1. B Driving Sustainable
Savings in the
Manufacturing
Supply Chain
through Continuous
Spend Capture
© 2012 Ariba, Inc. All rights reserved.

2. Agenda
Introduction
Controlling Spend in the Intelligent Economy
Simon Ellis - IDC Manufacturing Insights
Bob Dudas - PPG
Dustin Nield – Covidien
Q&A
2 © 2012 Ariba, Inc. All rights reserved.

3. Supply Chain Spend
Management 2012
Controlling Spend in the Intelligent
Economy
Ariba LIVE April, 2012

4. Agenda
1. Economic Conditions in 2012
2. Supply Chain Trends Driving Investment for 2012
3. Speed and Spend Management
4. Key Takeaways
© IDC Manufacturing Insights Page 4

5. Manufacturing Recovery and Results
65 95
60 90
55
85
80
Manufacturing attenuates,
50
45
75
70 PMI
confidence languishes
65
40 Consumer Confidence
60
35 55
30 50
07Q1
07Q2
07Q3
07Q4
08Q1
08Q2
08Q3
08Q4
09Q1
09Q2
09Q3
09Q4
10Q1
10Q2
10Q3
10Q4
11Q1
11Q2
125 7
6
115 5
4
105 3
95 2 Revenue
1
Revenue returns to peaks, 85 0
-1
Net Profit Margin Actual
margin follows. 75 -2
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
Q112
Q212
© IDC Manufacturing Insights Page 5

6. ….. and Healthy IT Spending in 2012
US Spend 2011 2012 Growth
($ Millions)
Auto 12,238 12.929 5.6%
Food &
11,704 12,573 7.4%
Beverage
Electronic
8,852 9,344 5.6%
Components
Aerospace 8,682 9,102 4.8%
Chemicals 6,164 6,585 6.8%
Source: IDC Manufacturing Insights Worldwide Spending Guide. Selected Categories
© IDC Manufacturing Insights Page 6

7. Manufacturing Supply Chain Trends
 The rise of the consumer - driven by mobility and social business
connectivity, the consumer now holds ‗the power‘; using ubiquitous
access to make more informed decisions and purchases
 Complex and extended global supply networks - are a
consequence of globalization and the chase for "low-cost"
manufacturing. The reality is that many manufacturers now
experience significantly longer product lead times than ever before,
driving a level of complexity in the supply chain that can prove
problematic if agility and responsiveness are required.
 Volatile demand is the new norm. Consumers are less brand loyal,
and far more selective, than ever before — and, frankly, are willing
to "leave their wallet at home" if the value they require in a purchase
is not apparent. Peer reviews and recommendations are driving
brand switching, and private label choices are becoming more
popular. All these conspire to drive forecast accuracy down and
demand volatility up.
© IDC Manufacturing Insights Page 7

8. Manufacturing Supply Chain Trends
 Growing regulation, particularly in the area of traceability, is
certainly worrisome to manufacturers, many of which prefer to be
proactive rather than reactive. Traceability has reinvigorated efforts to
improve visibility and supply chain responsiveness.
 The accelerating pace of business is putting pressure on
manufacturers to be more agile and run the clock speed of their
supply chains more quickly. Many businesses are facing sub-48-hour
order lead times, often with poor supporting capabilities.
 Inflation and direct input costs remain a concern for manufacturers
that lack the ability to make price increases stick or are already at a
cost disadvantage versus competition.
© IDC Manufacturing Insights Page 8

9. THE Supply Chain Challenge
Balance Forecasting and
Responsiveness (Agility)
Complexity
Management
Cost /Spend
Control
Supply Demand
Complexity Volatility
Service
Centricity
Fulfillment
Excellence
Risk
Management
Segmentation
© IDC Manufacturing Insights Page 9

10. Business Objectives
Driving IT Investments
© IDC Manufacturing Insights Page 10

11. Top Supply Chain Priorities
© IDC Manufacturing Insights Page 11

12. Manufacturers Focus on Clock-Speed Alignment
across the Supply and Demand Sides of their Supply
Chains
Weeks Hours
 Demand volatility and supply instability combine to drive increasing
cadence mismatches for manufacturers Supply Demand
Chain Chain
 Demand-side volatility has a higher inherent frequency, but is lower in
Cadence
cost (―frequency modulated‖); supply side instability has a lower Months
Mismatches
Days
inherent frequency, but is higher in cost (―amplitude modulated‖)
 For brand-oriented value chains, the rapidly accelerating demand Months
cycle is the ―pace maker‖ for the supply chain – driving manufacturers Information
to synchronize through better inventory management and demand Technology
signal utilization
Years
 For technology-oriented value chains, the need for accelerated time-to-volume is the ―pace maker‖
for the supply chain – driving manufacturers to look for faster planning and supply side
responsiveness capabilities
 For engineering-oriented value chains, the need for supply stability and supplier collaboration is the
―pace-maker‖ for the supply chain – driving manufacturers to look for more agile supply networks
and comprehensive risk management capabilities
 For asset-oriented value chains, the need for consistent return-on-investments is the ―pace-maker‖
for the supply chain – driving manufacturers to look for more effective ways to manage feedstock
pricing and asset utilization
© IDC Manufacturing Insights Page 12

13. Manufacturing Supply Chains Continue to Wrestle
with Margin Pressures - Pursue a Blend of Four
Approaches
 Product price increases are one way to ensure desired margins, particularly in the face of
input cost inflation; but as we wrote in a perspective last year, deciding to take a price
increase, and getting it to stick in the marketplace are very different.
 Increasing both the quality and frequency of product innovation can be an effective way to
refresh the product portfolio, to 'beat the fade' and recover premium margin opportunities;
yet it requires a deep level of development expertise, and an effective New Product
Development and Implementation (NPDI) process.
 Adjusting product mix is an approach companies have successfully employed in the past
– promoting higher margin items at the expense of lower margin alternatives – yet in
today's commercial environment, where consumers are trading down to stretch
disposable income and maximize perceived value, the luxury end of many manufacturer's
product portfolios are not performing well.
 Driving out unnecessary waste with cost efficiency programs has proven to be a very
effective way to preserve margin levels, and has enabled companies to be leaner and
more agile in responding to market forces; yet very few companies 'cost cut' their way to
prosperity and there is the very real fear of marginalizing product quality of losing sight of
the 'total cost' picture when chasing cost reduction targets.
© IDC Manufacturing Insights Page 13

14. Key Takeaways
 Even for manufacturers who have a service or quality-centric supply chain, cost
control and spend management is a critical priority
 Across all of manufacturing companies it is the top supply chain priority
 Concerns about input costs and resulting margin pressures makes procurement
an important area of focus – particularly in an environment where price
increases are hard to achieve
 Demand volatility means that the supply side of the chain must be more flexible
 This requirement for greater speed and responsiveness puts pressure on the
supplier relationship, necessitating both closer collaboration and greater
spend visibility
© IDC Manufacturing Insights Page 14

15. Driving Sustainable
B Savings in the
Manufacturing
Supply Chain
through Continuous
Spend Capture
Bob Dudas
Manager, eProcurement - PPG Industries
© 2012 Ariba, Inc. All rights reserved.

16. PPG is…
• A global maker of paints, coatings,
optical products, specialty materials,
chemicals, glass and fiber glass
• Founded in 1883
• Headquartered in Pittsburgh, Pa.
• Owned by approximately 197,000
shareholders, including 15,500
employees and retirees
• 2011
► Sales 14.9 B
► Net Income 1.1 B

17. PPG’s Global Operations
• Approximately 38,000 employees
• In more than 60 countries
PPG Presence

18. PPG is…
• Composed of 13 strategic business units in six major
product areas:
► Industrial Coatings
► Performance Coatings
► Architectural Coatings - EMEA
► Optical & Specialty Materials
► Commodity Chemicals
► Glass

19. Spend Management
Program at PPG

20. Strategic Purchasing
The Process:
Identify Develop Source & Develop Order Monitor &
Opportunity Strategy Negotiate Contract Execution Manage
Supplier
Our Tools: Discovery
Ariba Supplier Network
PPG eBuy
Analysis Category Ariba Contract Catalogs, Analysis PA-2.0
SMART Mgmt Sourcing Mgmt Contract s& SMART R.M. Analysis
Ad Hoc PO
Apvd Inv
$AVE-CAIR
ERP SPM-CAIR
Systems PSI
Oracle
Spend SAP
MFG-Pro
Data
P&D
Scoreboard

21. Procure to Pay
Strategic Imperatives – Without Ariba

22. Procure to Pay
Strategic Imperatives – With Ariba

23. Ariba Tools Strategic Imperatives
Pricing
Compliance Efficiency
Ariba
Tools
Automation Savings

24. PRICING
DESCRIPTION BEFORE AFTER
Ariba Tools Ariba Tools
PRICING Negotiated pricing was manually audited on Pricing points for all e-catalog items
a post transaction basis are negotiated and enforced by the
purchasing team
Contract price terms enable
purchasing negotiated pricing to be
appropriately modeled

25. EFFICIENCY
DESCRIPTION BEFORE AFTER
Ariba Tools Ariba Tools
EFFICIENCY Validating invoices to the contract price Price terms are locked in by the
terms used by a supplier, required manual system when the supplier is creating
lookups by the end user an invoice on the Ariba Network
Users no longer need to compile
Requisitioners needed to compile monthly monthly reconciliations as all
CPC reconciliations and documentation information is stored electronically in
resulting in wasted time and paper the Ariba tools
Approved invoices move to the ERP
Approved invoices would be sent to AP system for payment without the
for processing and entry into the involvement of AP, improving overall
appropriate ERP system process efficiency
Contracts are stored electronically and
Paper contracts were filed and retrieved quickly
stored manually

26. SAVINGS
DESCRIPTION BEFORE AFTER ¹
Ariba Tools Ariba Tools
SAVINGS Using Contract Price Terms generated compliance savings
of $2,340,000.
e-Invoice processing creates a process cost reduction of
$12/invoice generating savings of $672,000
PPG eBuy Catalogs generated savings of $153,000 (eBuy)
Suppliers provided discounts due to automated order entry
resulting in savings of $22,000
Adecco MSP (Temp Services) process generates
compliance and local market competitive rate savings
of $698,000
¹ Annual Savings reflect PPG Industries own processes; may not be reflective of other companies.

27. AUTOMATION
DESCRIPTION BEFORE AFTER
Ariba Tools Ariba Tools
AUTOMATION Users placed calls to suppliers to order Automation guides the catalog process
many of their items vs. using automated from order creation to payment processing
websites and catalogs from the supplier
Automated order entry system provides
opportunity for PPG to receive discounts
from suppliers for using the tool
Many invoice approvals generated Emails are auto generated by the tool when
manually through routing of paper gaining approval for either purchases or
invoices or emailing approvers as contract related tasks
required. AP received paper invoice
for processing. Invoice discrepancy resolution and
approvals are accelerated and
system managed

28. COMPLIANCE
DESCRIPTION BEFORE AFTER
Ariba Tools Ariba Tools
COMPLIANCE Preferred suppliers were not enforced at eBuy purchases enhance compliance
the point of ordering with utilization of PPG preferred suppliers
catalogs and contracts
Validating invoices to the contract price
Ariba tool enforces supplier compliance
terms used by a supplier, required when they are submitting their contract
manual lookups by the end user invoices
Contract expiration dates were manually Upcoming expiring contracts are easily
maintained with no automated alerts or identified for renegotiation and contribute
toward purchasing compliance and
reminders in place
efficiency
Ariba contracts promotes compliance with
PPG purchasing policies using
customized templates for building
contracts

29. Driving Sustainable
B Savings in the
Manufacturing
Supply Chain
through Continuous
Spend Capture
Dustin Neild
Program Manager, eSourcing - Covidien
© 2012 Ariba, Inc. All rights reserved.

30. is …
• A global medical device and pharmaceutical
manufacturing company with over $11 Billion in annual
revenue
• Well positioned with a diverse portfolio of products and
technologies in attractive franchises
• A company with a history of quality and innovation
• Highly efficient and productive, producing strong margins
and cash flow
• A leading player across our portfolio
30 | April 3, 2012

31. Integrity, Honesty, Safety and Quality
We will conduct business with
integrity
and honesty in compliance with all
laws
and Company policy.
We are committed to produce
products
that are safe and of the
highest quality for our customers.
31 | Confidential & Proprietary

32. What does Covidien mean?
 ―Co,‖ from the Latin word for together
 ―Vi,‖ from the Latin word for life
 Covidien is a unique name in our space within the healthcare
industry – and it is designed to stand out from our competitors
An ongoing partnership in the lifesaving work of
medical professionals, creating far-reaching benefits
for improved patient care
32 | April 3, 2012

33. Our Mission and Vision
Our Mission
Create and deliver innovative healthcare solutions, developed
in ethical collaboration with medical professionals, which enhance
the quality of life for patients and improve outcomes for our
customers and our shareholders.
Our Vision
Deliver unmatched value to our customers by providing solutions
that improve patient outcomes and healthcare delivery through
clinically relevant and economically valuable innovation.
34 | April 3, 2012

34. Strong Line-Up of Well Recognized Brands
36 | April 3, 2012

35. 48 Manufacturing Facilities in 17 Countries
Countries with Multiple Facilities
United States 23 France 2
Canada 2 Germany 2
Mexico 3 Ireland 4
United Kingdom 2
37 | April 3, 2012

36. Key Challenges, Before Ariba:
 Large, disparate Sourcing organizations
o Center-led Sourcing group, 6 Business Units, ~50 Mfg. sites
- Poor visibility into Sourcing activity
- Little control over processes
- Missed opportunities to aggregate spend
- No shared repository for content
- Inconsistent application of process & terms
- Missed opportunities to leverage previous or similar work
- Team document sharing was inefficient or lacking entirely
 Traditional negotiating methods – inefficient
and often undocumented
o Poor business continuity
o Underutilized economies of scale
o Too many suppliers
38 | April 3, 2012

37. Key Wins, with Ariba:
 Ariba Sourcing Provides a System of Record
o All Sourcing projects under one umbrella, one pipeline
o Reporting fields by category, project type, org structure, BU, site,
o Owner, etc.
o Processes modeled, stored, can be controlled
o Better aggregated spend opportunities & improved efficiency
o All content stored and accessible globally
- Standard terms applied everywhere; more parallel workflows
- Each user is empowered to access and re-use content
- Shared workspace for all projects
- Audit-ability greatly improved
 Improved negotiating efficiency, esp. with reverse
auction projects
o Documentation is stored, events easily copied = business continuity
o Better economies of scale
o Improved supplier rationalization / consolidation
o Scoring improves negotiating leverage & messaging
39 | April 3, 2012

38. Covidien‘s Ariba Footprint:
• Ariba Sourcing Professional
•$1B in Annual Spend Sourced
Contract
Mfg
8%
Indirect
42%
Direct
50%
40 | April 3, 2012

39. Q&A
Contact info:
Sundar Kamakshisundaram: sundar@ariba.com
41 © 2012 Ariba, Inc. All rights reserved.

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