Using the Internet to Automate the Manufacturing Supply Chain: A Case Study of Pitney Bowes Presented at Supply Chain

1. Using the Internet to Automate the Manufacturing Supply Chain:A Case Study of Pitney Bowes Presented at Supply Chain World 2000, Chicago, ILApril 11, 2000 Stuart J. Sawabini President, Eventra Merritt Crossing, 440 Wheelers Farms Road, Milord, CT 06460 www.eventra.com 877-EVENTRA

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3. Pitney Bowes - Company Overview Manufacturer of postage meters, mailing machines and other business equipment 1999 Rev. $4.43 Billion Complex manufacturing environment 5,000 parts Nearly 300 direct material suppliers Planning Schedule Issued Weekly Limited success with traditional EDI Traditional EDI in place since 1992 Only 57 EDI-capable suppliers Very small subset of that group of vendors doing Evaluated Receipt Settlement Like many manufacturers, Pitney Bowes has a complex manufacturing environment that requires massive buyer/planner/logistics coordination. We began implementing EDI with our top suppliers in 1992, but as you can see by the numbers, we still have a long way to go before we can say that the job is done.Like many manufacturers, Pitney Bowes has a complex manufacturing environment that requires massive buyer/planner/logistics coordination. We began implementing EDI with our top suppliers in 1992, but as you can see by the numbers, we still have a long way to go before we can say that the job is done.

4. EDI has Limited Penetration

5. Typical 80 -20 Approach To EDI EDI trading Partners are 20% of total supplier base Inventory levels reduced Inventory turns improved Headcount reduced Supplier base rationalized to a smaller base Lead times reduced But� only for parts from EDI-capable suppliers What�s missing is Continuous and Interactive Information Flow from all trading partners

6. Direct Materials in Manufacturing

7. What�s The Real Problem Traditional EDI: Expensive to implement Integration complex Little benefit to partners Uncovers operational issues 80 - 20 rule driven E-SCM: Quick implementation Continuous, interactive flows More partner value add Manageable operations Process improvement driven

8. Cost Complexity Supplier Benefit Success Meant Removing ALL Barriers The one barrier that still remained was the Return On Investment issue -- in other words, how would our suppliers benefit from being electronically linked via the Internet to Pitney Bowes. We saw this last point as being absolutely crucial to the success of our �100% Supplier E-Link� initiative. Because if all we did was to eliminate 2 out of the 3 barriers that were impeding complete electronic linkage to our suppliers, then Pitney Bowes would fail. I say fail, because we felt strongly going in that anything less than near 100% linkage to our suppliers was unacceptable. So in late 1997, we assembled a group to head up this effort and Pitney Bowes begin identifying the companies that offered Internet-based EDI solutions.The one barrier that still remained was the Return On Investment issue -- in other words, how would our suppliers benefit from being electronically linked via the Internet to Pitney Bowes. We saw this last point as being absolutely crucial to the success of our �100% Supplier E-Link� initiative. Because if all we did was to eliminate 2 out of the 3 barriers that were impeding complete electronic linkage to our suppliers, then Pitney Bowes would fail. I say fail, because we felt strongly going in that anything less than near 100% linkage to our suppliers was unacceptable. So in late 1997, we assembled a group to head up this effort and Pitney Bowes begin identifying the companies that offered Internet-based EDI solutions.

9. Issues Surrounding Initiatives Supply Chain cost savings and efficiency issues demanded a solution� Current EDI rollout rate was too slow ... �reluctance due to cost and complexity �resistance due to no perceived benefit In fact, at our current EDI rollout rate, Pitney Bowes would be 15 years older before the last supplier was electronically linked. But Pitney Bowes prides itself on being a market leader and an early adopter of new technology � so we were actively searching for a means to solve some key business problems. Those problems mainly were in the area of supply chain management -- Multiple schedule delivery methods Timeliness of schedule data Lack of visibility into the supply chain High cost of supporting small EDI-capable suppliersIn fact, at our current EDI rollout rate, Pitney Bowes would be 15 years older before the last supplier was electronically linked. But Pitney Bowes prides itself on being a market leader and an early adopter of new technology � so we were actively searching for a means to solve some key business problems. Those problems mainly were in the area of supply chain management -- Multiple schedule delivery methods Timeliness of schedule data Lack of visibility into the supply chain High cost of supporting small EDI-capable suppliers

10. To Succeed All vendors need to understand and respond to supply chain management requirements Timely information exchange is necessary and requires electronic linkage to suppliers

11. The Solution

13. Emerging LandscapeInter-Enterprise Business Application Extend from Enterprise Resource Planning to Inter-Enterprise Resource Planning (Collaboration) To enable new business processes and leverage existing ones

14. Inter-Enterprise Business Application Specifically: Deliver a solution for communicating with direct materials vendors, conforming to business processes manufacturer shares manufacturing planning information vendors share commitment & shipment information

15. Pitney Bowes�Collaborative Inter-Enterprise Application

16. Web Solution for Pitney Bowes Designed to improve the direct materials acquisition process Provides non-EDI capable vendors with a Web-based business application that communicates planning, shipment and remittance information Leverages Pitney Bowes� current EDI infrastructure Helps get more products out sooner to more customers As part of the VendorSite solution, Eventra has had extensive rounds of meetings with people from all areas of our supply chain -- from direct material suppliers to commodity managers to (name others). During that process they captured a great deal of feedback and their development staff has incorporated the major requests and needs of all these groups into the VendorSite product. The response we have received by our suppliers to VendorSite has been overwhelmingly positive. We are now at the point where we have begun rolling VendorSite out to our remaining suppliers, and we anticipate to have that completed by year-end 1998. One of the most important parts of the VendorSite solution that all of us at Pitney Bowes will be looking forward to is the post-implementation impact analysis study that Eventra will do for us one year from now. Their pre-implementation study was performed in conjunction with our own staff, and we are realistically anticipating to see a significant improvement in many areas of our supply chain.As part of the VendorSite solution, Eventra has had extensive rounds of meetings with people from all areas of our supply chain -- from direct material suppliers to commodity managers to (name others). During that process they captured a great deal of feedback and their development staff has incorporated the major requests and needs of all these groups into the VendorSite product. The response we have received by our suppliers to VendorSite has been overwhelmingly positive. We are now at the point where we have begun rolling VendorSite out to our remaining suppliers, and we anticipate to have that completed by year-end 1998. One of the most important parts of the VendorSite solution that all of us at Pitney Bowes will be looking forward to is the post-implementation impact analysis study that Eventra will do for us one year from now. Their pre-implementation study was performed in conjunction with our own staff, and we are realistically anticipating to see a significant improvement in many areas of our supply chain.

17. Supply Chain Objective To build a foundation for collaborative materials management between vendors and manufacturers To reduce costs for both the manufacturer and the vendor reduce inventories reduce overhead streamline business activities

18. Supply Chain Information Flow

19. Supply Chain Process

20. Supply Chain Process

21. Supply Chain Process

22. Web Design Issues �Thin� Client vs. �Fat� Client Data entry only vs. business application plug-in On-line vs. off-line processing Hosting Firewalls EDI Standards, XML vs. Proprietary Formats Level of Integration (extending the client)

26. It�s Not Just Click & Go

27. Return on Investment: Strategic Reduced inventory levels Shortened manufacturing time Provided global vendor support Enabled business process compliance

28. Return on Investment

29. Summary