Reducing Complexity and Creating Value by aligning Process and Technology

1. Reducing Complexity and Creating Valueby aligning Process and Technology Seema Phull Enterasys Networks April 2005

3. Agenda • Enterasys Overview • Business Challenges and Goals • Strategy of Attack • Current Status • Q&A

4. Enterasys at a Glance • Founded: 1986* • Corporate Headquarters: Andover, Massachusetts • Q2FY04 Quarterly Revenue: $91.7M • 2003 Revenue: $414.5M • Cash & Marketable Securities: $173.4M • R&D Investment: 21.4% of Revenue • Major Markets: Financial Services, Manufacturing, Healthcare, Education, Government • Number of Offices Worldwide: 62 • Number of Employees: 1276 We Build The World’s Most Secure Enterprise Networks *Cabletron Systems *Cabletron Systems

5. 25,000 Customers Globally Foundation for Growth Blue Cross Blue Shield BM&F Brasil Boise Cascade System Boston College Caja Madrid Celera CERN CITI City of Anaheim Colgate-Palmolive Comcast Goodyear Tire & Rubber Co. Gillette ING Insurance Commission of Western Australia LG Matsushita McCarron Airport Monsanto NEC Petrobras Pittsburgh International Airport SAP Sears Siemens State of Massachusetts State of Connecticut State of Illinois Swiss Life Toyota Trakya University Unisys United Airlines University of Toronto University of Southern California U.S. Air Force Winn Dixie Analog Devices Arcelor AT&T Audi Aurora Health Care Australian Taxation Office Banamex Banco de Mexico Bank of Baroda Bank One Baylor University Bear Stearns Bloomington Hospital & HealthCare

6. 1990 Launched first multivendor, distributed management platform(SPECTRUM) 1995 Developed first solution using directory-enablednetworking and policy-based management (SecureFast™) Enterasys Innovation & Technology Leadership Tradition of Strong R&D Enterasys Labs: Over 500 R&D engineers and 650 patents 2002 Secure Guest Access policy solution Centrally- administered Acceptable Use Policy solution 2004 Intrusion Response Quarantine Policy Distribution Layer policy Allocation/ Multi-User Authentication 2001 First standards-based policy networking solution (UPN) Co-authored 802.1X user authentication standard 1997 Layer 2/3/4 Packet Classification capabilities in intelligent switching products 2005 Enhanced Context-Based Policy Allocation 2003 New generation of policy- capable switches (Matrix N-Series DFE)

7. ETS Supply Chain at a Glance • Two tier distribution through approximately 10 major distributors • Direct sales force involved in most sales • Outsource manufacturing, distribution in EMEA • One tier 1 contract manufacturer • Two major ODM partner • One tier 3 contract manufacturer • Two distribution centers globally • Planning activities controlled at corporate office in USA

8. Business Performance Challenge

9. Optimizing operations through S&OP • Sales & Operations Planning strategically aligns supply and demand • CFDP: Minimize demand uncertainty • CPPP: Minimize supply uncertainty • Net Result: Improve customer service while reducing costs

10. Old Planning Approach Created Disconnects Forecasting Performance Measurement PM DP Sales Finance Supply Chain Management  No company-wide discipline or structure  Disconnects between departments  Reactive, “fire-fighting” business mode  Short-term, tactical focus (vs. strategic)  Islands of analysis driven manual efforts  No care for forecasting consequences  Too focused on product supply  Too much a clerical, judgmental effort

11. Re-engineering for Effective Demand Management • Create an enterprise closed-loop process that is not isolated to one functional area • Shared processes, assumptions and ownership across the entire organization S&OPPerformance Measurement Finance MPS/MRP/CM Integration / Fulfillment / Metrics Sales CFDP C3P PM Supply Chain Management DP Collaborative Forecasting & Demand Planning (CFDP) Collaborative Procurement Planning Project (C3P)

12. Method to the Madness • Sequence drives success • Business Process: Consistent, Collaborative, and drives Accountability • Resources: Understand roles and responsibilities of all players • Business Intelligence: Create and share critical and timely information • Technology Tools: Technology should follow process to ensure success Resources Business Process Business Intelligence Technology Tools

13. Collaborative Forecasting and Demand Planning Objective • To manifest and sustain an enterprise process for developing, approving, and disseminating meaningful demand forecasts that facilitate Enterasys decision-making. Goals • Increase demand predictability • Reduce costs related to safety stock, E&O inventory, and order expediting • Administrative and mfg. costs • Expediting freight costs • Improve customer service via better on-time delivery and higher line and order fill rates • Enable coordinated and streamlined execution of a consensus sales and operations plan • Achieve preferred vendor status

14. ETS ETS ETS ETS CFDP Goals as of June 2004 ETS ETS B E S T P R A C T I C E ETS ETS ETS ETS ETS ETS Stage 1 = Poor Practice Stage 2 = Better Practice Stage 3 = Good Practice Stage 4 = Best Practice Current State 6 Month Goal 12 Month Goal

15. Old Process Twice per quarter Reactive (no lock down period) Lack of accountability and measurement SOP meeting PPT Tactical Orientation CFDP Process Monthly in monthly buckets Proactive (using forecast frozen period) Accountability for Sales, PM, Finance, DP, and SOP Team SOP Scenario Simulation Demand & Supply Alignment Strategic Orientation S&OP Model for ETS

16. Sales and Product Management Make adjustments to the baseline forecast Actively participate in Post-Mortem, Pre-SOP, and SOP meetings Demand Planning Oversee the CFDP Process Report forecast performance Generate baseline forecasts Manage and issue the master forecast document and forecasting documentation Roles/Responsibilities in the New CFDP Process Supply Management • Assess the demand forecast with regards to supply chain implications • Actively participate in Post-Mortem, Pre-SOP, and SOP meetings Finance • Compare the demand forecast with the financial forecast; identify potential issues • Actively participate in Post-Mortem, Pre-SOP, and SOP meetings

17. One Plan of Record

18. So What Factor of CFDP • Analysts, Planners, and Manager are spending more time analyzing information rather than chasing data • Management Team is able get critical business information such Gross Margins, Inventory Exposure, and Revenue Tracking that enables action • S&OP Champion steering demand in response to market and sales conditions thus enabling a proactive approach to revenue management • ETS now has a closed loop process that connects Demand with Supply in near real time

19. ETS ETS ETS ETS CFDP Scorecard as of March 2005 ETS B E S T P R A C T I C E ETS ETS ETS ETS ETS ETS ETS Stage 1 = Poor Practice Stage 2 = Better Practice Stage 3 = Good Practice Stage 4 = Best Practice July 2004 6 Month Goal January 2005

20. Roadmap for S&OP and Beyond 10 Inter-Enterprise Supply chain network planning and inventory collaboration 9 Real Time Data Transfer SCOR based KPIs 8 Collaboration @ the execution level (VMI, etc.) 7 FY2004 & 05 Coordinate Demand and Supply Execution via ERP 6 5 Institutionalize SRM Program 4 Enable Supplier Collaboration Supply Chain Event Management 3 Establish Digital Link with CMs Advanced Planning System 2 MPS/MRP ATP Integrate CRM and ERP 1 S&OP in Steelwedge Steelwedge ERP PHASE 1 PHASE 2 PHASE 3 PHASE 4 • Better alignment of requested supply with demand will enable… • Increase in inventory turns • Reduction in total excess and obsolete inventory exposure • Reduction of costs related to expediting materials • Direct focus to high priority activities that require special attention such as material shortages 9

21. CFDP and C3P enable the future ETS Supply Chain • Flexible • Demand driven supply network that supports product development, supply sourcing, manufacturing, and logistics flexibility • Makes promises in real time and redeploy resources automatically and accordingly • Agile • Responds to changes in customer demand very quickly and notifies business partners as close to real time as possible • Streamlined • Structure supply chain organization and supply chain processes to shorten lead times • Improved employee productivity • Transformed • Automate where possible • Endorse and practice ‘Management by exception’ theme

22. Seven Steps to FAST • Substitute information for inventory • Work smarter, not harder (eliminate or reduce non-value adding activities) • Partner with suppliers to reduce in-bound lead-times • Seek to reduce complexity • Postpone inventory closer to customer demand • Manage processes not just functions • Utilize appropriate performance metrics, e.g. end-to-end pipeline time

23. Questions