Manage Uncertainty in Chemicals via Inventory Optimization

1. Manage Uncertainty in Chemicals via Inventory Optimization Ray Adams SAP, IBU Chemicals David Giacomini Anand Sundar DuPont Company Chris Potts Eastman Chemical

2. Spot Oil Prices – Department of Energy

3. Relationship to Inventories and Price Indices Source: US Bureau of Census Inventory to Shipments Ratio, ICIS Pricing

4. Powerful Trends Are Re-Shaping Chemicals Business Worldwide Energy & Raw Materials Management Innovation & Portfolio Management Globalization Compliance ? Cost Reduction • Price volatility • Cost pressures • Proximity to raw material sources • New opportunities and competitors • Consolidation / M&A • IP Management • Innovation networks and Hybrid Development • Portfolio optimization • Alternative Feedstocks • Environmental compliance • Global trade compliance • Risk Management Focused Investment • Cash is King, Increased Focus on Cash-to-Cash cycle • Challenging Prices and Reducing Margins • Tightening up of Working Capital • Prepare for the Unexpected: Strive for Transparency • Sustainability becomes a Board Room Topic • Operational Excellence & Business Network Innovation

5. Company Profile $26.1B 2009 Company Sales • DuPont is the world’s most dynamic science company • Creating sustainable solutions essential to a better, safer, healthier life for people everywhere • Founded in 1802 • Operating in more than 70 countries • Total 2009 Sales $26.1B

6. DuPont IDS: Headed in the Wrong Direction

7. DuPont’s SmartOps® Journey Laying the groundwork Automation & Integration Manual Implementations Proofs of Value • 4 businesses • Developed data management processes • Demonstrated SmartOps® value • SmartOps® Forum • Initial business discussions • Agreement to move ahead with POVs • SmartOps® led proofs of value for 2 businesses • Identified business value for MIPO • Made decision to license SmartOps® • Automate the data extract, transform, and load processes • Address requirements for scenario management • Standardized support model

8. DuPont Business Requirement “How do we provide a scalable architecture that can integrate supply chain data from several heterogeneous IT systems Business Unit A – SAP APO 4.1 Business Unit E – Legacy application Business Unit F – SAP R/3 Business Unit N MIMI Business Unit P - Legacy Business Unit C – SAP APO 3.0 Business Unit S – SAP R/2

9. Architecture for SmartOps® Integration Non – SAP Systems Time Phased SS Levels MIMI 6 LTT Manu BW 6 SAP R3 SmartOps® MIPO 1a 5 4 SAP-APO INFORMATICA Staging Area 5 Validate and Update SS in APO 1b Data Store 3 2 Data Gateway Excel / other Error Handling and Resolution

10. The Journey Continues All SmartOps® BUs begin using integrated functionality First BU begins using fully integrated functionality

11. A global manufacturer of chemicals, plastics and fibers headquartered in Kingsport, Tennessee A company dedicated to economic success, environmental stewardship and social responsibility A leading producer of coatings, adhesives, specialty plastics and cellulose acetate fibers A manufacturer of PET polymers for packaging The first company to commercialize a gasification facility in the U.S., in 1983, which is operating at industry-leading performance Who we are

12. What We’ll Cover … • Achieving the Right Balance – Why Eastman chose SAP Enterprise Inventory Optimization by SmartOps® (SAP EIO) • Project Tools and Processes: A Six Sigma Journey • Reporting – Measures and Dashboards • Results and Future • Wrap-up

13. Achieve the Balance Customer service level Some key stakeholders: • Customers • S&OP • Supply chain • Procurement • Logistics • Manufacturing • Business Profitability $$ Manufacturing cost Inventory Cost

14. Started with a Pilot/Proof of Concept • Work began: July 2008 • Pilot area: 90 items, 15 plants/warehouses • Manual models of pilot area: Oct 2008 • Decided upon major parameters and settings • Automated pilot area: Feb 2009 • Concluded pilot project: May 2009 • Company wide rollout: June 2009 • SharePoint reporting: Oct 2009 • SharePoint dashboard: Dec 2009

15. Parallel Project Efforts Business Process Design using Six Sigma • S&OP • Business process design team • Supply chain management • Supply planning • Manufacturing • Procurement • Software implementation team Software Tool Implementation & Configuration • Technical team • Business process design team • Supply chain management

16. Business Process Design Using Six Sigma • Define • Stakeholder matrix • Interview guide and plan • The Affinity Diagram (KJ Analysis) – key process needs to meet • Conceptualize • Process concept generation to meet key needs • Design of the business process • Optimize – Testing and improving the process • Control – Establishing the control plan for the process

17. Business Process Summary Slide

18. Inventory Measures • 1. Inventory level status – Current Inventory against limits • 2. Percent in control – % of KGs in control – weighted • 3. Percent touched safety stock – Percent of items that touched safety stock in last 90 days

19. Project Benefits • Initial results are consistent with our expectations • Demonstrating relationship of forecast accuracy, customer service, master data, and inventory investment • Identifying the right number, and identifying levers to improve the summation of the variables • Accelerating the rollout to other groups within our company using black belts

20. 7 Key Points • Master data is critical and expect to spend significant amounts of time to correct • Accurate forecasts are foundational to optimizing inventories • Technical changes have been easier to overcome than business process redesign • Measures and dashboards helpful to speed adoption • SAP EIO by SmartOps while a good tool, is NOT a silver bullet • SAP connectivity is not a simple out-of-the-box connection • Expect continual iterations and loops; MANY small steps and changes are needed to complete the journey

21. ] • Thank you for participating. David Giacomini David.Giacomini@usa.dupont.com Anand Sundar aksundar@linearlogics.com Chris Potts wpotts@eastman.com [