalBusiness

Objectives

Cross-FunctionalBusiness

Objectives

Purchasing &Supply Chain

Strategies

Purchasing &Supply Chain

Strategies

PerformanceMeasurement

System

PerformanceMeasurement

System

Purchasing and Supply Chain Management

What single piece of technology has changed the way we do business today?

Purchasing and Supply Chain Management

World Wide Web (Benefits)

Generates interaction globally! Creates a global community!

Facilitates communication!

Provides information!

What the WEB Says

Advantages– Availability of free information– Low cost of initial connection– The same protocol of communication can be used for several services – Facilitates rapid interactive communication– Facilitates the exchange of huge volumes of data– Facilitates professional contacts– Facilitates access to different sources of information– Facilitates management of companies information system– lt is accessible from anywhere– It has become the global media

What the WEB Says

Disadvantages– Danger of overload and excess information– Requires an efficient information search strategy– The search can be slow– It is difficult to filter and prioritize information– No guarantee of finding what your looking for– Misdirection– No regulation – No quality control over available data– Validity of findings

www.mfg.com

As you choose your supply base consider technology to assist in your efforts.

I. Provide bench-marking II. Deploy geographic boundariesIII. Set Non-disclosure boundariesIV. Provide price boundaries V. Tabulate your results VI. Expand your supplier intelligence

www.mfg.comI. Deploy geographic boundariesII. Set Non-disclosure boundariesIII. Provide price boundaries IV. Tabulate your results

RFQ # 688970

Quote Download Date 2013-04-22 10:08 RFQ Status Open

RFQ Information RFQ # 688970

Buyer Company Strong Solutions LLC RFQ Name Probe Tube, PressureBuyer Name John Strong Reference Number

Address 8906 Cobbler Lane RFQ Description Production of a Probe Tube, Pressure. Approximately 0.156 inch OD x 12.7 inch long.City Lafayette

Country United States of America Project

RFQ Creation Date 04/15/2013 10:28 Category FabricationRFQ Closing Date 04/29/2013 23:59 Question 1 RFQ Award Date 05/13/2013 23:59

Currency US Dollars Question 2

Shipping Terms DDP - Delivered Duty Paid / Supplier Pays

Payment Terms Net 45 days Question 3 Special Logistics

Item Information

Item Pos. # Item # Item Name Quantity 1 Quantity 2 Quantity 3 Estimated Annual Use (EAU) Unit

01 1366036086296 Probe Tube, Pressure 75 300 3600 3600 Pieces

www.mfg.com

Supplier Name

Liaocheng Golden Empire Group

Co.,Ltd

Yixin Precision Metal & Plastic

Ltd.

Shanxi Fuding International Trade Co.,Ltd.

Hecasa USA Corporation

Qingdao Huameier

Metalwork Products Co.,Ltd

青岛华美尔金属制品有限公司

Compare quote totals based on Quantity 1 Quantity 1 Quantity 1

Using the quoted prices for Quantity 1 Quantity 1

Quote Summary [US Dollars]

Item Total 730.80 20,880.00 1,800.00 5,112.00 4,500.00Tooling Total 0.00 0.00 0.00 0.00 0.00Engineering Total 0.00 0.00 0.00 0.00 0.00Material Total 0.00 0.00 0.00 0.00 0.00Miscellaneous Total 0.00 0.00 0.00 0.00 0.00Quote Sub-Total [US Dollars] 730.80 20,880.00 1,800.00 5,112.00 4,500.00Shipping Total 0.00 0.00 0.00 0.00 30.00Quote Total [US Dollars] 730.80 20,880.00 1,800.00 5,112.00 4,530.00

Quote Comparison [US Dollars]

Prices Based on

My Total Baseline Price for These Items 0.00 0.00 0.00 0.00 0.00Over/Under for This Quote (730.80) (20,880.00) (1,800.00) (5,112.00) (4,500.00)Average Over/Under for Competing Quotes (6,604.56) (6,604.56) (6,604.56) (6,604.56) (6,604.56)

My Total Target Price for These Items 0.00 0.00 0.00 0.00 0.00Over/Under for This Quote (730.80) (20,880.00) (1,800.00) (5,112.00) (4,500.00)Average Over/Under for Competing Quotes (6,604.56) (6,604.56) (6,604.56) (6,604.56) (6,604.56)

Price Rank vs. Competing Quotes 1 5 2 4 3

Item Details [US Dollars]

Prices Based on

Item # 1366036086296Item Name Probe Tube, PressureEstimated Annual Use (EAU) 3600 3600 3600 3600 3600Item Unit Pieces Pieces Pieces Pieces PiecesPrice Per Unit 0.203 5.80 0.50 1.42 1.25Tooling 0.00 0.00 0.00 0.00 0.00Rolled Up Price Per Unit 0.203 5.80 0.50 1.42 1.25Baseline Price 0.00 0.00 0.00 0.00 0.00

Over/Under (730.80) (20,880.00) (1,800.00) (5,112.00) (4,500.00)Target Price 72.00 72.00 72.00 72.00 72.00

Over/Under (658.80) (20,808.00) (1,728.00) (5,040.00) (4,428.00)Price Rank vs. Competing Quotes 1 5 2 4 3Item Total [US Dollars] 730.80 20,880.00 1,800.00 5,112.00 4,500.00

Unit Prices only (not including any one-time cost)

Estimated Annual Use (EAU)

Quantity 1

Unit Prices only (not including any one-time cost)

www.mfg.com

Tabulate your results

Delivery Date

Quantity 1 Unit

Unit Price Qty

1

Unit Price Qty

2

Unit Price Qty

3EAU Qty 1

CostEAU Qty 2

CostEAU Qty 3

Cost Suppliers Payment Terms

2013-06-27 75 Pieces 1.42 0.892 0.791 5,112.00 3,211.20 2,847.60 Net 45 days

2013-06-27 75 Pieces 0.50 0.24 0.12 1,800.00 864.00 432.00 Net 45 days

2013-06-27 75 Pieces 1.25 0.75 0.50 4,500.00 2,700.00 1,800.00 50% on placement of order and 50% on completion, after inspection and prior to shipping

2013-06-27 75 Pieces 5.80 2.80 1.50 20,880.00 10,080.00 5,400.00 To be negociated.

2013-06-27 75 Pieces 0.203 0.203 0.203 730.80 730.80 730.80 Net 45 days