A Net-Centric Focused E-Supply Chain: An Integrated Framework for Competitive Advantage

1. A Net-Centric Focused E-Supply Chain:An Integrated Frameworkfor Competitive Advantage Supply-Chain World North America 2000 Conference April 10-12, 2000 Chicago, Illinois Presented By Rob Fitzgerald Oracle Proprietary

2. Agenda • Introduction • Challenges to Emerging ValueChains • The Impact of Netcentricity • e-Supply Chain Strategyand Portals • The Net’s Vulnerability • Pitfalls to Avoid • Payoff Potential • Conclusion and Questions Oracle Proprietary

3. Annual Revenues $8.8B Operates in 145 Countries 41,000 Employees Founded in 1977 Innovation & Technology Leadership About Oracle Corporation Managing information is our business! Database, application server, tools and application products along with related consulting, education and support services World’s Leading Supplier of Software for Information Management World’s Second Largest Software Company Oracle Proprietary

4. 9 of TOP 10 Bus-to-Business Sites 10 of TOP 10 Bus-to-Consumer Sites Marshall Ind. Cisco Systems Bay Networks Dell Compaq Federal Express IBM W.W. Grainger 3 COM First Union 1800 Flowers Amazon CDNOW Schwab Cisco Dell E-Trade NECX OnSale REI 70%of the Fortune 500 Source:Giga Group 1998,NetMarketing Over 300 Internet Procurement Customers (75 in full production) Commercial e-Business Runs on Oracle Enterprise Portal Technologies Oracle Proprietary

5. “Revolutions, by their nature, create new and unanticipated opportunities, challenges and risks for those caught up in them. We all find ourselves in the midst of a technological revolution propelled by digital processing. All around us, in ways and forms we cannot fully appreciate, new digitally based economic arrangements are changing how people work together and alone, communicate and relate, consume and relax. These changes have been rapid and widespread, and often do not fit the established categories for understanding economic developments. As a result, early efforts to take the measure of these changes have often seemed to be inventories of what is not yet known.” Robert J. Shapiro Under Secretary of Commerce for Economic Affairs Oracle Proprietary

6. Challenges to EmergingValue Chains • New e-commerce competitors are ableto build brand equity rapidly. • In business-to-business trade firms arenow facing the appearance of industry market exchanges, Internet marketplaces where buyers and suppliers search and bid for business. • Stability of a range of products and industries are being threatened by digital technology’s ability to transform content into a format capable of being disseminated widely and cheaply over electronic networks. • New competitor’s unbundling existing package offerings, separating out high-value components allowing customers to shop and price individual components. Source: Corporate Strategy Board Research. Oracle Proprietary

7. Challenges to EmergingValue Chains • New entrants are bypassing traditionalsales and distribution channels by usingthe reach of the Internet to target existingand new customer segments. • Challenges to traditional firm control ofchannels by new e-commerce initiativesfor disintermediating traditional middlemen. • Rise of buy-side agents capable of electronic searches for lowest price posing a direct challenge to the stability of incumbent firm’s pricing schedules. • Rise of demand aggregators - agents that combine demand from multiple buyers to win volume discounts. Source: Corporate Strategy Board Research. Oracle Proprietary

8. Changing Nature Logistics e-Business • To • Integration (Total Asset Visibility) • Information Fusion • Focus on value creation • Enhanced Competitiveness • Virtual Organization • Close B2B relationships through collaborative operations between third party logistics providers & customers at the regional level • Shared decision making and planning • Broad, rich information sharing • Extensive value chain • From • Single customer/partner interactions (request/response) • Stovepiped information • Focus on what needs to get done • Vertical Organization • Arms length B2C relationships • Simple transaction processes • High cost of operations • Limited information sharing • Limited value added capabilities Oracle Proprietary

9. Technology Transformation Expected Benefits From Internet Technology • A new “best practice” formof organization is taking hold. • A new skill profile is transforming the labor force. • A “swarming effect” is occurring as the use of new technologies demonstrate drastic cost reductions and dramatic performance and reliability improvements across products, servicesand processes. • New technologies gain acceptability as their use spreads and intensifies. Increased Revenue Ability to Enter New Markets Reduced Costs Improved Knowledge Sharing Enhanced Customer Service Improved Communication % of Respondents Source: 1998 Booz-Allen & Hamilton Survey Oracle Proprietary

10. Anticipated Online OrderGrowth Through 2001 Percentage Source: Forrester Research, Inc., August 1999, p.4. Oracle Proprietary

11. Other Projected Demand Forecasts Increasing Visibility of Orders Decreasing Order-to- Receipt Cycle Accepting Online Returns Managing Volumes Lowering Fulfillment Costs Distributing Globally 2001 Fulfillment Challenges Percent of 40 Companies Responding Source: Forrester Research, Inc., August 1999, p. 4. Oracle Proprietary

12. Organization C Supply Chain Organization B Organization A Organization D Alliance A & B Internet Netcentricity Digital Networks Progressively reshaping business models, interrelationships, and practices throughout the global economy. Alliances Non-Core Activities Customers Core Activities Fluid Teams Integrated Users Customers The Impact of Netcentricity Source: University of Maryland, Robert H. SmithSchool of Business Study, Harnessing the Powerof Netcentricity, pp. 24-29,1999. Oracle Proprietary

13. Impact of Netcentricity on the Organization • Leadership and Management Processes • Change is leadership-driven. • The role of management changes due to multi-directional and open information flows. • A tectonic jolt to the cultural core. • Knowledge Ownership • Control over information is eroded - akey management prerogative. • The knowledge asset is embedded in the network and the rules for sharing and transforming data into information. • Employee Attraction and Retention • Vulnerability to the loss of core information assets places a premium of attracting and retaining knowledge workers. Source: University of Maryland, Robert H. Smith School of Business Study, Harnessing the Power of Netcentricity, pp. 24-29,1999. Oracle Proprietary

14. Impact of Netcentricity on the Organization • Organizational Size • Generally less “mass” than pre-net organizations; e.g., the Fortune 50. • Organizational Change • The unprecedented premium on speed forces organizations to create transformational models to manage the effect of change in shorter, continuing cycles, while avoiding excessive employee burnout and/or organizational chaos. • Organizational Form • Netcentricity’s enormous impact on organizational structures and cultures, business models, alliances, customer relationships, and individuals drives equally significant changes in organizational form. Source: University of Maryland, Robert H. Smith School of Business Study, Harnessing the Power of Netcentricity, pp. 24-29,1999. Oracle Proprietary

15. “If you cry ‘forward’, you must make clear the direction you want to go. Don’t you see if you fail to do that and simply call out the work to a monk and a revolutionary, they will go precisely in the opposite directions.” -- Anton Chekov Oracle Proprietary

16. Optimize Return on Investment (ROI), customer satisfaction and value Supply Chain Strategy:Fulcrum Points • What is your basis of competition? • What are your financial objectives? • Through which markets and channels should you offer your products and services? • Which future product platforms will your growth depend upon? • What new technologieswill you need to master? • Supply Chain Configuration • Enabling Practices • Strategic Relationships • Organization • Application of Information Technology Core Strategic Vision Source: Adopted from Global Supply Chain, article by Bill Helming and Jan Paul Zonnerberg, “The 5 Fulcrum Points of a Supply-Chain Strategy”, pp. 13-15. Oracle Proprietary

17. Plan Make Source Deliver Deliver Make Maintain Deliver Source Make Maintain Source Maintain Suppliers’Supplier Customer’sCustomer Supplier Customer The Organization Internal or External Internal or External Information Fusion Material & Service Flow Enabling Technology An e-SCOR Framework “From your supplier’s supplier to your customer’s customer” Source: Adopted from the Supply Chain Council SCOR Model Oracle Proprietary

18. What Is An Internet Portal? • A single point of access to the Internetand corporate knowledge . . . fullenterprise search. • Integration with corporatedata and applications. • Role-basedpresentation and security. • E-commerce, collaboration, transactionmanagement, search and information delivery,business process automation, and report generation. Oracle Proprietary

19. Productivity services (e.g. email) Enterprise Portal Supply Chain Management Browser Employee Employ EXsdfe EXs CustomerInformationSystems (CRM) Abcd Business Intelligence Systems ERP Applications PersonalizedCorporate Intranet, Internet access... Logistics Enterprise Portal Framework • 1 Place to access information (individual or role-based) • Information Fusion - efficiently sharing information • Drives quicker, better decisions • Self-service vehicle for trusted trading partners Employees Oracle Proprietary

20. Level 4 Level 3 • Additional Features: • Procurement Support • Supply Chain Management • E-Marketplace Integration • Advanced Personalization • EDI, XML. Java • Contiguous Intranet/Extranet/Internet Level 2 Level 1 • Additional Features: • Customer Support • Transactions • Collaboration • Role-based Workflows • ERP Integration • Additional Features: • Extensive Information • Advanced Search • Directories • Personalization • Features: • Enterprise Information • Miscellaneous Content • Search • Links Intranet Entry Point Content Integration Workplaces Integration Marketplace Integration Low Strategic Value High Building Enterprise PortalStrategic Value The complexity of an enterprise portal implementation can vary within each level’s functional domain; e.g., bare bones to a fully fledged implementation of leading-edge technology. Source: Gartner Group, Monthly Research Review, West, M., “A Framework for Enterprise Portals Simplifies Intranets,” 1999. Oracle Proprietary

21. Ford Motor Company General Motors Daimler Chrysler • Direct all production and non-production purchases through the auto exchange • Contribute employees to manage business operations • Oracle Corporation • Provide the technology • Provide systems integration services • Host the exchange • Contribute employees tosupport technical operations • Procure all productionproducts CommerceOne • Procure non-production products Ford AutoXchange: Now Auto Exchange Auto Exchange • Operating Principles • Create a market open to the entire industry; including other OEMs, all tiers ofsuppliers and dealer networks • Operate independently and without bias. Oracle Proprietary

22. The Auto Exchange • Oracle/Ford joint vertical exchange venture • Oracle provided technology and support • Ford provided industry expertise and relationships • 30,000 member supply base • $300 billion annually through supply chain • Open to the entire automotive industry • Full supply chain capabilities • Leveraging Oracle technology and Applications • Operational in less than 60 days • First auction for tires: $78 million winning bid price saved $10 million over estimated cost Oracle Proprietary

23. Business Change Quick Hits Technology Advancements Drivers E-Business Roadmap Current State E-Business Vision Stage 1 Stage 2 E-Business Architecture Roadmap for Rapid Implementation Phased Implementation in 120 Day Cycles • E-Business deployment requires transition stages to meet time-to-market demand. • Each stage should be designed to deliver measurable business value • Architecture implemented over a series of projects scoped to allow 90 to 120 day implementation • Quick hits providing immediate improvement identified throughout transition. • Architecture and transition continually influenced by business changes and technologyadvancements. Oracle Proprietary

24. The Brain: Customer-Driven Strategy The Lifeblood: Innovative Products & Services The Conscience: Customer Satisfaction & Continuous Improvement The Body: Enabling Technology The Heart: People The Muscle & Bone: Facilities & Equipment Suppliers The Vital Signs: Performance Measurement The Central Nervous System: Business Planning & Control An Integration Framework Oracle Proprietary

25. “The newest innovations, which we label information technologies, have begun to alter the manner in which we do business and create value, often in ways not readily foreseeable even five years ago.” Alan Greenspan Chairman, US Federal Reserve Board May 6,1999 Oracle Proprietary

26. Net’s Vulnerability ThreatensE-Commerce -- And You How soft is the underbelly of the Internet? • In 2003, the US will account for roughly 50% of Internet-based commerce, compared with 75% in 1998. • E-commerce sites on the Net have been falling likedominoes in 1999. • Yahoo shut down for 3 hours. • eBay, Amazon.com, CNN and E*Trade sites “choked” off by traffic. • 300K credit-card numbers were “snatched” from music retailer CD Universe. • ATT/GTE/Sprint lost $2M from theft of calling card numbers by organized crime in Italy. • The Melissa virus caused an estimated $80M in global damage, paralyzing e-mail systems. Source: BusinessWeek Online Cover Story, February 21, 2000 Oracle Proprietary

27. Net’s Vulnerability ThreatensE-Commerce -- And You • Russian organized crime used hackers to break into Citibank to steal $10M -= only $400K was recovered. • FBI estimates computer losses at up to $10B per year. • The biggest threats are from within - up to 60% of break-ins are from employees. • There are 1,900 Web sites offering free digital tools to snoop, crash computers, hijack control, or retrieve a copy of a keystroke. • At least 80% of an organization’sintellectual property is in digital form. • FBI reported that 60% of the 520 firmsin their annual survey reportedunauthorized use of computer systems. Source: BusinessWeek Online Cover Story, February 21, 2000 Oracle Proprietary

28. Potential Pitfalls to Avoid • Short-term horizon • Too much or too little data detail • Extrapolation of past trends • Thinking in two dimensions • Using published costs • Inaccurate or incomplete costs • Use of erroneous analytical techniques • Lack of appropriate strategic analysis: risk,trade-off, marginal, sensitivity, etc. Oracle Proprietary

29. The Payoff Potential inSupply Chain Management • Pittiglo Rabin Todd & McGrath Study: • Best-practice companies enjoyed a 45% total supply chain cost advantage over median competitors. • Supply chain costs as a percentage of revenue were between 3-7% less than the median. • A.T. Kearney Research • Supply chain inefficiencies can waste up to 25% of a company’s operating costs. • MIT, Center for Transportation StudiesResearch • 50% reduction in inventory • 40% increase in on-time deliveries • 27% decrease in cumulative cycle time • Doubling of inventory turns coupled witha nine-fold reduction in out-of-stock rates • 17% revenue increase Oracle Proprietary

30. The Payoff Potential inSupply ChainManagement • Dell Computer’s online sales more than doubled during 1999 accounting for 30% of total revenues. Dell expects this percentage to increase to 50% in 2000. • Travelocity.com had gross sales of $128M during the first quarter of 1999, a 156% increase over the same period the previous year and registered 1.2M new members. • Users of Quicken Mortgage, Intuits online mortgage provider, arranged for $400M in loans in the first three months of 1999 compared to $600M for all of 1998. • During the first quarter of 1999, online brokerages broke their fourth quarter 1998 records adding another 1.2M accounts and $100B in new assets, and increasing the average number of daily trades by 49%. Oracle Proprietary

31. QUESTIONS? “Far better it is to dare mighty things To win glorious triumphs even though checkered by failure, Than to rank with those poor spirits Who neither enjoy much nor suffer much Because they believe in the gray twilight That knows neither victory nor defeat.” -- Theodore Roosevelt Oracle Proprietary

32. Contact Information W. Robert (Rob) Fitzgerald Senior Practice Director, Federal Program Development Oracle Corporation 1910 Oracle Way Reston, Virginia 20190 USA Office Phone: 703-364-8026 Cell Phone: 703-395-3849 Fax: 703-364-3038 Internet/e-mail: wfitzger@us.Oracle.Com Oracle Proprietary