1

Supply ManagementSupply ManagementBuilding an

Organizational Capability

Purdue UniversityyTim Fiore

• Terex Corporation Overview

Agenda

• Global Supply Management Organization

• Integrated Steel Supply Chain

2

2

TEREX is the 3rd largest manufacturer of construction equipmentin the world

Based on last twelve months of available Construction Equipment Sales ($’s in Billions)

Where We Are Today

$16.4

$9.5 $8.6 $7.7 $6.7 $5 1 $5 0 $5 0 $4 5 $4 4 $3 8

$29.4

33

$5.1 $5.0 $5.0 $4.5 $4.4 $3.8

(1) Represents total sales before Power Products and Financing and Insurance Services sales.(2) Represents Komatsu’s Construction and Mining Products segment as of December 31, 2007.

Exchange rate of 111.445 as of Dec 31, 2007(3) Exchange rate used as of December 31, 2007 of USD/JPY 111.445(4) Represents Volvo’s Construction segment as of Dec 31, 2007 plus prorated annual sales of $864

million acquired from Ingersoll Rand’s Roadbuilding business in May 2007 for the 4 months not owned in 2007 of approximately $300 million; Rate of USD/SEK 6.464

(5) Represents Deere’s Construction and Forestry segment as of January 31, 2008

(6) Represents 2007 Construction equipment sales of $1.5 billion based on exchange rate at December 31, 2007 of KRW/USD 936.07 plus estimated 2007 Bobcat sales of $2.9 billion

(7) Estimated, as these are privately owned companiesJCB: 2007 revenue of GBP 2.25 billion converted at Dec 31, 2007 GBP/USD rate of 1.9870Liebherr: 2006 Construction segment revenue of EUR 4.6 billion converted at a more current rate, using Dec 31, 2007 EUR/USD rate of 1.45983

(8) Represents CNH Global’s Construction Equipment Segment(9) Includes Access sales of $2.54 billion for the year ended September 30, 2007 plus Commercial

(concrete mixer trucks, concrete plants and refuse trucks/systems) sales of $1.25 billion.(10) Represents 2007 Mining & Construction sales converted at SEK/USD 6.46

Caterpillar (1) Komatsu (2) Terex Deere (5)Hitachi (3)Volvo (4) CNH Global (8) Oshkosh (9)Liebherr (7) JCB (7) Doosan (6)Sandvik (10)

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Recent Financial Highlights

27%CAGR

• Fiscal year ended December 31, 2007 income from continuing operations increased 55% versus 2006

$4,000$5,000$6,000$7,000$8,000$9,000$10,000

'95 '9

on 19% higher sales

• Second quarter 2008 earnings per share increased 39.8% versus second quarter 2007 on 25.3% higher revenue

12 year compounded annual

44

–$1,000$2,000$3,000$4,0005 96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08

Note: Net Sales in millions of dollars

2008 sales are calculated as LTM through Mar 2008

• 12-year compounded annual growth rate (CAGR) of 27%

• 2008 Net Sales guidance is for a range of $10.5 – $10.9billion

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Aerial Work Platforms

Aerial Work Platforms

Light Towers

TelehandlersGenerators

Trailers

5

Construction

ExcavatorsLoadersOff-Road TrucksSit DSite DumpersCompactionMotor GradersMaterial HandlersTruck Mounted CranesContractor Pumps

6

4

Cranes

Rough Terrain Cranes

7

Telescopic Truck CranesAll Terrain CranesCrawler CranesLattice Boom Truck CranesTower CranesReach Stackers

Mining

8

Hydraulic Excavators Mining Trucks Drilling Equipment

Drill BitsHighwall Mining Systems

5

Materials Processing

Crushers

Screens

Trommels

Shredders

Washing-Systems

9

(Equipment Limited)HANDLERS

Global Production Sites

WAVERLY

NORTH HAULER

ACMC

LUZHOUAWP

HIGHWALLMINERS

MATERIALS

ASV

10

CMI CIFALl

HALCO

Roadbuilding/UtilitiesCranesMining/Materials ProcessingConstructionAerial Work PlatformsOther/Joint Ventures

LIGHT CONSTRUCTION

LIFT

PROCESSING

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Supply Management: Objectives

2007 2008 2009 2010

Create Competitive Advantage In the Supply Chain

Build the Foundation

Expand the Core

Achieve Excellence

• Establish consistent sourcing processes

• Build the organization • Common objectives

I t ti l S i

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• Enhance sourcing tool set

• International Sourcing Infrastructure

• Drive savings and common suppliers

• Deploy Day 1 sourcing

• Deeper supplier integration

• TBS initiatives

• Continual focus on TCO

Maximize Supply Chain Value CreationF1. Drive continuous working capital improvement through

the supply chain

S t C t B i U it & S l Ch i P t

Fina

ncia

ls

F3. Support revenue growth through on-time, defect-free supply chain

execution

F2. Increase operating margins through total material

cost reductions

Terex Supply Management Strategy Map

Build & Manage a Global Supply Network for Competitive Advantage

Support Customers, Business Units & Supply Chain PartnersS1. Improve customer

satisfaction through enhanced supply chain performance

Structured Supplier ManagementKey Supplier Relationships

Stak

ehol

ders

sses

Strategic Global SourcingP5. Identify strategic supplier

relationships & establish selected partnerships

S2. Drive continuous improvement in supplier quality

& operational performance

S4. Be a customer of choice to a diverse Terex supplier base

S3. Improve lead-time flexibility for Terex business units &

customers

P8. Formalize supplier development & qualification processes across Terex

P6. Ensure access to new technologies & continuous cost improvements

P9. Establish an effective suite of e-tools for sourcing & supplier management

P11. Plan and manage an effective international logistics program

P12. Establish an effective international procurement organization

P10 E t bli h bli t P13 Provide supply chain process

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Team

Build & Sustain a World-Class Supply Management Team

Proc

es

T1. Attract the “best & brightest” global talent internally & externally

T2. Provide opportunities for collaborative professional growth & personal

development

Live the Terex Values

Strengthen the Foundation

P7. Implement an effective Early Supplier Involvement process for new products

P1. Establish a systematic Terex sourcing process &

category strategies

P2. Establish effective, cross-functional sourcing

teams across Terex

T3. Develop a diverse Terex SM team with meaningful growth

opportunities for all

P3. Implement transparent spend & savings data management systems

P10. Establish enabling procurement policies & procedures across Terex

P13. Provide supply chain process leadership across Terex

P4. Develop & implement a structured supplier management

program

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7

Division Leadership

Supply

Engage Division Supply Management Leadership

Management

Leadership

Dirk VorsteherMining

Paul Kearney

Materials Processing

Steven KimAWP

Leo DiazConstruction

Mike Hovanec

NA Cranes

StephanFolschweiller

Europe Cranes

RBUNone

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Customer Focus

Supply Management Organization

Organize Around Supply Market

SupplyManagement

WorkmanNA Metals, Fabs

& Castings

Mangold/PalmkeEU Metals, Fabs

& Castings

McGrathHydraulics

EverittIndirect

McNamaraPower Systems

MalikElectrical, Cabs

& Plastics

NolanTransportation

1414

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Key Success Metrics

Supplier quality by 30% year over year

What Division Improvements Milestone

Supplier deliveries by 25% year over year

Cash savings 2% year over year

Re-order lead-times 15% year over year

Ad d i 25% Q2 2008

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Advanced sourcing 25% Q2 2008

Develop the common processes Q3 2008

Terex Strategic Sourcing Process

Understand internal spendand external

Evaluate supply base and identifyll i bl li

Create preliminary “go to market”

h

Decideappropriateexecution tool

Conduct aggressivesupplier negotiations

Operationalize agreements

Monitor marketand supplier performance

Purpose

Develop Commodity Profile

Develop & Select

Sourcing Strategy

Generate Supplier Portfolio

Manage RFP/Auction

Negotiate & Select

Suppliers

Integrate Supplier's)

Continuous

Improvement &

Benchmarking1 2 3 4 5 6 7

and external market

all viable suppliersapproach execution tool performance

• Form sourcing team• Identify current usage

• Overall volumes• Locations and

suppliers• Pricing

performance• Forecasts• Specification

risks

• Collect detailed supplier information &

execute RFI• Generate potential supplier master list

• Develop qualification criteria

• Screen potential li li t

• Perform complexity reduction reviews

• Value Analysis / Value Engineering reviews

• Assess business impacts

• Assess supply market complexity

• Assess bargaining position

• Develop internal management engagement plan

• Select RFP/ e-RFP or supplier development path

• Develop RFP execution strategy

• Develop RFP evaluation criteria &

i ht

• Finalize & distribute RFP to suppliers

- or –• Conduct auction/ negotiation

• Analyze responses• Best price

evaluation• Non-price

comparisons

• Execute written supplier agreements

• Finalize Terex implementation team

• Identify & anticipate implementation issues

• Consider organizational implications &

• Develop supplier performance measurement process

• Evaluate supplier support of VA/VE

• Develop processes to monitor market conditions

• Initiate continuous supplier

1 2 3 4Stage Gate Reviews

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risks

• Conduct preliminary industry analysis

• Supply market• Competitive

analysis

supplier list against criteria

• Define lotting strategies

• Establish supplier reduction targets

• Finalize technical specifications & update drawings

position• Strategically segment the purchases

• Select appropriate sourcing approaches and techniques

weights• Develop preliminary negotiation strategy

comparisons• Develop award scenarios

• Review with plants

• Get plant agreements

• Finalize negotiation strategy

implications & required changes

• Develop & manage supplier launchplans

• Develop new processes & procedures

• Execute transition/ implementation plan

• Update forecasts• Monitor results

supplier benchmarking

• Assess supplier improvement opportunities

• Update competitive analysis of market

Sourcing Tasks

Rev. 6/3/08 16

9

Building a Solid Foundation through Integrated Information Management

eCOST

GBT

Data warehouse Spending by BU, supplier, commodity, part, etc.

TSTTerex Sourcing Tool Global Benefit Tracker

NEW NEW

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TPTTerex Project TrackerSystem used by sourcing teams to manage implementation steps following supplier award decisions

geSourcing system used to efficiently manage RFIs, RFPs and Reverse Auctions

Detailed tracking and analysis of pricing changes

NEW

Global Steel Market Dynamics

107

158164161 161 164

140

120123

120

114

155

110

120

130

140

150

160

170

SBB Historical

Forecast

167

113

127

148

175164

156163 163

157

112120

140

160

180

200

SBB Historical

80

90

100

2007Q1

2007Q2

2007Q3

2007Q4

2008Q1

2008Q2

2008Q3

2008Q4

2009Q1

2009Q2

2009Q3

2009Q4

Plate

179

148149

160173

144 141140

160

180

200

109113112

80

100

2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4

China

Forecast

161

180187

199202

135

191

187206

150

170

190

210

230

SBB Historical

Forecast SBB Historical

18

103 100 98

109

96

80

100

120

2007Q1

2007Q2

2007Q3

2007Q4

2008Q1

2008Q2

2008Q3

2008Q4

2009Q1

2009Q2

2009Q3

2009Q4

Plate

Forecast

135

121119106

50

70

90

110

130

2007Q1

2007Q2

2007Q3

2007Q4

2008Q1

2008Q2

2008Q3

2008Q4

2009Q1

2009Q2

2009Q3

2009Q4

India

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Integrated Steel Supply ChainChange Business Relationship with Mills and Key Suppliers

Receiving & Handling $200M Input Cost

Steel Mill Transport Blasting

Processing

Kitting, Delivery, Rack Return

ScrapCredit

$1,440 / ton

$2000/ ton

Net Steel

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•Fully understand value stream•Require cost transparency to account for steel fluctuations•Strike steel deals and flow to subcontractors

•Retain intimacy of mill prices

Illustrative

NA Steel Action Plan

Re-NegotiatePre Cut

Significant price reductions of confirmed to-date Counter-proposal letters requesting retro price reduction issued Oct 9th Meetings to formally notify of supply base consolidation plans – ‘winner take all scenario’

Data collection and opportunity analysis underwayNew Pre-Cut Source (NA)

BCC Pre-CutPlate

NA FabSourcing

Data collection and opportunity analysis underwayGoal is to identify five (5) high potential supplier candidatesKey features: industry incumbent, $50M to $250M revenue, limited capital investment, lower labor rates

Terex site audit completeAward scenario confirmed, steel order confirmed, cert testing and sample validation underway1st article production acceptance scheduled for Dec-08

$20M Fab spend quoted to preferred global suppliers5 Terex Business Units included $4.53M savings identified in BCC, move to implementable

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Mill Agreement

Steel PriceValidation

p p

NA steel RFP responses received.Mgmt review complete Nov 7th ‘Quick Strike’ negotiations scheduled with for week of Oct 20th; othermills to follow

Draft of steel spend versus steel index completeData received for Q4 steel RFP for market price comparisonTerex price analysis received from key supplier