100 day plan presentation to caps 9-06 travel copy rev b

September 2006 Imation Confidential

SOURCING TRANSFORMATION AT IMATION CORPORATION

Imation SourcingSeptember, 2006

September 2006 Imation Confidential

AGENDA

• Imation Corporation Background• Current Sourcing Organization• Initial Attack Plan• Observations from Stakeholders & Sourcing Groups• Sourcing 100 Day Plan Initiatives & Results• Potential Areas of Focus for 2007• Lessons Learned• Summary• Q&A

September 2006 Imation Confidential

WHO IS IMATION AND WHAT DO WE DO?

• Imation Corp. is a leading global developer, manufacturer and supplier of removable data storage media.

• U.S.-based public company with more than 50 years of experience in removable data storage.

• Spun off from 3M in 1996. • The broadest product portfolio in the industry—from the desktop to the data

center. • Technology focus--Imation has more than 330 data storage-related patents. • Acquired Memorex Corporation in January 2006.• 2200 employees worldwide.• 2005 Sales of $1.2B (2006 forecast is $1.5B).• Annual spend of $1.1B.

September 2006 Imation Confidential

IMATION HAS A BROAD GLOBAL FOOTPRINT

Corporate HQ & Technical Center

Oakdale, MNOakdale, MN

Worldwide HeadquartersProduction FacilitiesProduction FacilitiesSubsidiaries, Sales Office,DistributorPercent of Global Revenue

European HQSchiphol, Netherlands

APAC HQTokyo, JapanTokyo, Japan

Americas~ 44%

APAC~ 19%

Europe~ 37%

EuropeanTechnical Center

Components & Assembly Plant

Wahpeton, NDWahpeton, ND

Tape Coating Plant

Weatherford, OK

Tape Coating Plant

Camarillo, CA

Consumer HQConsumer HQ

Cerritos, CACerritos, CA

September 2006 Imation Confidential

Ulysses

Emulators and

HDD Cartrid

ges

Tape Drives

and Tape

Cartridges

Optical Media

MagneticMedia

Flash, Micro Hard Drive

Drives

Accessories

Ulysses Removable Hard Drive Backup

Data Storage Systems & Services

New

New

IMATION PRODUCTS

Multi-Branding

Multi-Branding

B2B, Government$1.0 billion

Retail/Consumer$0.8 billion

September 2006 Imation Confidential

40,000 BCECave

Paintings,Bone Tools

3500 Writing 105 Paper 1450Printing

1870ElectricityTelephone

1947Transistor

1950Computing

Late 1960sInternet

1993 TheWeb

1999 2003

More Data Was Created in the Last 3 Years than in the Previous 40,000 Years Combined!

Source: UC Berkley, School of Information Management and Systems

Global Data Creation (Bytes)

WHY FOCUS ON DATA STORAGE?

September 2006 Imation Confidential

WHY FOCUS ON DATA STORAGE?

Product/Service

Imation Market Position

Magnetic Tape   #1 Worldwide

Optical Media   #1 Worldwide

USB Flash Memory   #2/3 U.S; Growing Worldwide

Removable Hard Disk   New Growth Area

Accessories Growth Area, built on strong Memorex position

Data Storage Services Vaulting, Data Center Diagnostics

New Growth Area

September 2006 Imation Confidential

IMATION GLOBAL SOURCING ORGANIZATION

VP of Sourcing

Raw Materials Sourcing Manager

Finished Goods & IndirectSourcing Manager

Compliance, Int’l Trade, & Operations Manager

RM Commodity Mgrs.(3) Finished Goods CM’s (2) Import/Export (3)

New Products CM (1)

Plant Indirect Sourcing (4)(Reports Into Plants)

Indirect CM’s (3)IT/Process Improvement

(1)

EMEA Sourcing Leader (1)

PO Execution (2)

Global Sourcing SpecAsia (1)

Mag Sourcing SpecialistJapan (1)

Consumer Sourcing Organization(Taiwan based) (11)

September 2006 Imation Confidential

SOURCING TRANSFORMATION

September 2006 Imation Confidential

INITIAL ATTACK PLAN

• Gather extensive feedback from current Sourcing employees and key stakeholders.

• Identify strengths and weaknesses of the current organization and past approaches.

• Launch a “100 Day Plan” to capitalize on existing current strengths and close identified gaps.

• Communicate the 100 day plan across the organization.• Put in place a management approach and structure to

sustain the gains and continue to drive improvement year-on-year.

September 2006 Imation Confidential

ACTIONS SINCE JOINING IMATION--R. Christoffersen

• Met will all Sourcing professionals worldwide.• Met with 30+ key stakeholders of Sourcing including:

– Americas Business– European Business– Product Strategy group– Engineering– Plant managers– Europe and APAC business leaders– Finance– Legal– Top management

• Visited all three manufacturing plants.• Spent extended time with the current Sourcing leadership team.• Attended CAPS Best Practices annual conference.• Met with 15+ key suppliers.

September 2006 Imation Confidential

SUMMARY OF IMPRESSIONS FROM STAKEHOLDER and SOURCING INTERVIEWS

• POSITIVE FEEDBACK & THINGS SOURCING DOES WELL:– Good relationship with nearly all key stakeholders.– Very dedicated employees.– People are competent at doing their jobs.– People in Sourcing get along well with others inside the function.– Have demonstrated strong commodity expertise in many areas.– Have good relationships with our key suppliers, especially in raw

materials.– Many “islands of excellence” in how we do our work.

September 2006 Imation Confidential

SUMMARY OF IMPRESSIONS FROM STAKEHOLDER and SOURCING INTERVIEWS

• AREAS FOR IMPROVEMENT:– Need to improve linkage with R&D and Product Strategy groups.– Need to strengthen the link between Planning and Sourcing, especially in the

Americas.– Need stability in leadership and organization structure.– Need a clearer vision and direction for Sourcing.– Need more focus on people development, skill building and sourcing tools.– Focus in Sourcing needs to move from tactical to more strategic.– Key metrics are not always clear.– Work plans and development plans need improvement.– We are too reliant on sole suppliers.– Too many points of contact with key suppliers.– Commodity strategies are not documented and published.– Total cost of ownership is not always understood and used in all decisions.– Sourcing organization in Asia not extensive enough.– Time to market and decision making is too slow.

September 2006 Imation Confidential

KEY ACCOMPLISHMENTS – THE 100 DAY PLAN

New mission statement for Sourcing completed and rolled out. Key metrics established for 2006. Key work plan initiatives defined for 2006. Progress being formally

tracked quarterly with all Sourcing employees. Significant improvements to the 2006 material cost plan were

submitted and we are exceeding the plan. Formal, written sourcing strategies have been developed for flash

and optical purchased products. Further refinement of these and communication with stakeholders will occur in 2006.

The primary sourcing approach for all finished products was revised in quarter four, 2005 with a focus on gross margin improvement.

Imation’s first-ever supplier conference was held in February 2006.

September 2006 Imation Confidential

KEY ACCOMPLISHMENTS – 100 DAY PLAN (continued)

New processes have been documented and deployed for Supplier Report Cards and Managing Price Increases.

A formal monthly communication & training session for Sourcing is now in place.

All current Sourcing procedures have been identified and classified into logical section headings. All are being updated in 2006.

A “lean” opportunity list has been developed. Priority setting is underway.

A formal commodity manager checklist for orienting new employees at Imation has been drafted and is being piloted.

Established a new product introduction commodity manager position and staffed it with an experienced sourcing professional.

September 2006 Imation Confidential

DISAPPOINTMENTS & CORRECTIVE ACTION PLANS

• Did not complete a full corporate spend analysis due to the infeasibility of querying this data from Oracle.

• Did not complete CAPS assessment of Imation’s procurement practices. Questions were not completed by CAPS until June 2006.

• Organization structure changes were placed on hold due to the Memorex acquisition.

• Working with possible IT providers. Hope to propose a solution in 2007.

• Target to complete high level assessment by Q4 and identify other possible areas for improvement for 2007 work plan.

• Will be addressed after the integration is fully completed in 2007.

September 2006 Imation Confidential

INITIATIVES PLANNED FOR 2007

Conduct an employee survey of all members in the Sourcing team to assess morale, job satisfaction, and areas needing focus.

Complete a company-wide spend analysis to identify other possible target areas.

Complete the CAPS 10X Lite Assessment and identify other possible areas for further improvement.

Update all supplier contract agreement templates to reflect 2007 expectations of suppliers.

Continue development of improved cost models and roll out to the Sourcing team.

Build on and sustain the improvements rolled out in 2005-6.

September 2006 Imation Confidential

LESSONS LEARNED

• Driving change can be a painful process.• Engage everyone in the Sourcing organization in the transformation.

“Buy in” is important.• Focus on strengths of the current organization.

– Be careful not to convey the past as “bad”.• Do not push too hard or too fast.• Stay engaged with key stakeholders on a regular basis.• Recognize “terminology” difference between companies can be a

barrier.• Be conscious of the potential for disruption from “external” factors.

– The Memorex acquisition slowed or stopped a lot of planned work for much of 2006.

September 2006 Imation Confidential

SUMMARY

• Imation has a good Sourcing organization, with good people, doing a good job.

• The opportunity clearly exists to elevate the organization and its performance.

• You need to engage and tap the support, energy, and ideas of everyone in Sourcing to achieve the business and functional objectives.

• You need the full support and cooperation of all key stakeholders to make this journey.

• This is not a 100 meter dash, it is a marathon!

September 2006 Imation Confidential

QUESTIONS?

September 2006 Imation Confidential

APPENDIX

September 2006 Imation Confidential

IMATION GLOBAL SOURCING MISSION

The mission of the Imation Global Sourcing team is to procure products and services for the company at the lowest total cost of ownership. To execute our mission, we will:

Identify, develop and manage a global supply base which provides:

Market-competitive total delivered costs World class delivery and service Six Sigma-level quality Technology leadership

Develop a Sourcing organization with the following characteristics:

Unquestionable ethics and integrity Relentless focus on total cost of ownership Strategic and global view of our business and the supply chain Functionally excellent in Procurement

September 2006 Imation Confidential

Region Quality Service Technology Cost OverallAmericasEuropeAPACOverall

(Supplier) 2006 Report Card(Supplier) 2006 Report Card

Region Quality Service Technology Cost Overall

2005 Report Card

Date:

Code: Approved:

Rating Definitions:

95+ Totally responsive to customer requirements/Excellent!

85+ Responds well to customer requirements / Good

75+ Marginal responses to customer requirements / Average

65+ Responds unacceptably to customer requirements / Poor

<64 Totally unresponsive to customer requirements/ Failing

September 2006 Imation Confidential

Accomplishments

September 2006 Imation Confidential

Areas for Improvement

September 2006 Imation Confidential

Top Four Improvement ProjectsTop Four Improvement Projects

Report Card Completed by: Date: