The Supply Chain Excellence Study 2015. Long version

The Supply Chain Excellence Study 2015 Long version Stuttgart, November 2015

Contents Page A. Management summary 3 B. Study objectives and design 8 C. Supply Chain Excellence across industries 12 D. Supply Chain Excellence industry insights 31 E. Contacts 88 This document shall be treated as confidential. It has been compiled for the exclusive, internal use by our client and is not complete without the underlying detail analyses and the oral presentation. It may not be passed on and/or may not be made available to third parties without prior written consent from. Roland Berger 2

A. Management summary 3

Management summary (1/4) Study background and objectives > Supply chains spanning all activities from Plan and Source to Make and Deliver form the backbone of manufacturing companies' business success > The importance of supply chains is ever increasing owing to More and more volatile, uncertain, complex and ambiguous (VUCA) operating environments and Higher requirements from customers on a multitude of aspects such as cost, flexibility, lead times, etc. > However, new technologies and concepts help supply chains to meet those requirements in line with their increased importance > This study therefore aims at providing CEOs, COOs and Supply Chain Managers with insights into trends, targets and levers in the context of supply chains in order to help in making the right decisions 4

Management summary (2/4) Key results > Many trends are having a major impact on supply chains and manufacturing companies are focusing their activities/allocating resources accordingly The importance of the various top trends that have an impact on supply chains differs only marginally, which leaves companies with a wide range of objectives and difficulties in focusing Rising requirements regarding reliability (on time in full) and flexibility (individualization of products, volume, time, ) are the most important trends, together with increasing demand volatility; higher requirements regarding cost is also an important trend, though this comes in behind delivery performance trends in terms of relevance Transparency on customer requirements is moderate to high overall, with B2B industries clearly lagging behind industries with direct contact to final customers and consumers More and more customers want individualized products and solutions. Though this is enabled by technological advancements (e.g. additive manufacturing), it makes supply chain flexibility and efficient customer response even more important 5

Management summary (3/4) Key results > Supply chains have to meet many targets at the same time Today, reliability and cost are most important, closely followed by flexibility and lead time; transparency and sustainability are comparatively less important In five years' time, all targets are expected to be nearly equally important, putting even more pressure on supply chains > The importance of different supply chain levers in improving performance differs significantly by category Companies assign greater importance to fulfillment levers (Source, Make, Deliver); coordination levers (SC Design and Plan) tend to be underrated Maturity of lever application is only moderately high on average Supply chain levers in the Source and Deliver categories are considered the most important The Automotive industry is still leading in the application of levers in most categories; Consumer Goods and Med-Tech are leading in single categories (Deliver and SC Design, respectively) 6

Management summary (4/4) Key results > Supply Chain Excellence differs by industry. For detailed industry-specific insights on any of the following industries, please refer to the latter section of this study Automotive > Flexibility and reliability are the most relevant SC targets and trends > Source levers are considered most important but leave room for improvement High-Tech > Most active industry in managing a VUCA environment > Forecasting and end-to-end supply chain integration are important levers Chemicals > The most active in managing the important trend of increasing governmental regulations > Industry with the strongest focus on coordination levers (SC Design and Plan) Construction > Least active industry on the most important trends Med-Tech & Pharma > The most impacted by globalization and cost pressure > Supply Chain Design levers are considered most important Engineered Products > Reliability, lead time and demand volatility are the most important SC targets and trends > Levers in the Source category are considered most important, especially supplier selection Consumer Goods > Reliability, volatility and heterogeneous customer requirements are the most relevant SC trends > Systematic inventory management and reliable forecasts are key levers 7

B. Study objectives and design 8

In light of the increasing importance of supply chains for companies' business success, this study provides insights into trends and levers Background Supply chains are an important factor in maintaining and improving companies' overall performance: > Companies increasingly operate in a VUCA world (volatile, uncertain, complex and ambiguous) > Requirements regarding the supply chain are continuously increasing > At the same time, new technologies and concepts such as Industry 4.0 and digitization are offering new opportunities Objectives Provide CEOs, COOs and Supply Chain Managers with insights into: > The most relevant trends impacting their supply chains > Importance of different supply chain levers as well as maturity of application > Best practice industries in terms of lever application 9

This study covers seven core industries More than 150 participants from relevant positions contributed to the results Overview of Supply Chain Excellence Study 2015 participants Participants' industries Participants' operating regions Pharma/ Med-Tech Construction 7% 6% Other 6% 25% Consumer Goods Western Europe North America 93% 94% 83% 90% +1% +7% 10% Chemicals 12% Automotive 15% High-Tech 19% Engineered Products Asia Eastern Europe South America 74% 80% 62% 74% 79% 83% +7% +12% +3% Africa 50% 62% +12% Operating in region in 2015 Expecting to operate in region in 2020 10

This study is structured along four dimensions: trends, supply chain targets and their importance as well as applicable levers Study design and key questions Trends > How strong is the impact of different trends on the supply chain? > How active are companies concerning those trends? Supply chain targets > How important are the different supply chain targets in relation to each other? > How is this expected to change in the future? Supply chain importance > How important is the supply chain performance in differentiating against competitors? > What is the supply chain function responsible for and at which level in the organization is it represented? Levers > What are the most important levers to increase supply chain performance? > How mature are companies in applying those levers? 11

C. Supply Chain Excellence across industries 12

Rising requirements regarding reliability and flexibility paired with increased volatility are the trends with the biggest impact on the SC Top 10 trends impacting the supply chain Trend Rising customer requirements regarding reliability (on time in full) Impact on supply chain 4.3 Trend-related activities Low High Rising customer requirements regarding flexibility 4.1 Increasing demand volatility (e.g. driven by project business, promotions) 4.0 Rising customer requirements regarding lead times Rising customer requirements regarding cost Increasing uncertainty (e.g. lack of forecast accuracy, disruptive innovations) Increasing complexity (e.g. higher number of SKUs or customers) Increasing globalization (e.g. additional markets to serve, importance of emerging markets, global network) Increasingly heterogeneous customer requirements (e.g. for different customer groups or markets) Increasing speed of change (e.g. more frequent product phaseins/outs, shortened product lifecycles) 1 = Low impact of a trend on the supply chain 5 = High impact 13

Automotive and Consumer Goods companies know most about their customers' requirements B2B industries distinctly below average Transparency of customer requirements across industries Automotive 4.1 Consumer Goods Med-Tech & Pharma Construction Overall average High-Tech Engineered Products Chemicals Industries with above-average transparency Industries with below-average transparency 1 = Very low transparency, 5 = Very high transparency 14

Importance of supply chain as a differentiator is increasing SC function tends to be organized as division or at board level Importance of supply chain as a differentiator by industry Highest hierarchical level Importance of supply chain performance as differentiator Highest hierarchical level Automotive Construction Engineered Products Consumer Goods Chemicals 73% 83% 93% 83% 100% 75% 86% 74% 86% 92% +10% +11% +12% +19% +17% Unit Department Division Board > Automotive and Construction companies assign greatest importance to supply chain as a differentiator, whereas High- Tech, Med-Tech and Pharma see it as less important > Across all industries, supply chain is becoming more important as a means of differentiating against the competition > The supply chain function is either a division or there is a board member with supply chain responsibility High-Tech Med-Tech & Pharma 57% 67% 83% 86% +17% +29% > Construction companies tend to organize SC function at the highest level Chemicals firms at the lowest Importance today Important Very important Importance in 3-5 years Important Very important 15

Responsibility of supply chain functions differs by industry Most Consumer Goods companies feature end-to-end responsibility Importance of supply chain as a differentiator by industry Responsibility for SC Automotive Construction Engineered Products Consumer Goods Chemicals Importance of supply chain performance as differentiator 73% 83% 93% 83% 100% 75% 86% 74% 86% 92% +10% +11% +12% +19% +17% Full responsibility 1) 27% 63% 26% 50% 58% 73% 57% 57% 71% 46% 20% 0% 17% 50% 33% 70% 71% 54% 77% 65% > The supply chain function's responsibility differs by industry > Majority of supply chains are fully responsible for delivery and sourcing > Make category mostly not under the responsibility of the supply chain > Supply chain functions in Consumer Goods companies are mostly full orchestrators of all categories from planning to delivery High-Tech 67% 83% +17% 63% 74% 42% 47% Med-Tech & Pharma 57% 86% +29% 75% 75% 25% 81% 1) % of SC departments that are fully responsible for the SC categories Plan Source Make Deliver/Return Supply chain department is fully responsible for respective function for more than 50% of companies 16

SCs have to meet multiple targets simultaneously Targets that are now less important will catch up to become more or equally important Importance of supply chain targets SC targets in relation, 2015 vs. 2020 Expected average importance 2020 Average importance 2015 Cost Reliability 5 4 3 2 1 1 Transparency and traceability > Reliability and cost are the most important supply chain targets today Transparency and traceability as well as sustainability are comparatively less important > All targets gain in importance within the next five years, especially those that are less important today Sustainability 2 3 Flexibility 4 5: Very important 1: Not important 5 Lead time Average importance 2015 Expected average importance 2020 17

SCM embraces suppliers and customers to offer an end-to-end perspective Supply Chain Design as the overall enabler Supply chain Overview of lever categories Supply Chain Design Forecasting Demand planning Supply planning Distribution planning Procurement planning Plan Customer Coordination Fulfillment Supplier Deliver/Return > Warehousing > Transportation > Order fulfillment Production planning Make Ordering/ call-off 18

Across all industries, the greatest importance is placed on fulfillment today SC coordination tends to be underrated Importance of supply chain lever categories COORDI- NATION FULFILL- MENT 1 2 3 4 Supply Chain Design Plan Source Make Current importance of all levers 54% 57% 61% 70% Current maturity Low High > Levers in the Source category considered most important > Planning and Deliver/Return levers rank in midfield > Levers in the Make and Supply Chain Design category considered least important > Maturity of lever application is only moderately high and not in proportion to importance of levers 5 Deliver/ Return 64% Important Very important 19

Construction lags behind on maturity in all supply chain categories Automotive is leading in most Current maturity of lever application per SC category Industry benchmarking 1 Supply Chain Design 2 Plan 3 Source 4 Make 5 Deliver/ Return Importance of SC as a differentiator 1) Low High Low High Low High Low High Low High Automotive B B B 83% Construction W W W W W 83% Engineered Products 75% Consumer Goods B 74% Chemicals 73% High-Tech 67% Med-Tech & Pharma B 57% B Best W Worst 1) Percentage of respondents ranking supply chain as important or very important as a differentiator in their industry 20

1 Supply Chain Design End-to-end SC integration is the most important lever in the Design category Service supply chain and new technologies less crucial Importance and maturity of Supply Chain Design levers (sorted by importance) End-to-end SC integration, i.e. SC as orchestrator of complete chain from customer order to customer delivery Traceability incl. inputs and finished goods Optimized supply chain configuration (e.g. postponement strategies, push vs. pull steering) SC segmentation, i.e. different SC service levels and solutions per customer segment Make-or-buy optimization (e.g. via 3PL/4PL) Current importance 48% 66% 61% 60% 60% Current maturity Low High > End-to-end supply chain integration considered the most important lever within SC Design category > Assigning equal attention to the service supply chain and the product supply chain and use of new technologies considered less important Maturity consequently below a moderate level Equal attention on developing the service supply chain as on the product supply chain 45% Use of new technologies (e.g. automation solutions for production or warehousing, big data analysis to optimize route planning) 40% Important Very important 21

1 Supply Chain Design Application of SC Design levers most mature in Med-Tech & Pharma Construction has largest gap between importance and maturity Importance/maturity of SC Design levers Industry performance (sorted by maturity) Cross-industry results Med-Tech and Pharma Consumer Goods Chemicals High-Tech Current importance of all Supply Chain Design levers 47% 54% 55% 60% 59% Current maturity Low High > Supply Chain Design levers in Consumer Goods, High-Tech and Construction more important than in other industries > Maturity of SC Design lever application in most industries is moderately high Med-Tech & Pharma slightly more and Construction less mature Engineered Products 43% Automotive 50% Construction 64% Important Very important 22

2 Plan Reliable demand forecasts and systematic alignment of supply and demand very important levers for SC optimization in Plan category Importance and maturity of Plan levers (sorted by importance) Reliable demand forecast aligned across functions and regions Systematic alignment of demand and supply/capacity planning (e.g. as part of S&OP process) Collaborative planning with customers (e.g. forecast exchange, regular joint business reviews, ) Integration of S&OP process with other planning activities (e.g. financial/business planning, strategic sales planning) Balancing of demand and supply for service business (e.g. production slot allocation, planning rules, ) Current importance 76% 71% 61% 56% 40% Current maturity Low High > Aligned demand forecasts and systematic S&OP processes are the most important levers within Plan category > S&OP process is the most mature Plan lever > Integration of service business in planning is the least important and mature lever Important Very important 23

2 Plan Automotive stands out as most mature in application of Plan levers Planning very important for Construction and Consumer Goods Importance/maturity of Plan levers Industry performance (sorted by maturity) Cross-industry results Automotive Med-Tech and Pharma Consumer Goods Engineered Products Chemicals Current importance of all Plan levers 33% 52% 61% 59% 67% 69% Current maturity Low High > Application of Plan levers shows moderate maturity in all industries except for Automotive, where maturity is significantly higher, and Construction, where it is lower > Importance of planning levers above average in Construction, Automotive and Consumer Goods > Med-Tech and Pharma assign little importance to Plan levers High-Tech 57% Construction 78% Important Very important 24

3 Source Source levers play an important role in optimizing the SC Supplier selection, development and risk management very important Importance and maturity of Source levers (sorted by importance) Consideration of SC requirements in supplier selection and contracting (e.g. lead times, volume flexibility) Supplier development to optimize value chain (e.g. regarding lead times, stock) Implementation of supplier risk management (e.g. early warning system, backup strategies) Seamless information flow to suppliers (e.g. forecast and order data exchange via EDI) Current importance 81% 72% 70% 58% Current maturity Low High > Considering supply chain requirements in supplier selection is given a significantly high level of importance Maturity above average but still shows distinct room for improvement > Supplier development and active risk management also of high importance > Information flow to supplier least important and mature lever in Source category Important Very important 25

3 Source In line with the importance of Source levers, Automotive is also very mature in their application Importance/maturity of Source levers Industry performance (sorted by maturity) Cross-industry results Automotive High-Tech Engineered Products Med-Tech and Pharma Consumer Goods Chemicals Current importance of all Current maturity Source levers Low High 38% 58% 70% 67% 74% 81% 85% > Automotive, High-Tech and Construction assign above-average importance to Source levers > Med-Tech and Pharma see Source levers as less important but they have already reached aboveaverage maturity levels > Consumer Goods, Chemicals and Construction show belowaverage maturity of Source lever application in supply chain optimization Construction 81% Important Very important 26

4 Make Manufacturing footprint optimization and transparency on production capacities are the most important levers in the Make category Importance and maturity of Make levers (sorted by importance) Manufacturing footprint optimization Transparent view on available internal capacities for main production steps incl. interdependencies Flexibility measures in production (e.g. job hoppers, multi-purpose equipment, external backups) Integration of production steps/ defragmentation (e.g. one-piece flow) Current importance 44% 57% 63% 63% Current maturity Low High > Footprint optimization and transparency on available production capacities are the two most important levers, with maturity above a moderate level > Integration of production steps or defragmentation is the least important Make lever > Overall, moderate level and little deviation in maturity among levers for supply chain optimization in production Important Very important 27

4 Make Automotive and High-Tech companies consider Make levers more important than other industries and attained highest maturity levels Importance/maturity of Make levers Industry performance (sorted by maturity) Cross-industry results Automotive High-Tech Engineered Products Med-Tech and Pharma Consumer Goods Current importance of all Current maturity Make levers Low High 47% 57% 55% 53% 68% 70% > Automotive and High-Tech industries significantly above-average in terms of importance of levers in the Make category Correspondingly, the maturity of lever application is also comparatively high > Other industries show a moderate maturity level and slightly below-average importance of levers in production Chemicals 51% Construction 49% Important Very important 28

5 Deliver/Return Inventory management is the most important lever in the Deliver/ Return category Importance and maturity of Deliver/Return levers (sorted by importance) Systematic inventory management (e.g. maketo-stock vs. make-to-order decisions, slow mover handling, sales vs. after sales business) Warehouse footprint optimization (number of warehouses, crossdocking, hubs, ) Leverage of alternative inventory strategies (e.g. VMI Vendor Managed Inventory, consignment stock) Systematic transportation logistics optimization (e.g. mode of transportation, routing) Current importance 74% 62% 62% 60% Current maturity Low High > Systematic inventory management is the most important lever for delivery > Alternative inventory strategies (with suppliers) stands out as least mature lever despite comparatively high importance > Pure logistics widely considered comparatively mature Important Very important 29

5 Deliver/Return Deliver/Return levers are most important in Consumer Goods and Automotive industries, where the highest maturity is reached Importance/maturity of Deliver/Return levers Industry performance (sorted by maturity) Cross-industry results Consumer Goods Automotive High-Tech Med-Tech and Pharma Engineered Products Chemicals Current importance of all Current maturity Deliver/Return levers Low High 44% 52% 59% 64% 61% 78% 73% > Consumer Goods and Automotive assign distinctly above-average importance to Deliver/Return levers and show highest maturity levels > Med-Tech/Pharma and Chemicals see less importance in delivery levers > Maturity of Deliver/Return lever application is above a moderate level in all industries except Construction Construction 63% Important Very important 30

D. Supply Chain Excellence industry insights 31

Automotive High-Tech Chemicals D. Supply Chain Excellence industry insights Construction Med-Tech and Pharma Engineered Products Consumer Goods 32

Automotive Automotive supply chains are mainly impacted by flexibility and reliability requirements Source levers are the most important Summary Trends > Covering customer requirements on flexibility, reliability and complexity are the trends with the biggest impact on supply chains in Automotive Activity levels in those areas are correspondingly high and only topped by cost measures > Both sustainability and technological advancements have comparatively little impact on Automotive supply chains Supply chain targets > Reliability and flexibility are the most important targets in supply chain considerations This is also expected to remain the case in the future > Sustainability, currently clearly ranked as the least important target, is expected to increase in importance over the coming years but still falls short in comparison to others Levers > Supply chain levers in the Source category are clearly considered the most important The gap to the maturity of lever application, however, is significant, leaving room for improvement > Besides the Source levers, certain levers from other categories are considered to be of outstanding importance for Automotive supply chain optimization; those are manufacturing footprint optimization and alignment of demand and supply/capacity planning through S&OP 33

Automotive On seven out of the ten top trends, Automotive is among the three most active industries Lowest activity on managing uncertainty Activity level for top 10 trends across industries Industry ranking Most important trends Current activity level for industries [average activity; 1 = Not active 5 = Very active] Most active industry Least active industry Rising reliability requirements 4.2 4.2 4.0 4.0 4.0 Rising flexibility requirements 2.9 Increasing demand volatility 4.1 4.0 Rising lead time requirements Rising cost requirements 4.4 4.0 3.2 Increasing uncertainty 3.2 Increasing complexity Increasing globalization 4.4 4.2 Increasingly heterogeneous customer requirements 3.2 3.2 3.0 Increasing speed of change 2.9 Construction Med-Tech and Pharma Engineered Products High-Tech Automotive Chemicals Consumer Goods 34

Automotive Focus in Auto is on covering customer requirements on flexibility, reliability and complexity Still moderate activity on bottom 3 trends Top 3 and bottom 3 trends Trend Impact on supply chain Trend-related activities Low High Rising customer requirements regarding flexibility Rising customer requirements regarding reliability (on time in full) Increasing complexity (e.g. higher number of SKUs or customers) Average of all trends Industry 4.0 (e.g. autonomous vehicles, connected machines) Technological advancements (e.g. 3D printing/additive manufacturing, RFID-based tracking) Rising customer requirements regarding sustainability and a "green" supply chain 2.7 4.4 4.3 4.2 Three trends with the highest impact on the supply chain Three trends with the lowest impact on the supply chain 1 = Low impact of a trend on the supply chain 5 = High impact 35

Automotive Flexibility ranked top with high level of activities Cost requirements rank in the middle of the top trends but have highest activity level Top 8 of 17 trends Impact on supply chain and activity level Trend Rising customer requirements regarding flexibility Impact on supply chain 4.4 Trend-related activities Low High Rising customer requirements regarding reliability (on time in full) 4.3 Increasing complexity (e.g. higher number of SKUs or customers) 4.2 Increasing globalization (e.g. additional markets to serve, importance of emerging markets, global network) 4.2 Rising customer requirements regarding cost 4.1 Increasing speed of change (e.g. more frequent product phase-ins/outs, shortened product lifecycles) Increasing demand volatility (e.g. driven by project business, promotions) Increasing uncertainty (e.g. lack of forecast accuracy, disruptive innovations) 4.0 1 = Low impact of a trend on the supply chain 5 = High impact 36

Automotive For the bottom trends, activity levels fall with the impact on the supply chain Sustainability clearly ranked lowest on SC impact Bottom 9 of 17 trends Impact on supply chain and activity level Trend Rising customer requirements regarding sustainability and a "green" supply chain Technological advancements (e.g. 3D printing/additive manufacturing, RFID-based tracking) Impact on supply chain 2.7 Trend-related activities Low High Industry 4.0 (e.g. autonomous vehicles, connected machines) Rising customer requirements regarding transparency and traceability Digitization (e.g. big data, real time routing) Increasing relevance of the "service supply chain" (e.g. for value-added services or spare parts) Increasingly heterogeneous customer requirements (e.g. for different customer groups or markets) Rising customer requirements regarding lead times Increasing governmental regulations (e.g. REACH, emission quotas, local content requirements) 1 = Low impact of a trend on the supply chain 5 = High impact 37

Automotive Today's bottom trend, sustainability, is expected to increase the most over the next five years Biggest importance/maturity gap in sourcing Supply chain targets and importance of lever categories 1 Supply chain targets Reliability (on time in full) Importance 93% 100% Importance and maturity of lever categories Average: 1 = Not important/mature; 5 = Very important/mature -0.7 2 3 4 Cost Flexibility Lead time 73% 73% 87% 87% 87% 93% -0.5 4.3-0.2-0.3 4.0-0.6 5 Transparency and traceability 47% 60% 2.9 6 Importance today Importance in 5 years Sustainability/"green" supply chain Important Important 27% 53% Very important Very important 1 2 3 4 5 SC Design Plan Source Make Deliver/Return Importance Maturity 38

Automotive Optimization of manufacturing footprint is by far the most important lever Overall, fairly high maturity on all top ten levers Top 10 Automotive levers across all SC categories by importance Current importance Low Current maturity High Manufacturing footprint optimization Consideration of SC requirements in supplier selection and contracting (e.g. lead times, volume flexibility) Implementation of supplier risk management (e.g. early warning system, backup strategies) Seamless information flow to suppliers (e.g. forecast and order data exchange via EDI) Systematic alignment of demand and supply/capacity planning (e.g. as part of S&OP process) Supplier development to optimize value chain (e.g. regarding lead times, stock) Systematic inventory management (e.g. make-to-stock vs. make-to-order decisions, slow mover handling, ) Collaborative planning with customers (e.g. forecast exchange, regular joint business reviews, ) Warehouse footprint optimization (number of warehouses, crossdocking, hubs, ) Leverage of alternative inventory strategies (e.g. VMI Vendor Managed Inventory, consignment stock) 93% 87% 87% 87% 85% 80% 80% 79% 73% 73% SC category: SC Design Plan Source Make Deliver/Return Important Very important 39

High-Tech Supply chains in High-Tech mainly impacted by uncertainty and demand volatility Sourcing levers are most important Summary Trends > Covering customer requirements on uncertainty, demand volatility and flexibility are the trends with the biggest impact on supply chains in High-Tech Activity levels in those areas are correspondingly high and only reliability measures showing a similar level of activity > Both sustainability and technological advancements have comparatively little impact on High- Tech supply chains Supply chain targets > Reliability, lead time and flexibility are the most important targets in supply chain considerations However, transparency is expected to become a top three target in the future > Sustainability, currently clearly ranked as the least important target, is expected to increase in importance over the coming years but still falls short in comparison to others Levers > Supply chain levers in the Source category are clearly considered the most important The gap to the maturity of lever application, however, is significant, leaving room for improvement > Besides the Source levers, certain levers from other categories have comparatively high importance levels for High-Tech supply chain optimization; those are reliable demand forecast, end-to-end SC integration and transparent view on available internal capacities 41

High-Tech High-Tech industry most active in managing a VUCA environment Focus on rising flexibility requirements, volatility and uncertainty Industry ranking for top 10 trends across industries Most important trends Current activity level for industries [average activity; 1 = Not active 5 = Very active] Most active industry Least active industry Rising reliability requirements 4.2 4.2 4.0 4.0 4.0 Rising flexibility requirements 2.9 Increasing demand volatility 4.1 4.0 Rising lead time requirements Rising cost requirements 4.4 4.0 3.2 Increasing uncertainty 3.2 Increasing complexity Increasing globalization 4.4 4.2 Increasingly heterogeneous customer requirements 3.2 3.2 3.0 Increasing speed of change 2.9 Construction Med-Tech and Pharma Engineered Products High-Tech Automotive Chemicals Consumer Goods 42

High-Tech Overall, activity level in High-Tech is in line with SC impact Comparatively little impact and few activities in Industry 4.0 Top 3 and bottom 3 trends Trend Impact on supply chain Trend-related activities Low High Increasing uncertainty (e.g. lack of forecast accuracy, disruptive innovations) 4.3 Increasing demand volatility (e.g. driven by project business, promotions) 4.2 Rising customer requirements regarding flexibility 4.1 Average of all trends Industry 4.0 (e.g. autonomous vehicles, connected machines) 2.6 Rising customer requirements regarding sustainability and a "green" supply chain 2.5 Technological advancements (e.g. 3D printing/additive manufacturing, RFID-based tracking) 2.5 Three trends with the highest impact on the supply chain Three trends with the lowest impact on the supply chain 1 = Low impact of a trend on the supply chain 5 = High impact 43

High-Tech High-impact trends receive high levels of attention Increasing cost pressure still ranks among the top trends, albeit at the bottom end Top 8 of 17 trends Trend Increasing uncertainty (e.g. lack of forecast accuracy, disruptive innovations) Increasing demand volatility (e.g. driven by project business, promotions) Impact on supply chain 4.3 4.2 Trend-related activities Low High Rising customer requirements regarding flexibility 4.1 Rising customer requirements regarding lead times 4.0 Rising customer requirements regarding reliability (on time in full) Increasing globalization (e.g. additional markets to serve, importance of emerging markets, global network) Rising customer requirements regarding cost Increasing complexity (e.g. higher number of SKUs or customers) 1 = Low impact of a trend on the supply chain 5 = High impact 44

High-Tech Notably, consistent with the limited expected impact of Industry 4.0, technological advancements also show the lowest activity levels Bottom 9 of 17 trends Trend Technological advancements (e.g. 3D printing/additive manufacturing, RFID-based tracking) Rising customer requirements regarding sustainability and a "green" supply chain Impact on supply chain 2.5 2.5 Trend-related activities Low High Industry 4.0 (e.g. autonomous vehicles, connected machines) 2.6 Digitization (e.g. big data, real time routing) 3.0 Increasing relevance of the "service supply chain" (e.g. for value-added services or spare parts) Increasing governmental regulations (e.g. REACH, emission quotas, local content requirements) Increasingly heterogeneous customer requirements (e.g. for different customer groups or markets) Increasing speed of change (e.g. more frequent product phase-ins/outs, shortened product lifecycles) Rising customer requirements regarding transparency and traceability 1 = Low impact of a trend on the supply chain 5 = High impact 45

High-Tech Today's bottom trend, transparency, is expected to increase the most over the next five years Biggest importance/maturity gap in sourcing Supply chain targets and importance of lever categories 1 Supply chain targets Reliability (on time in full) Importance 89% 95% Importance and maturity of lever categories Average: 1 = Not important/mature; 5 = Very important/mature -0.7 2 3 Lead time Flexibility 84% 84% 74% 89% -0.6-0.6 4.1-0.5-0.3 4 Cost 53% 74% 5 Transparency and traceability 33% 89% 3.0 2.9 6 Importance today Importance in 5 years Sustainability/"green" supply chain Important Important 11% 37% Very important Very important 1 2 3 4 5 SC Design Plan Source Make Deliver/Return Importance Maturity 46

High-Tech Across all SC categories, importance of sourcing ranks highest in High-Tech Overall, maturity of all top ten levers is on the high side Top 10 High-Tech levers across all SC categories by importance Current importance Low Current maturity High Consideration of SC requirements in supplier selection and contracting (e.g. lead times, volume flexibility) 89% Supplier development to optimize value chain (e.g. regarding lead times, stock) Reliable demand forecast aligned across functions and regions 89% 84% Implementation of supplier risk management (e.g. early warning system, backup strategies) 83% End-to-end SC integration, i.e. SC as orchestrator of complete chain from customer order to customer delivery 79% Transparent view on available internal capacities for main production steps incl. interdependencies 79% Leverage of alternative inventory strategies (e.g. VMI Vendor Managed Inventory, consignment stock) 74% Traceability incl. inputs and finished goods 74% Manufacturing footprint optimization 74% Flexibility measures in production (e.g. job hoppers, multipurpose equipment, external backups) 74% SC category: SC Design Plan Source Make Deliver/Return Important Very important 47

Chemicals Flexibility and reliability are the most relevant for Chemicals supply chains Companies are active concerning governmental regulations Summary Trends Supply chain targets > Covering customer requirements on flexibility and reliability are the trends with the biggest impact on Chemicals supply chains > Even though increasing governmental regulations is "only" the third most important trend, the activity levels in this area are highest > Both sustainability and technological advancements have very little impact on Chemicals supply chains Customer requirements regarding cost rank only in midfield > Reliability and flexibility are and will remain the most important targets in supply chain considerations > In the future, the other targets will gain relative importance in comparison to cost targets, which becomes especially apparent for the target of sustainability Levers > Supply chain levers in the Supply Chain Design and Plan categories are clearly considered the most important The gap to the maturity of lever application, however, is very high, leaving room for improvement > Collaborative planning with customers is considered an important lever but the maturity of application lags behind that of other levers 49

Chemicals Chemicals companies are less active than those in other industries on most of the important trends Activity level for top 10 trends across industries Industry ranking Most important trends Current activity level for industries [average activity; 1 = Not active 5 = Very active] Most active industry Least active industry Rising reliability requirements 4.2 4.2 4.0 4.0 4.0 Rising flexibility requirements 2.9 Increasing demand volatility 4.1 4.0 Rising lead time requirements Rising cost requirements 4.4 4.0 3.2 Increasing uncertainty 3.2 Increasing complexity Increasing globalization 4.4 4.2 Increasingly heterogeneous customer requirements 3.2 3.2 3.0 Increasing speed of change 2.9 Construction Med-Tech and Pharma Engineered Products High-Tech Automotive Chemicals Consumer Goods 50

Chemicals Flexibility, reliability & regulations are the most important trends for Chemicals SCs Few activities in new technologies & sustainability Top 3 and bottom 3 trends Trend Impact on supply chain Trend-related activities Low High Rising customer requirements regarding flexibility Rising customer requirements regarding reliability (on time in full) Increasing governmental regulations (e.g. REACH, emission quotas, local content requirements) 4.2 4.1 Average of all trends Industry 4.0 (e.g. autonomous vehicles, connected machines) 2.5 Rising customer requirements regarding sustainability and a "green" supply chain 2.4 Technological advancements (e.g. 3D printing/additive manufacturing, RFID-based tracking) 2.4 Three trends with the highest impact on the supply chain Three trends with the lowest impact on the supply chain 1 = Low impact of a trend on the supply chain 5 = High impact 51

Chemicals The most important trends are reliable deliveries within given lead times despite the required flexibility in a volatile environment Top 8 of 17 trends Impact on supply chain and activity level Trend Rising customer requirements regarding flexibility Impact on supply chain 4.2 Trend-related activities Low High Rising customer requirements regarding reliability (on time in full) Increasing governmental regulations (e.g. REACH, emission quotas, local content requirements) Rising customer requirements regarding lead times Increasing demand volatility (e.g. driven by project business, promotions) Increasing uncertainty (e.g. lack of forecast accuracy, disruptive innovations) Increasing globalization (e.g. additional markets to serve, importance of emerging markets, global network) Digitization (e.g. big data, real time routing) 4.1 1 = Low impact of a trend on the supply chain 5 = High impact 52

Chemicals Technological trends do not play a major role for Chemicals SCs Requirements regarding cost are also among the bottom trends Bottom 9 of 17 trends Impact on supply chain and activity level Trend Technological advancements (e.g. 3D printing/additive manufacturing, RFID-based tracking) Rising customer requirements regarding sustainability and a "green" supply chain Impact on supply chain 2.4 2.4 Trend-related activities Low High Industry 4.0 (e.g. autonomous vehicles, connected machines) 2.5 Increasing speed of change (e.g. more frequent product phase-ins/outs, shortened product lifecycles) Increasing relevance of the "service supply chain" (e.g. for value-added services or spare parts) Increasingly heterogeneous customer requirements (e.g. for different customer groups or markets) 2.8 Increasing complexity (e.g. higher number of SKUs or customers) Rising customer requirements regarding cost Rising customer requirements regarding transparency and traceability 1 = Low impact of a trend on the supply chain 5 = High impact 53

Chemicals Gap between importance and current maturity of SC levers is high Reliability and flexibility are and will remain of greatest importance Supply chain targets and importance of lever categories 1 Supply chain targets Reliability (on time in full) Importance 85% 92% Importance and maturity of lever categories Average: 1 = Not important/mature; 5 = Very important/mature -0.7 2 3 Flexibility Cost 77% 100% 69% 77% -0.4-0.4-0.5-0.3 4 Transparency and traceability 5 Lead time 62% 85% 54% 77% 3.0 3.0 6 Importance today Importance in 5 years Sustainability/"green" supply chain Important Important 23% Very important Very important 69% 1 2 3 4 5 SC Design Plan Source Make Deliver/Return Importance Maturity 54

Chemicals SC segmentation and reliable demand forecasts are most important levers, while maturity on the top 10 levers is only moderate Top 10 Chemicals levers across all SC categories by importance Current importance Low Current maturity High SC segmentation, i.e. different SC service levels and solutions per customer segment 85% Reliable demand forecast aligned across functions and regions End-to-end SC integration, i.e. SC as orchestrator of complete chain from customer order to customer delivery 77% 77% Manufacturing footprint optimization 75% Systematic alignment of demand and supply/capacity planning (e.g. as part of S&OP process) Consideration of SC requirements in supplier selection and contracting (e.g. lead times, volume flexibility) Collaborative planning with customers (e.g. forecast exchange, regular joint business reviews, ) Optimized supply chain configuration (e.g. postponement strategies, push vs. pull steering) Systematic inventory management (e.g. make-to-stock vs. make-to-order decisions, slow mover handling, ) Warehouse footprint optimization (number of warehouses, crossdocking, hubs, ) 69% 69% 69% 67% 62% 62% SC category: SC Design Plan Source Make Deliver/Return Important Very important 55

Construction Flexibility and uncertainty impact Construction companies the most Maturity of Plan and Source levers very low despite high importance Summary Trends Supply chain targets > Covering customer requirements on flexibility in a more and more uncertain environment paired with increasing regulations are the trends with the biggest impact on Construction supply chains > Construction companies focus their activities most on dealing with increasing governmental regulations and complexity > Digitization and technological advancements have very little impact on Construction supply chains > The supply chain targets within the Construction industry can be clustered in three groups: Most important are lead time and reliability; flexibility and cost are somewhat less important but still at a high level; transparency and sustainability are of minor importance > In the future, all targets are expected to be of equal importance as today's less important targets gain significantly in importance Levers > Supply chain levers in the Plan and Source categories are most important but still exhibit a massive gap to the maturity of lever application > Besides the levers from the Plan and Source categories, certain Supply Chain Design levers stand out in importance, such as use of new automation technologies and supply chain integration 57

Construction Construction is the least active industry concerning the ten most important trends across all industries, ranking last seven times Activity level for top 10 trends across industries Industry ranking Most important trends Current activity level for industries [average activity; 1 = Not active 5 = Very active] Most active industry Least active industry Rising reliability requirements 4.2 4.2 4.0 4.0 4.0 Rising flexibility requirements 2.9 Increasing demand volatility 4.1 4.0 Rising lead time requirements Rising cost requirements 4.4 4.0 3.2 Increasing uncertainty 3.2 Increasing complexity Increasing globalization 4.4 4.2 Increasingly heterogeneous customer requirements 3.2 3.2 3.0 Increasing speed of change 2.9 Construction Med-Tech and Pharma Engineered Products High-Tech Automotive Chemicals Consumer Goods 58

Construction Despite the high impact of rising customer requirements regarding flexibility, the Construction industry lags far behind with its activities Top 3 and bottom 3 trends Trend Impact on supply chain Trend-related activities Low High Rising customer requirements regarding flexibility Increasing uncertainty (e.g. lack of forecast accuracy, disruptive innovations) Increasing governmental regulations (e.g. REACH, emission quotas, local content requirements) 4.4 4.3 4.1 Average of all trends Digitization (e.g. big data, real time routing) 2.9 Industry 4.0 (e.g. autonomous vehicles, connected machines) 2.9 Technological advancements (e.g. 3D printing/additive manufacturing, RFID-based tracking) 2.6 Three trends with the highest impact on the supply chain Three trends with the lowest impact on the supply chain 1 = Low impact of a trend on the supply chain 5 = High impact 59

Construction Construction companies are very active concerning increasing governmental regulations and increasing complexity Top 8 of 17 trends Impact on supply chain and activity level Trend Rising customer requirements regarding flexibility Impact on supply chain 4.4 Trend-related activities Low High Increasing uncertainty (e.g. lack of forecast accuracy, disruptive innovations) Increasing governmental regulations (e.g. REACH, emission quotas, local content requirements) 4.3 4.1 Rising customer requirements regarding reliability (on time in full) 4.1 Increasing complexity (e.g. higher number of SKUs or customers) 4.0 Rising customer requirements regarding lead times Increasing demand volatility (e.g. driven by project business, promotions) Rising customer requirements regarding cost 1 = Low impact of a trend on the supply chain 5 = High impact 60

Construction Technological trends are ranked as having very low impact in Construction and companies are very inactive in this area Bottom 9 of 17 trends Impact on supply chain and activity level Trend Technological advancements (e.g. 3D printing/additive manufacturing, RFID-based tracking) Impact on supply chain 2.6 Trend-related activities Low High Industry 4.0 (e.g. autonomous vehicles, connected machines) 2.9 Digitization (e.g. big data, real time routing) 2.9 Rising customer requirements regarding sustainability and a "green" supply chain Increasing globalization (e.g. additional markets to serve, importance of emerging markets, global network) Increasing speed of change (e.g. more frequent product phase-ins/outs, shortened product lifecycles) Increasingly heterogeneous customer requirements (e.g. for different customer groups or markets) Rising customer requirements regarding transparency and traceability Increasing relevance of the "service supply chain" (e.g. for value-added services or spare parts) 1 = Low impact of a trend on the supply chain 5 = High impact 61

Construction Gap between importance and current maturity of SC levers is significantly high Importance of top SC targets will remain the same Supply chain targets and importance of lever categories 1 2 Lead time Supply chain targets Reliability (on time in full) Importance 88% 88% 88% 88% Importance and maturity of lever categories Average: 1 = Not important/mature; 5 = Very important/mature -1.5-1.4 4.2 4.0-1.2-0.9-1.4 3 Flexibility 75% 75% 4 5 Cost Transparency and traceability 75% 88% 38% 63% 2.3 2.7 2.6 2.6 2.4 6 Importance today Importance in 5 years Sustainability/"green" supply chain Important Important 25% Very important Very important 75% 1 2 3 4 5 SC Design Plan Source Make Deliver/Return Importance Maturity 62

Construction SC Design, Plan and Source levers are the most important in Construction Some highly important levers have very low maturity Top 10 Construction levers across all SC categories by importance Current importance Low Current maturity High Consideration of SC requirements in supplier selection and contracting (e.g. lead times, volume flexibility) 100% Integration of S&OP process with other planning activities (e.g. financial/business planning, strategic sales planning) Use of new technologies (e.g. automation solutions for production or warehousing, ) 88% 88% Reliable demand forecast aligned across functions and regions 88% Implementation of supplier risk management (e.g. early warning system, backup strategies) 88% Supplier development to optimize value chain (e.g. regarding lead times, stock) End-to-end SC integration, i.e. SC as orchestrator of complete chain from customer order to customer delivery 88% 88% Systematic alignment of demand and supply/capacity planning (e.g. as part of S&OP process) 88% Optimized supply chain configuration (e.g. postponement strategies, push vs. pull steering) 88% Systematic inventory management (e.g. make-to-stock vs. make-to-order decisions, slow mover handling, sales vs. after sales business) 75% SC category: SC Design Plan Source Make Deliver/Return Important Very important 63

Med-Tech and Pharma Med-Tech/Pharma SCs are influenced by globalization and cost pressure SC Design levers most important but also highly developed Summary Trends > The trends with the biggest impact on supply chains in Med-Tech and Pharma are increasing globalization, cost pressure and reliability requirements Companies also focus their activities in those high-impact areas > Both sustainability and technological advancements have comparatively little impact on Med- Tech and Pharma supply chains Supply chain targets > Reliability and cost are clearly the most important targets in supply chain considerations This is also expected to remain the case in the future > Lead time and flexibility, currently ranked as being of only moderate importance, will gain significantly in importance over the next five years Levers > Supply Chain Design levers are considered the most important within Med-Tech and Pharma > Overall, Med-Tech and Pharma companies see no major gap between the importance of supply chain levers and their current maturity > Traceability of inputs and finished goods stands out as an important lever within Med-Tech/ Pharma but is already considered quite well developed 65

Med-Tech and Pharma Med-Tech and Pharma industry ranks in the midfield on activities concerning the top trends in comparison to other industries Activity level for top 10 trends across industries Industry ranking Most important trends Current activity level for industries [average activity; 1 = Not active 5 = Very active] Most active industry Least active industry Rising reliability requirements 4.2 4.2 4.0 4.0 4.0 Rising flexibility requirements 2.9 Increasing demand volatility 4.1 4.0 Rising lead time requirements Rising cost requirements 4.4 4.0 3.2 Increasing uncertainty 3.2 Increasing complexity Increasing globalization 4.4 4.2 Increasingly heterogeneous customer requirements 3.2 3.2 3.0 Increasing speed of change 2.9 Construction Med-Tech and Pharma Engineered Products High-Tech Automotive Chemicals Consumer Goods 66

Med-Tech and Pharma Globalization has a major impact on Med-Tech and Pharma supply chains Sustainability has the lowest impact on supply chains Top 3 and bottom 3 trends Trend Impact on supply chain Trend-related activities Low High Increasing globalization (e.g. additional markets to serve, importance of emerging markets, global network) 4.3 Rising customer requirements regarding cost 4.1 Rising customer requirements regarding reliability (on time in full) Average of all trends Industry 4.0 (e.g. autonomous vehicles, connected machines) 2.8 Technological advancements (e.g. 3D printing/additive manufacturing, RFID-based tracking) 2.8 Rising customer requirements regarding sustainability and a "green" supply chain 2.5 Three trends with the highest impact on the supply chain Three trends with the lowest impact on the supply chain 1 = Low impact of a trend on the supply chain 5 = High impact 67

Med-Tech and Pharma Globalization and costs have very high impact on Med-Tech/Pharma SCs, closely followed by reliability and attention to services Top 8 of 17 trends Impact on supply chain and activity level Trend Increasing globalization (e.g. additional markets to serve, importance of emerging markets, global network) Impact on supply chain 4.3 Trend-related activities Low High Rising customer requirements regarding cost 4.1 Rising customer requirements regarding reliability (on time in full) Increasing relevance of the "service supply chain" (e.g. for value-added services or spare parts) Rising customer requirements regarding transparency and traceability Increasing demand volatility (e.g. driven by project business, promotions) Increasingly heterogeneous customer requirements (e.g. for different customer groups or markets) Increasing complexity (e.g. higher number of SKUs or customers) 1 = Low impact of a trend on the supply chain 5 = High impact 68

Med-Tech and Pharma Increasing governmental regulations stand out with high activity level among the bottom trends Technology & sustainability insignificant Bottom 9 of 17 trends Impact on supply chain and activity level Trend Rising customer requirements regarding sustainability and a "green" supply chain Technological advancements (e.g. 3D printing/additive manufacturing, RFID-based tracking) Impact on supply chain 2.5 2.8 Trend-related activities Low High Industry 4.0 (e.g. autonomous vehicles, connected machines) 2.8 Digitization (e.g. big data, real time routing) Increasing speed of change (e.g. more frequent product phase-ins/outs, shortened product lifecycles) Increasing governmental regulations (e.g. REACH, emission quotas, local content requirements) Increasing uncertainty (e.g. lack of forecast accuracy, disruptive innovations) Rising customer requirements regarding flexibility Rising customer requirements regarding lead times 1 = Low impact of a trend on the supply chain 5 = High impact 69

Med-Tech and Pharma Today, supply chains are driven by reliability and cost targets Maturity and importance of SC levers are in alignment Supply chain targets and importance of lever categories 1 Supply chain targets Reliability (on time in full) Importance 88% 100% Importance and maturity of lever categories Average: 1 = Not important/mature; 5 = Very important/mature -0.2 2 Cost 88% 88% 0.0 3 4 Lead time Flexibility 50% 75% 38% 63% +0.1 0.0 3.2-0.1 5 Transparency and traceability 38% 57% 3.0 3.0 6 Importance today Importance in 5 years Sustainability/"green" supply chain Important Important 13% 25% Very important Very important 1 2 3 4 5 SC Design Plan Source Make Deliver/Return Importance Maturity 70

Med-Tech and Pharma SC Design levers are considered to be of high importance, while maturity levels match importance levels Top 10 Med-Tech and Pharma levers across all SC categories by importance Current importance Low Current maturity High Traceability incl. inputs and finished goods 88% Manufacturing footprint optimization Consideration of SC requirements in supplier selection and contracting (e.g. lead times, volume flexibility) Warehouse footprint optimization (number of warehouses, crossdocking, hubs, ) Make-or-buy optimization (e.g. via 3PL/4PL) SC segmentation, i.e. different SC service levels and solutions per customer segment Reliable demand forecast aligned across functions and regions End-to-end SC integration, i.e. SC as orchestrator of complete chain from customer order to customer delivery Systematic alignment of demand and supply/capacity planning (e.g. as part of S&OP process) Systematic inventory management (e.g. make-to-stock vs. make-to-order decisions, slow mover handling, ) 63% 63% 63% 57% 50% 50% 50% 50% 50% SC category: SC Design Plan Source Make Deliver/Return Important Very important 71

Engineered Products Engineered Products supply chains are mainly impacted by reliability and lead time requirements Source levers are important Summary Trends > Covering customer requirements on reliability, lead times and demand volatility are the trends with the biggest impact on supply chains in Engineered Products Activity levels in these areas are correspondingly high but companies are at least equally active in flexibility and cost measures > Sustainability, technological advancements and Industry 4.0 have comparatively little impact on Engineered Products supply chains Supply chain targets > Cost and reliability are the most important targets in supply chain considerations However, lead time and flexibility, nowadays of moderate importance, will be of high importance in the future > Sustainability, currently clearly ranked as the least important target, is expected to increase in importance over the coming years but still falls short in comparison to others Levers > Supply chain levers in sourcing are considered the most important The gap between importance and maturity is, however, significant and leaves room for improvement > Among sourcing levers, consideration of SC requirements in supplier selection is by far the most important single lever 73

Engineered Products Engineered Products industry is more active than most on the top 10 trends Focus on complexity, uncertainty, costs and lead time Industry ranking for top 10 trends across industries Most important trends Current activity level for industries [average activity; 1 = Not active 5 = Very active] Most active industry Least active industry Rising reliability requirements 4.2 4.2 4.0 4.0 4.0 Rising flexibility requirements 2.9 Increasing demand volatility 4.1 4.0 Rising lead time requirements Rising cost requirements 4.4 4.0 3.2 Increasing uncertainty 3.2 Increasing complexity Increasing globalization 4.4 4.2 Increasingly heterogeneous customer requirements 3.2 3.2 3.0 Increasing speed of change 2.9 Construction Med-Tech and Pharma Engineered Products High-Tech Automotive Chemicals Consumer Goods 74

Engineered Products The activity level corresponds strongly to the impact level of the top and bottom 3 trends Currently, Industry 4.0 at lower end of trends Top 3 and bottom 3 trends Trend Impact on supply chain Trend-related activities Low High Rising customer requirements regarding reliability (on time in full) Rising customer requirements regarding lead times Increasing demand volatility (e.g. driven by project business, promotions) 4.2 4.1 4.1 Average of all trends Industry 4.0 (e.g. autonomous vehicles, connected machines) 3.0 Technological advancements (e.g. 3D printing/additive manufacturing, RFID-based tracking) 3.0 Rising customer requirements regarding sustainability and a "green" supply chain 2.5 Three trends with the highest impact on the supply chain Three trends with the lowest impact on the supply chain 1 = Low impact of a trend on the supply chain 5 = High impact 75

Engineered Products Activities per trend are consistently at a high level, corresponding to the overall high impact of the 8 most important trends Top 8 of 17 trends Trend Rising customer requirements regarding reliability (on time in full) Impact on supply chain 4.2 Trend-related activities Low High Rising customer requirements regarding lead times 4.1 Increasing demand volatility (e.g. driven by project business, promotions) Increasing uncertainty (e.g. lack of forecast accuracy, disruptive innovations) 4.1 4.0 Rising customer requirements regarding flexibility 4.0 Rising customer requirements regarding cost Increasing complexity (e.g. higher number of SKUs or customers) Increasing globalization (e.g. additional markets to serve, importance of emerging markets, global network) 1 = Low impact of an trend on the supply chain 5 = High impact 76

Engineered Products Activity level is increasing moderately, correlating to the impact level of the 9 less important trends Industry is behind on digitization Bottom 9 of 17 trends Trend Rising customer requirements regarding sustainability and a "green" supply chain Technological advancements (e.g. 3D printing/additive manufacturing, RFID-based tracking) Impact on supply chain 2.5 3.0 Trend-related activities Low High Industry 4.0 (e.g. autonomous vehicles, connected machines) 3.0 Rising customer requirements regarding transparency and traceability 3.0 Digitization (e.g. big data, real time routing) Increasing speed of change (e.g. more frequent product phase-ins/outs, shortened product lifecycles) Increasing governmental regulations (e.g. REACH, emission quotas, local content requirements) Increasingly heterogeneous customer requirements (e.g. for different customer groups or markets) Increasing relevance of the "service supply chain" (e.g. for value-added services or spare parts) 1 = Low impact of a trend on the supply chain 5 = High impact 77

Engineered Products In 2020, the industry will be mainly driven by costs, reliability, lead time and flexibility Maturity level trails behind importance in all categories Supply chain targets and importance of lever categories 1 2 3 4 Cost Reliability (on time in full) Lead time Flexibility Supply chain targets Importance 87% 87% 78% 96% 70% 87% 65% 91% Importance and maturity of lever categories Average: 1 = Not important/mature; 5 = Very important/mature -0.6-0.5-0.3-0.3-0.3 3.2 3.2 3.2 5 Transparency and traceability 26% 55% 3.0 3.0 6 Importance today Importance in 5 years Sustainability/"green" supply chain Important Important 22% 48% Very important Very important 1 2 3 4 5 SC Design Plan Source Make Deliver/Return Importance Maturity 78

Engineered Products Sourcing levers are of highest importance, followed by Return and Make levers Overall, maturity is currently at a fairly moderate level Top 10 Engineered Products levers across all SC categories by importance Current importance Low Current maturity High Consideration of SC requirements in supplier selection and contracting (e.g. lead times, volume flexibility) 83% Systematic inventory management (e.g. make-to-stock vs. make-to-order decisions, slow mover handling, ) Seamless information flow to suppliers (e.g. forecast and order data exchange via EDI) 74% 74% Supplier development to optimize value chain (e.g. regarding lead times, stock) 70% Implementation of supplier risk management (e.g. early warning system, backup strategies) 70% Reliable demand forecast aligned across functions and regions Systematic transportation logistics optimization (e.g. mode of transportation, routing) 64% 61% Leverage of alternative inventory strategies (e.g. VMI Vendor Managed Inventory, consignment stock) 61% Transparent view on available internal capacities for main production steps incl. interdependencies 59% Integration of production steps/defragmentation (e.g. onepiece flow) 59% SC category: SC Design Plan Source Make Deliver/Return Important Very important 79

Consumer Goods Consumer Goods supply chains are mainly impacted by reliability and demand volatility Make levers are the least important Summary Trends > Covering customer requirements regarding reliability and demand volatility, along with heterogeneous customer requirements are the trends with the biggest impact on supply chains in Consumer Goods Activity levels, particularly in the first two areas, are correspondingly high > Industry 4.0, technological advancements and sustainability have comparatively little impact on Consumer Goods supply chains Supply chain targets > Reliability and costs are the most important targets in supply chain considerations However, in the future lead time, flexibility and transparency will substantially gain in importance > Sustainability, currently clearly ranked as the least important target, is expected to increase in importance over the coming years but still falls short in comparison to others Levers > The Make supply chain lever category is the least important, while the others are almost equally important The gap between lever importance and maturity with respect to Plan and Source is most significant, leaving room for improvement > The most important single levers are systematic inventory management and reliable demand forecast 81

Consumer Goods Consumer Goods companies rank above average on their activity level in the top 10 trends across industries Industry ranking for top 10 trends across industries Most important trends Current activity level for industries [average activity; 1 = Not active 5 = Very active] Most active industry Least active industry Rising reliability requirements 4.2 4.2 4.0 4.0 4.0 Rising flexibility requirements 2.9 Increasing demand volatility 4.1 4.0 Rising lead time requirements Rising cost requirements 4.4 4.0 3.2 Increasing uncertainty 3.2 Increasing complexity Increasing globalization 4.4 4.2 Increasingly heterogeneous customer requirements 3.2 3.2 3.0 Increasing speed of change 2.9 Construction Med-Tech and Pharma Engineered Products High-Tech Automotive Chemicals Consumer Goods 82

Consumer Goods Rising reliability requirements paired with demand volatility have the biggest impact on Consumer Goods supply chains Top 3 and bottom 3 trends Trend Impact on supply chain Trend-related activities Low High Rising customer requirements regarding reliability (on time in full) Increasing demand volatility (e.g. driven by project business, promotions) Increasingly heterogeneous customer requirements (e.g. for different customer groups or markets) Average of all trends 4.5 4.2 4.0 Rising customer requirements regarding sustainability and a "green" supply chain 3.0 Technological advancements (e.g. 3D printing/additive manufacturing, RFID-based tracking) 2.7 Industry 4.0 (e.g. autonomous vehicles, connected machines) 2.5 Three trends with the highest impact on the supply chain Three trends with the lowest impact on the supply chain 1 = Low impact of a trend on the supply chain 5 = High impact 83

Consumer Goods Top trends in Consumer Goods all relate to meeting higher delivery performance requirements in less stable environments Top 8 of 17 trends Trend Rising customer requirements regarding reliability (on time in full) Impact on supply chain 4.5 Trend-related activities Low High Increasing demand volatility (e.g. driven by project business, promotions) Increasingly heterogeneous customer requirements (e.g. for different customer groups or markets) 4.2 4.0 Increasing complexity (e.g. higher number of SKUs or customers) Rising customer requirements regarding lead times Rising customer requirements regarding flexibility Increasing speed of change (e.g. more frequent product phase-ins/outs, shortened product lifecycles) Increasing uncertainty (e.g. lack of forecast accuracy, disruptive innovations) 1 = Low impact of a trend on the supply chain 5 = High impact 84

Consumer Goods For the bottom 9 trends, the activity level largely correlates to SC impact Exceptions are sustainability and transparency/traceability Bottom 9 of 17 trends Trend Industry 4.0 (e.g. autonomous vehicles, connected machines) Impact on supply chain 2.5 Trend-related activities Low High Technological advancements (e.g. 3D printing/additive manufacturing, RFID-based tracking) Rising customer requirements regarding sustainability and a "green" supply chain 2.7 3.0 Digitization (e.g. big data, real time routing) Increasing relevance of the "service supply chain" (e.g. for value-added services or spare parts) Rising customer requirements regarding transparency and traceability Increasing governmental regulations (e.g. REACH, emission quotas, local content requirements) Increasing globalization (e.g. additional markets to serve, importance of emerging markets, global network) Rising customer requirements regarding cost 1 = Low impact of a trend on the supply chain 5 = High impact 85

Consumer Goods For 2020, transparency and sustainability targets are on the rise Maturity level significantly below importance for Plan and Source Supply chain targets and importance of lever categories 1 2 3 Reliability (on time in full) Cost Lead time Supply chain targets Importance 87% 97% 80% 93% 77% 87% Importance and maturity of lever categories Average: 1 = Not important/mature; 5 = Very important/mature -0.7-0.7-0.5-0.4-0.4 4 5 Flexibility Transparency and traceability 38% 67% 86% 83% 3.0 3.0 6 Importance today Importance in 5 years Sustainability/"green" supply chain Important Important 7% 63% Very important Very important 1 2 3 4 5 SC Design Plan Source Make Deliver/Return Importance Maturity 86

Consumer Goods Most levers are of equal importance with the exception of those in Make category Maturity level lags behind, especially for Plan levers Top 10 Consumer Goods levers across all SC categories by importance Current importance Low Current maturity High Systematic inventory management (e.g. make-to-stock vs. make-to-order decisions, slow mover handling, ) 90% Reliable demand forecast aligned across functions and regions Systematic alignment of demand and supply/capacity planning (e.g. as part of S&OP process) 86% 83% Warehouse footprint optimization (number of warehouses, crossdocking, hubs, ) 83% Consideration of SC requirements in supplier selection and contracting (e.g. lead times, volume flexibility) 83% Supplier development to optimize value chain (e.g. regarding lead times, stock) Leverage of alternative inventory strategies (e.g. VMI Vendor Managed Inventory, consignment stock) 72% 72% End-to-end SC integration, i.e. SC as orchestrator of complete chain from customer order to customer delivery 70% Implementation of supplier risk management (e.g. early warning system, backup strategies) 69% Optimized supply chain configuration (e.g. postponement strategies, push vs. pull steering) 69% SC category: SC Design Plan Source Make Deliver/Return Important Very important 87

E. Contacts 88

Study authors Dr.-Ing. Carsten Bock Principal Tel.: +49 (711) 3275-7223 Mobile: +49 (160) 744-7223 carsten.bock@rolandberger.com Dr.-Ing. Henry Widera Project Manager Tel.: +49 30 39927-3572 Mobile: +49 (160) 744-3572 henry.widera@rolandberger.com Matthias Kohl Senior Consultant Tel.: +49 (211) 4389-2938 Mobile: +49 (160) 744-2938 matthias.kohl@rolandberger.com 89

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