EPM Commodity Manager Meeting Breakout Session

1. EPM Commodity Manager MeetingBreakout Session The Next Big Thing Bill Clemens Fisher Valves

2. Agenda • Problem Definition • SWOT Analysis • Strengths • Weaknesses • Opportunities • Threats • Recommendations

3. Problem Definition • NMI calculation has been focused on removing price – many other activities drive contribution (ROTC) • Raw material pressure volatility • Consumption growing with developing countries • Currency fluctuation now impacting our global supply footprint • Significant amount of spend has been tensioned, in some cases multiple times • Effort has been regional relative to demand • ES supplier involvement/identification needs refinement to better align candidates to business in question • Some business understated – will create inflation in future

4. SWOT Analysis Opportunities: Strengths: • Find niche supply base to align w/demand • PSL • Logistics opportunity • Widen scope to “Supply Chain” • Total cost • Understand, drive, and track total cost • Supplier development • Europe spend • Asia • Latin America • Indirect material • Dual sourcing – tension and supply • Oracle • Part rationalization cross divisions • Tools, ES, MIN, etc • Global org Proc and Mfg • Process level leverage, org. • Spend vol as a group • Current supply base PSL Weakness: • Lots and lots of parts • High mix low vol • Unique matls, special demands • Difficult to forecast • Documented requirements • Multiple business systems • Time to move (velocity) • Lack of common supplier approval process • Lack of supplier capability in various world areas • Total cost tracking/attention • Independent KPI tracking Threats: • Rohs challenge • PED • Import/Export issues/risks • Currency and metals • Supply base consolidation • Availability • BCC economic development

5. Brainstorm • Second tier leverage • More strategic personnel interaction within Process • Divisional teams in addition to Corporate teams • Supplier development management to ensure appropriate “use” • Buyouts • Customer scoped projects – early project pursuit involvement • Cross functional teams, marketing, sales, project mngt, procurement • Europe • Asia • Latin America • Indirect material • Central buys • Intercompany / direct sourcing – find best cost • Rethink overall strategy • Supply Chain Scope

6. Brainstorm • Ensure defined / justified inflation controls • Currency • Metals • Regional – Global analysis • Risk management • Capacity • Logistics • Total cost • Business growth impact on supply footprint • Still optimum?

7. Recommendations • Develop cross functional teams to address mega customer orders • Divisional and Process • Global • Allow for reporting of contribution • Define “Supply Chain” management • Total cost • Strategic planning • Risk management • Divisional Team development • Share best practices • Align supply base utilization with demand • Don’t misuse • Discover/attack untapped world areas/countries • Vietnam • FSU • Eastern Europe • Velocity • Complexity reduction of processes • Supplier qualification • FA approval Regional/Global Risk management QA alignment

8. Project Procurement

9. Topics • Objective • Points of Engagement • Scope • Process • Challenges • Forward plan

10. Objective • Best cost material sourcing strategy • Drive margin improvement on projects / products (Engineered Products Business Unit) • Plan supply base • Improve OTD on projects

11. Project Procurement – Execute Strategy Sales Engineering Order Entry Manufacturing Sourcing Strategy

12. Communication Channel Project Management Application Engineering FCEC Project Procurement QA (Supplier Audit) Engineering Order Entry Manufacturing Suppliers

13. Project Procurement Process Develop manufacturing strategy for assemblies / sourcing strategy Identify high impact items & develop sourcing plan Finalize scope • Sales / Project Management • Freeze specifications • Provide component level • details • Identify/communicate • country of origin restrictions • Special processing • requirements • NDE requirements • Lead time • Project Management/ Project Procurement • Finalize manufacturing • strategy • Establish sourcing strategy • Plant capabilities and • capacity • Master schedule • Project profitability • End destination • Business impact • Lead time New Develop new suppliers and start qualification process** Shortlist suppliers Existing Prepare bid package and develop bid strategy No Reverse Auction Negotiate with suppliers Yes Send invitation and conduct auction Evaluate bids, finalize suppliers, and make recommendation to buyers “**” -> Depends upon the component and manufacturing process

14. Project Procurement Scope - Products • Develop and execute sourcing strategy for Tier 3 & other WA projects • Engineered Specials (TBX, FB, etc) • Special Alloys (Duplex, Super Duplex, 254 SMO (Avesta), Hast’C) • Special Alloys (Monel, Alloy-20, Titanium) • Super Large Bodies / Trims (E bodies 16”-24” & EH 8”-12”) • Buy Outs

15. Project Procurement Scope - Components • Bodies (Casting / Open Forging) • Bonnets • Plugs • Flanges • Cage Retainers • Fabricated Parts • Buyout (Actuator / Accessories)

16. Project Procurement – Organization Chart

17. Responsibilities – Project Proc. Leader • Develop sourcing plan in conjunction with manufacturing strategy • Plan and lead supplier solicitation, bid evaluation and supplier selection. • Early engagement of suppliers • Hand off quotes w/recommendation to site purchasing

18. Issues / Challenges • No internal process in place to execute strategy • Brainstorm based on actual projects • Ensure all functions are in the loop • How Procurement can engage early on non-Tier3 projects? • Specials – Proactive communication of part number details prior to order entry • Standards – How planner could raise a red flag to purchasing for BCC sourcing? • Impact reporting

19. Questions?