Integration in practice:Procter & Gamble and NovozymesExperience and lessons learnedWhile optimizing the Upstream Supply Chain

Didier Rossi – P&G Global Purchasing IT ManagerBo Hegner – Novozymes

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Procter & Gamble

168 years oldOperations in over 80 countriesSelling in more than 180 countriesNearly 5 billion consumersNOS $ 51.4 billions/year in 2003-2004

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What is eBusiness for P&G

eBusiness with Suppliers

e-Connect CollaborativeDesign

Payment, andInvoicingeProcess

eAuction eRFQ eTradingSC DocsRepository

eOutsourcing

Tier 1 SuppliersSupply Chain Integration

And Collaboration(Extended Enterprise)

Tier 2 SuppliersBest Value Option

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What do we mean with eConnect ?

DemandSignals

JointCollaboration

ReplenishmentOptimization

Flow Mapping(Analysis of Information, Physical and Cash Flows)

2 ways InformationSharing on:

1. P&G Demand2. P&G Inventory3. Supplier Planned

Shipments

Joint Re-design ofProduct Flow:

- Collaborative Inventory Management with automated dispatch/ Rcpt signals

- Sensitivity Analysis on Trade offs

Discussion Platformon:

1. Long Term Demand 2. New Initiatives

Process Changes

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Potential SavingsReplenishment “Losses”(Demurrages, Freights, Emergencies)

IMMEDIATELY RECOVERABLE

Planning, Processing,Replenishment Optimizations

PARTIALLY RECOVERABLE ININTEGRATION PHASE &COMPLETE B2B JOINT COLLABORATION

PARTIALLY RECOVERABLE IN SYNCHRONIZATION PHASE(DEMAND SIGNALS)

Raw Materials &Processing Costs

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P&G and NovozymesTime

Integration Level

TELEMETRY

PURCHASE ORDERS/FAX, Phone

PURCHASE ORDERSwith FORECAST VISIBILITY/

FAX, Phone

SMOI with INVENTORY/FORECAST VISIBILITY/

VSR

Full electronic SYNCHRONIZATION

ERP2ERP IntegrationXML

PORTALPLATFORM

”TRADITIONAL BUSINESSRELATIONSHIP”

SYNCHRONIZATIONPHASE

INTEGRATIONPHASE

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Undisputed world leader in enzymes

Source:Novozymes’ estimate 2004

Total market value 2004: DKK 12.8 billion

Around 4,000 employees worldwideApproximately 2,100 in Denmark

Others

NovozymesDSM

Genencor Int.

5%

18%

44%

5%BASF

28%

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Why this project is important to Novozymes - Our Supply Chain Challenge

With manufacturers Many product variants from biotechnical complexproduction processProduction time is up to ten weeks – varies from product to product. A fermented process.Products are strategically important to our customersCustomers are different in size and internalare different in size and internal organizationizationyity is critical to customersnternally and from market to reduce inventories

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1Inventory and

forecast data areused as basis tocreate purchase

orders

Customer plant

Raw materials Purchase

NovozymesSales Finished Goods &

Production

Order handling process

SalesOrder

2Purchaseplanner is

deciding when topurchasematerials

4000kg 18-12-02

4000 kg enzyme4000kg 11-12-02

4000 kg enzyme4-12-2002

8000 kgenzyme

3Sales orders are

created inNovozymes ERP

system

4000kg 18-12-02

4000 kg enzyme4000kg 11-12-02

4000 kg enzyme4-12-2002

8000 kgenzyme

4Verify thatsuffucient

materials areavailalbe

5Create

confirmationsand backorders

6Receive

confirmations oforders that are

OK

7Decide what to

do withbackorders

1) New date?2) Other Qty?8

Changecoming fromcustomerscustomer

FAX

Safety stock

Safety stock

Make to stock

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1Inventory and

forecast data areused as basis tocreate purchase

orders

Customer plant

Raw materials Purchase

NovozymesSales Finished Goods &

Production

Automated VMI process

SalesOrder

2Purchaseplanner is

deciding when topurchasematerials

3Distributionplanner is

deciding whenand how much to

ship

4AVerify thatsuffucient

materials areavailable

5Confirm

SuggestedShipments

6Receive

Informationabout when

shipments arrive

7Decide what to

do withbackorders

1) New date?2) Other Qty?8

Changecoming fromcustomerscustomer

X4000kg 18-12-02

4000 kg enzyme4000kg 11-12-02

4000 kg enzyme4-12-2002

8000 kgenzyme

8000kg 18-12-02

4000 kg enzyme4-12-2002

8000 kgenzyme

X

X

4BPlan ahead tomake sure that

material areproduced onlonger term

Safety stock

Make to forecast

XX

X X

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The Benefits- as experienced in pilot and roll out

Admin - 20% Stock – Reductions achieved in the chainTransportation – optimised.No more rush orders and FTL shipmentsOperated within confidence windowPositive impact on Product Availability

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Road Map – as experienced byNovozymes Benefit

Low High

Hig

h

Potential Risk :Benefits <= IT cost

Standardorderflow

SystemSupported

Collaboration

ManualVMI

SAP 2 SAPOrder to cash

SystemSupported

VMI

1A

2

3This is

where we would

like to be

Cos

t

1B

2

Low

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Our opportunity

Scaling usage across our relationship

Share experience

Scaling with more trading partners– Lower costs and ease of adoption through more

standardisation