Building a competitive and sustainable supply network Case Fiskars

Tiina Nieminen 26.11.2012 Director Logistics, Fiskars Group

Agenda
1. Introduction to Fiskars Group 2. Operations 3. Manufacturing 4. Sourcing and supplier base 5. Logistics

6. Processes and tools 7. Summary

Page 2

Company confidential

Our over 360-year heritage

From Finnish ironworks to global consumer product business

From Fiskars Village to Fiskars Campus

Fiskars Village
Founded in 1649 as an ironworks Centre for Finnish art, design, and craftsmanship 20 Fiskars employees work in the village

Fiskars Campus
Arabia factory, founded in 1873, was named after the district Houses today over 450 Fiskars employees
Corporate headquarters Business area management: Home, Garden EMEA & Boats Marketing and product development Arabia ceramics factory Shared Services

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1883 Fiskars becomes a joint stock company and expands into a number of new businesses 1915 Fiskars is listed on the Helsinki Stock Exchange 1967 A wide range of plastic consumer products iconic orange-handled scissors

1985 Fiskars starts producing garden tools

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Fiskars has acquired several innovative companies to enlarge its offering in consumer products
1985 Gerber Legendary Blades

2007 Leborgne

2007 Iittala Group

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Fiskars in 2011
Net sales EUR 742.5 million Some 3,400 employees around the world Products sold in over 60 countries

Production units in Finland: Helsinki, Iittala, Nuutajrvi, Billns, Sorsakoski, htri

Madison/Garden & SOC Portland Outdoor/Gerber

AMERICAS in 2011 net sales EUR 233 million 31% of consolidated net sales 565 personnel (FTE)

Sourcing offices, Bangkok & Shanghai

EMEA in 2011 net sales EUR 517million 69% of consolidated net sales 2,609 personnel (FTE)
Manufacturing Office
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Sales office / distributor

Our business areas

HOME
Modern Scandinavian design products for the kitchen, table, living room and school, office and craft

GARDEN
Ergonomically designed tools for gardening and construction

OUTDOOR
Innovative, essential products for an active lifestyle and durable leisure boats

306 MEUR in 2011, -1% 41% of total sales

294 MEUR in 2011, +7% 40% of total sales

138 MEUR in 2011, +7% 19% of total sales

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A portfolio of clearly defined brands

Key international brands

Leading global brand for scissors and garden tools

Internationally renowned design brand

Essential equipment Essential equipment for outdoor activities for outdoor activities

Leading regional brands

Finlands most popular motor boats

Finnish design for the home for over 135 years

Nordic expert in cookware & cutlery

Local and tactical brands

DRIVE BOATS EBERTSANKEY GINGHER HGANS KERAMIK HYANG-POLARIS KAIMANO KITCHEN DEVILS LEBORGNE MONTANA

RAADVAD RRSTRAND ZINCK-LYSBRO

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Pathway to global growth

Tomorrows Fiskars
2012
2010 20082009
Fixing the base New management Integrated consumer goods company strategy introduced First step towards global growth: 360 Integration Program Powering the machine Defining future operating and business model Unified processes and systems in EMEA Focus and groupwide integration Gearing for growth Global ambitions Refined category and brand strategies

New organization Tomorrows EMEA: Design for Function and Growth

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Executing the integrated company strategy

FISKARS STRATEGIC AGENDA FOCUS
Strong business area focus Specialist premium brand portfolio Optimized product range for selected categories

ACTIONS IN 2011
FOCUS
Increased focus on international brands, Silva divested and Bodanova discontinued Continued SKU efficiency

EFFICIENCY
Business platform investment program launched in EMEA Nordic distribution centre established in Hmeenlinna Global sourcing office established in Bangkok

EFFICIENCY
Simplified structure Integrated business processes Demand-driven supply chain

GROWTH
Consumer-focused product development Innovative R&D Commercial expansion

GROWTH
New market openings in Central Europe and Asia for Home Strengthened position in key markets for Garden Successful product launches boosted Outdoor categories in the Americas

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Implications to supply network

Focus Efficiency
Growth

Shared, simplified structure, SKUs

Harmonized processes

Scalability

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Agenda
1. Introduction to Fiskars Group 2. Operations 3. Manufacturing 4. Sourcing and supplier base 5. Logistics

6. Processes and tools 7. Summary

Page 13

Company confidential

Financial impact of Operations

Cost of goods sold x% of sales / gross profit
Other COGS Distribution & warehousing, freight,

Driven by logistics strategy

Product cost

Driven by manufacturing and sourcing strategy

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How can Operations contribute to margin improvement? Margin improvement

1. Launch new products with targeted minimum margin requirement
Increase modularization of the products

2. Strengthen the main brands -> Premium price 3. Build competitive supply network 4. Optimize warehouse locations and distribution cost

Page 15

Company confidential

How can Operations contribute to working capital improvement?

Working Capital Improvement
1. Increase stock turn
2. Increase sales responsibility of the stock
Forecast = commitment to sell

3. Reduce complexity (# stock keeping units) 4. Implement S&OP (demand and supply planning process)
Page 16 16 Company confidential

Business level key performance indicators / operations

Inventory turnover
Ambition level

Gross profit margin

45 40 35
Ambition level

30
25 20 15 10

5
0

Page 17

Agenda
1. Introduction to Fiskars Group 2. Operations 3. Manufacturing 4. Sourcing and supplier base 5. Logistics

6. Processes and tools 7. Summary

Page 18

Company confidential

EMEA manufacturing footprint today

Garden Home Outdoor S Sales and customer service CuS Customer service DC Distribution center M Manufacturing

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Size of DCs to be reviewed

Americas manufacturing footprint today

Portland, OR OR/Gerber

Apopka, FL Pottery

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New competitors have agile business models

The rules of the game are changing Focus on core competencies

Design

Sourcing

Manufact. Logistics

Marketing

Sales

Orchestrating several external value chains

Company x

Manufacturing vision
Own manufacturing maintained when cost efficient and/or strategically justified

Cost

R&D IPR

Brand

Service level

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Company confidential

Both own manufacturing and external suppliers have special roles in the supply network
Role of own manufacturing
Special technology/materials knowhow and close cooperation with R&D IPR protection Flexibility in production (small batches) and fast reaction capability to meet demand changes and customisation needs close to sales markets Cost competitive

Role of external suppliers

Cost competitive Capacity flexibility Access to new materials and technologies

H Korhonen

23

Wednesday, 28 November 2012

Agenda
1. Introduction to Fiskars Group 2. Operations 3. Manufacturing 4. Sourcing and supplier base 5. Logistics

6. Processes and tools 7. Summary

Page 24

Company confidential

Fiskars sourcing cornerstones

Create and maintain cost leadership Drive quality for competitive advantage Ensure flexible and reliable supply Develop new products

Manage risks

Build capable organization

Page 25 Company confidential

We work in close cooperation with our suppliers

Fiskars Supplier Days 2010

Sustainability throughout Lifecycle

Consumption: Durable, functional with lasting design Environmental friendly materials Reuse, recyclability

NPD: Starting point! Build in Environmental Aspects Product safety Good Quality

Distribution: CO2 emission Efficient packing Goods turnover speed

Manufacturing: Efficiency in Energy and Material use Environmental, health and safety protection Quality systems

Leadership and Administration Knowledge, Involvement, Support

Supplier Code of Conduct project

Scope
Labour and Human Rights
Fair treatment Prevention of involuntary and underage labor Working hours Wage and benefits Freedom of association

Health and Safety

Injury prevention Prevention of chemical exposure Emergency prevention, preparedness Occupational safety procedures Dormitory and dining

Environment
Hazardous substance management Wastewater management Air emissions management Solid waste management Environmental permits and reporting

Business Ethics
Business integrity Disclosure of information Protection of intellectual property

Training and communication

Management systems (audits, corrective actions etc.)
Page 28 Company confidential

Agenda
1. Introduction to Fiskars Group 2. Operations 3. Manufacturing 4. Sourcing and supplier base 5. Logistics

6. Processes and tools 7. Summary

Page 29

Company confidential

World Class Logistics adds value to our business

Highly competent people thanks to
larger entities and shared processes

Cost efficiency; economies of scale

Capability to serve different sales channels Value Added Services

(e.g. wholesale, web shop)

Logistics becomes regional service for all BAs with less DCs
Improved availability
optimization in the whole chain allows small markets to sell wider assortment

Scalability / flexibility

Global partners high performance

Agenda
1. Introduction to Fiskars Group 2. Operations 3. Manufacturing 4. Sourcing and supplier base 5. Logistics

6. Processes and tools 7. Summary

Page 31

Company confidential

What is an operating model?

Fiskars Operating Model defines how Fiskars will work as an integrated company.
Architecture

Strategy

Business model(s)

Operating model(s)

Processes

IT

Customers

Organization

R&R

Products
Value chain

Competencies
Governance

Deliverables
Metrics

An operating model is the abstract representation of how an organization operates across process, organization, technology domains in order to deliver value defined by the organization in scope. (Wikipedia http://en.wikipedia.org/wiki/Operating_model)

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Company confidential

UP! Program is the vehicle to implement Fiskars Operating Model

UP! Program Mission

Execute Fiskars operating model transformation in EMEA for supply chain and financials by 2015

People

Structures
85% business

Processes

IT systems
15% IT

Agenda
1. Introduction to Fiskars Group 2. Operations 3. Manufacturing 4. Sourcing and supplier base 5. Logistics

6. Processes and tools 7. Summary

Page 34

Company confidential

Building competitive Supply Network

Focus Efficiency - Growth

Simplified operations structure Harmonized way of working

Platform for growth - scalable

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Lasting everyday design, since 1649