1. B MC Defend Profits by
Reducing COGS in the
“New Normal” of
Commodity Volatility:
The Role of Sourcing
Gianni Giacomelli, SVP of Product Innovation
Genpact
© 2012 Ariba, Inc. All rights reserved.

2. Agenda
• Speaker Introduction
• Commodity Volatility Challenges
• How Can Volatility Be Managed?
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3. Agenda
• Speaker Introduction
• Commodity Volatility Challenges
• How Can Volatility Be Managed?
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4. Keynote Speaker
Gianni Giacomelli - Senior Vice President,
Product Innovation Leader, Genpact
Gianni is responsible for building and executing a global Product
Innovation framework which takes an integrated view of Genpact’s
process excellence capabilities, IT solutions and analytical tools.
His career spans over 20 years’ experience across innovation strategy,
organization redesign, corporate business development, and across
three continents. He has worked, among others, with SAP, the Boston
Consulting Group, and Danone.
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5. Making Sourcing & Procurement More
Intelligent Processes
• Formerly GE Capital Information Services, 50+
Pioneers spun off in 2006, NYSE (“G”) Nationalities
in Global • 55,000+associates. 600+ Clients, 35+
BPM Fortune 500, 95+ Fortune 2000. Over 25+
4,500 processes Languages
Software integration Sourcing
Loans Engineering Services
Risk Management Research/Analytics
Depth of Collections Supply Chain Analytics
Procurement Finance and Accounting
Offerings Helpdesk Marketing Support
Order to Cash Customer Service
Treasury Management
Fleet and Logistics
Proprietary Tools to Deliver Framework for Best
Foundation
10,200 + Industrial Strength Practices That are „Must
Green Belts* Operations Haves‟
of 480+ Common Metrics
and Standards to
operating Black Belts* / MBBs*
Report Process
excellence $2.82 Billion Health
Business Impact Delivered*
5m+ 15+ years of Sourcing
40m+
12
34
56
Deep Transactions
Invoices per year Experience
per year
Sourcing
30+
Expertise 3,000 transitions executed Procurement 2,000+
customers Procurement FTEs
* 2010 Figures.

6. Agenda
• Speaker Introduction
• Commodity Volatility Challenges
• How Can Volatility Be Managed?
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7. Commodity Prices Have Increased
Sharply Since 2000, Erasing All
Declines of the 20th Century
Source: Economist
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8. Since 2002 the CPG Sector Hasn’t
Outpaced the S&P 500 Because of the
Response to Changing Commodity Prices
• 1985-2002: companies passed on the input price increases while
holding prices when raw material costs declined. In 1996-2002, this
provided 60%+ of net margin expansion i.e. ~$10 bn
• 2002-2007: companies passed on just 15% as commodity costs
grew 40%, driving 75% of the sector’s margin contraction ($70 bn)
• If CPG commodity prices increase 20% in next 5 years and
companies maintain prices to hold share, 4.5% EBITDA - or about
33% of it!
Source: Genpact analysis on McKinsey data
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9. What We Asked
• 180 senior finance executives in the United States, Europe,
and Asia
• CPG, discrete manufacturing, $100m+
• Survey conducted by CFO Research Services in
December 2011
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10. In 2011, Commodity Price Volatility Eroded
Earnings; Little 2012 Improvement
How much has commodity price volatility affected your EBIT over the past
12 months? What do you expect over the next 12 months?
Decrease EBIT Increase
Over past 12
24% 34% 18% 15% 9% months
Over next 12
17% 36% 23% 19% 5% months
Decrease Decrease No effect Increase Increase
>50 basis pts <50 basis pts <50 basis pts >50 basis pts
Percentage of Respondents
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11. …Same Mayhem on Share Prices…
What has been the effect of commodity price volatility on your share price during the past
12 months? What do you expect over the next 12 months?
Negative Share price Positive
Over past 12
7% 44% 27% 16% 5% months
Over next 12
2% 42% 33% 19% 4% months
Very negative Somewhat negative No effect Somewhat positive Very positive
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12. We’ve Never Been Here Before…
Is your business experiencing any more or less commodity price volatility
than in the past?
Less Volatility More
1% 3% 15% 46% 35%
Much less Somewhat Somewhat more Much more
less
Copyright © 2012 CFO Publishing
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13. …Across the Board
Which of your business’s cost inputs do you anticipate will be affected
substantially by price volatility in the coming year?
US/Canada Europe Asia/Australia
48%
Energy 67%
49%
71%
Raw materials 16%
39%
48%
Transportation and logistics 36%
41%
8%
Services 42%
26%
13 © 2012 Ariba, Inc. All rights reserved.

14. The Effects Are Not Limited to
Sourcing – But They Start There
In which cost areas do you expect your company will feel the effects of
commodity price volatility the most over the coming year?
Procurement
Production 52%
Logistics 44%
36%
Inventory &
warehousing
Marketing
18%
16%

15. First - Look for Better Forecasts,
But Also…
In which of the following areas would improvements be most helpful
in enabling your company to manage commodity price volatility better 54%
and achieve timely and accurate costing?
38% 39% 39%
33%
31%
Standard costing Sales forecasts Cross-functional IT systems Pricing process Estimates of
of our products process support commodity price
integration fluctuation
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16. Agenda
• Speaker Introduction
• Commodity Volatility Challenges
• How Can Volatility Be Managed?
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17. It Is a Cross-Function Process Issue
Typical process Implications
• Lean cross-functional teams • Imprecise forecasts for brand
P&L and category roll-ups for next
• ERP systems of records with 6 to 9 months
no detailed scenario
planning capabilities • Future cost volatility isn’t fully used
to optimize product P&L by Sales &
• Standard cost (product accounting) Marketing, Finance, other SCM
in ERP from past data only
• Inventory optimization doesn’t • Potentially suboptimal marketing
mix and inventory optimization
include COGS volatility
and spend allocation, and
• Aggregate (S&OP) and ad-hoc optimization sought only at local – not
forecast input from sourcing and other regional – level
cost owners (e.g. logistics), in Excel
• Re-pricing analysis not granular
• Reallocation of resources enough - marketing asked to “raise
happens nationally price” across the board
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18. The Six Sigma Way Forward
Key impact on
COGS, capital intensity, EBIT volatility (β)
company value
Key source of Which products, regions
variance Most exposed parts of the BOM
Focus on material exposure
Process for
Advance visibility to SC, Finance, S&M
reduction
Statistical analysis, not management
of defects
accounting heuristics
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19. Step 1: Prioritize Products
High
Rationalize products Regain Margins
2 3
Keep viable or Improve profit with cost
strategically important control, optimal use of
ones, rationalize the rest marketing and inventory.
Cost surge
potential*
Else, review volume mix
Do nothing Promote actively
1 4
Continue with existing Optimize volumes to
marketing approach maximize profits
4 3
Low High
Profit Pool (Rev * Margin)
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20. Step 2 – Step Up What You Do Already
• Watch for early warning signs of suppliers’ financial stretch
• Detect which inputs’ volatility affects them (resources, politics) and their
Scrutinize your access to credit to reassess e.g. payment terms to improve their cash
suppliers more velocity, ensure they can finance raw materials and production, shorten
payment terms, limit suppliers on open accounts, buy raw materials for
them, etc.
• Assess alternatives (geographies, secondary suppliers)
Re-evaluate • Analyze transit lanes for lead times and lead time variability, cargo
options security, and resiliency to e.g. weather, labor strikes, natural hazards,
community conflicts
Consider • Weigh the inventory holding and obsolescence costs vs. other costs
forward buying
Revisit supply • Transportation expediting can cause of total landed cost excess
chain speed
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21. Step 3: Establish Granular, Timely
End-to-End Information Flow
Vendor portfolio
management
Terms
Supply chain
Current and renegotiation
future cost Commodity
price hedging
Inventory
Cost of optimization
production
Manufacturing
Cost of optimization
logistics Logistics
optimization
Accurate
Accurate
Finance
Accurate budget
Product
and timely Profitability and
Costing
BOM / guidance scenario-
(current,
SCA based
forecast)
forecast
Portfolio Marketing
Price /
Marketing
optimization, planning
marketing
/ Sales
volume and profit
analysis Sales
forecast
planning
21 © 2012 Ariba, Inc. All rights reserved.

22. Step 4 – Use Sourcing as a Catalyst of
Change: Your Data Is Worth Gold, Use It!
Simulate near-term impact of
pricing, marketing, inventory
Prioritized commodities –
sourcing data • margin regain
• volume mix
• stock management
Cost forecast range by:
Profitability forecast for key
Volume
products and portfolio
Location
• which products
Fluctuation magnitude • when
Time
Accurate, timely, granular
product standard cost
• which cost inputs
• where
22 © 2012 Ariba, Inc. All rights reserved.

23. Sourcing is the beginning of
the (process) solution
Claim your role as an input – not
an output - of your company’s
strategy
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24. THANK YOU
www.genpact.com
Gianni.giacomelli@genpact.com
24 © 2012 Ariba, Inc. All rights reserved.

25. Don’t Miss the General Session
Panel Today at 5:15 p.m.
• Sustainable Supply Chains through Vested Trading
Partner Relationships
Long-term, mutually beneficial partnerships between buyers and suppliers are
increasingly being described as vested relationships, defined by a shared
vision, agreed-upon desired outcomes, transparency, trust, and win-win.
Developing such trading partner relationships pays dividends in many
ways, particularly when your goal is ensuring a sustainable supply chain. Join
Tim Minahan, chief marketing officer for Ariba, as he explores the concept with
Kate Vitasek, author of Vested Outsourcing, and Tim McBride, general manager
for global finance shared services at Microsoft. Mr. Minahan and his guests will
engage with Ariba customers who will talk about such investments at their
companies, and the impact they have on their comprehensive sustainability
programs.
5:15 p.m. – 6:00 p.m. – Florentine III and IV
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