The Workbook: Conducting a Supply Chain Opportunity Assessment

1. The Workbook:Conducting a Supply Chain Opportunity Assessment Supply Chain Optimization Team Project Kickoff - March 2001

2. Document Outline Discussion Topics I. Work Plan II. Leveraging the Shell Analysis III. Mapping to Supply Chain Drivers IV. Quantify the Benefits V. Defining the Change Projects (I/T & Other) Appendices - Shell analysis to date

3. 1 2 3 What Problem Are We Trying To Solve? What problem should we work? Problem Level “Optimize all networks” Maximize potential of one individual network “Make Things Happen Right Every Day” inside each operating unit of an individual network

4. 5. 2. 3. 4. Define Deliverables Where to Start GO Decision Interpret Shell Analyses Define Solution Approach 1. 2 Weeks Shell CheckPoint Define Project Workplan Present Results Process, Facilities, Benefits SE L E C T E D ME T H O D S Quick wins Identify Dollar Benefits Analysis Pilot What’s Next Organization, Metrics & Skills 8 Weeks I/T: Existing & New Specific Recommendations Shell CheckPoint Review Develop Specific Projects

5. What do we have to work with? Shell Team research to date... I. Improvement opportunities from MAS analysis II. PwC Harmonization Study III. Health Check List III. 3/29/2001 Workshop & Findings

6. Leveraging Shell Analysis Gaining “traction” ... • Organize by supply network: • Front line, Cross-functional Teams • Get & review all analyses 1 • Understand SCM value drivers: • Physical • Process 2 Categorize networks by supply chain drivers 3 Quantify benefits - Get “optimized base case” Prioritize projects, including I/T 4

7. Each Network is a “Different Animal” Analysis sequence is very important... Understand crude and product regulatory environment 1 Know all the assets: Facilities: refineries, pipelines, terminals, ports Knowledge: exchanges, processing, trading, markets 2 Know, model and anticipate your competitors: both facilities and strategies 3 • Have a solution approach - framework that manages: • Processes, Organization, Measures & Policies • Functions (and/or facilities) 4 Discover: Where are the benefits, how large Acknowledge: Change takes time, stepwise approach makes sense 5

8. Define the Networks - USA Mobil Example 6 Team 2 Team 1 Supply - Trading 5A 4 Ex-Paulsboro 5B Joliet 1 Torrance as a Metrics Model Beaumont Retail Market Share Chalmette Greater than 20% 10-20% Less than 10% 2 3 Team 3

9. Team 1Torrance 2Beaumont 3Chalmette 4Joliet 5Paulsboro 6S&T Crude Supply Mobil: PwC: Trading/Feedstock Mobil: PwC: DemandForecasting Mobil: PwC: Other... Mobil: PwC: Organize by Network and Process Which team is your best fit? Sponsors Steering Team Work Teams

10. Set Price & Notify Customers Set Price & Notify Customers Set Price & Notify Customers Develop NBUs - Network Context Model Pick a benchmark for the current Shell SCM metrics Trade, Exchange Schedule & Transport Crude - F/stocks Trade, Exchange Schedule & Transport Products Develop Rack &Bulk Customers Select & Acquire Crude - F/stocks Plan & Operate Refinery NBU Network 5 Trade, Exchange Schedule & Transport Crude - F/stocks Trade, Exchange Schedule & Transport Products Develop Rack &Bulk Customers Select & Acquire Crude - F/stocks Plan & Operate Refinery NBU 1 NBU 2 NBU 3 Network 2 Trade, Exchange Schedule & Transport Crude - F/stocks Trade, Exchange Schedule & Transport Products Develop Rack &Bulk Customers Select & Acquire Crude - F/stocks NBU 4 Plan & Operate Refinery NBU - Natural Business Unit

11. Doing the Analysis - Physical 1Torrance 2Beaumont 3Chalmette 4Joliet 5Paulsboro 6S&T • Facilities • Refineries • Terminals • Owned • Other • Pipelines- Ports • Exchanges • Supply Volumes/Type • Crudes • Feedstocks • Products • Market Characteristics • Competitors • Customers • Price Setter • Shell Characteristics • Strategy • Channels • Product mix • NBU Reporting • Organization

12. Set Price & Notify Customers Doing the Financial Analysis - Metrics Trade, Exchange Schedule & Transport Crude - F/stocks Trade, Exchange Schedule & Transport Products Select & Acquire Crude - F/stocks Develop Rack &Bulk Customers Plan & Operate Refinery Total for NBU • Fixed Capital Employed • Refineries • Terminals • Owned • Other • Pipelines- Ports • Inventories • Crudes • Feedstocks • Products • Other Working Capital • Receivables • Payables • Expenses • Fixed • Variable • Margin • Gross

13. Set Price & Notify Customers Available Definitions: Processes Big hit potential Granular approach needed Trade, Exchange Schedule & Transport Crude - F/stocks Trade, Exchange Schedule & Transport Products Select & Acquire Crude - F/stocks Develop Rack &Bulk Customers Plan & Operate Refinery Star Enterprise PW*Stars Koch Koch Refining PW*Stars Koch BPUSA+ Star Enterprise BPUSA + Star Enterprise Need a “Level 2.0” What’s Going on - by process to define “Similarities & Differences by network

14. The Action is at The Corners Breakdown A rated network = • Reduced inventory goal does not allow for product hedging strategies • Product traders global info not communicated to marketers or refinery • Plant operations has no idea of why a crude was purchased • Scheduling inside the plant not coordinated with crude selection process Global Trading Integrated Network Breakdown Breakdown Standalone Manufacturing • No one “owns” facilities needed to efficiently move product along a pipeline or common carrier • Spot product economics do not reflect margin deterioration in market

15. Define SCM Guiding Principles for Project • Support MSD Vision & Mission • ROCE Target • Leverage Assets • Industry Cost Leader • Selective Growth in Attractive Markets • Process development to provide a mutually agreed customer service level: • Lowest laid down cost to the terminal rack • Optimum feedstock cost to refineries (location, quality, timing) • Maximize margins along an imbalanced supply chain • Flexibility, adaptability in a changing environment • Maximize economic utilization of assets (i.e. Inventory Management) • Facilitate optimization of the supply chain • Capture the SAP potential, moving to the next level • Fully aligned supply chain organization (Metrics) • Center of expertise/knowledge for: • Market intelligence • Logistics • Cost-to-produce (cost structure) • Optimization analytics • Decision making (the science) • Leverage business relationships • Fully leverage trading partnership Best Practices Semiconductor Paper Steel Asset Intensive = Improved Utilization Best Practices Automotive Computers Material Intensive = Improve synchronization Best Practices Pharmaceutical Consumer Products Frito Lay Distribution Intensive = Reduce cost

16. Downstream as a Supply Chain Asset Intensive Material Intensive Distribution Intensive Supply Push Demand Pull Plants Terminals Sites Crude Product Trading Exchanges Bulk Off The Rack ImprovedUtilization Improved Synchronization Cost Reduction • Lowest laid down cost to the terminal rack • Optimum feedstock cost to refineries (location, quality, timing) • Maximize margins along an imbalanced supply chain • Flexibility, adaptability in a changing environment • Maximize economic utilization of assets (i.e. Inventory Management) • Facilitate optimization of the supply chain Process Improvements to Meet Customer Service Levels

17. Identify Primary SCM Benefits Benefit Drivers OptimizeTrades& Exchanges ImprovedAssetUtilization Lower DistributionCosts Improved Customer Satisfaction ManageInventory Demand Planning Network 1 Network 2 Network 3 Network 4 Network 5 Network 6

18. Quantify the Benefits $ 3 MM ImprovedProcesses Best Practices NewMetrics Select Focus Areas $ 5 MM ImprovedProcesses NewMetrics Best Practices $ 10 MM ImprovedProcesses NewMetrics Best Practices Low Cross Network Selected Focus Areas High “To-Be” Value “As-Is” Value

19. PricewaterhouseCoopers Candidates Marty Stetzer (BME, MBA) • 18 years experience with Esso, Superior and Mobil. • 10+ years downstream consulting experience. • Expertise in downstream trading, supply and wholesale marketing. Susan Hulse (Europe) • 10 years industry experience with Exxon. • Range of roles in supply and distribution. • Expertise in supply-distribution operations and scheduling, transportation management. Russell Pell (BSChE, MBA) • 8 years experience with Exxon, 4th year PwC consulting. • Refinery experience in planning, scheduling and process engineering. • Expertise in supply chain management, inventory management, demand and refinery planning. Additional Candidates • 17 years consulting experience. • Expertise in crude selection, modeling & LP’s XXXX • years experience with Exxon. • years downstream consulting experience. • Expertise in strategy, operations and organization restructuring. YYY • years experience with Superior Burlington Resources, Torch Energy • years consulting experience. • Expertise in oil/gas and NGL marketingand trading ZZZ • years technical experience. • years consulting experience. • Expertise in decision support system design and implementation.