Midmarket Industrial Machinery & Components

Level One Presentation

Challenges, Strategies, and Solutions Quick Implementation Why SAP? Why Now?

You Have the Right Focus and the Right Strategies

Increase margins with virtual manufacturing capabilities YOUR FOCUS throughout the extended supply chain Increase Shareholder Value Improve time-to-market by fostering engineering and product Increase Revenue and Profit Margins development collaboration Gain Operational view of all external a complete Excellence and internal processes and Product Leadership operations Improve Customer Satisfaction Foster customer loyalty with cuttingedge customer service and support

Business STRATEGY

YOUR FOCUS Increase Shareholder Value Increase Revenue and Profit Margins Cost Leadership Product Leadership Improve Customer Satisfaction

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But Not Enough Ability to Execute

Your people cant execute on your business strategy, because your business platform is
COMPLICATED TO OPERATE
Complex and broken process flows Incomplete or hidden information

Business STRATEGY

DIFFICULT TO CONTROL
Lack of visibility Hard to enforce corporate policies

Business Enabler

IMPOSSIBLE TO CHANGE
Multiple costly integration points Redundant and inconsistent data

Ability to EXECUTE

You need a business enabler to help your organization refocus on your strategies!
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Market Forces and Business Needs

Market Forces
Price erosion due to globalization and cyclical capital investment Customer demands for customized products with short lead times Decreasing customer loyalty Increasingly complex customer base and regionally diverse customer base Trend toward offshore manufacturing

Resulting Key Challenges

Counter margin pressures Speed up time-to-market Improve visibility Improve customer loyalty

Low market growth

SAP AG 2005, Midmarket Industrial Machinery & Components/ #

Market Forces and Business Needs

Market Forces
Price erosion due to globalization and cyclical capital investment Customer demands for customized products with short lead times Decreasing customer loyalty Increasingly complex customer base and regionally diverse customer base Trend toward offshore manufacturing

Resulting Key Challenges

Counter margin pressures Speed up time-to-market Improve visibility Improve customer loyalty

Low market growth

SAP AG 2005, Midmarket Industrial Machinery & Components/ #

Margin Pressures
Challenges
Increasing cost pressure due to globalization
Increased demand for customized products and options Lack of operational efficiencies, leading to higher inventories

Strategies
Reduce cost through strategic sourcing
Optimize production process Cut production costs through outsourcing and offshore manufacturing Improve asset utilization through better production planning

SAP can help you

Track, measure, and optimize material costs Optimize end-to-end planning

Benefits
Lower material cost Lower capital commitment Lower operating costs

Streamline production
Optimize inventory levels Manage asset utilization

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What Customers Have Experienced

Kaeser reduced production lead times by up to 15% and lowered the inventory level for spare parts in its subsidiaries by 23% Leybold reduced the number of people involved in planning process from 90 to 4 and achieved overall cost savings of approximately 1 million per year.

Trumpf Improved processes and increased productivity in production planning, logistic controlling, and quality assurance.
SAP AG 2005, Midmarket Industrial Machinery & Components/ #

Market Forces and Business Needs

Market Forces
Price erosion due to globalization and cyclical capital investment Customer demand for customized products with short lead times Decreasing customer loyalty Increasingly complex customer base and regionally diverse customer base Trend toward offshore manufacturing

Resulting Key Challenges

Counter margin pressures Speed up time-to-market Improve visibility Improve customer loyalty

Low market growth

SAP AG 2005, Midmarket Industrial Machinery & Components/ #

Time-to-Market
Challenges
Engineers spend up to 80% nonvalue added time during product definition. (CIM Data)

Strategies
Design to minimize complexity and support material cost optimization

The success rate of new product Conduct collaborative design introductions has dropped from with dispersed design locations 75% to 25% over the last decade. and with large customers to eliminate inefficiencies in the Product innovation cycles in the design process IM&C industry are shortening.

SAP can help you

Collect and manage ideas Define new products and services Collaboratively design and specify new products

Benefits
Shorter product innovation cycles Streamlined development process with reduced R&D costs The ability to market the right product at the right time Technology leadership resulting in additional pricing power

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What Customers Say

Thanks to mySAP Product Lifecycle Management, we could significantly lower costs. Higher-quality product data is now available earlier in the development process.
Thomas Hirtz, Project Leader, Schuler Pressen

With mySAP Product Lifecycle Management, we are able to shorten product development time, achieve higher customer satisfaction, and benefit from competitive advantages.
Erlfried Koenig, IT Manager, Uhlmann Pac-Systeme GmbH & Co. KG

SAP AG 2005, Midmarket Industrial Machinery & Components/ #

Market Forces and Business Needs

Market Forces
Price erosion due to globalization and cyclical capital investment Customer demand for customized products with short lead times Decreasing customer loyalty Increasingly complex customer base and regionally diverse customer base Trend toward offshore manufacturing

Resulting Key Challenges

Counter margin pressures Speed up time-to-market Improve visibility Improve customer loyalty

Low market growth

SAP AG 2005, Midmarket Industrial Machinery & Components/ #

Visibility
Challenges
Increased speed of business Need to identify and quickly respond to competitive threats and emerging business opportunities Greater scrutiny of corporate accounting practices by governments and the financial community

Strategies
Integrate data from heterogeneous sources to obtain a complete view of all external and internal processes and operations

Gain complete insight into the processes of customers, partners, and employees
Identify and standardize key performance indicators

SAP can help you

Get information from one source through common logistics and financial reporting Improve financial planning with one trigger for financial and logistics tracking, integration of financials, and cost evaluations Manage lead times through capacity, supplier, and resource visibility

Benefits
Better information for employees to foster optimized decisions Greater responsiveness to changing conditions Compliance with government regulatory requirements

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What Customers Have Experienced

Kaeser achieved a 32% decrease in finished stock.

Schumacher cut the time required for month-end closing in half.

Trumpf is centrally monitoring production and logistics KPIs for eight plants.

SAP AG 2005, Midmarket Industrial Machinery & Components/ #

Market Forces and Business Needs

Market Forces
Price erosion due to globalization and cyclical capital investment Customer demand for customized products with short lead times Decreasing customer loyalty Increasingly complex customer base and regionally diverse customer base Trend toward offshore manufacturing

Resulting Key Challenges

Counter margin pressures Speed up time-to-market Improve visibility Improve customer loyalty

Low market growth

SAP AG 2005, Midmarket Industrial Machinery & Components/ #

Customer Loyalty
Challenges
Fewer distinct technical differences commoditization of machines and components Pricing pressure on new machinery increases, importance of aftersales business New technologies encourage cherry picking in aftermarket Aftermarket business is turning into a competitive battle ground

Strategies
Generate new revenue streams through value-added services and proactive maintenance Exploit up-selling and crossselling potential

Bundle services with product sales

Lock customers into long-term service level agreements

SAP can help you

Manage customer interactions over multiple channels Enable customers to buy products and spare parts online and browse through their installed base Plan the stock levels of spare parts to improve order fill rate while minimizing inventories

Benefits
Offer improved service with 24x7 availability Allow for bundles of service offerings and maximize margins on these offerings Improve customer satisfaction and retention Increase revenues and profitability

Manage service level agreements and track their profitability

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What Customers Have Experienced

Leybold improved on- time delivery from 87% to 95%.

Halton is offering customers complete, end-to-end solutions. Komatsu is putting self-service tools into customers hands. Mennekes significantly increased customer service and customer satisfaction.
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Challenges, Strategies, and Solutions

Quick Implementation Why SAP? Why Now?

Fast, Predictable Payback

Implement what you need, when you need it with SAP.
cash flow
Shorter Payback Time

Accelerate Time-to-Benefit Reduce Initial Investments

time

SAPs phased implementation approach provides the following benefits: Addresses key business issues from an industry-specific perspective Limits business disruption through predefined services focused on industry best practices Supports future growth Delivers business value through the service providers that best fit customer needs:
Customers can choose familiar industry partners Customers can choose SAP if needs dictate

Provides real ROI within budget and timeline

Enables customers to buy only the modular functionality they need Leverages and extends existing investments. Customer decides what to add or replace
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What the Statistics Say

Implementation

> 9 months < 9 months

More than 60% of all SAP R/3 implementations are accomplished in less than nine months.

IM&C customers by no. of employees

Range of Employees X-Large Large Medium > 25,000 5,000-25,000 1,000-4,999 < 1,000 45 97 293 804 190 1.429

40
30 25%

40%

35%

20
10 0 10-11 weeks 12-13 weeks 14-16 weeks

Recent implementations of SAP solutions at midsize companies have averaged only 13 weeks.

Small Not Assigned Total

Average implementations for midsize companies are measured in weeks.

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IM&C is already successful in the midmarket.

What Our Customers Say

The distinguishing characteristic of SAP SI is its practical approach to rapid SAP implementations without compromise to quality or increment to project risk. Its emphasis on customer education combined with cross-industry domain, process improvement, and extensive functional SAP R/3 standards and specific product knowledge provided our company with an ERP infrastructure supportive of our business and information technology goals. The success of our SAP implementation was wholly dependent upon the contributions of SAP SI.
Martin Harbeck SAP Implementation Project Manager Ryobi North America, Inc.

Pro-featured power tools for homeowners, hobbyists, and craftspeople.

Challenge Aging systems and increasing competition.

Solution SAP R/3

Implementation 20 weeks

Result Significant cost savings and operational improvements

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What Our Customers Say

I valued not only the overall management of our SAP project implementation, but also SAP SI Americas leadership in the application of the MaxValu methodology. for NexPress Solutions LLC. Eight weeks into the project, MaxValu had us testing in a working environment. You can count me as a satisfied customer and chalk this one up as an on-time, on-budget project for NexPress Solutions.
Robert Scheidt IS/IT Manager NexPress Solutions, LLC

Joint venture of Kodak and Heidelberger Druckmaschinen AG, supplying the printing industry.

Challenge Integrated business processes, a consistent platform to improve and standardize information systems for its global business operations.

Solution SAP R/3

Implementation 16 weeks

Result All business processes and information systems are now linked with other family companies, which dramatically improves operational efficiencies.

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Challenges, Strategies, and Solutions Quick Implementation Why SAP? Why Now?

SAP: The Smart Choice for Your Global Business!

12 million users. 69,700 installations. 1,500 partners. 28,900 people in more than 50

countries. 27 industry solutions. $7 billion in revenue and over $1 billion annually in R&D.
SAP is the recognized leader in providing collaborative business solutions for all types of industries and for every major market. SAP is the worlds largest interenterprise software company and the worlds third-largest independent software supplier overall. SAP will continue to provide you with solutions for all future trends to protect your investment.
SAP AG 2005, Midmarket Industrial Machinery & Components/ #

SAP R&D Investment

R&D Investment ( Millions)
Importantly, the stronger margin does not appear to be coming at the expense of future growth R&D headcount is up Q/Q and Y/Y, and S&M headcount is down marginally quarter-onquarter and up year-on-year both indicating that capacity and product investment are not being curtailed.
Solomon Smith Barney

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Worldwide Relative Market Share

Total License Revenue: Relative Market Shares
(Rolling four quarters, based on license revenues)
60%
54% 51% 56% 48% 41% 43% 44% 46% 58% 59%

50%
40% 40%

40%

30%
21% 22% 17% 16% 5% 21% 18% 16% 20% 17% 16% 4% 20% 17% 16% 18% 18% 15% 3% 18% 17% 15% 17% 17% 16% 14% 14% 2% 13% 2% 15% 15% 12% 2% 14% 14% 12% 2% 15% 13% 11% 2%

20%

19% 16%

10%
4% 4% 3%

2%

0%
Q2 2000Q1 2001 Q3 2000Q2 2001 Q4 2000Q3 2001 Q1 2001Q4 2001 Q2 2001Q1 2002 Q3 2001Q2 2002 Q4 2001Q3 2002 Q1 2002Q4 2002 Q2 2002Q1 2003 Q3 2002Q2 2003 Q4 2002Q3 2003 Q1 2003Q4 2003E

I2*

PSFT&JDEC*

Oracle **

Siebel*

SAP AG

* Forecast by Financial Analysts (I2,PSFT&JDEC,SEBL) ** Fiscal year is not calendar year - Comparison based on most recent quarter (e.g. SAP Q1 vs. Oracle Q3) Source: CMI Analysis based on Company Data and Financial Analysts Estimates as of January 20th 2004

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IM&C Customer Portfolio

SAP Industrial Machinery & Components Customers

SAP AG 2005, Midmarket Industrial Machinery & Components/ #

Challenges, Strategies, and Solutions Quick Implementation Why SAP? Why Now?

In Summary
SAP is flexible so it grows with your business:
Allows for increasing market share Scales to meet your needs Gives you operational visibility Helps shorten time to market Helps improve customer loyalty

SAP is quick to implement with fast, predictable payback:

Fixed-price, 13-week average implementation time Phased approach and best practices

SAP is the smart choice for your investment:

Over 30 years in business with 1,500 industrial machinery and component customers Number one enterprise software vendor in the world with more than $1 billion in annual R&D
SAP AG 2005, Midmarket Industrial Machinery & Components/ #