procurement value in powering the global supply chain 2 sgci confidential information. february 23,...

This document contains proprietary and confidential information of Saint-Gobain Containers, Inc. (SGCI) and is being provided to you by SGCI for your use only. You may not

copy, modify, distribute, disclose or otherwise communicate any part of the information contained in this document to any third party without SGCi’s express approval.

Peter J. WaltersVice President, Purchasing & Distribution

February 12, 2010

Procurement Value in Powering the Global Supply Chain

SGCI Confidential Information.

Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010

Gre

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Greetings on Abraham Lincoln’s 201st Birthday! We Hoosier’s claim him as our own… He lived most of his formative years here. His father opposed slavery and Indiana was a free state. He moved his family here…

The topic I am privileged to speak to you on today is of HUGE value. This is best illustrated by a recent experience I had while speaking to a group of 3rd grade students at the Charlotte, NC International School. I was explaining the value of recycling glass containers…

Explained that for every 10% increase in recycled content we achieved a 4 to 5% energy savings. A little 8 year old autistic boy asked how much recycled material we were using and I told him…

He got out his pencil and paper and began feverishly writing and yelled at the top of his lungs… This is HUGE! You’re getting 45% energy cost savings. Why don’t you do this everywhere???

Here is some background on my industry and my company



Worldwide Glass Container Market• Approximately 325 glass factories worldwide

• Operating with 500 furnaces, 2000 machines

• Output of approximately 65,000,000 metric tons

• Output of an estimated 180 billion containers (26 for every person in the world)

North America

South America

Europe

Asia

Australia

Source: Estimates



Saint-Gobain Packaging - Paris, France45 glass factories worldwide

Operating in 12 countries with 98 furnaces , 294 machines

15,500 employees

26 billion bottles and jars manufactured every year

Sales of $5.0 billion in 2008



A little history . . .

King Louis XIV

Palace of Versailles


Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010Design Presentation / 2002

The Gallery

of Mirrors

Name / Date of Presentation

Page 6Slide 6February 23, 2010 SGCI Confidential Information. Do Not Copy or Disclose without SGCI’s Permission.



U.S. Glass Container Industry

http://pt6.packaging.saint-gobain.com/gallery/view_photo.php?full=1&set_albumName=SGCI&id=Art_Glass_01



North American Glass Container Manufacturing Plants

Manufacturing Plants

Owens-Illinois

Saint-Gobain

Anchor Glass

Others



U.S. Glass Container Industry 2009 Overview

Wine

6%

Carb Bev

2%

Non-Carb

Bev

6%

Spirits

4%

Food

17%

Beer

59%

FAB

4%

Non-Food

Jars

2%

Other

9%

Anchor

19%

SGCI

27%O-I

45%

Marketplace of 232 million gross or 8.4 million metric tons

Source:U.S. Dept of Commerce



Weaknesses

Mature workforce

Plant locations sometimes create a freight disadvantage

Flexible plant & machine configuration

Cost structure affected by plant location –

east & west

Strengths

Glass is pure, sustainable, 100% recyclable

and has a premium image. No toxicity issues

Flexible plant & machine configuration

Value added services and operations

As part of CSG, we have the ability to make investments to achieve customer needs

Market leader in product design and development

Current Strategic Position

Threats

EPA initiatives at both state and federal level

could have impact on cost structure

Return of high inflation and energy price volatility

Continued movement to alternative packaging

Economic conditions leading consumers

towards substitutes

Opportunities

Best practice and WCM opportunities

Expand value added capabilities

Expand into non-traditional markets

Develop low volume QTM process

Execute recycled material strategy



Glass – A Sustainable Package

Protects the Product

Excellent shelf life

Maintains true taste

Protects the Environment

Made with renewable resources

100% recyclable

Recycled glass use reduces energy resources for melting and producing containers

Protects the Consumer

Glass is rated GRAS by the FDA “Generally regarded as safe,” meaning no requirements for minimum parts per thousand imparted to the product inside



Consumer Preferences in PackagingTotal MarketBased only on those consumers expressing a preference

Best Purity

78%

2%

6%14%Best Quality

73%

2%4%

21%

82%

2%

4%12%

Source: GPI and Newton Marketing & Research

Preserves Food in

Healthiest FormGlass

Plastic

Metal

Paper



Consumer Preferences in PackagingTotal MarketBased only on those consumers expressing a preference

Environmentally Safe

62%

18%

3%

30%

Best Shelf Life

62%

12%23%

3%

89%

4%

5%2%

Source: GPI and Newton Marketing & Research

Most True Flavor

Glass

Plastic

Metal

Paper



Saint-Gobain Containers2009 Glass Manufacturing Locations

13 plants throughout the U.S.

1MM square ft. of DC serving Napa Valley

Produce 2.4 million Mtons of glass in ten glass colors

Sales to all product families

Consider services and quality to be key attributes



Saint-Gobain ContainersTop Customers

Anheuser-Busch

B & G Foods, Inc.

Bacardi-Martini

Bay Valley Foods

Beech Nut Nutrition

Bronco Wine

Campbell Soup Company

Carriage House Companies

Constellation Brands

Crown Packaging

*In alphabetical order

Diageo

J M Smucker Company

Jackson Family Wines

Kraft Foods Global, Inc.

McIlhenny Company

Mount Olive Pickle

Pepsi Bottling Group

Red Gold

Ste-Michelle Wine Estates

The Wine Group

Unilever



ECO SeriesTM Revolution Package

Marketed as having :

50% of the bottle weight

50% of the environmental impact

50% of the price.

Significant reduction in the carbon footprint for the package

Competes against imported wines

Produced in Seattle , WA and Madera , CA

2009 Clear Choice Award WinnerWine category - Bronco Wines [Down Under]



New 48 ounce glass jar size for Tostitos

Extends the product line for the customer

Excellent start-up with Frito Lay

Produced at Henderson, NC

2009 Clear Choice Award WinnerFood Category - Tostitos



Product packaging changed from plastic tubs to elegant flint glass packaging.

New spreadable cheese addition to the Zionsville, IN based dairy

Produced at Dolton, IL

2009 Clear Choice Award WinnerConversion Recognition - Traders Point Creamery



Manufacturing Process



Inside a Saint-Gobain Containers Plant

Commitment to

double the recycled

content in our

products in the next

five years – achieve a

50% recycled

material rate.

This will enable a 20-

30% reduction in

GHG emissions.

SGCI and eCullet,Inc.

celebrated the start-

up of a new on-site

recycling plant at

Seattle in September

Installation of energy

efficient furnaces and

emission control

devices.

Deployment of the

most efficient

furnaces in the world

Significant

improvements in NOx,

SOx and Particulates.

Use of XPAR

infrared

inspection

equipment to

analyze hot

containers

exiting the

bottle making

machines

Self-

manufactured

glass forming

machines

designed for

specific volumes

and product mix

Achieving some

of the best cycle

times and

efficiencies in the

industry

Partnerships

with EPA

Energy Star

and Climate

Leaders

Programs

Named

Energy Star

Partner of the

Year for Mfg.



Inside a Saint-Gobain Containers Plant

Controlled container

annealing to enhance

container strength.

Several coating options

delivered with precise spray

systems to reduce abrasion.

Extensive use of the latest in

container inspection

equipment such as squeezers,

plug gauging, thinwall &

check detection, sidewall &

sealing surface inspection.

Containers has the first ISO

22000 (Food Safety) certified

plant in the U.S.

Automated palletizing

systems used to improve

quality and reduce the labor

component.

Strapping and wrapping

systems designed to

protect the package.



Key Costs

Batch

Materials

19%

Energy

17%

Outside

Storage

2%

Molds

2%

Supply and

Repair

Parts

8%

Packaging/

Labels

13%

Labor/

Benefits

31%

Freight to

Customer

8%



Saint-Gobain ContainersBest Practices – What We Have Learned

Experience has taught us that “huge value” can be extracted from professional procurement best practices

SBU’s with consolidated, focused strategic professional procurement should see a minimum of 8-10% cost improvement with the introduction of “best in class” procurement practices

Continued execution of progressive procurement practices should produce a minimum of 3% cost improvement/reduction year over year

Our business identified conservative savings of 3.1% on a $900M addressable spend directly attributable to a global procurement strategy, independent of market indexes in 2009. This was achieved after many years of strategy refinement.



Saint-Gobain ContainersKey Factors of Success to Deliver Outstanding Savings

Hire high-potential people in purchasing

Integrity

Intellect

Energy

Expansive Vision

Team players

Use appropriate technology

Database management for consolidation of diverse business

Extract direct from financial systems where possible

WebEx for regular team communications globally

Get a senior management mandate for full cross divisional participation. (Educate senior management with good data to get full buy-in)

Savings are maximized when procurement professionals are involved earlier in the process



Cost savings are maximized when professional

purchasers are involved earlier in the process

Follow up

Supplier

choice

Supplier selection RFI - RFP

Negotiation

&

contract

Specification

of the needs

Time

Savings

30 %

20 %

10 %



Saint-Gobain ContainersStrategy for Success

Consolidated purchasing with key subject matter expert professionals embedded throughout the organization vs. the old modelof centralized purchasing from only one location

Inventory Human Resources > Procurement Professionals, Engineers, End Users, Finance, IT

Assign Category Managers > i.e. MRO, Lift Trucks, Corrugated Packaging, Railroads, Van Freight, Lehrs, Refractories, etc.

Create Cross-Functional Teams form throughout the business based on expertise

Build the Global Database: Volumes/Prices/Suppliers –Forecast of the Categories

Analyze the Database Make Assignments



Saint-Gobain ContainersStrategy for Success

Team’s focus:Optimize specifications

Globalization of the spend

Standardization

LCC sourcing opportunities

Introduction of new suppliers

Partnership with our strategic suppliers

Renegotiation of existing contracts

Purchasers must be able to act as business partners: i.e. work with technical teams and challenge technical specifications and status quo

Execution and contract compliance

Communication of results



Saint-Gobain ContainersThree Illustrations

I. Cullet

• Produce good data through cross-functional collaboration

• Challenge status quo

• Develop diverse solutions from new technology to legislative agendas

• Celebrate results including sustainability

• Huge savings

II. Corrugated Packaging

• Many diverse businesses in SGCNA – many “sacred cows”

• Huge effort…hired third party for Data Management

• Consolidated volumes be region

• Team representing each SBU

• E-Commerce RFP to begin the refinement process

• Huge savings with process improvement

III. Centralized Load Tendering

• Outbound freight procurement process totally re-engineered

• 250,000 full truckloads of glass containers

• Goal: Improve on-time delivery and lower $100M annual freight cost



Sustainable Commitment from a

leading company

“Glass is the most favorable packaging material for a

sustainable economy. Saint-Gobain Packaging already

offers eco-designed packaging, generating value for its

customers and the well-being of consumers.”

Glass:

100% Collected – 100% Recycled

procurement value in powering the global supply chain 2 sgci confidential information. february 23,...

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