Giacomo Squintani, PTC presenation at Spare Parts 2013

Spare Parts:from undervalued challengeto profit-boosting opportunity

Giacomo O. SquintaniMarketing Manager

Stockholm, February 8, 2013

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Agenda

All content is Copyright © 1999-2013 PTC, Inc. All rights reserved.

• PTC: An Introduction*

• Service Lifecycle Management: The Theory– what the analysts are saying

• Service Lifecycle Management: The Practice– what OEMs have achieved

• Q & A

* very short, I promise

3

$100

$125

$150

$175

$200

$225

$250

$275

$800

$900

$1 000

$1 100

$1 200

$1 300

2009 2010 2011 **2012 Guidance

8%

16%

8%

Americas: 37%

FY 2011 REVENUE BY REGION

Europe: 40% AP: 23%

FY 2011 REVENUE BY VERTICAL

Life Sciences:4%

Industrial Products:29%

Federal, Aerospace& Defense:19%

Electronics &High Tech:

16%

Automotive:12%

Retail & Consumer:

7%

Other:12%

* This presentation contains non-GAAP financial measures. A reconciliation between the non-GAAP measures and the comparable GAAP measures is located in the “Financial and Operating Metrics” document on the Investor Relations page of our website at www.ptc.com. ** Represents FY12 guidance range.

Total Revenue ($ millions)Total non-GAAP operating profits* ($ millions)% = YOY growth

PTC: A Large & Successful Global Company


<what’s our strapline?>

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you may well be thinking: “That’s great guys, but…”

SO WHAT?WHY SHOULD I CARE?!?

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Service Lifecycle Management Business Challenges

Fragmented Service Organization

• Silos of people, processes and technologies

• Increasing product and service complexity

Internal Pressures

• Growth and profitability center

• New sources of long term competitive differentiation

• Competition for executive mindshare

• Talent retention and management

Immature Service IT Infrastructure

• Disconnected data & processes

• Homegrown systems lack scale and innovation

• Service extensions from other enterprise systems (e.g., ERP+)

ExternalPressures

• Global economic difficulties

• Customer expectations for faster, better service experience

• Increasing product and service competition globally

• Smart Products

• From Product & Service to Product as a Service (PaaS)

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Service Performance Challenges Today

~80%First-timeFix Rate

25% of the time, service parts are not available or are wrong

Service errors resulting from outdated service information

Only

~56%Service Worker

Productivity

Low

Too many disparate sites for critical service content

40% of time looking for information

2-9%Revenue Lost to Warranty

Annually

Warranty data is not analyzed to identify trends for early corrective action

Suppliers are not traceable for supplier recovery

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you may well be thinking: “Look, I know all that…”

BUT STILL MY BOARD DOESN’T CARE!!!

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Shareholder Value

Profitability

Invested Capital

Revenue

Costs

Working Capital

Fixed Capital

Impact of Service Lifecycle Management

• Part Sales, SLAs, PBL Agreements, Maintenance, Labor, Warranty Contracts

• Purchases, Transportation, Labor, Repair, Handling, Customer Acquisition

• Inventory, Repair WIP

• Warehouses, Vehicles, Assets, Tools

Sources: Harvard Business Review, University of Michigan

Companies with High Customer Satisfaction Have Consistently Outperformed the S&P 500

Services Drives Shareholder Value

ACSI:+94%S&P 500:+4%

Service Focus Creates Shareholder Value

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Service Lifecycle Management: The Theory

All content is Copyright © 1999-2012 PTC. All rights reserved.

11

“Most companies have a fragmented service information technology infrastructure. This inhibits advancement in maturity because it prevents the efficiencies gained through improved visibility, scalabilityand collaboration.”

Supply Chain Transformation: The Service Life Cycle Management Maturity Model, Gartner (March 2011)

“After‐sale service… operationsthat really add value – thatenhance customer satisfaction,contribute significantly tocompanies’ revenue and profitgoals, and promote rigorous costefficiency – are rare.

The most important characteristicof a Service Value Chain is its clearintegration with all functions thatinfluence a company’s ability toprovide service to its customers.”

The Service Value Chain (February 2011)

What GARTNER and ACCENTURE Are Saying

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Service Lifecycle Management (SLM) optimizes the

system of people, processes and technology

employed by manufacturers, service providers and equipment

operators and ensures that their customer achieves maximum

value over the entire serviceable life of a product.

True SLM enterprise solutions provide a strategic view of

service by connecting planning, delivery and analysis to

increase service revenue, profitability and customer value.

We Believe Those Problems Can Be Solved

the PTC definition of SLM


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Product Lifecycle

Management

RequirementsProduct

Optimization

ReleaseTo

Manufacturing

SystemsDesign

Service Part Pricing and

Planning ServiceInformation

Delivery

Service Knowledge

Asset Tracking& Management

WarrantyProcessing & Analysis

Field Service

Depot Repair

Products & Service

PerformanceAnalysisDetailed

Design

Reliability & Maintainability

Analysis

Service Network

Optimization

Manufacturing Planning

ServicePlanning

& Information

Issue Analysis& Corrective

Action

Service Lifecycle

Management

Closed-Loop Lifecycle Management

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Service Lifecycle Management: The Practice


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AVAYA

Challenges:• Achieve a consolidated global view• Integrate with legacy systems & ERPs• Improve first-time fill rates• Manage central and field stocking locations

Results:• Reduced inventory by over $90m / >10%• Avoided $5m in service parts repair costs• Avoided purchases through rebalancing• Improved first-time fill rates by over 30%

DELL

Challenges:• Meet the needs of >2m same-day SLAs• >200,000 part:location pairs• Decrease inventory & maximize customer

experience

Results:• Improved customer satisfaction• Record service levels (99.5%) with reduced

inventory• Grew same-day service business globally• Implemented new 3PL strategies• Improved partner labour utilisation

Sample Results

small toys

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HONEYWELL

Challenges:• Required a quick implementation with

minimum IT resources and integration with legacy systems

• Had to improve customer service whilst reducing inventory

• Needed to support the unique needs of the aerospace business across disparate business units

• 150,000 part numbers• 14 R&O shops

Results:• Increased service levels to 91%• Reduced supplier lead times by 15%• Improved on-time delivery by 40%

KOMATSU

Challenges:• Lack of visibility at the dealer level• Inability to take into consideration part

lifecycle• Need to reduce overall inventory• 3 months to implement price books• Required a solution that would optimise

aftermarket pricing utilizing market data, insurance claims information and build “what-if” scenarios which predict market response to price changes

Results:• Reduced global parts inventory by 18%• Improved service levels• Increased profitability by nearly $150m• Improved customer satisfaction• Priced new parts in less time

Sample Results

big toys

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• world leader in the production and distribution of electron microscopes, including scanning electron microscopes (SEM), transmission electron microscopes (TEM), DualBeam™

Case Studies: FEI & a Major Manufacturing Company

overview • 600 locations

• 120 countries


• >10,000

• >€3bn

staff

2011 revenues

• 2,000

• €604m($826m)

Manufacturing Company

≠

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Case Study #1: FEI Company


19FEI Confidential

Spare Parts Planning at FEI

P DCA

10/24/12 19

20FEI Confidential

2 Pillars of Spare Part Planning

Global supply chain footprint

• 3 hubs – covering 100% of all parts

• 22 warehouses –covering 75% of all parts

Part Segmentations

• Segmentation based on popularity and cost

• Safety stock A parts is highest, for C parts lowest

P DCA

10/24/12 20

21FEI Confidential

Daily Planning Cycle• Two global planners

manage stock levels in all hubs & warehouses.

• If the stock level is below the required level, global planner will initiate an order

P DCA

Replenishment orders

• Inventory will be shipped from hubs to local warehouses

Purchase orders

• When levels in the hubs drop below re-order point, a supplier purchase order will be initiated

10/24/12 21

22FEI Confidential

Weekly Performance ReviewPerformance analytics focuses on 4 areas

ADPC

Client• Client A always scores below targeted fill rate• Part segmentation should be re-assessed

Supplier• Supplier B underperforms• Critical parts list is used to get supplier to focus on supply of

certain parts

Region• Region X over performs resulting in high inventory cost• Safety stock levels should be adjusted

Process• Inventory in warehouse Y is not booked properly • Retraining of staff is required

10/24/12 22

23FEI Confidential

Service fill rate has increased significantly since implementation in Q4 2011

The Results

10/24/12

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Case Study #2: Manufacturing Company


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A journey to industry-leading level of aftermarket pricing sophistication begins

•Pricing tool RFQ, selection and project started•Co-operation between business areas, regions and central services expands

2007

2008

• Initiated a Spares optimization forum•Following Bain study increased focus to pricing

•Stop negative margin trade•Spot 90 % increase in cost of hydraulic parts via margin erosion

•Currency reviews performed for certain assortment where neglected for years

.......

The quick wins justified the investmentto a pricing tool to increase the scopeof pricing work

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PRICING ENGINEDemand

Current Cost

Current Price

Recommended

New Price

Competitor Data

Location Attributes

MarkupInputs

Part Attributes

ChannelDiscount

CustomerDiscount

Net Price

Inside the PTC Pricing Tool Outside

• Price Alignment & Tiers• Market Adaptive Pricing• Elasticity• Cost Plus/Markup

Scoping and Setting Expectations

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The PTC Tool provides market level visibility to:

• Cost and price data – consolidated margin

• Transaction and discount data

• Market data entry, storing and usage

• ...and allows advanced pricing policy setting and simulations

• Segmentation of parts to separate buckets based on technical, commercial, market, business and etc. attributes

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Market-adaptivepricing

Between-marketalignment of pricing

Attribute-basedprice setting

Intelligent cost-plusand optimization

• Compare current price and competitiveness, to market offering

• Set prices to position competitively at market place

• Act based on fact based information

• Aim to have aligned prices between markets

• Enable professional handling of multinational customers

• Prevent cross border trading

• Set price of spare parts based on physical and performance characteristics

• Prices between items make sense for customer

• Key is finding the right drivers

• Making competitiveactions relative to market share and additional business

• Understanding hit rate, and lost sales

• Mark-up factors based on modeling

70x Value Index 51

Piston Diameter

x Importance 7

1410x Value Index 92

Stroke Length

x Weight 10

< 50x Value Index 55

Rod Diameter

x Importance 0.0

Attribute

Value index

Category

Importance

Application of Appropriate Pricing Techniques

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Insights concerning a pricing project

• For operating a pricing tool the requirements for data format are strict, and lot of attention needs to be put to securing correct output

• Dedicated and empowered implementation team that works from one location will secure success, and speed up problem resolution cycle

• Via benchmarking we found the Servigistics/PTC pricing product to be structured, versatile and flexible

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Benefit realization of pricing systemand pricing strategy implementation

• Financial targets have been achieved to date according to plan

• Information available about transaction, customers, prices and etc globally on detailed level in real time, which also enables much more than pricing alone

– Of course this information would be available otherwise as well via ad hoc reports, but continuous ad hoc work is not the way to go...

– This can support e.g. sales, tendering, discount structure design, and etc.

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That’s How Value Is Added!


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Strategy Coordination

Operational Coordination

Supply Chain &Manufacturing

Master DataProject Accounting

PurchasingLogistics

Supplier QualityProduction Scheduling

Production Control

Service SchedulingService DeliveryParts Logistics

Warranty & Contract Management

Systems EngineeringHardware EngineeringSoftware Engineering

Product Validation

Supply Chain DesignCost ManagementRisk Management

ManufacturingProcess Engineering

Tooling Design

RequirementsApplication Engineering

Service EngineeringParts Planning

Service InformationFailure Analysis

PTCOptimizes

Strategy

ERPOptimizes

Operations

Sales & ServiceHardware & SoftwareEngineering

Product Advantage Service Advantage

Transforming How Products Are Created And Serviced

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Service KnowledgeManagement

Warranty & ServiceContracts

ServiceLogistics

ServiceParts

Management

Field ServiceManagement

Technical Information

Customers & Products

Addresses the Needs of the Global Service Network

With a SingleSystem for Service

PTC’s Single System for Service


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“Leaders in service management… are likely to depend less on ERP to handle parts and

service, since ERP systems often struggle in areas such as forecasting, managing

distributed inventories and aligning resources with specific service or maintenance events.”

The Service Value Chain (February 2011)

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One Final Perspective: Accenture

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“After a lengthy and rigorous evaluation program, we concluded that the

Servigistics [now PTC] solution had a strong European infrastructure that could

handle high levels of complex data, increasing the visibility and efficiency of

our service parts operation”

Bernhard Weigl, Eurocopter

OK, one more…

Thank You for Attending

Giacomo SquintaniMarketing Manager

[email protected]

+44 7977 068176

www.ptc.com

THAT is why your Board needs to care!

…any questions?

mailto:[email protected]

http://www.servigistics.com/

Giacomo Squintani, PTC presenation at Spare Parts 2013

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