As Procurement organizations optimize and automate sourcing and procurement processes to handle Indirect Spend, there is a renewed focus to extend the same automation to Direct Material Spend. With increased globalization, outsourcing and raw material cost inflation, controlling Direct Material spend is key to driving sustainable savings and improve risk mitigation. Join this session to hear from Ardent Partners and key Ariba customers who leverage extensive collaboration and automation to capture more direct & indirect spend and drive sustainable savings and risk mitigation in their supply chains.

1. #AribaLIVE
Direct Materials Sourcing and Procurement
Strategies to Drive Accelerated Savings
and Improved Risk Mitigation
@ariba
Speakers
• Lois Fresne – Oriflame
• Sundar Kamakshisundaram – Ariba, an SAP Company

2. Agenda
• Introduction
• Overview of Direct Materials Sourcing –
Business Drivers and Challenges
Sourcing Meets Supply Chain: A Practitioner Point of View
Identifying and Improving Risk Mitigation – Guidance
• Direct Materials Sourcing @ Oriflame
• Demo
• Q & A
© 2014 Ariba – an SAP company. All rights reserved.2

3. Key Challenges that Affect Direct Material
Sourcing and Procurement
• Fragmented supply base with varying degree of
supplier capability
• Volatile supply markets
• Intricate pricing and discounting structures
Market
Complexity
• Detailed specifications, design requirements
• Unique Raw Material needs
• Large no. of line items to be evaluated with pricing
dependent on both regions and volume
Category
Complexity
• Strategic relationships with suppliers
• Effective Risk Management – supply
chain, financial, product design, safety and environmental
etc.
• Historical procurement policies
• Regulatory, Environmental requirements
Strategic
Constraints
© 2014 Ariba – an SAP company. All rights reserved.3

4. From Our 2014 Manufacturing Commerce Predictions
#4: Direct procurement becomes a key
strategic skill for brand owners
© 2014 Ariba – an SAP company. All rights reserved.
• Brand owners seek to manage vendors,
contracts, and services more holistically
• Key suppliers are engaged during
innovation and product
development stages
Buy Now!
4

5. Direct Procurement: A Delicate Balance
Drivers
• Reduce costs
• Increase automation
• Control spend
• Increase revenues
• Respond to market
opportunities
Risks
• Supply volatility
• Compliance
Requirements
• Supplier Reliability
• Global supply base
© 2014 Ariba – an SAP company. All rights reserved.5

6. Sourcing Success: Procurement and
Finance Work Together
© 2014 Ariba – an SAP company. All rights reserved.
Source: IDC Manufacturing Insights, 2014
Product
Design Input
Demand
Input
PLAN
Make/Build
Deliver
PLANPLAN PLAN
6

7. Assessing Risk in Direct Materials
• Strategic Items – High profit
impact, high supply risk, high
sourcing difficulty, long-term
contracts, executive visibility
• Leverage Items – High profit
impact, low supply risk, medium
level visibility, focus on price
competitiveness
• Bottleneck Items – Low profit
impact, high supply risk, high
sourcing difficulty
• Non-critical Items – Low profit
impact, low supply risk, low sourcing
difficulty, low level
visibility, transaction focused
© 2014 Ariba – an SAP company. All rights reserved.
Source: Kraljic’s Portfolio Matrix
7

8. Risk Mitigation in Direct Materials
• Strategic Items – Give most
attention; cultivate supplier
relationships; apply strategic
sourcing/analytics;
contingency planning
• Leverage Items – Spend
aggregation, flexibility to substitute
suppliers/products, place
high-volume orders
• Bottleneck Items – Stock-up when
item is available, seek alternative
sources, find ways to control vendor
• Non-critical Items – Automate as
much of this spend as possible
© 2014 Ariba – an SAP company. All rights reserved.
Source: Kraljic’s Portfolio Matrix
8

9. Using Technology to Mitigate Risk
• E-procurement and catalog management
help manage non-critical items
• E-sourcing and Category Management
are key tools for leverage items
• Strategic Sourcing Tools are appropriate
for effectively managing strategic items
• Supplier Management is a focal point for
bottleneck items
© 2014 Ariba – an SAP company. All rights reserved.
Source: Kraljic’s Portfolio Matrix
Strategic
Sourcing
Tools
eProcurement
Catalog
Management
Supplier
Management
eSourcing
Category
Management
9

10. Capital Market Demands More
© 2014 Ariba – an SAP company. All rights reserved.10

11. Productivity Barriers; Sourcing and
Supply Chain Siloes
• Profit
• Supplier Risk
• Cost
• Service Level
Sourcing Supply Chain
© 2014 Ariba – an SAP company. All rights reserved.11

12. Collaborative and Holistic Approach
Required
Sourcing and Supply Chain
Supply Chain Results
Sourcing Results
Business Processes
© 2014 Ariba – an SAP company. All rights reserved.12

13. #AribaLIVE
Direct Materials e-Sourcing at
Oriflame
Loic Fresne, Sr. Director, Oriflame
@ariba

14. 2014-04-07 Copyright ©2012 by Oriflame Cosmetics SA 14

15. 2014-04-07 Copyright ©2012 by Oriflame Cosmetics SA
Direct Material
esourcing at Oriflame
Ariba Live Event
April 9th 2014

16. 2014-04-07 16
Agenda
• Oriflame Business Overview &
Strategy
• Oriflame Procurement Spends &
Supplier Evaluation
• Direct Spends & NPD activities
• Ariba integration with IFS
• Oriflame Sourcing Activity with Ariba
• Q&A
Copyright ©2012 by Oriflame Cosmetics SA

17. Oriflame Business Overview
last years figures show no sales growth and margins lower
than expectation
17Copyright ©2012 by Oriflame Cosmetics SA
• 2013 FY Sales -3% in local currency
– Units: -6%
– Price/mix +6%
– Exchange rates -5%
• Margins impacted by currency
• Challenges in CIS and Europe
• Strong in the other regions:
– Latin America, Turkey, Africa and Asia (29% of
Group sales)
• Good service levels and
low inventory
0.10.1
0.1
0.20.2
0.2
0.30.40.30.3
0.4
0.4
0.5
0.70.7
0.8
0.9
1.1
1.31.3
1.51.51.5
1.4
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
bn EUR sales
1990 – 2011: CAGR organic sales of over 15% - long term target set at 10%

18. Strategic Directions
182014-04-07 Copyright ©2012 by Oriflame Cosmetics SA
• Securing income opportunity and leadership
development leading to sales force growth
• Brand building
• Strong product programmes
• Further develop online Channel
• Operational efficiency
• Geographic expansion
• Focus on Margin improvements through sales growth
and cost reductions

19. Procurement is part of Global Operations
2014-04-07 Copyright ©2012 by Oriflame Cosmetics SA 19

20. New Procurement organisation in Oct 2013 with increased
focus on category management
202014-04-07 Copyright ©2013 by Oriflame Cosmetics SA
Professional organization
Edwin Koehler
VP Global Procurement
Loic Fresne
Sr Dir. Global Indirect
Procurement
Tom Wade
Dir. Strategic Sourcing
Johan Gillbro
Dir. Global Direct
Procurement
Jessica Tjulander
Global Category
Director Accessories
Print
Logistics
Marketing
Services
Finished Goods
Components
Raw Materials
FRA
SKC
PHC
CCS
WELL
ACC
Contracts
Analysis
IT

21. Overview of current Oriflame Spends
22
Spend breakdown
EUR millions, 2013
Total 601342 259
Direct
spend
260
Indirect
spend
34182 259
~35
22
26
Characteristics of indirect procurementResources
4
~351
▪ Procurement activities cover ~22 % of
spend, partly on ad-hoc basis
▪ Main share of spend managed
regionally or on country per country
basis
▪ Few standardized processes and
central guidelines in place
Spend managed by central purchasing
XX
XX
Purchasing FTEs
Regional purchasers
Copyright ©2012 by Oriflame Cosmetics SA

22. Supplier evaluation hierarchy in three levels
Supplier approval stage
Supplier performance stage
Project performance stage
CSQA I E
Quality Technical Financial Sustainability
CSQA I E

23. Supplier requirements defined within four
approval building blocks
A Excellent
B Good
C Acceptable
D Poor/Weak
E Unacceptable
Minimum of C score is required to be an Oriflame supplier
Quality Technical Financial Sustainability
Owner Quality
R&D
Technical services
Packaging
Procurement Quality
Scope of
evaluation
Quality processes
and systems
Production
equipment and
processes
Financial solidity
and liquidity
Social and
environmental
processes and
systems

24. 262014-04-07 Copyright ©2012 by Oriflame Cosmetics SA
Assured Supply
Supplier is meeting our ever changing demand, providing support, flexibility, ensuring resources and being in
control of fluctuations – keeping products supply under control.
Quality
Items delivered without quality issues and within our specification from approved suppliers.
Service
Supplier is able and eager to react to our needs. Supplier is striving to continuously improve and it is
easy to do business with.
Cost
The lowest total product cost first time is provided. The cost is transparent. Supplier is
consistent, works on cost improvements, offering rebate schemes.
Innovation
Supplier is creative and thinking “outside the box”, offering product and process development;
increasing value through innovation.
Environment and Ethics
Supplier is aligned with our strategy to be a sustainable company, clearly demonstrating suitable
policies and building ECO trend.
Performance of Finished Goods, Packaging and
Raw Material suppliers

25. Direct Spends focus on Projects for New
Product Launches
NPD
2014-04-07 Copyright 2011 By Oriflame Cosmetics SA
 Newness target >20% per Catalogue
 > 400 new products a year
 > 5 000 RFQs sent in 2011 before Ariba implementation
• Multifunctional Team work by categories
Cosmetics categories, Accessories & Wellness
• Product development of hundreds of products
• New Formulas & New Components (Capex)
• Support Marketing in new concept briefs
• Allocate New Products to Suppliers OTIF

26. The Oriflame Stage & Gate Process
Idea
Generation
Develop
Project
Implement
Project
Produce
Design
Project
G1
G2
G3
G4
G5
Identify
opportunity
Set targets
Order
components
Make products
Ship products
Define product
Design
Formula
Design
Packaging
Investigate
suppliers &
RFI
Award
suppliers
Build tools
Approve
Packaging
Approve
Formula
Develop
formula
Develop
Packaging
RFQ process
Cost productCost
Estimations &
OCSA Target
2014-04-07 Copyright 2011 By Oriflame Cosmetics SA
Procurement activities
New product Development Process

27. Ariba Modules in scope
Suppliers

28. Ariba integration with IFS, system overview
for NPD
302014-04-07 Copyright ©2011 by Oriflame Cosmetics SA
IFS System / ERP Transactions
Planning
JDA
Pack Brief
Structures
FG EXW Price
LT, MOQs…
OCSA set up
Ariba Sourcing
RFQ Process
Component Event
5 templates
Step 1
Filling Event
1 template
Step 2
Component
EXW
Prices, LT, MOQ
s…
Automated Awards
to suppliers
Customized Integration
with IFS
GM MRP, 4 Shifts ?
Manual duplication of data

29. Oriflame Sourcing Activity with Ariba
• 1169 Sourcing Events in 2013 initiated by 24 active users
(vs. 1297 events in 2012)
Auction 9
RFI 1
RFP 1159
Total 1169
Personal & Hair Care 405
Skin Care 266
Fragrances 256
Colour Cosmetics 206
Unclassified 17
Wellness 11
Indirect Spend 8
1169
Event Volume Product Group
Copyright ©2012 by Oriflame Cosmetics SA

30. 2014-04-07 Copyright ©2012 by Oriflame Cosmetics SA 32

31. 2014-04-07 Copyright ©2011 by Oriflame Cosmetics SA 33

32. Summary - Wrap Up
Balance Cost Reductions with
Risk Mitigation
Build Collaborative Relationships with
Suppliers for maximum impact
Leverage Business
Networks to provide
transparency
ACCELERATE SAVINGS, IMPROVE COMPLIANCE & MITIGATE RISK!

33. Thank you
Q
A&
Contact information:
Sundar Kamakshisundaram
Sr. Director – Global Solutions Marketing
E: sundar.kamak@sap.com
© 2014 Ariba – an SAP company. All rights reserved.

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© 2014 Ariba – an SAP company. All rights reserved.