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CCI Purchasing Conference

CCI Purchasing Conference. September 21-22, 2011. Provisur Technologies Overview . Company Overview Sales Plan Manufacturing Footprint Product Overview Forming Slicing Grinding/Mixing Separation, System Growth Plan NPD Process Strategic Sourcing Org Structure Key Initiatives

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CCI Purchasing Conference

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  1. CCI Purchasing Conference September 21-22, 2011

  2. Provisur Technologies Overview • Company Overview • Sales Plan • Manufacturing Footprint • Product Overview • Forming • Slicing • Grinding/Mixing • Separation, System • Growth Plan • NPD Process • Strategic Sourcing • Org Structure • Key Initiatives • 2011 Update • Material Spend • Case Studies 1

  3. Provisur Technologies Company Overview Provisur Worldwide Locations: Equipment Revenue by Region (2011B): • Leading global provider of precision engineered, industrial food processing equipment and aftermarket parts & service • Headquarters: Mokena, Illinois, USA • > 510 employees on 4 continents • Formed in 2009 – merger of Formax, Weiler, & Beehive • Acquired AM2C and TST 8/11 and 9/11 • Current product lines include: • Forming (Formax) • Grinding/Mixing (Weiler) • Separation (Beehive) • Slicing (Formax, Cashin) • Equipment installed in over 2,000 food processing facilities located in over 90 countries • Worldwide installed base of over 7,000 machines 2

  4. Sales Plan – Positioned for Growth ($M) 63% of Revenue is Derived from Aftermarket Sales, Revenue through July FY11 was $88.3M Excludes acquisition of AM2C and TST

  5. Provisur Product Overview • Separation: Usable protein product separated from hard material (bone, sinew) • Slicing: Deli meats, whole muscle product, bacon and pepperoni AM2C Acquisition augments Beehive product line Forming: Formed patties, nuggets, and whole muscle strips Grinding, Mixing, and Material Handling: Ground/mixed product for formed beef & poultry, sausages, and chubs 4

  6. Product Overview – Forming Equipment • Primary Outputs – Formed patties, nuggets, whole muscle strips and certain non-protein products including cheeses and confectionary items • Legacy Brands – Formax, Young • Key Customers – Tyson, Smithfield, OSI, Cargill, Keystone, Pierre Foods • End Markets – QSR, Retail, Institutional • Key Competitors – Opens (CFS), Stork (Marel), Nu-Tec/Provatec (Azzar AG), MP Equipment (Middleby) 5

  7. Product Overview – Slicing Equipment • Primary Outputs – Ready-to-eat deli meats, whole muscle product, bacon and pepperoni • Legacy Brands – Formax, Cashin • Key Customers – Kraft, Tyson, Smithfield, Danish Crown, Hormel, Cargill • End Markets – QSR, Retail, Institutional • Key Competitors – Weber, CFS, Trief, Schindler, AEW Thurne (Marel) 6

  8. Product Overview – Grinding/Mixing Equipment Primary Outputs – Ground/mixed product to feed forming and other processing machines (primarily formed beef & poultry and sausage preparation) Legacy Brand – Weiler Key Customers – Tyson, Cargill, OSI, Birchwood, Keystone, JBS End Markets – QSR, Retail, Institutional Key Competitors – Wolfking (CFS), Seydelmann, Cozzini, Laska, Carnitech 7

  9. Product Overview – Grinding/Mixing Aftermarket Front-end Wear Parts Feedscrews / Heads / Hoppers Key Competitors – Speco, Thomas Industries, Rome, Cozzini, local machine shops 8

  10. Product Overview – Slicing Aftermarket Slicing Parts Blades Tooling • Key Competitors – Cozzini, Rudolph, local machine shops; competition predominantly on blades 9

  11. Product Overview – Forming Aftermarket Paper Forming Parts Tooling / Mold Plates • Key Competitors – MP/Tomahawk (Middleby), local machine shops 10

  12. Dry Sausage Grinding System

  13. Organic Hamburger System

  14. Provisur Key Customers 13

  15. Provisur Technologies Manufacturing/Distribution Footprint Mokena – Corporate Headquarters for Provisur Mecaprecis is a machining center acquired by Provisur as part of the AM2C acquisition; 8/2011 TST acquired by Provisur; 9/2011 14

  16. Growth Plan • Goal stated in 2009: Double our revenue by 2014 • Three prong approach: • Product Development • 2010 – 4 major new products introduced • 2011 – 5 major new products will be introduced • Global Expansion • Thailand office opened July 2010 • Brazil office opened June 2011 • Increased number of sale and service personnel committed to Europe and the Middle East • Acquisitions • AM2C acquired July 2011 • #4 in mechanical separation market; together with our Beehive product line makes us the clear #1 worldwide supplier • Significant market presence in Eastern Europe • Employ 33 people; facilities 27,000 square feet • How are we doing? • Total revenue is forecasted to exceed our 2011 budget by 5% • Equipment revenue is forecasted to grow by 40% over 2010. This will be 70% higher than 2009. • Additional investments: • Organization • Systems

  17. Provisur Product Overview - TST 16

  18. NPD Stage Gate Process Introduces Commercial Justification Prior to Resource Allocation Gates prior to significant resource investments • Primary Benefits • Disciplined allocation of internal costs and external spending • Cost considerations and manufacturability incorporated into all designs • Builds in the Voice of the Customer • Manages business risk • More effective Return on Investment 17

  19. Strategic Sourcing - Organization Structure 18

  20. Strategic Sourcing - Key Tenants • Supply Chain Optimization The supplier base will create opportunities by increasing their ability to add value to supply chain execution and implementation which is becoming more complex and will require scalabilityto support Provisur’s growth • NPD Collaboration Provisur’s efforts to align Sourcing, Supply Chain, the supply base, and engineering, to improve the collaboration, teamwork, and speed to market for new product launches under the Staged Gate process • Strategic Contracting and Cost Management Continue efforts to drive cost out of the system through tensioning the current business model and provide opportunities for core suppliers to garner long term contractson current business, out-sourcing of non-valued added activities, and securing NPD contracts • Globalization of Supply Base As Provisur grows we will develop an international supply chain and expand our supply base globally to meet the challenges in our new markets

  21. 2011 Key Initiatives • Award $20M in multi year supply agreements to core suppliers • Develop supply agreements to effectively communicate requirements with supply base and ensure steady state of business given performance. • Map Provisur supply chain to improve tools and processes to manage requirements with suppliers • Invest in human capital, processes, and tools to improve supply chain and Sourcing • Engage suppliers upfront in New Product Development Staged Gate Process • Right size supply base to provide opportunities for key suppliers to garner larger share of Provisur business • Secure $1.3M in cost containment

  22. 2011 Key Initiatives - Update

  23. FY11 Forecast Direct Material Spend - $66M • 50,000+ active part numbers • 50,000+ dormant part numbers (Purchase every 2 years) • 400+ active suppliers

  24. Cost Containment FY11

  25. Cost Containment FY11

  26. Forecasted Material Plan ($M) – Excluding Cost Containment Excludes acquisition of AM2C and TST

  27. Global Direct Material Spend

  28. Engineered Components Spend Overview • Total Spend: $36.6M • Number of Suppliers: 47 (Mokena) & 28 (Whitewater) • Number of Items: 35,000 • Major Commodities: • Fabricated Sheet Metal Parts ($9M) 14 suppliers • Milling ($18.0M) 36 suppliers • Turning ($1.0M) 3 Suppliers • Broaching ($0.4M) 3 Suppliers • Hobbing ($0.7M) 3 Suppliers • Raw Material ($4.0M) 4 Suppliers • Miscellaneous ($3.5M) 17 Suppliers • Goal of Strategic Sourcing of Engineered Parts • To create a world class lean and flexible supply chain organization

  29. Engineered Components Internal Customer Overview $36.6M • 4 Internal Customers each Requiring a Unique Sourcing and Supply Chain Strategy

  30. Tooling • Type of Production • 100% “One-Off” Custom Engineered Production • Competitive Pressure: • Our Competitors are saying “Provisur can not respond rapidly – since they do not make tooling” • Provisur offering 5 day service – Competitors offering 3 day… • Counter Measures to explore: • Kitting at suppliers (COMPLETE) • Overnight Plating / Treating (COMPLETE) • Current two step order process… Tool room & then Purchasing – can streamline to one step (save ½ day) (COMPLETE) • Ship Direct on “Critical Orders” (UPS Pickup) with label printing being done from Mokina (save 1/2 day) • Review Repetitive orders – And figure out how to build ahead • Faster generation of prints for duplicate orders possible • Standardize sizes with customers – drive away from everything “custom” • Need to map entire process and streamline

  31. Aftermarket • Type of Production • 70% “Repetitive Parts” • Competitive Pressure: • Inventory high – currently needed to maintain fill rates • Can not let our customers go to someone else • Counter Measures to explore: • Need to review inventory levels based on moving demands • Can we remove the non-moving “rocks” • Bring Lean - consignment to be increased • Supplier Lead time improvements • Finalize contracts to allow more “flexibility” when “one off” parts are ordered • Review what machine / parts should be obsoleted

  32. Production Machines • Type of Production • Mostly repetitive production parts / mixed with some engineered “One Offs” • Competitive Pressure: • 10-12 weeks for machines… quoted to customers • Customer consistently want machines with shorter lead times • Many parts have longer lead times… so ordering and pushing/pulling in anticipation of sales is killing suppliers and the supply chain team • 1,000’s of parts per machine – all ordered and received separately and most ordered per sales order. A supplier may ship in 80 line items per machine / each received separate • Counter Measures to explore: • Single Pricing – 3 year contracts • Supply Chain Review by machine – determine optimal level of assemblies to bring in and what suppliers should manufacture the parts • Kit the parts by machine • Pull System / lead time reduction with suppliers • Blanket orders w/releases for production parts • Explore additional consignment

  33. Engineering Projects • Type of Production • 100% Engineered “One Off” parts • Competitive Pressure: • Parts are never fast enough… • Communication for part timing not always ideal • Massive disruptions of the supply chain – without forecasting • No timing on the part level – tying to build timing • Counter Measures to explore: • Stage/Gate Process set up to forecast demand (Complete) • Plan part arrivals and priorities per timeline and build • Engineering purchasing in engineering area (Complete) • Hold regular supply chain update meetings (Complete) • Attendance in Engineering Planning meetings to manage supplier capacity planning • Set up “Prototype” suppliers that have rapid turnaround that does not interrupt production schedules

  34. Commercial Components Spend Overview • Total Spend: $19M • Number of Suppliers: 334 • Number of Items: 15,000 • Major Commodities: • Electrical ($7.6M) • Electronics ($1.5M) • Hydraulics ($2.8M) • Pneumatics (1.2M) • Power Transmission ($6.1M) • Goal of Strategic Sourcing for Commercial Items • To create a world class lean and flexible supply chain organization

  35. Electrical/Electronic Distribution Strategy • Provisur has 64 electrical/electronic distributors • 60 for Mokena • 4 for Whitewater • Different manufacturing models • Strategic Goals: • Utilize suppliers that can create mutual benefit • Inventory management • Order management • Technical support • Reduce the number of suppliers • To reduce Provisur’s cost of procurement • Timing • Analysis to be complete by end of December 2011 • Sourcing Strategy to commence January 2012

  36. Cost Management • Tension as much of the spend as possible to ensure we are in alignment with the market • Target of $18.0M in multi-year supply agreements in 2012 • Recognize cost of change • Supply agreements will aid the flow of business between Provisur and supply base • Automate PO creation • Inventory management

  37. Risk Management/Mitigation of Sole Sources • Identify critical components • Identify sources of supply • Qualify at least two sources • Goal: to reduce supply chain risk

  38. NPD Controls Package Sourcing • Project Title: NPD Controls Package Accumax and Rotary Former • Project Leader: Brad Nusbaum • Project Team: T. Wolcott, D. Hancock • Mission Statement: Competitively source controls package for Rotary Former and Pump-Fed Slide Plate Machine while meeting strict technical requirements • Background: • Two major new forming products are in development • The controls architecture will be the same on both of them presenting a opportunity to leverage the spend • Project Goals: • Greater control of software (and revisions) by Provisur • Risk mitigation against obsolescence • Better cost position • Project Plan and Deliverables: • Worked with Engineering to get requirements • Contacted ten suppliers • Met with them to ensure they understood requirements • Seven quoted • Two were selected • Timing of controls development cycle allows for continued discussions with suppliers • All three goals will be met, including identifying $1.2M savings over ten years from competitive tensioning process

  39. Future Project – Machine Components • $30M / 3 yr. program will be tensioned in upcoming months • This includes approximately $6M of new aftermarket parts from Weiler and Beehive • 3 year supply agreements that incorporates the following: • Increase value • Assemblies, kitting, multiple processes • Reduce / stable cost through • Volume planning, inventory reductions, material handling • Lead us through lean fundamentals • Lead time, quality, waste reduction • Timing • Develop strategy and communicate to supply base by 10/2011

  40. Transfer Conveyor Outsourcing Project • Project Title: Transfer Conveyor Outsourcing Project • Project Leader: Tim Hahn / Steven Call • Project Team: T. Hahn, W. Jackson, R. Sdano, J. Johnson, T. Dillemuth, M. Sisko • Steering Committee: M. D’Amico, R. Hancock • Mission Statement: Source Transfer Conveyor Manufacturing • Background: • All transfer conveyors have been “Custom Design” activities tying up both valuable engineering and manufacturing resources. It is recognized that transfer conveyor manufacturing is not a “core competency” but a key component in linking the entire systems together. The value Provisur brings is the ability to design and specify an entire protein handling system. • Roughly 30 Belt conveyors to be manufactured in 2011

  41. Transfer Conveyor Outsourcing Project Cont’d • Project Goals: • Finalize a “standardized” conveyor with a menu of options and sizes that will • Allow the sales team to easily quote and specify • Permit the engineering team to specify key attributes w/o having to commit design resources • Allow a supplier to build ahead standardized parts and quickly react to customer orders • Project Plan and Deliverables: • Set up a cross-functional team with defined roles and responsibilities Aug 2011 - COMPLETE • Finalize standardize designs for the variety of conveyor options Aug 2011 - COMPLETE • Finalize a “labor +” contract with the supplier June 2011 - COMPLETE • Complete a design review with the team and outside supplier September 2011 - COMPLETE • Complete first conveyor build meeting cost, quality and delivery targets - Est. Oct 2011

  42. Standard Conveyor

  43. Strategic Sourcing Agreements Project • Project Title: Strategic Sourcing Agreement • Project Leader: Mark D’Amico • Project Team: Steven Call, Brad Nusbaum • Mission Statement: Contract in a recognized and consistent manner with key suppliers to ensure capacity, cost, and quality while improving Provisur’s internal ability to create flexibility and improve velocity in executing the supply chain and commercializing NPD sourcing • Background: • Provisur ‘s supply chain has four internal customers to support: Tooling, Aftermarket, Production, Engineering • Suppliers have been hesitant to make long term investments without long term commitments from Provisur • Continuous and repetitive quoting of components created tactical disadvantages across the supply chain and administrative burdens through the IT platform Peoplesoft

  44. Strategic Sourcing Agreements Project Cont’d • Project Goals: • Develop a uniform sourcing agreement capable of being utilized across the commodity and supplier portfolio • Implement universal pricing regardless of volume and Purchase Order quantity to service our internal customers • Build a foundation to implement a demand pull process in the future • Utilize the agreement during the NPD process to secure production costing up front • Leverage the commitment of long term agreements • Project Plan and Deliverables: • Create standard agreement template - Complete • Implement agreement s valued at $20M in multi-year spending in FY11 – Awarded $17.8M in multi-year agreements

  45. Supply Chain Mapping Project • Project Title: Supply Chain Mapping Project Mokena • Project Leader: Jeff Switall • Project Team: M. Collins, N. Beck, J. Switall, K. Johnson, J. Burosh, Mike McCafferty • Steering Committee: B. Ernat, J. Smith, S. Call, B. Nusbaum, M. D’Amico • Mission Statement: Become a lean supply chain organization that will allow each team coupled with continuing to development the skill sets needed to achieve the SBF • Background: • Ever expanding product lines and business engagements have increased supply chain activities and complexity. In order to determine areas of improvement a cross functional team was formed to define and understand the entire process. The team was assembled to identify and construct a detailed flow chart to map the current supply chain process.

  46. Supply Chain Mapping Project Cont’d • Project Goals: • Identify all functional areas of the supply chain process • Determine areas of largest non-value activity • Propose functional improvements • Project Plan and Deliverables: • Map current supply chain process by 7/18/11 • Identify areas of possible system automation

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