Feb 20, 2014

THE SOLUTION

S&OP – IBS APPROACH

Our innovations & differentiators:

Along with all the traditional attachments of S&OP:

Forward cover bands

Embedded analytics

Exceptions detection

Root cause(s) engine

Guided Recommendations

Demand management

Supply management

Process calendars

Scenario planning &

managementKPI reports

MTNA

DemandInventory

(Units)

“Optimized” Target

Supply

Businesses typically manage the variables of demand, inventory

and supply separately – Existing ERPs typically induce this type

of performance

MAKEThe Numbers™

MAKEThe Numbers™

MAKE Don’t Chase the Numbers!

SupplyDemand

IBS S&OP solution manages all the variables together thus

reducing the variability on the supply side

Inventory

(Weeks of Cover)

Max Target

Min Target

MAKEThe Numbers™

MAKEThe Numbers™

MAKE Don’t Chase the Numbers!

MTNA

ANALYTICS LIBRARY

Stock out/Lost sales prediction

Pricing and promotions analytics

Dynamic supply chain segmentation

Inventory/service level analytics

Supplier score-carding

Etc

SUPPLY TO CHANGEDEMAND TO CHANGE

Reduce supply

eg: defer/cancel/reduce PO,

reduce MOQ

Reduce demand

eg: defer promotions, allocate

stock

EXCEPTION FRAMEWORK

LEAD TIME FENCE

ST

OC

K

SH

OR

TA

GE

EX

CE

SS

TIM

E

Increase supply

eg: increase PO, MOQ, expedite

Increase demand

eg: run promotions, channel

loading

ROOT CAUSE ENGINE

Level 1

• Demand related

• Supply related

Level 2

• Which customer/Why

• Did promotion succeed

Level 3

• Is there product cannibalization

• Why promotion failed to achieve target

RECOMMENDED ACTIONS

Automatic recommendations How many times this

action was chosen in the

past

Auto

execute

CLOSED LOOP P-D-C-A

P

D

C

A

MANAGING DEMAND EXCEPTION

Demand planner identifies

exceptions

Shortage within lead-time period

She reviews item in the gameboard

Identifies root cause: Too much

promotion

Soln notifies marketing on

promotion

Marketing reviews and

defers promotion

The demand planner reviews the exception list

DEMAND PLANNER

LOGIN

DEFAULT ENTRY: MY WORKSPACE

Your scenarios

The

exceptions

Tasks

D

NAVIGATE TO EXCEPTIONS

The bands

Navigate to the

Gameboard

Promotions

indicator

D

NAVIGATE TO GAMEBOARD

WOH cover

Compare it

against last

cycle’s situation

Change values &

simulate here

C

IDENTIFY ROOT-CAUSE & USE PROCESS PLAYBOOK

Click to know why

deviation in WOH

Action: Defer

promotion

A

MARKETING MANAGER

LOGIN A

ACTIONS NOTIFIED AS TASKS TO MARKETING MANAGER

Navigate from

top bar

A

PLAYBOOK: REDUCE PROMOTION

Reduce

planned

promotion

P

PLAYBOOK: EXCEPTION ELIMINATED

Reduce

planned

promotion

P

LOGIN

STATISTICAL FORECAST/MGMT

compare

Auto

classification

Forecast

accuracy

P

Seasonality,

trend

MANAGE PROMOTIONS P

In-build

scenario

management

NPI/LIKE PRODUCTS P

DEFAULT ENTRY: MY WORKSPACE

Your scenarios

The

exceptions

Tasks

D

NAVIGATE TO EXCEPTIONS

The bands

Navigate to the

Gameboard

Promotions

indicator

D

NAVIGATE TO GAMEBOARD

WOH cover

Compare it

against last

cycle’s situation

Change values &

simulate here

C

IDENTIFY ROOT-CAUSE & USE PROCESS PLAYBOOK

Click to know why

deviation in WOH

Action: Defer

promotion

A

SUPPLY PLANNING

Review BOHEdit MOQ, LT,

EOQ etc

P

EXECUTIVE REPORTS

REVENUE C

INVENTORY C

FINANCIAL C

SEGMENTATION C

HIERARCHICAL NAVIGATION

All ISBN

Level 2

Level 3

Support for

•Time hierarchy (Fiscal, Months, Weeks,

day)

•Product hierarchy (All, portfolio, item)

•Customer hierarchy (National, region,

account)

A

SCENARIO MANAGEMENT A

BUILDING VALUE PROP

BENCHMARKING MITSUBISHI ELECTRIC

*Source: IDC Industry data for Electrical appliances worldwide, 2012

^ Based on available benchmarking data. Needs further engagement to validate assumptions

1 Demand mgmt has lot of potential to improve

2 High inventory may be due to low score on #1

3 Best measure. High inventories supports OTIF

4 Integrated planning is low & builds up inventory

5 Plan compliance has to be measured

IBS’ initial

observations/comments^Initial benchmarking*

VALUE PROPOSITION

Based on our experience, we estimate a range of value** that can be created and

captured at Mitsubishi to achieve the benchmarking objectives by using our global

network of experts, industry knowledge and proprietary tools.

**Based on available high level data. Needs further engagement to validate assumptions. See Appendix A for input

details

Value Drivers Low Medium High

One Time Value

Inventory Reduction $3,500,000.00 $6,000,000.00 $7,500,000.00

F&E Investment Reduction $0.00 $0.00 $0.00

Improve Margin Rate

Lower Cost of Goods Sold $3,500,000.00 $5,250,000.00 $8,750,000.00

Inventory Write-Off $225,000.00 $255,000.00 $300,000.00

Reduce Expenses

Inventory Carrying Costs $350,000.00 $600,000.00 $750,000.00

Expedited Freight Expense $0.00 $0.00 $0.00

SG&A Expense $0.00 $0.00 $0.00

Recurring Savings (1 year) $4,075,000.00 $6,105,000.00 $9,800,000.00

Recurring Savings (5 years) $20,375,000.00 $30,525,000.00 $49,000,000.00

One-Time Savings $3,500,000.00 $6,000,000.00 $7,500,000.00

IBS VALUE ASSESSMENT

Detailed report

Business case

Detailed report

Business case

AS-IS / TO-BE

VA report

1. Cost build up

2. 3 years of invoices/real demand

3. Closing inventory

4. Lead time

ERP integration

Full system

availability

Continuous

improvement

and monitoring

IBS METHODOLOGY FOR UNLOCKING VALUE

Congratulations!

You have

already

completed this.

Detailed

discovery with

stakeholders

and detailed

assessment of

potential

Now, you can

play with our

processes/syste

ms and YOUR

data

Further unlock

value by rolling

out the test drive

system to entire

corporation

Continuous

improvement

and monitoring

1 week 1 week 2-3 weeks 4-6 weeks On going

APPENDIX – A

MITSUBISHI VA SURVEY

RESPONSES

MITSUBISHI VA SURVEY

RESPONSES

Current Inventory $50,000,000.0

Inventory Carrying Costs 10%

Revenue $200,000,000

Gross Margin Rate 12.5%

COGS $175,000,000

Inventory Turns 3.5

SG&A Expense as a % to Sales 0.00%

Expedited Freight Expense as a % to Sales0.00%

Inventory Write-Off as a % to Inventory 3.0%

FINANCIAL METRICS

WE TAKE PROSPECT’S DATA

Current Inventory $50,000,000.0

Inventory Carrying Costs 10%

Revenue $200,000,000

Gross Margin Rate 12.5%

COGS $175,000,000

Inventory Turns 3.5

SG&A Expense as a % to Sales 0.00%

Expedited Freight Expense as a % to Sales0.00%

Inventory Write-Off as a % to Inventory 3.0%

FINANCIAL METRICS A representative sample of SKUs

Fast movers, medium movers, slow movers

For each SKU

Average forecast error

Lead time fence

MOQ

Incremental order qty

ITEM Period1 Period2 Period3 Period4 Period5 Period6 Period7 Period8 Period9 Period10 Period11 Period12

Starting Inventory 966 -351 1640 734 515 -372 458 394 333 115 235 409

Production/Purchasing 2940 420 2100 840 1260 840 1260 1260 1260

Sales 1317 949 906 219 1307 1270 904 1321 1058 1140 1086 1669

Ending Inventory -351 1640 734 515 -372 458 394 333 115 235 409 0

Cost of goods sold 13,170.00$ 9,490.00$ 9,060.00$ 2,190.00$ 13,070.00$ 12,700.00$ 9,040.00$ 13,210.00$ 10,580.00$ 11,400.00$ 10,860.00$ 16,690.00$

Revenue 15,804.00$ 11,388.00$ 10,872.00$ 2,628.00$ 15,684.00$ 15,240.00$ 10,848.00$ 15,852.00$ 12,696.00$ 13,680.00$ 13,032.00$ 20,028.00$

ADMINISTER ONLINE SURVEY

DELIVER: BENCHMARKING

*Source: IDC Industry data for Electrical appliances worldwide, 2012

^ Based on available benchmarking data. Needs further engagement to validate assumptions

IBS’ initial

observations/comments^Initial benchmarking*

1 Demand mgmt has lot of potential to improve

2 High inventory may be due to low score on #1

3 Best measure. High inventories supports OTIF

4 Integrated planning is low & builds up inventory

5 Plan compliance has to be measured

DELIVER: VALUE PROPOSITION

Based on our experience, we estimate a range of value** that can be created and

captured at Mitsubishi to achieve the benchmarking objectives by using our global

network of experts, industry knowledge and proprietary tools.

**Based on available high level data. Needs further engagement to validate assumptions. See Appendix A for input

details

Value Drivers Low Medium High

One Time Value

Inventory Reduction $3,500,000.00 $6,000,000.00 $7,500,000.00

F&E Investment Reduction $0.00 $0.00 $0.00

Improve Margin Rate

Lower Cost of Goods Sold $3,500,000.00 $5,250,000.00 $8,750,000.00

Inventory Write-Off $225,000.00 $255,000.00 $300,000.00

Reduce Expenses

Inventory Carrying Costs $350,000.00 $600,000.00 $750,000.00

Expedited Freight Expense $0.00 $0.00 $0.00

SG&A Expense $0.00 $0.00 $0.00

Recurring Savings (1 year) $4,075,000.00 $6,105,000.00 $9,800,000.00

Recurring Savings (5 years) $20,375,000.00 $30,525,000.00 $49,000,000.00

One-Time Savings $3,500,000.00 $6,000,000.00 $7,500,000.00

IBS VALUE ASSESSMENT

MTNA CASE-STUDY: LINKSYS

Functional silo’s working from their own set of numbers

Higher than desired inventory cost fueled by high safety stock holding

Higher than desired COGS caused by unpredictability to suppliers

Poor forecast accuracy scores across the board

Business Challenges:Quick Company Facts:

Division of Cisco Systems, Inc.

Over $1B Revenues

Global sales in over 100+ countries

High-Volume business

MAKEThe Numbers™

MAKEThe Numbers™

MAKE Don’t Chase the Numbers!

MTNA CASE-STUDY: LINKSYS

Quick Company Facts:

Division of Cisco Systems, Inc.

Over $1B Revenues

Global sales in over 100+ countries

High-Volume business

MAKEThe Numbers™

MAKEThe Numbers™

MAKE Don’t Chase the Numbers!

Revenue up 1-2%

Customer Inventory reduction of 30%

Linksys inventory reduction of 35%

Global order backlog reduced 60%

Expediting reduced from 35% to 3%

SKU level forecast accuracy from 30% to 71%

Supplier fill rate increased from 65% to 95%

Business Results:

THANK YOU