This document discusses how Eaton can become a more attractive customer to suppliers. It notes that Eaton currently has over 12,000 unique suppliers in Europe. It outlines criteria that smart suppliers look for in customers, such as access to innovation, best total costs, and perfect quality and service. The document suggests Eaton work to establish formal strategic procurement and share data, communication channels, and process improvements with suppliers in order to maximize attractiveness and mutual benefit.

1. Stéphane GUELAT
Head of Strategic Procurement EMEA
DEVELOPING ATTRACTIVITY
TO BECOME A CUSTOMER OF CHOICE
This presentation contains Eaton Confidential and Proprietary Information – February 2013. The participants are subject to
strict confidentiality thereto. The Participants are not authorized at any time to wholly or partially use, reproduce and/or disclose
in any manner this presentation to any third-party without the prior written authorization of Eaton.

2. Eaton Corp & SMART Suppliers
DEVELOPING ATTRACTIVITY
TO BECOME A CUSTOMER OF CHOICE
Stéphane Guélat
Head of Strategic Procurement EMEA
© 2013 Eaton Corp.
All rights reserved.

3. Eaton Corporation
Eaton is a diversified $ 16Bn power management company and global technology leader.
Eaton provides energy efficient solutions for electrical, mechanical, and fluid applications.
And we’ve been doing business for 100 years.
Revenue
Operating margin
Cities & Industrial & Information
Buildings Machinery Technology
EBIT
Cash Conversion Cycle
DSO + DOH – DPO
Transport Infrastructure Energy &
Utilities
© 2013 Eaton Corp.
All rights reserved.

4. Eaton’s vision among stakeholders
Eaton’s vision is to be the most admired company within its markets.
 Is Eaton attractive to its Customers ?
Yes, if Customers say, “We want to do more business with Eaton.”
 Is Eaton attractive to its Shareholders ?
Yes, if Shareholders say, “Eaton is one of my best investments.”
 Is Eaton attractive to its Employees ?
Yes, if Employees say, “I am proud to be part of the Eaton team.”
 Is Eaton attractive to its Suppliers?
Why should Eaton be attractive to its Suppliers?
© 2013 Eaton Corp.
All rights reserved.

5. Our end to end Supply Chain
© 2013 Eaton Corp.
All rights reserved.

6. Our end to end Supply Chain
Eaton purchase every year:
• 230’000 tons of steel
• 129’000 tons of grey iron
• 40’000 tons of plastics
• 26’000 tons of copper
• 18’000 tons of aluminum
This material is then machined,
stamped, extruded, turned, forged, painte
d and tested.
© 2013 Eaton Corp.
All rights reserved.

7. Our end to end Supply Chain
• Long & complicated Supply Chain
 Simplify, standardize, rationalize
• International business
 Playground for international players
• High Quality & Service expectations
 Focus on Supply Excellence
• Competitive environment
 Total Cost of Ownership
• 700+ Direct material suppliers
 Focus, Select, Award, Consolidate,
Collaborate, Involve, Deliver Synergies,
Business continuity, Added Value
© 2013 Eaton Corp.
All rights reserved.

8. How is Eaton attractive to this supplier?
Real Case from
one of our suppliers
=> Eaton is position #6
© 2013 Eaton Corp.
All rights reserved.

9. Selection criteria for being a STRATEGIC supplier
What are the criteria to select a strategic suppliers ?
• Meet basic requirements: competitive pricing,
quality / certifications, service delivery, customer
satisfaction
• Meet extended requirements: competitive value,
flexibility, standardization, complexity reduction,
business continuity
• Dedicate resources to the joint business
relationship: people – process – technology –
capacity – investments
• Grant access to brainpower, deliver innovation
• Align to Eaton’s strategic goals
© 2013 Eaton Corp.
All rights reserved.

10. Selection criteria for being an ATTRACTIVE customer?
What are the criteria to be selected
as an attractive customer?
• Can Eaton be an attractive customer ?
• Eaton have 12’000 unique suppliers in Europe
• Can / will Eaton be attractive to all ?
© 2013 Eaton Corp.
All rights reserved.

11. The SMART supplier
• SMART suppliers are organizations driving
Innovation and Performance Excellence.
• SMART suppliers attract Talents, invest in
Technologies and are looking for great companies
to serve and build mutual competitive advantage.
• SMART suppliers proactively dedicate resources
to the joint relationship and grant you access
to their brainpower for best total cost & perfect
delivery and services. STRATEGIC
SUPPLIER
 What are you doing to become attractive =
to these organizations ? SMART
SUPPLIER
© 2013 Eaton Corp.
All rights reserved.

12. Why aim to be an attractive customer?
• Most attractive customer will:
o Get access to Brainpower
o Receive Development efforts
o Get innovation & best practices shared
• Devotion to Eaton, not to its competitors !
• Our role in Procurement:
o Identify the SMART suppliers
o Get the SMART suppliers to select us
© 2013 Eaton Corp.
All rights reserved.

13. How does this sound familiar to you as a customer?
• Customers sometimes (often) do not pay invoices
according to agreed terms
• Customers overestimate demand to ensure
suppliers will produce enough – and negotiate
lower prices
• Customers specify tight delivery time windows
• Customer places too many orders with average
low order size
• Customer does too many last minute changes
• Customer always push rush order costs on the
supplier
• Customers push inventory on suppliers
(Consignment Stock)
© 2013 Eaton Corp.
All rights reserved.

14. How does this sound familiar to you as a customer?
• Suppliers ship products with inferior specs –
especially when supplies are tight
• Suppliers make promises they know they can not
always keep
• Suppliers overcharge for services not explicitly in
the agreement
• Suppliers push inventory on customers
(Minimum Order Quantity MOQ)
 What does each party do that cost money to the other party ?
 What if the parties would engage into Joint business process reengineering
to unlock the costly burden we impose each other ?
© 2013 Eaton Corp.
All rights reserved.

15. Change the Game
DRIVE INNOVATION AND PERFORMANCE EXCELLENCE
 BEST TOTAL COST
 PERFECT SERVICE
 PERFECT QUALITY
© 2013 Eaton Corp.
All rights reserved.

16. Change the Game
DRIVE INNOVATION AND PERFORMANCE EXCELLENCE
 BEST TOTAL COST
 PERFECT SERVICE
 PERFECT QUALITY
© 2013 Eaton Corp.
All rights reserved.

17. Change the Game
DRIVE INNOVATION AND PERFORMANCE EXCELLENCE
Thetransformation
 BEST TOTAL COST
PERFECT SERVICE
has started
 PERFECT QUALITY
© 2013 Eaton Corp.
All rights reserved.

18. Innovation Drives Excellence, Achievements and Savings
© 2013 Eaton Corp.
All rights reserved.

19. Innovation Drives Excellence, Achievements and Savings
The procurement function is also:
- A relationship builder agent
- A change agent
- A partner identifying, selecting and
developing attractivity with SMART suppliers
- A business process improvement agent
© 2013 Eaton Corp.
All rights reserved.

20. Innovation Drives Excellence, Achievements and Savings
Eaton, Supplier survey
October 2012
Q: What strategic actions are you
planning in the next 24 months to
become more globally
competitive? (check all that apply)
A: Out of 8 possible actions,
3.4 strategic actions selected on
average by SMART suppliers
© 2013 Eaton Corp.
All rights reserved.

21. Innovation Drives Excellence, Achievements and Savings
© 2013 Eaton Corp.
All rights reserved.

22. Value derived from joint business process improvements
© 2013 Eaton Corp.
All rights reserved.

23. Selection criteria for being an ATTRACTIVE customer
Question from the SMART suppliers where Eaton needs
to position itself in a way to answer YES to every question:
• Do we share strategic & transactional data and
have we linked our information systems ?
• Do we have multiple channels of communication
and established escalation paths to a higher level ?
• Is the relationship with Eaton built on mutual trust,
openness and a network of cross-functional connections ?
• Is working for Eaton the best place to learn how to
develop the supplier’s competitive advantage ?
• Am I working jointly with Eaton on projects
to improve inter-company processes ?
• Do we jointly use best-cost model and share best practices
+ Establish formal strategic procurement organization
with standard approach how to build attractivity
© 2013 Eaton Corp.
All rights reserved.