Medical Device Supply Chain Council

Larry P. Smith, VP Global Supply ChainJune 4, 2014Chicago -- Spring Meeting

Agenda• BD Overview• Emerging Markets Overview and Challenges• Network Design and Optimization• Conclusions• Q & A

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Who is BD?• FORTUNE 500 company (#332)

• Locations in more than 50 countries

• Nearly 30,000 associates worldwide

• Serves healthcare institutions, life science researchers, clinical laboratories and the general public

• Sells a broad range of medical supplies and services, devices, laboratory equipment and diagnostic products

FY 2013 Revenues: $8.054B

BD Biosciences$1.1B

BD Medical$4.3B

BD Diagnostics$2.7B

By Segment: By Geography:

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BD SafetyGlide™Injection Needle BD Nexiva™ Closed IV

Catheter System

BD PosiFlush™Heparin-filled Flush Syringe

BD Soluvia™ Prefillable Microinjection System

Enabling safer, simpler and more effective parenteral drug delivery

BD Emerald™ Syringe

BD Sterifill Advance™ Plastic Prefillable Syringe

Insert BD Simplist here

BD Simplist™ line of ready-to-administer prefilled injectables

Improving clinical outcomes through new, accurate and faster diagnostics

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BD Viper™ System with XTR Technology

BD MAX™ SystemBD FocalPoint ™ GS

Imaging System

BD Kiestra™ Total Lab Automation

BD Veritor™ System

BD BACTEC™ FX

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Providing tools and technologies to the research community that facilitate basic science, drug discovery and cell therapy

BD FACSVerse™ Analyzer

BD™ LSR II

BD FACSCanto II™ Flow Cytometer

BD Accuri® C6 Flow Cytometer

BD FACSCount™ SystemBD LSR Fortessa™ Cell Analyzer

Research Technologies Clinical Technologies

BD FACS Jazz™

BD FACSCalibur™

BD FACS™ Lyse Wash Assistant

Enhancing disease management in diabetes, women’s health and cancer, and infection control

8BD Viper™ System with XTR Technology BD BACTEC™ FX

Women’s Health and Cancer Infection Control and Patient Safety

BD PosiFlush™Heparin-filledFlush Syringe

BD SurePath™PAP Collection System

Diabetes Care

BD Ultra-Fine™ Nano 4mm Pen Needles with PentaPoint™ Comfort

BD AutoShield™ Pen Needle

Agenda• BD Overview• Emerging Markets Overview and Challenges• Building your Emerging Market Network• Conclusions• Q & A

Emerging Markets Potential Quadrant

Source: Transport Intelligence

Emerging Markets- 5 Years Forecast

Source: Transport Intelligence

Emerging Market Challenges• Currency Fluctuations / Stability• Economic Stability• Political / Regulatory / Trade Compliance Environment• FCPA Issues• Ability to leverage trade agreements • Labor Availability & Skills• Language / Culture• Technology Maturity / Infrastructure• Intellectual Property Risks / Protection• Physical Infrastructure (Roads, facilities, transportation

equipment, etc.)• Lead Time and Cost to Serve• Supply Risk / Demand Risk / Pricing Risk

Emerging Markets - China

Emerging Markets - China

• Challenges:– IP Risk– Availability (and turnover) of qualified employees– Level of local competition– Supply chain infrastructure– Availability of qualified local partners (JV, 3PL, Distributors)– Limited internal knowledge of market– Regulatory requirements– Escalating employee compensation– FCPA – Aging population

Emerging Markets - India

Emerging Markets - India• Challenges

– Availability of qualified SC partners– New labeling requirements– IP risk– Availability (and turnover) of qualified Talent– Local competition– Regulatory/Reimbursement uncertainty– Supply chain infrastructure– Limited knowledge of market– FCPA

DC’s ( CFA)

FACTORY

LUCKNOW

HYDERABAD

BAWAL

MUMBAI

DELHI

CHENNAI

CALCUTTA

BANGALORE

COCHIN

RANCHIAHMEDABAD

INDORE

PANCHKULA

ZIRAKHPUR

CHANDIGARH

JAIPUR

CUTTACK

India SCM Network

Proposed reductions 16 to 4 DC

DIFCO

CHENNAI

PATNA

BD India Network

Emerging Markets - Brazil

Emerging Markets - Brazil• Challenges

– Regulatory/ANVISA– Labeling requirements– Availability (and turnover) of qualified talent– Complexity of importation process

• High import tariffs• Difficult customs system

– Local and Chinese competition– IP risk– Employee Safety– Port slowdowns and strikes

Port Ranking - The Economic Forum

Face to this, Brazil is one of the last Countries in a list of Port Quality

Grade 1= inefficient; Grade 7= efficient

Brazilian Ports

Ethiopia 30 daysBrazil 10 daysChina 7 days

United States 5 daysChile 3 daysSweden 2 days

Brazilian Ports are not efficient...Days to remove container from port

and are not productive...

SANTOS ROTTERDAMBiggest in Latin America Biggest in Europe

HANDLING 76MM ton per year 378MM ton per yearSTEVEDORE (LABOR) 4 605 5 441PRODUCTIVITY 16 500 ton per stevedore 69 500 ton per stevedore

Brazilian Railroad coverage and availability

Train average speed in Brazil is among the lowest in the world.

FRANCE

UNITED STATES

RUSSIA

BRAZIL

300 Km/h

64 Km/h

46 Km/h

25 Km/h

Emerging Markets- Russia

Emerging Markets - Russia

• Challenges– Unstable economy – Availability of qualified SC partners– Security concerns– Ease of access to the market– Political challenges – Large Geography– Geopolitical disruptions– FCPA adherence

BD Russia Network

DC

Mexico

• Companies are now considering Mexico as “the little darling of emerging markets” and an exciting growth story – Forbes Magazine

• Mexico the “China of the Americas” – Siemens Mesoamerica CEO Louise Goeser

• “China’s Export Pain May Be Mexico’s Gain” – Wall Street Journal

Mexico

• Battle of Emerging Markets

Mexico vs China

China MexicoShrinking working pool – 1 child policy Low cost but highly skilled labor

UN - # of Women ages 15-24 will fall from 106MM – 92MM in 2015

Good industrial real estate capacity and available land

Demands for higher pay & labor costsCost of manufacturing increasing by 15-20%/yearShipping lead time to the US - 15-20 daysFTA’s – 20 nations

48-72 hours lead time to the USDrug Cartels – More Isolated Regional IssuesMild inflationFTA’s – 43 nations

Mexico

• Mexico Manufacturing Wage

Agenda• BD Overview• Emerging Markets Overview and Challenges• Building your Emerging Market Network• Conclusions• Q & A

Global Finished Product Movement

Modeling Optimization Simulation

Supply Chain Network Optimization

Supply chain network optimization is the practice of locating andrationalizing the facilities within the supply chain, determining thecapacity of these facilities, determining how to source demandthrough the network and selecting modes of transportation in amanner that provides the required level of customer service atthe lowest cost.

Objective:

Network Design• Understand your Co/Business Strategy• Understand your Regional GTM Strategy • Align Your SC Strategy• Model the “Base Case”• Simulate Multiple Scenarios to Develop Optimal

Solution• Balance Inventory Levels, Service Levels,

Transportation and DC Costs• Select the Best Match to Your Strategy• Execute the Optimized Network

ManagementBusinessReview

ManagingNewActivities

ManagingSupply

ManagingDemand

Integrated Reconciliation

Sales & Operations Planning -Key to Planning

Agenda• BD Overview• Emerging Markets Overview and Challenges• Network Design and Optimization• Conclusions• Q & A

Conclusions

• Emerging markets generate more top line growth versus slower growing mature markets

• China, Brazil, and India are still considered the top growing emerging markets over the next 5 years

• Level of risks and challenges still exist and can vary in different emerging markets

• Near-shoring of Manufacturing to Mexico and the USA is increasing• If you don’t have an emerging market supply chain network strategy,

you greatly increase the likelihood of having a supply chain that cannot support desired financial opportunities and is not flexible and resilient

• Embrace the challenges and the opportunities !

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