Download - Global Supply Chain - icv-controlling.com · measure of value creation that ties our strategic focus to returns. Reconciliations of other non-GAAP measures are provided in our Reconciliations

April 2018

Global Supply ChainMichael Prado, Chief Purchasing Officer

Cautionary Statements

This presentation contains “forward-looking statements,” that is, statements that address future, not past events. In this context,

forward-looking statements often address our expected future business and financial performance and financial condition, and often

contain words such as: “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” or “will.” Forward- looking statements by their nature

address matters that are, to different degrees, uncertain. These statements are based on assumptions of future events that may not

prove accurate. They are also based on our current plans and strategy and such plans and strategy could change in the future. Actual

results may differ materially from those projected or implied in any forward-looking statements. Please refer to our most recent SEC

filings, including our 2017 Annual Report on Form 10-K, subsequently filed Quarterly reports on Form 10-Q, as well as our other filings

with the SEC, for detailed information regarding factors that could cause or contribute to actual results differing materially from those

expressed or implied in such forward-looking statements. We do not undertake to update our forward-lookingstatements.

This presentation also contains non-GAAP financial information, including CFROI. CFROI is defined as cash flow from operations

plus after-tax interest expense divided by a 2-point average of debt and equity. CFROI is considered important as it is a cash-based

measure of value creation that ties our strategic focus to returns. Reconciliations of other non-GAAP measures are provided in our

annual SEC filings announcing financial results, and may be found in the accompanying appendix. We use this information in our

internal analysis of results and believe that this information may be informative to investors.

Global Supply Chain |2

Dividend Paid Consecutively For 141 Years; Increased For Past 50 Consecutive Years

A Diversified Global Leader

Tools & Storage

Industrial

Security

Industrial $2.0B • STANLEY Engineered Fastening

• Infrastructure

Tools & Storage $9.0B• Power Tools & Equipment

• Hand Tools, Accessories & Storage

Security $2.0B• Commercial Electronic Security

• Mechanical Access*

STANLEY BLACK & DECKER (NYSE: SWK)

2017 Revenue: ~$13.0B Market Cap: $26.1B Cash Dividend Yield: 1.4%

Social ResponsibilityContinued Top Quartile PerformanceKnown For Innovation

Market Cap & Dividend Yield Are As Of Market Close 12/29/2017 $169.69

Revenue Is Adjusted For The 1Q’18 Adoption Of New Revenue Recognition & Retirement Benefit Accounting Standards Global Supply Chain |3

Continue Organic Growth Momentum

Be Selective And Operate In Markets Where

Pursue Acquisitive Growth

Consistent, Rigorous & Disciplined Strategic Framework Executed Over The Last Decade

• Utilize SFS 2.0 As A Catalyst• Mix Into Higher Growth. Higher Margin Businesses• Increase SBD Weighting of Emerging Markets (Goal = 20% +)

• Brand Is Meaningful• Innovation Drives Definable & Sustainable Value Proposition• Global Cost Leadership Is Achievable

• Build Upon Global Tools Platform• Expand Industrial Platform (Engineered Fastening | Infrastructure)• Commercial Electronic Security Acquisitions• Pursue Industrial Adjacency Opportunities

Strategic Framework


Accelerate Progress Via Stanley Fulfillment System

FY2017

$13B Revenue

Tools &Storage

$9B69%

Security$2B15%

Industrial$2B15%

~12%Total Revenue CAGR

~$5-7BAcquired Revenue

~4-6%Organic

Revenue GrowthAssumptions

2022 Vision

~$22B Revenue

Tools &Storage

~$12-14B59%

Security~$3-4B

16%

Industrial~$5-6B

25%

Financial Vision


Our Long Term Financial Goals

Peer Group Includes DHR, DOV, EMR, GE, HON, IR, ITW, MM, SPXC, TXT And UTX

We Continue To Perform In The Same League As Elite Industrials

794%

S & P

500158%

394%Peer Group

Average

Data From: Jan 2000 – Dec 2017

>620%

380% - 620%

280% - 380%

<280%

Top Quartile

3rd Quartile

2nd Quartile

1st Quartile

2000 – 2017 Peer Group TSR Quartiles

Total Shareholder Return Since The Turn Of The Century


A Company That Has Built Well Established, Global Franchises…

Business Value Drivers

…Around Powerful Brands That Supports A Consistent Strategic Framework

In Tools &

Storage

A Global Leader

In Engineered

Fastening

In Commercial

Electronic

Security

#1

#2

Global Franchises


Core SFS

S&OP

Global Supply

Management

S1R1

Commercial Excellence

Functional Transformation

Core SFS

BreakthroughInnovation

Digital Excellence

Our Commitment To Drive Operational Efficiency & Strong Free Cash Flow Generation Continues…

…Opportunities Remain To Accelerate Progress Toward Our Vision Of 10 WCT

Order-To-Cash

Excellence

Complexity

Reduction

Operational

Lean

SFS 2.0 – Digital Excellence


Global Supply Management

(GSM)

GSM Strategic Imperatives

• Productivity | Working Capital

• Acquisition/Integration | Localization | NPD

• Continue Deployment Of Advanced Analytics

• Artificial Intelligence, Block Chain, Robotics

Processed Automation (RPA) & SRM

• Capitalize On Scale & Scope

• Buy Where We Make

• Manage Import & FX Risk

• Magnet & Incubator For Talent Development

1. Aggressively Protect The Core

2. Create Competitive Edge With Data

3. Localization

4. Relentless Commitment To Talent


GTS

71%

IND

14%

SEC

12%

CORP

3%

FG

1.9

COMP

1.7

INDIR

1.0

RM

1.0

TRANS

0.4

Productivity

By

BU

By

Typ

e

Working Capital

~$6B Spend

GSM Proven Track Record Of Outperformance

$$$$$$

$$$

2015 2016 2017

$$$$$

$$

2015 2016 2017


Acquisitions

Target 3% To 5% YOY Improvement

Supplier Portfolio Management

• Define Optimal Number Of Suppliers Per Category

• Shared View Of Supply Base Across Multiple Functions

• Asses Capability & Performance

• Vary Relationship By Criticality.

• Focus On Competitive Advantage With Partner Suppliers

• Mitigate Risk For Key Availability Suppliers.

Relationship Management Sourcing Strategy

Relationship

Performance

Human Resources

Supply Chain Disruption

Financial Health

EnvironmentalIndicators

Supplier Risk Score

(RPI)

Influence, Alignment, Information, Sharing, Change in Ownership

Quality (Recall / Patent Infringement), Delivery, Capability, Service, Flexibility, Capacity, Sub-supplier

Turnover, Union Issues, Pay Position, Health & Welfare (Pandemic)

Market Power, Information Visibility, Concentration, Disruption Potential, Transportation, Flexibility

Size, Asset Utilization, Capitalization, Profitability, Solvency

Market Dynamics, Mergers, Regulatory, Disasters, Transportation, Location Risk Exposure

1

6

5

4

3

2

Key Drivers Of Success

• Standardized & Quantified Approach

• Integrated & Aligned To SBU Operations

• Focused On Multi-Facet Risk Factors… “Six Point” Key Focus Areas

• Very Strong Cross Functional Reactive Engagement

GSM Risk Management Model


Gross Sales Value (GSV) @ RISK

0

50

100

150

200

250

0 1000 2000 3000 4000 5000 6000

AB

CD E

“Six Point” Risk Model Allows Predictive Versus Reaction

F

Quantitative Point Structure

GSV

GSM – Commitment To Talent

ASIAUS

EMEA

SourcingQuality

SC

Finance HR/Other

30 Offices In 14 Countries GSM Global HC

Productivity

$15.5 $20.0 2.8

( 2.0 ) ( 0.7 )

1.5

5.5

( 1.9 ) ( 0.6 )

Year 1 Volume Price FX Prodt'y Inf / Def Mix Other Year 2

Sales $100 $90 11%

Std Cost of Sales 40 37 8%

Standard Margin (SM) $60 $53 13%SM% 60% 59% 1.1Pts

Manufacturing (Mfg) 5 10 5% Other Cost of Sales (OCOS) 10 14 7%

Adjusted Gross Margin (AGM) $35 $30 19%AGM% 35% 33% 2.2Pts

Sales, General & Admin (SG&A) 15 14 7%

Operating Margin (OM) $20 $16 29%OM% 20% 17% 2.8Pts

Income Statement (P&L)

Yr 2 Yr 1 V%

GSM Financial Position

Operating Margin Walk

OM Walks Are One Of The Most Powerful Tools A GSM Business Leader Can Utilize…


• $ Of Net Project Execution

• Planned Other (Unfavorable)

• Favorable Gross Productivity

Productivity Guidelines: 8% | 5% | 3% Rule

Total Plant Cost (4-Wall)

Feed Funnel

2 Identify Project Deck:

5% To 7%

Green Deck (SS|SNS)

1

3

4

Project Funnel Should Include:

Ensure Projects:

• Target 8% To 10% Gross 5% To 7% Net Inflation 3% To 5% Rule

• Drives YOY Organic Productivity

Cost Categories


Inflation

Due in large part to massive demand from emerging economies, the price of major raw materials used in the manufacture of automobiles have increased considerable over the past several years. The materials include rubber, plastic, copper, steel, and aluminum. The price of these commodities have increased 45%, 20%, 23%, 66%, and 40%, respectively, since the beginning of 2010...Strong demand from emerging markets for these commodities continue to increase the price of Ford’s raw materials, and this trend will likely be long-term.

“We just see the inflation trends creeping in on many parts of our value chain,”…The Michigan-based appliance giant projected that additional raw material costs, driven by rising prices of steel and resin, would shave as much as $250M off it’s profit this year.

Caterpillar Inc., have pointed to rising material costs as a hurdle in the coming year.

3M Co., the St. Paul, MN based maker of myriad products including Scotch tape and industrial films and adhesives, has signaled it may raise its prices more than expected to offset inflation if it accelerates this year.

Harley-Davidson Inc., has benefited from a weaker dollar in recent months that has helped U.S. manufacturers boost overseas sales. But CFO John Olin told analysts last month that the help from the currency exchange will be “more than offset” by expenses including rising steel and aluminum costs this year.

Macro Impact Of Material Inflation

Global Inflationary Pressure Across All Sectors


Inflation / (Deflation) Management

Mitigating Inflation through Pricing and Projects

Example: Copper & Rare Earth PeakCredit Bubble

Deflationary TroughFinancial Crash

Aggregate Market Commodity Index

• Price Recovery

• Clean Sheet (Cost Analysis)

• Stall, Deny, Delay

Working Capital

How Can We Improve WC Turns?

Working Capital Days

Days Sales Of A/R Outstanding (DSO)

• Credit & Risk• Negotiated Terms• Billing Milestones• Letters of Credit• Standby Letters of Credit

Days Of Sales Inventory (DSI)

• Consignment & JIT• Inco Terms• MOQ & Lead Time• Plant Utilization• Make Versus Buy

Days Of Sales Payables Outstanding (DPO)

• Negotiated Terms• Citi Financing

DSO DSI DPO

Leveraging SFS 1.0 & 2.0 Strategies Maximize Working Capital Efficiency…


minus equals

$40 + $50 = $90 $60 $30

Inventory Accounts Payable Working CapitalAR Current Assets

Return On Capital Employed

Focused On Building Long-Term Shareholder Value

Return On Capital Employed (ROCE)


MARGIN VELOCITY

GSM Margin Tool Box GSM Velocity Tool Box

• Clean Sheet

• VAVE

• Productivity

• Inflation

• Synergy

• LCC Sourcing

• Make Vs. Buy

• Distribution

• Inventory Turns

• Supplier Lean

• Term Extension

• Consignment

• MOQ

• LTR

• VMI

• Stocking

THE WORLD IS CHANGING… LEADERS ADAPT

We Have Entered A New Transformational Era…

• Higher Volatility/Unpredictability

• Increasing Velocity Of Change

• Disruptive Business Models

• Disruptive Technology

…More Risk, More Opportunity

Link Finance Results With Supply Chain Excellence…How do you execute in your business?

SBD Vision


Q&A

Thank you!

Download - Global Supply Chain - icv-controlling.com · measure of value creation that ties our strategic focus to returns. Reconciliations of other non-GAAP measures are provided in our Reconciliations

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