2012 MM China Logistic optimization

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20 Novembre, 2010

2012 MM China Logistic optimization

Wenty Zhou

Purchasing Director

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Magneti Marelli Company Confidential April 4, 2013

• Self introduction

• About Magneti Marelli

• Status before integration

• Result and experience sharing

• Suggestion & expectation

OUTLINE

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Self introduction

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Education background

• Engineering Master Degree in HARBIN INSTITUTE of TECHNOLOGY • EMBA ,CHINA-EUROPEAN INTERNATIONAL BUSINESS SCHOOL

Working experience

• SAIC group

• Tenneco Automotive China

• Fiat China (Magneti Marelli China)

18 years experience in auto industry through different functions as manufacturing, project management, purchasing, quality, technical, sales.

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Magneti Marelli is an international company committed to the design and

production of hi-tech systems and components for the automotive sector.

ELECTRONIC SYSTEMS

(Instrument clusters, Infotainment & Telematics, Lighting & Body Electronics)

SUSPENSION SYSTEMS

(Suspension Systems, Shock Absorbers, Dynamic Systems)

POWERTRAIN AUTOMOTIVE

LIGHTING

AFTERMARKET PARTS & SERVICES EXHAUST SYSTEMS MOTORSPORT PLASTIC COMPONENTS AND MODULES

Company overview

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Magneti Marelli Company Confidential April 4, 2013 12 6.2% ~ 36,900 5.2% 5.8 billion € 83 26 R&D Centers

R&D (of sales)

Employees worldwide

Sales 2012 Production units

Investments (of sales)

Application Centers

Magneti Marelli Worldwide Presence

R&D Center

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Magneti Marelli Company Confidential April 4, 2013 Production plant R&D Center Application Center Changsha 长沙 ShangHai 上海 WuHu 芜湖 China presence POWERTRAIN 动力传动 AUTOMOTIVE LIGHTING 汽车照明 EXHAUST SYSTEMS 排气系统 SMMP Joint Venture AMT Comp. ELECTRONIC SYSTEMS 电子系统 Changchun 长春 POWERTRAIN 动力传动杭州 HangZhou 广州 GuangZhou 佛山 Foshan Shock Absorber 减震系统 EXHAUST SYSTEMS 排气系统

Magneti Marelli China Presence

6 ELECTRONIC SYSTEMS 电子系统 AUTOMOTIVE LIGHTING 汽车照明 AUTOMOTIVE LIGHTING 汽车照明 POWERTRAIN 动力传动 EXHAUST SYSTEMS 排气系统 HeFei 合肥

• Start in China since1996;

• 2012 sales: 2.5 Billion RMB Vs 5.8 Billion € ;

• 10 production sites now, still expansion;

• Head account: Approx. 2,500 Vs 36,900 group;

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• Consolidate WOFE first: PWTSH/PWTWH/ALWH/ELSGZ

• 21 suppliers(inland&forwarding) deliver to 22 main destination city.

• 2011 spend 41M RMB, 2012 spend around 44M RMB.

MM China logistic overview

7 SITE 2011 Inland Spend 2011 External WH & Others 2011 Overseas spend 2012 Inland spend 2012

Overseas spend 2012 subtatal ALWH 4,600,000 1,700,000 12,000,000 9,000,000 14,200,000 23,000,000 ELSGZ 6,800,000 9,200,000 6,300,000 8,200,000 15,000,000 PWTWH 2,000,000 200,000 1,700,000 2,700,000 1,200,000 3,900,000

PWTSH 500,000 2,000,000 250,000 1,500,000 1,800,000 Subtotal 14,000,000 1,900,000 25,000,000 18,000,000 25,000,000 44,000,000

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Delivery diagram

8 Shanghai Guangzhou Wuhu Changchun Changsha Chongqing Wuhan Qingdao

Destination ELSGZ ALWH PWTWH PWTSH ALFS EXHCS

Changchun     ChangSha     Chongqing   Foshan  Guangzhou    Haerbin Haikou  Hefei  Huizhou  Liuzhou  Nanjing   Qingdao  Shanghai    Shenzhen  Tianjin   Wuhan     Wuhu   Xiangfan  Yantai  Yizheng  Zhengzhou Zhuzhou   Total 15 4 6 11 1 1 22 main destination

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Magneti Marelli Company Confidential April 4, 2013 • MMGZ • ALWH • PWTWH • PWTSH

2012 Key route for each site (Inland)

9 WUHAN 7.71% QINGDAO 29.81% SHANGHAI 15.04% CHANGCHUN 37.69% CHANGSHA 35.48% CHANGCHUN 45.29% CHANGCHUN 20.24% GUANGZHOU 38.29% CHANGCHUN 29.98% WUHU 63.79% WUHAN 18.3% XIANGFAN 32.16% SHANGHAI 9.21%

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Magneti Marelli Company Confidential April 4, 2013 • MMGZ • ALWH • PWTWH • PWTSH

2012 Key route for each site (Import&Export)

10 BUSAN Sea 11.63% PARIS Air 18.61% ITALY Air 72% COLOGNE Air 94.4% HAMBURG Sea 9.77% SPAIN Air 28% TORINO Sea 11.2% TORINO Air 67.55% VICENZA Air 6.97%

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2012 Top 5 route for MM China whole(Inland)

11 • ALWH: Wuhu-Changchun ¥ 5.0M/year 500 trucks/year( 10 Ton+) • ALWH: Wuhu-Changsha ¥ 3.9M/year 600 trucks/year ( 10 Ton+) • ALWH: Wuhu-Wuhan ¥ 2.0M/year 650 trucks/year ( 10 Ton+) • ELSGZ: Guangzhou-Changchun ¥ 1.5M/year 5000+ pallet /year • ELSGZ: Guangzhou-Qingdao ¥ 1.2M/year 4000+ pallet /year 28% 22% 11% 9% 7% Route Cost (RMB) WH-Changchun WH-Changsha WH-Wuhan GZ-Changchun GZ-Qingdao

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2012 Top 10 route for MM China (Import&Export)

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• ELSGZ: Torino-Guangzhou Air ¥ 5.1M/year

• PWTWH: ITALY-Wuhu Air ¥ 2.9M/year

• ALWH: Paris-Shanghai Air ¥ 1.7M/year

• PWTWH: Spain-Wuhu Air ¥ 1.1M/year

• PWTSH: Cologne-Shanghai Air ¥ 1.1M/year

• ALWH: Wuhu-Busan Sea ¥ 1.1M/year

• ALWH: Hamburg-Shanghai Sea ¥ 0.9M/year • ELSGZ: Torino-Guangzhou Sea

¥ 0.9M/year • ALWH: Shanghai-Yokohama Sea

¥ 0.8M/year

• ALWH: Hamburg-Shanghai Sea ¥ 0.7M/year 27% 9% 6% 6% 5% Route Cost (RMB) Torino-Guangzhou Italy-Shanghai Paris-Shanghai Spain-Shanghai Cologne-Shanghai Shanghai-Busan Hamburg-Shanghai Torino-Guangzhou Shanghai-Yokohama Hamburg-Shanghai

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Current operation mode

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• Each plant has its own supplier(Total 21);

• Logistic supplier sourcing is under plant purchasing;

• Local (geography around plant) service provider could only cover

region, service level is different;

• Frequency of transportation method change (truck to air) is high due

to car maker’s forecast fluctuation;

• Warehouse space is not enough comparing with business expansion;

MM Site Warehouse No. Internal Warehouse (m²) Internal Warehouse No. Outside Warehouse (m²)

Outside Further demand

PWTSH 1 1’000 0 500

PWTWH 1 3’500 3 3200+2500 elevated storage

ALWH 2 4’900 2 5’280 2’000

ELSGZ 3 3’000 1 100

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Target to optimize logistic model

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• Business consolidation;

• Improve efficiency;

• Cost reduction;

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• Project start up

Information collection & evaluation • Clarify deviation

Potential supplier meeting RFQ to shortlist

• Supplier quotation & clarification Proposal comparison

Summary & Report Joint meeting for SOP Agreement negotiation • Trial run Feb to Mar Apr to May Jun to Aug Sep to Oct

Timing

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• 1. Total logistic cost reduced X% annually;

After combination of different B/L demand, stowage rate increased comparing with single product delivery;

Example: Engine control Vs lighting. (Weight & bulk parts together);

By comparison of supplier bidding , route allocation would be easy after finding the strength of suppliers;

• 2. Supplier base reduced from 21 to 5;

In a total map of bidding package, easy to balance the tiny route requirement;

• 3. Unified agreement clause and payment term;

In group level negotiation, strategic partner would understand better of each other’s demand and compromise;

• 4. Easy to react in urgent case from headquarter;

Single contact window, deeply understanding of customer planning make it easy to adjust to auto industry’s fluctuation;

• 5. Better integration between purchasing and logistic dept;

Model design from whole supply chain view, makes different dept consider more of each other;

Result

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Suggestion & expectation

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 Monitor and improve logistic optimization level would be a long term action;  More communication is encouraged from supplier to customer; The more

you know, the better proposal you made. The final winner would not be only to focus on price down, but the suitable solution.

 By joint workshop, supplier and customer could understand of each other’s demand deeply. Better solution would be found in brain storm;

 Supplier need to provide more consulting service to customer, especially the proven mature model in different region, industry, and so on.

2012 MM China Logistic optimization