Frank Kleinschrodt Senior Vice President Aspen Technology frank.kleinschrodt@aspentech

1. Profiting from Private Exchanges and Collaborative Supply ChainsCase Study: ICI Paints' E-Procurement and Collaborative Replenishment Strategy Frank Kleinschrodt Senior Vice President Aspen Technology frank.kleinschrodt@aspentech.com

2. Agenda Tough Choices in a Tough Environment Private Trading Exchanges: Goals and Benefits Case Study: Paints and Coatings Dealing with the Public vs Private Apparent Dilemma Summary & Questions

3. Economic and Technology Pressures • Excess Supply • Economic downturn hitting demand • Little Product Differentiation • New Costs Arising from Recent Terrorism Events • High Costs and Low Flexibility of ERP Projects • Costs of Trading Partner Integration Higher than Projected Benefits • e-Business technology providers evolving, merging or disappearing ``This is the worse the industry has seen in the past 20 years in terms of volumes and margins.” – Andrew Rosenfeld, Prudential Securities

4. Goals E-BusinessStrategies Goals and Strategies Reassessed • Lower internal and feedstock costs • Price Improvement with Better Service • Increase margins and revenue • Improve ROCE e-procurement CPFR E-Sales • Optimize your value chain • Focus on projects with near-term ROI • Focus on projects with long-term strategic value • Scaleable strategies capable to promise (CTP) strategic sourcing customer portals CRM

5. Agenda Tough Choices in a Tough Environment Private Trading Exchanges: Goals and Benefits Case Study: Paints and Coatings Dealing with the Public vs Private Dilemma Summary & Questions

6. Key Points • Private Exchanges power current business processes, enable you to maintain control of customer/supplier relationships, and provide flexibility, agility and responsiveness to changing environment • Collaboration can significantly reduce unplanned variability across your supply chain • Automation of the procurement and sales process isa prerequisite to full collaboration • Optimization of the procurement and sales processes bring the greatest benefits in reducing costs, increasing revenue, and improving capital asset efficiency

7. Direct vs. Indirect … Chemicals vs. Discrete Manufacturing • e-Business in the Chemical Industry • High cost of interruptions • Tightly interlocked supply chains • Substitutability of products Buy-Side & Sell-Side Private Marketplaces Contract How Businesses Buy/Sell Spot Public Marketplaces Direct Materials Indirect Materials What Businesses Buy/Sell

8. The Result… • High transaction costs • Frequent errors • Flawed decisions • High stocks of the wrong product • Increased logistics costs • Inefficient use of resources • Multiple change orders Traditional Procurement Process Inefficiencies • Traditional characteristics of procurement process: • Primarily manual (phone, fax, etc.) • Multiple hand-offs • Frequent data (re)entry • Variability of orders • Highly reactive to manufacturing • Limited supply chain visibility

9. Value Chain Planning Value Chain Planning Supply-side Optimization Supply-side Optimization Production Optimization Production Optimization Demand-side Optimization Demand-side Optimization Buy-side Marketplaces Logistics Providers Asset Optimization Asset Optimization Value Chain Planning E X E C U T I O N E X E C U T I O N Supply-side Optimization Production Optimization Demand-side Optimization Operating Company E X E C U T I O N Asset Optimization Engineering & Construction Firms Sell-side Marketplaces Collaboration in a Private Exchange Order Management and Commitment Make the right order commitment decisions in seconds through better coordination with production planning Collaborative Demand Management Increase efficiency and accuracy of your demand plans through shared planning and forecasting processes E-Procurement Automate and improve your procurement processes through machine-to-machine and machine-to-web connections SUPPLIERS CUSTOMERS Materials and Receipts Optimization Automate and optimize operational planning leads to better manufacturing and raw material utilization, and inbound logistics management Collaborative Replenishment Collaboratively manage your customers’ inventory, automate replenishment & coordinate logistics E-Sales Automate and improve your sales processes through machine-to-machine and machine-to-web connections

10. Private Exchanges: The Benefit Areas • Enhance Existing Business Processes and Relationships • Support Multiple Sales Channels and Customer Segments • Greater Privacy and Security • Superior Collaborative Capabilities • Faster Implementation • Protection and Enhancement of Competitive Positioning

11. Benefit Drivers and Value Opportunities Example: Specialty Chemicals Manufacturer Reduced Inventory Faster Shipment-to-Cash Cycle Reduced Cost of Expedited Shipments Reduced Stock-Outs Increased Revenue Reduced Transaction Costs Better Visibility / Lower Variability Eliminate Transaction Lags and Errors Better Planning and Scheduling Functions Better Demand Information Flow Better Service / Ease of Business Explicitly / Automatically Support Trading Agreements

12. Value Opportunity Levels Available to Trading Partners Example: Specialty Chemicals Manufacturer SupplierBuyer Reduced Inventory 20-30% X X Faster Shipment-to-Cash Cycle25-50% X Reduced Transaction Costs 25-75% X X Lower Shipping Cost 5-10% X Reduced Cost of Expedited Shipments 30-80% X Reduced Stock-Outs 10-50% X X Increased Revenue 1-5% X

13. Agenda Tough Choices in a Tough Environment Private Trading Exchanges: Goals and Benefits Case Study: Paints and Coatings Dealing with the Public vs Private Apparent Dilemma Summary & Questions

14. Verify Product Availability Verify Timing and Product Automate 4 Place PO Customer Service Purchasing 2 1 Confirm/Renegotiate Ship Date &/or Product 3 Plant Scheduling Final Agreement on Ship Date & Product Plant Manu-facturing 5 Issue COA Shipping 9 Seller Buyer Request status update Receiving 10 Accounts Receivable Communicate status 13 Cut invoice 15 Accounts Payable 16 Traffic 3-way match Payment/Settlement 18 11 Request status update and receive response Issue Bill of Lading, MSDS, packing list 17 Set-up payments according to terms 12 8 20 14 Cut freight invoice Pay freight invoice Receive product, BOL, & packing list 19 Confirm Pickup 7 Optimize Schedule Carrier Pickup 6 Traditional Procurement Processes Logistics Provider

15. Demand Plan On-Hand Inventory RPR* Purchase Order, etc. Review Forecast & Agree With Customer on Changes Create Consensus Demand Forecast Generate Replenish-ment Plan Review Replenish-ment Plan & Agree With Customer on Changes Execute Replenish-ment Plan… Forecast Orders Inventory Targets ERP System Sales History Open Orders Logistics Constra-ints On Hand Inventory In-Transit Inventory Collaborative Planning, Forecasting & Replenishment Customer Generate Initial Demand Forecast Seller * Replenishment Proposal Request

16. ICI Paints Paints & Coatings Manufacturer Business Challenge: Current Status: • 400 suppliers • 9 plants • Bulk & non-bulk materials • Hundreds of millions of $ in direct materials purchases • No ERP system in place • Standardizing on Aspen Buy for all direct materials purchasing in North America • Buy-side system installed at ICI NA paints • Currently connecting suppliers via machine-to-machine and machine-to-web Solutions Applied: "ICI Paints believes that the Aspen Buy solution will create the opportunity for ICI and its key suppliers to reduce inventories and lower transaction costs by enabling real supply chain collaboration.“ – Director of Purchasing, ICI Paints • Supply-side Optimization • E-Procurement • Collaborative replenishment

17. Value Chain Planning Value Chain Planning Supply-side Optimization Supply-side Optimization Production Optimization Production Optimization Demand-side Optimization Demand-side Optimization Operating Company Operating Company E X E C U T I O N E X E C U T I O N Asset Optimization Asset Optimization Vendor Managed Inventory 1/5 Transactions: • Supplier buys back current inventory • For bulk products fills tanks to 100% capacity • For packaged goods stocks warehouse to an agreed upon “maximum” value • Supplier agrees to maintain certain safety stock levels for buyer Tank Farm

18. Value Chain Planning Inventory & Actual Usage Demand Plan Supply-side Optimization Production Optimization Demand-side Optimization Operating Company E X E C U T I O N Asset Optimization Vendor Managed Inventory 2/5 Value Chain Planning Supply-side Optimization Production Optimization Demand-side Optimization Operating Company E X E C U T I O N Asset Optimization Transactions: • Buyer provides visibility into inventory levels on a periodic basis: • Tank telemetry system for bulk products • Forecasts • Inventory or actual usage info for non-bulk products • Buyer provides demand forecast on a periodic basis Tank Farm

19. Value Chain Planning RPR Supply-side Optimization Production Optimization Demand-side Optimization Operating Company E X E C U T I O N Asset Optimization Vendor Managed Inventory 3/5 Value Chain Planning Dock Schedule Request RPR Supply-side Optimization Production Optimization Demand-side Optimization Operating Company E X E C U T I O N Asset Optimization Transactions: • Supplier determines the optimal replenishment strategy & schedule • Supplier generates a Replenishment Proposal Request (RPR) that is transmitted to buyer • Supplier requests receiving dock time slot Tank Farm

20. Value Chain Planning Supply-side Optimization Production Optimization Demand-side Optimization Operating Company E X E C U T I O N Asset Optimization Vendor Managed Inventory 4/5 Value Chain Planning Order Create Dock Scheduling Confirmation Supply-side Optimization Production Optimization Demand-side Optimization Operating Company E X E C U T I O N Asset Optimization Transactions: • Buyer receives RPR and automatically generates and transmits a P.O.: • Price determined based on long-term contract • Delivery date checked to make sure specified date is a valid receiving day for the buyer • Product is checked to ensure that it is “VMI-enabled” • Buyer confirms and assigns receiving dock time slot Tank Farm

21. Value Chain Planning Supply-side Optimization Production Optimization Demand-side Optimization Operating Company E X E C U T I O N Asset Optimization Vendor Managed Inventory 5/5 Value Chain Planning Ship Notice Supply-side Optimization Production Optimization Demand-side Optimization Delivery Receipt Operating Company E X E C U T I O N Asset Optimization Transactions: • Supplier ships product and generates a Confirmation of Shipment (COS) notice • Buyer receives goods and transmits a Receipt message to supplier • Buyer pays supplier based on pre-negotiated terms Tank Farm

22. Agenda Tough Choices in a Tough Environment Private Trading Exchanges: Goals and Benefits Case Study: Paints and Coatings Dealing with the Public vs Private Apparent Dilemma Summary & Questions

23. Dealing with the Dilemma of Public vs Private Exchanges • The apparent dilemma forces a choice between: • Lower costs promised from a public or hub based approach and • The intimacy of a more customized and possibly lower scalability of the private commerce hub • The good news is you really can have it both ways: • Emerging standards coupled with a hosted approach provide a means for a private commerce hub to give you the one-to-many scalable connectivity you need • The better news is you can customize and personalize this approach for your unique inter-company business processes – not limited to the lowest common denominator approach

24. Agenda Tough Choices in a Tough Environment Private Trading Exchanges: Goals and Benefits Case Study: Paints and Coatings Dealing with the Public vs Private Apparent Dilemma Summary & Questions

25. Key Points • Private Exchanges power current business processes, enable you to maintain control of customer/supplier relationships, and provide flexibility, agility and responsiveness to changing environment • Collaboration can significantly reduce unplanned variability across your supply chain • Automation of the procurement and sales process isa prerequisite to full collaboration • Optimization of the procurement and sales processes bring the greatest benefits in reducing costs, increasing revenue, and improving capital asset efficiency

26. Questions?