Creating Supply Chain Value P H I L I P M O R R I S U S A Craig E. Stariha, Director, Direct Materials Procurement, Philip Morris USA Global Supply Chain Management Conference, Krannert School of Management, Purdue University February 17 th , 2006
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Creating Supply Chain Value
P H I L I P M O R R I S U S A
Craig E. Stariha, Director, Direct Materials Procurement, Philip Morris USAGlobal Supply Chain Management Conference, Krannert School of Management, Purdue University
February 17th, 2006
PM USADocument Owner: Director, Direct Materials Purchasing February 17, 2006Slide 2
PM USA Mission
Our Goal Is To Be the Most Responsible, Effective and Respected Developer, Manufacturer and Marketer of Consumer Products, Especially Products Intended For Adults.
Our Core Business Is Manufacturing and Marketing the Best Quality Tobacco Products to Adults Who Use Them.
PM USADocument Owner: Director, Direct Materials Purchasing February 17, 2006Slide 3
PM USA Core Strategies
PM USAMISSION
Exceed Consumer Expectations
Align with Society
Create Long-Term
ValueWe will continue to develop our
people and design our business systems to add value and create
sustainable growth.
We will continue to develop new, creative approaches and products for our adult consumers
that provide smoking pleasure, reduced exposure/risk, and improved quality.
We will continue to be an active participant in resolving societal concerns that are relevant to our business.
PM USADocument Owner: Director, Direct Materials Purchasing February 17, 2006Slide 4
PM USA Procurement
Role: To Procure Materials, Goods and Services That Meet Business Requirements and Customer Expectations At the Best Possible Cost
Purchase Approximately $2 Billion Annually In Materials, Goods and Services (Excluding Leaf)
Support Two Manufacturing Facilities (Richmond, VA; Cabarrus, NC)
PM USADocument Owner: Director, Direct Materials Purchasing February 17, 2006Slide 5
PM USA Global Network
Duty Free &US Military
Richmond, Virginia &Cabarrus, NC
Manufacturing Facilities
JapanAsia
Central EuropeMiddle East & Africa
More Than 280 Materials Procured: Components, Packaging and Flavors & Ingredients
PM USADocument Owner: Director, Direct Materials Purchasing February 17, 2006Slide 6
PM USA Supply Network Is A Critical Driver of Shareholder Value and Competitive Differentiation
Supply Chain Optimization and Efficiency Initiatives Are Closely Tied to PM USA Core Business Strategies (i.e., Creating Long Term Value, Exceeding Customer Expectations)
Continuous Improvement and Innovation in Supply Chain Operations Is A Critical Objective for PM USA
Creating Supply Chain Value
PM USADocument Owner: Director, Direct Materials Purchasing February 17, 2006Slide 7
What Is A Value Chain?
Source: Supply Chain Council, Supply Chain Reference Model (SCOR)
An Interconnected Network of Organizations, Resources and Knowledge Streams Involved In the Creation and Delivery of Value to End Consumers
PM USA
PM USADocument Owner: Director, Direct Materials Purchasing February 17, 2006Slide 8
Creating Value @ PM USA
Accelerate Innovation
Improve Product Quality
Ensure Continuity of Supply
Improve Manufacturing Efficiency
Improve Cost Efficiency
Leverage Technology
Ensure Quality & Regulatory Compliance
CreatingSupply Chain
Value
PM USADocument Owner: Director, Direct Materials Purchasing February 17, 2006Slide 9
Accelerate Innovation Collaborate Closely With Customers, Suppliers and
Service Providers to Identify Opportunities Integrate Suppliers Into New Product Development
to Accelerate Time-To-Market Benchmark, Refine and Institutionalize “Best-In-
Class” Practices Across Supply Chain Operations Utilize Procurement Strategy Council (PSC) and
Other Resources to Identify Best-In-Class Practices
Creating Value @ PM USA
PM USADocument Owner: Director, Direct Materials Purchasing February 17, 2006Slide 10
Leverage Technology Advanced Supplier Relationships and Technologies
Including Web-enabled and E-Market Capable Systems
Single, Consistent Set of Information Visible Across the Entire Supply Network
End-to-End Visibility Through Real-Time, Event-Driven Processing and RFID
Creating Value @ PM USA
PM USADocument Owner: Director, Direct Materials Purchasing February 17, 2006Slide 11
Creating Value @ PM USA
Improve Product Quality Premium Quality for Premium Products Benchmarking “Best-in-Class” Quality and Consistency = Higher Manufacturing
Utilization
PM USADocument Owner: Director, Direct Materials Purchasing February 17, 2006Slide 12
Creating Value @ PM USA
Ensure Continuity of Supply Ongoing Assessment of Risk of Supply Chain
Disruptions Across PM USA Supply Network Real-time Monitoring of Supply Chain Intelligence to
Support Risk Assessment and Contingency Planning Supplier Business PerformanceRaw Material, Direct Material, Service Market ConditionsGeopolitical & Environmental Threats
Higher Level of Communications with Stakeholders Ensuring Early Identification of Potential Supply Chain Risks and Opportunities
PM USADocument Owner: Director, Direct Materials Purchasing February 17, 2006Slide 13
Creating Value @ PM USA
Improve Manufacturing & Cost Efficiency Shorter, Flexible Production Cycles Demand-Driven Planning Optimize Material Specifications Cost Efficiencies: Inventory Holding Costs, Change
Order Costs, Manufacturing Waste
PM USADocument Owner: Director, Direct Materials Purchasing February 17, 2006Slide 14
Creating Value @ PMUSA
Ensure Quality & Regulatory Compliance PM USA Quality System Fiscal Compliance & Responsibility Sarbanes Oxley Antitrust LawMaster Settlement Agreement (MSA)
P H I L I P M O R R I S U S A
Thank You!Questions?
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