Network Supply Chain (NSC)

1. Network Supply Chain (NSC) Present and Future State

2. What is the NMSC? • The Emerson NMSC is an integrated in-bound shipping program designed to create strategic and economic value by: • Lowering transportation costs and increasing speed through purchasing leverage, improved utilizations, equipment mix and LCL/Air avoidance • Providing divisional in-bound product visibility from origin to final destination • Establishing network performance metrics enabling reduced carrying costs by enhanced inventory management • Creating a global, collaborative supply chain organization dedicated to extracting advantage by managing supply chain costs and improving Emerson’s comparative advantage “Creating operating and capital efficiencies that generate strong cash flow to fund dividends, strategic acquisitions, capital investment and technology development.”

3. VISIBILITY • Outcome: Enable Emerson and APLL to consistently optimize decision making • How?: • Data Aggregation • Process Management • Communication • SCALE • Outcome: Lower transportation costs and reduced cycle time • How?: • Expanded SCC • Enhanced Pricing • Multi-mode options • ORGANIZATION • Outcome: Long term partnership and knowledge gain creates efficiency, innovation, flexibility and faster response times • How?: • Fully allocated team • Program Management • Flat, Cross Functional Structure How?

4. Competitive Advantage Visibility Scale Organization NMSC Advantage over time Phase I Phase II Phase III Expand As Is Stabilize Innovate Increase Service Scope

5. Customer Store(s) Air AFS Vendor(s) CY Ocean CFS DC(s) Customer DC(s) • Increased opportunities for consolidation, lead time reduction, and standardized reports • Greater control over carrier selection • Greater value for common customers through reductions in receiving ops. and overhead • Lower cost required to “share” channel across divisions • Elimination of redundant processes and systems • Standardized reporting and metrics • Ability to share best practices across company • Greater control over corporate spend on supply chain • Lower cost of developing new brands • Greater ability to build customer ready loads • Increased co-loading and consolidation opportunities (enable reductions in size of po) • Scale in origin trucking / FCA (greater potential for milk run pickups) • Lower cost/tkm in air through consolidation • Lower demand for investments in fixed distribution assets • Eliminate redundant systems and processes • Greater opportunities to position product closer to customer demand • Greater opportunity to build customer direct shipments at point of deconsolidation • Greater opportunity for TL / LTL consolidations to support DCs • Increased potential to reduce intra-dc transfers • Increased control over modal selection and routing • Improved carrier selection and MQC mgmt • Standardized documentation and information exchange with carriers • Aggregate Emerson buying power • Standardize vendor information exchange • Common reporting on vendor performance • Ease of implementing new programs Divisional Consolidation • Consolidating logistics operations across divisions has the potential to unlock significant value across extended supply network DECON Benefits From Consolidation

6. Origin Operations Flow Network Mngmt / SPS POD VCP ASN Delivery Management Vendor Mngmt Vendor Mngmt Trade Delivery Trade Data

7. 1. Business and Operations Analysis 6. SCT Visibility 8. VCP & Reporting 2. SOP Creation 3. Data Mapping and Programming 4. Training 5. PO Visibility 11. Mode & Equipment Selection 14. Delivery 9. Booking 12. Vendor Delivery 13. “On the water” Process Footprint vs. Operational Impact Operational Impact Time

8. Customer DC Customer Store Vendors Multi-Path Supply Chain Network • Emerging models are being implemented that employ multiple “paths” through which shipments can flow Benefits resultfrom making cost / service tradeoffs on a more discrete level Global Sourcing/Manufacturing International Ocean / Air DistributionCenter Network Delivery ReceivePut-awayPickShip Push ReceiveCrossdock Ship Pull Market Demand ReceivePick Ship Pull Direct Ship Pull Inventory Inventory Inventory

9. Sub-optimized supply chain due to: • In-bound decision making based on port pair basis only • Under utilized containers due to lack of visibility of other available origin freight • Poor equipment mix due to lack of scale and leverage • Limited mode options • Lack of purchasing leverage due to fragmented supplier network • No inbound product visibility • Lack of end-to-end connectivity from Origin to Destination (Decon/Trans) • No dedicated organization • No strategic design to create best practice and advantage • Optimized Supply Chain due to: • In-bound decision based on pan-Asia and pan-Destination information • Improved utilizations due to greater scale across multiple vendors divisions • Improved equipment mix with forecasting and contract leverage • Expanded mode options like Air-Sea by leveraging 3PL asset/service base • Increased leverage through data aggregation and rationalized partner base • In bound visibility from booking to delivery • Fully dedicated organization • Long term, collaborative strategic design Today vs. Tomorrow

10. Asia Shipment Planning Centers Concept Current State

11. Proposed Future State “Optimization resides in Asia, Exceptions reside at Divisions” ? • Optimization Alignment with Data • Rationalize Communication and Decision Making • Parallel Service Integrity • Macro Network Options Visibility

12. Next Steps • Strategic Drivers • Scale, Visibility and Organization • Background – Pilot Program • Project and Program Design - Multiphase • Research • Scope Statement* • GANTT • Risk Analysis • Communication Plan • Organizational Design* • SOP Creation • Asia Collaboration

13. Next Steps, Cont.

14. Strategic Driver - Organization

15. Division Collaboration • NMSC Pilot Stabilization and Learning • Scope Validation • On-boarding Matrix • Profile Questionnaire • IT Roadmap • NMSC Supply Chain Group Formation • Metrics and Communication • Strategic Growth

16. MCC Current State Map (Asia to US)

17. MCC Program Status Highlights • Project pilot started in Jan ’03 • Program grew from 2 to 12 divisions • Maintaining projected savings >30% • Savings from start of project $732k • Not counting air-sea mode shift • 14 days transit time improvement

18. Asia to North America (APLL)Status • Division Participation Fully committed to program once end-to-end solution is in place EGS is getting ready to turn over factory 20’ loads Ex-SHA, TAO Oct-Nov Timeframe On-Boarding scheduled through October ‘04 Shanghai, Thailand and Malaysia shipments to augment SCC

19. MCC Metrics Update

20. MCC Network Process Development Carrier Compliance Cross-dock Compliance Milestones Destinations Origins KPI’s LTL/FTL Compliance Broker Compliance Vendor Compliance Impacts: Transport Costs Service Reliability Supply Visibility Building a network management process with key milestones and metrics for each event in the chain

21. Ocean Future State Map Supplier & Division Origin Ports qingdao shanghai pusan shenzhen taiwan hong kong southaven manila LAX Pending APLL Proposal bangkok kualal lumpur kuala lumpur singapore Deconsolidation Cross Dock FCL Carriers: APL, Maersk, P&O, ZIM (NVOCC unknown) MCC Carrier: APL Distribution: Overnight Express MCC flow SCC flow or groupage US Customs Broker: Menlo Worldwide

22. Future Deconsolidation Points

23. Data Aggregation and Visibility NMSC Strategic Drivers: Scale, Visibility and Organization • APLL global ACS123 application = Data Aggregation (Scale) which enables network optimization and provides data platform and integration via multiple data modes (manual, flat file, EDI, XML) • See Change (SCS) = Internet-based visibility to part number level with multiple, customized report and event tracking applications

24. Case Study #1 - Cost Comparison “Danzas Closet Maid ProposalScenarios”

25. Pallet Optimization • Division: Asco Power • Supplier: Venture Electronics • Pallet size was redesigned to allow the same amount of cartons, but with 20% less pallet gross volume

26. Total Cost = $5,890 (30% savings) New Opportunities to reduce cost 1.18 CBM’s for Liebert ex HK for TX at $265 USD 22.75 CBM’s for Liebert ex Chiwan for TX at $4,070 USD 26.6 CBM’s for Liebert ex PH for TX at $4,070 USD Total Trans. Cost = $8,405

27. Next Step Opportunities • Establish program point of contact • Conduct shared analysis on potential for additional benefits • Validate savings • Collaborate on SOP and On-boarding alignment • Establish communication and service guidelines • Evaluate IT goals and resources (Roadmap) • Fully deploy program

28. Internet Visibility Options • SeeChange is a web based supply chain management tool. • Any shipment modes (ocean, air, ground) • Any delivery modes (CY, CFS, SDD) • Any carriers (ocean, rail, truck, air) • One application and global data repository • SeeChange will give you visibility to your shipment • You have the ability to search by • SKU or Product number • P.O. number • Container number • Bill of lading • And more Customized searches, reports and analytics

29. Logging In To log in to See Change 2.0 • Use the URL http://www.seechange.com/SeeChange/index.jsp • Or go to http://www.seechange.com and click SeeChange 2.0 Enter your user name and password (both are case sensitive). Then click the Login button.

30. New See Change 2.0 Interface

31. On boarding Phases Divisional Effort APLL Effort Due Diligence / Questionnaire SOP and Origin Alignment Service Deployment Phase I – 3 wks Phase II – 3 wks Phase III – 3 wks