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1. Supply Chain & Logistics
From Downstream Logistics to Supply Chain
From operations excellence to customer intimacy
JM Fallet – SVP Supply Chain & Logistics

2. Schneider Electric
A world leader in Power & Control
Electrical Automation
Distribution & Control
# 1 worldwide # 2 worldwide
“Make power “Control and monitor
safe, available machines and installations,
and reliable” protect people”
Energy management
“Ensure uninterrupted and high quality power,
optimise energy consumption”
SC&L – JM Fallet - September 2007 2

3. Close to you
with strong local operations
Sales and employees by geographical region
Schneider Electric Europe
in figures North America
47%
€13.7 billion
27%
48 500
revenue in 190 countries 26 000
105,000 employees*
Local presence in
106 countries
more than 200 factories Asia-Pacific
6,500 R&D people in Rest of the world
25 countries 18%
Source: 31/12/2006
8% 23 000
*workforce including permanent
and temporary employees
7 500
31% of revenue in emerging countries
SC&L – JM Fallet - September 2007 3

4. An international leading team
Chairman of the Management Board
(1) Management board
& CEO
(2) Executive committee Jean-Pascal TRICOIRE (1),(2)
Chief Financial Strategy, Customers Strategic resources
Central functions Officer &Technology and organization
Pierre BOUCHUT (1),(2) Eric PILAUD (2) Jean-François PILLIARD(2)
new² Globalization Global
Quality
Company program Serge GOLDENBERG & Industry Human Resources
Alejandro SOLIS Hal GRANT (2) Karen FERGUSON (2)
North America Automation Renewable energies
Dave PETRATIS (2) Business units Michel CROCHON (2) Claude GRAFF (2)
Europe Building Automation Power
Julio RODRIGUEZ (2) Arne FRANK (2) Eric RONDOLAT (2)
Critical Power &
Asia-Pacific Services & Projects
Russell STOCKER (2)
Cooling services Eric PILAUD (2)
Laurent VERNEREY (2)
Installation Systems
International Customized Sensors
Christian WIEST (2)
Operating divisions and Control
Chuck TREADWAY
Jean-Pierre CHARDON
SC&L – JM Fallet - September 2007 4

5. A unique offer
in four markets
Energy & infrastructures Industry Buildings Residential
availability, safety, productivity, flexibility, comfort, communication safety, comfort,
Cost effective safety, traceability safety, operating costs communication
16% of sales 32% of sales 37% of sales 15% of sales
electrical networks, food & beverage, offices, stores, single-family homes,
water treatment, automobile, factories, hotels, apartment buildings
airports, tunnels, electronic, packaging, hospitals, museums,
telecom, data centres pharmaceuticals schools, universities
SC&L – JM Fallet - September 2007 5

6. A unique offer
in the management of power and control
Power Control
core and historical Industrial
activities Low & Medium Automation and Control
Voltage
Building Automation
Installation systems & Home control
new activities
Energy management
critical power and cooling services / energy efficiency
Services
integrated, communicating and smart products, equipment and systems
SC&L – JM Fallet - September 2007 6

7. Partnering with & for our customers
to serve end-users
Schneider Electric
Wholesaler prime contractor global
project owner strategic
account
engineering firm power utility
installer contractor
panelbuilder systems
OEM integrator
electrician
End user
SC&L – JM Fallet - September 2007 7

8. What is Supply Chain ?
Michael Dell definition
In December 2004 the MIT Supply Chain 2020 Industry Advisory
Council visited Dell Computers. The Council discussed the future of supply
chains and talked with Michael Dell about his company’s supply chain-
driven success.
SC2020
How has the Dell business model contributed to the company’s success?
MICHAEL DELL
Lots of work goes on behind the scenes to shape demand and supply,
and adjust to the optimal outcome. There have been disruptions.
We had the West Coast dock strike, which was a big one.
But it caused less of a disruption for us than for our competitors.
That's the opposite of what you'd think, but it's because of our flexibility,
reaction time, planning and anticipation.
The ability to fundamentally alter a lot of outcomes in a dynamic fashion
based on what is going on around us.
SC&L – JM Fallet - September 2007 8

9. What was the situation of the Schneider
Electric Supply Chain 3 years ago ?
Countries independent and managing both Business and
Operations
No visibility
Local option & Micro-optimization
Re-invent permanently the wheel
No SC organization, only downstream Logistics in countries
Poor competencies in planning and international transportation
Silos between Front office, Logistics and Manufacturing
Low performance
Service Rate on lines below 93%
Costs on Logistics 7% of P&L
93 days of inventory, no forecast accuracy in place
Customer surveys pointing Logistics as a main weakness for SE
SC&L – JM Fallet - September 2007 9

10. The first questions I’ve asked to my team
How many customers have you met ? 1 to 3…. We are process makers
How many suppliers have you met ? None… Purchasing responsibility
How many KPI’s for SC&L ? 53…. We need to know
What is the cost of transportation ? Nobody knows…. Local vision
How many DC’s Nobody knows…. Local vision
How many gates between Plant and 2 to 4…. Close to the market
Customers
How many sku’s Nobody knows…. The marketing
decides
SC&L – JM Fallet - September 2007 10

11. Define a Strategy
Missions : a Supply Chain for what ?
To convert into solutions the customers expectations
To make sure that the right resources are available all along the
supply chain from suppliers to end user customers delivering the
goods, services & information at the right time in the right location
To execute operations with optimum level of quality relative to
costs and assets management
To manage end to end flows of information
To ensure that our actions fit into the criteria of Sustainable
Development while improving continuously our environmental
health and safety performances
increase our competencies and develop the Continuous
improvement process with the contribution of all employees
SC&L – JM Fallet - September 2007 11

12. Complexity is increasing
1st of Jan 2007 figures
20% growth a year
215 Plants (40 moves in 3 years to support the rebalancing plan)
135 DC’s (50 closed in 3 years and 35 new one linked to acquisition)
700 applications to run operations
> 880 000 ref
115 Brands (70 brands 3 years ago)
16 000 suppliers (of which 856 carriers)
36 000 000 lines shipped
800 000 tons
2,8 Bn€ inventory
1,2 Bn€ Spent
SC&L – JM Fallet - September 2007 12

13. Strategy
Main orientations & Projects
Increase & strengthen Customer satisfaction thanks to accurate
and proactive information to our customers : BOOSTER project
Simplify & shorten the logistics network
Organization of Logistic Territories
Transportation network with end to end visibility : T² Project
Standardization of execution processes
Develop Supply Chain Planning & Inventory Control
Management: SLICE project
Create demand/ supply planning process
Integration of Product Life Cycle management
Communication throughout the Supply Chain
SC&L – JM Fallet - September 2007 13

14. Strategy
Organization
G&I
Hal GRANT APC-MGE
APOD Jay GUIMOND
James KEEGAN Supply Chain &
Logistics I & I OD
Strategy EOD Gérard JORGE
Bernard PESSO Jean-Michel FALLET
Design NAOD
Supply Chain Design Chuck GERARDI
Jean-François GROLLIER
Human Resources
Support Zita PATONAI
Financial
Control Bridge Controller
Christophe GALLET Hervé LE MAREC
Supply Chain Supply Chain Execution Customer Relationship
Operations Planning Transport - Warehousing Management
Planning Logistics Network Customer Satisfaction
Projects Hervé GALON Jean OBERLE Xavier GAUVAIN
SC&L – JM Fallet - September 2007 14

15. SC&L Corporate and OD’s relationship
Global strategy and Arbitrage
Share vision & tactical approaches, Co-design the implementation
Market intelligence
Intercontinental Transport Plan
SC&L Committee 3 times a year with SC&L OD’s VP & Central SC&L
Networking and community reinforcement
Main projects review & Transversal processes
Functional WW People review / Competency development
SC&L OD’s Business review 2 times a year
Business Review : results, organization, priorities, action plans
OD’s best practices
Skill Network & Program Management
Main global projects
Standardization and simplification of processes
Performance measurement : KPI & Commitments
Execute missions & projects : do with them
High level of expertise on specific missions
Share and deploy best practices
SC&L – JM Fallet - September 2007 15

16. Coherency
Global vision from strategy to concrete actions
Strategy KPI’s Projects Skill Networks
BOOSTER (CRM)
OTDS
C Increase & strengthen Customer OTDC2
satisfaction thanks to accurate Logistic Offer
R and proactive information to our
M customers
S Simplify and shorten the logistics
T² (SCE)
network Transport
C Organization of Logistic Territories LCS
Transportation network : E2E visibility
Warehousing
E Standardization of processes
SLICE (SCP)
Develop & deploy Supply Chain DIN Material
S Planning Management
C Create demand/supply Planning process Demand
Integration of Product Life Cycle Mgt
P Communication throughout the Supply Chain Planning
SC&L – JM Fallet - September 2007 16

17. Supply Chain Reengineering
Projects Management and KSF
Be very ambitious
Raise the bar : service rate from 93% to 97%
Identify breakthrough opportunities : total redesign of transportation
Recruit only the best
Go outside and manage WW people review
Manage competencies and knowledge as well & as fast the Cie
manage the growth
Limit the number of priorities : 3 or 4 no more
Very clear deliverables with limited number of common WW Kpi's
A project has to be a first step for DNA new structure of the Cie
Pilots to be launched very soon : test and fail as a best practice
SC&L – JM Fallet - September 2007 17

18. Work on a solid foundation
The golden rules of SE Supply Chain Management
SUPPLY CHAIN DESIGN
1. The Logistics Offer, part of the Commercial Offer, is the base of the Supply Chain design and performance
2. Logistics offer and stocking policy are defined before the launch of the products, and should be revisited during
their lives
3. Supply Chain design has to comply with the Logistics territories structure
4. Simplify the logistics network and shorten lead-times. Any Supply Chain lengthening must be validated by SC&L
5. Supply chain decisions must take into account the desired level of return on capital employed.
FORECASTING & PLANNING
6. Countries' marketing own the forecast process. They enrich the statistical forecast with their knowledge of market,
customers and products
7. The forecast must be done in quantities to be understood and used by all the stakeholders
8. The Master Production Schedule (MPS) drives plants' ability to respond to demand, and is used to generate supplier
forecast
9. Sales Marketing, Product Marketing, Operations and controllers must share formally and regularly assumptions,
commitments and financial risks
10. The overall planning process Forecast, DRP, MPS, S&OP should run at least monthly. The outcome must be realistic
and feasible
FULFILMENT
11. Each entity is committed to a service level on first and second delivery date
12. Each entity makes information available prior to the delay
13. A reliable second delivery date must be given before being late
14. Each customer order must go through an approval process before execution
15. Transportation optimizations are to be weighed against inventory and lead-time considerations
SC&L – JM Fallet - September 2007 18

19. One Priority and its global main project
Supply Chain Execution : The T² Project - Context
Ambition
Set-up best -in class transportation practice at Schneider Electric through a
global Transportation Transformation (T²) initiative
Reduce energy consumption as well as CO² emission
Objectives
Improve significantly customer satisfaction
Generate €40 million annual savings by end of 2008
Stakes
3,1% of sales (400 M€ in 2005) without customs clearance fees
An ambassador of =S= for our customers
A vital link between =S= and our suppliers
A key input of infrastructure strategy tomorrow (sourcing, plants, warehouses)
An activity to put under control before any outsourcing decision can be made
A key activity for best-in-class companies (e.g. Toyota, Walmart, Dell)
SC&L – JM Fallet - September 2007 19

20. Our starting point 18 months ago
Dimension Weaknesses observed Assesment of maturity level
1 2 3 4
• Transportation cost-oriented and local approach derived
from strong leadership of purchasing and country
I Strategy management
• Professional buyers in place
II Organization
• Almost no transportation mode experts
• Operational role undervalued
• Too many Indians, not enough leaders
• Poor knowledge of supplier market and practices
• Little integration of customs operations
• Too few reviews of flows (competitive bidding,
III Process optimization…)
• Very little consolidation of flows
• Objectives setting and target definition
• No working relationships with transport suppliers
IV KPIs & Performance • Service KPIs looked on a monthly basis
Management • No visibility on costs
• Poor carrier performance
• Many diverse IT systems
V IT Systems & Tools • No visibility tools
SC&L – JM Fallet - September 2007 20

21. Transportation costs & service not under control
Schneider Electric transport flows synthesis [2005, M€]
With a total transportation costs of 400M€ (of which 104M€ are not tracked or managed)
External suppliers =S= factory =S= IDC / RDC =S= RDC / LDC Customers
85 M€ 53 M€ 74 M€ 127 M€
(21%) (13%) (19%) (32%)
=S= factory =S= LDC
60M€
(15%)
Supplier flows = 85 M€ Internal flows = 127 M€ External flows = 187 M€
(21%) (32%) (47%)
And…
Road mode represents 73% of spent Domestic flows represent 62% of spent 9 Logistics Territories cover 87% of
& 93% of volumes transportation expenditures
Air mode for 19% spent & 2% volumes Intercontinental flows for 21% Of which France covers 31%
Sea mode for 8% spent & 5% volumes Continental flows for 17% And US cover 30%
SC&L – JM Fallet - September 2007 21

22. Priorities and main projects
Supply Chain Execution : The T² project - Main Deliverables
Organization
Federate Schneider Electric transportation community
Standardize transportation organization
Staff each logistics territory with dedicated transportation
management and transportation procurement dedicated resources
Set-up a centralized and dedicated team of project managers and
buyers to manage all air and sea & express flows at group level
Project Management
3-year roadmap (2006-2008) with key tactics, actions planned, roll-
out by geography to manage transportation productivity
Design under access of a program management tool to manage
more than 150 transportation projects
Control 100% of transportation invoices through a freight payment
outsourcing project covering 80% of transportation expenditures
Optimization of EOD road flows (€130 million scope)
SC&L – JM Fallet - September 2007 22

23. 53 M€ annual productivity by EOY 2008...
Productivity earnings by lever [2005-2008; M€]
Annual Saving
39,4 M€
27,6 - 14,0 493,7 - 4,6 - 12,3
80,4 - 8,8 - 13,7 454,3
399,7 +2,1% per
year Pure purchasing T2 projects (included purchasing contribution) : reported
+6,3% per actions : consolidated in detail in program management
year in program
management PROGRAM MANAGEMENT PERIMETER
Transport Volume Price effect Purchasing Extrapolated Invoice Flow Intercon- Local Impact of
cost 2005 effect Productivity baseline control optimization tinental initiatives productivity
% of total in spend
% of total
productivity
productivity 12% 31% 22% 35%
earnings
earnings
Source: Data collection, June 2006 ; OD estimation savings ; Roland Berger analysis
SC&L – JM Fallet - September 2007 23

24. 80% of costs are invoiced by 9% of suppliers
Transportation suppliers Pareto
Transport
100%
Costs %
90%
80%
80%
70%
60%
50%
40%
30%
20%
10%
# Active
0%
856 Suppliers
0 77 100 200 300 400 500 600 700 800
Source: Data collection, June 2006 ; OD estimation savings ; Roland Berger analysis
SC&L – JM Fallet - September 2007 24

25. How to distribute responsibilities and leverage each
available expertise?
Air and Sea carriers
Trucking companies
Fleet Management
Freight forwarders
Freight audit and payers'
Consolidators
Control Towers
…
SC&L – JM Fallet - September 2007 25

26. Built internally a “plug & play” 4PL capability
COST VISIBILITY
Freight Audit & Payment
SERVICE VISIBILITY
Air & Sea Road
Global Trade Management Road Tower Control
• Transportation track events • Route optimizer
• Customs (SKU, order, shipment) • GPS localization
• Use of consolidators • Track & Trace
• Direct negotiations with sea/air carriers • Driving hours and ton.kms
SC&L – JM Fallet - September 2007 26

27. Benefits of a freight audit & payment system
- 7 à 12%
GROUP & INTER - DIVISIONS
Cost Consolidation / Group
-2 à 3% management Benchmark / Tender
Budget Transport methodology
12- 24 months
Transport/ SITE & INTRA - DIVISIONS
Cost Consolidation / Group
sales Benchmark / Tender
-2 à 3% management
Transport methodology
Transport /
purchase Double invoice
Rate / Ship
-3 à 6% Mistake tariffs & conditions
audit Non justified shipments
Inter sites Immediate
Reallocation of internal resources
Operations
-0,5 et 0,7% (cost allocation, shipment registration,
costs custom & transport invoicing, control)
(3 months)
Freight Scan + POD
+0,5 à 0,7 % payment Audit + management
cost Payment & reporting
Price +1 à 5%
evolution
In place in the US, Starting in France ans Spain, next step Australia
SC&L – JM Fallet - September 2007 27

28. Transportation major cost drivers (1/2)
TRADE AGREEMENTS OIL PRICE POST-PANAMAX
LACK OF GLOBAL VISIBILITY SOCIAL & DEMOGRAPHICS GLOBAL WARMING
SC&L – JM Fallet - September 2007 28

29. Transportation major cost drivers (2/2)
LEAD TIME VARIABILITY CONGESTION SUPPLY CHAIN SECURITY
LACK OF SYNCHRONIZATION PACKAGING PAPER WASTE
SC&L – JM Fallet - September 2007 29

30. In short : 3 Key Success Factors
Processes
Run the supply chain with processes that are clear, well defined and targeted
with Few but global KPI’s
Focus
Focus the whole supply Chain on :
– Customers
– Speed
– Profit
Networking
Coordinate the SC together with the whole Cie, through clear leadership
Develop our people : be an emerger
Benchmark, exchange, enrich permanently your knowledge
SC&L – JM Fallet - September 2007 30

31. Conclusion We believe the supply chain must become more than
a series of cost centers, transactions and negotiations
it can and must be and engine for growth itself
A.G. Lafley, Chairman, President and CEO,
SC is transversal,
Proctor & Gamble
addressing global end to
How to transform our Supply Chain and achieve
end processes
our Customer satisfaction goals ? … the 4T’s
SC is focused on customer
satisfaction and asset
Trust
management
SC is strengthening its
Teamwork
professionalism
SC is becoming a Bridge
Time Transparency
between Sales and
From local single initiatives to processes
Manufacturing
From Experts in silos to Professionals in Network
SC&L – JM Fallet - September 2007 31

32. My job
If you ask me what I’m doing……….
I will answer : proselytism
50% of my time to explain why and how
to change
SC&L – JM Fallet - September 2007 32

33. Supply Chain
Replacing inventory
with information
for customer satisfaction
http://logistics.schneider-electric.com
Jean-Michel Fallet
+33608558447
SC&L – JM Fallet - September 2007 33

34. Q&A
SC&L – JM Fallet - September 2007 34