Organization Transformation

Truly Global Procurement

Craig Laudadio Procurement Solutions Manager Xerox Corporation

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Xerox Third Party Confidential

Xerox Global Purchasing Organization Transformation, Agenda

Xerox Overview Business Environment and Challenges Developing a Solution, Planning and Implementation Transformation and Globalization of Procurement The Results & Benefits Wrap-Up

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Presented by Craig Laudadio @ Xerox 585-2655131

Xerox Overview
Xerox Corporation is the world's leading document management technology and services enterprise. It provides the document industry's broadest portfolio of offerings. Digital systems include color and black-and-white printing and publishing systems, digital presses and "book factories," multifunction devices, laser and solid ink network printers, copiers and fax machines. Xerox's services expertise is unmatched and includes helping businesses develop online document archives, analyzing how employees can most efficiently share documents and knowledge in the office, operating in-house print shops or mailrooms, and building Web-based processes for personalizing direct mail, invoices, brochures and more. Xerox also offers associated software, support and supplies such as toner, paper and ink.

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Xerox Mission
Our strategic intent is to help people find better ways to do great work -- by constantly leading in document technologies, products and services that improve our customers' work processes and business results.

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Xerox Corporation at a Glance

CEO: Ursula M. Burns 2008 revenue: $17.6 billion 2008 income: $230 million Employees: 57,100 worldwide. Operates in: 160 countries Founded: In 1906 as The Haloid Company; named Haloid Xerox in 1958; named Xerox Corporation in 1961 Fortune 500 ranking: No. 147 NYSE: XRX Headquarters: 45 Glover Avenue, Norwalk, CT 06856 www.xerox.com

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Xerox Global Purchasing Organization

Xerox Corporation is a $17.6 Billion Technology and Service Enterprise
Office of President and CEO Jim President & UrsulaUrsula Firestone Ursula Burns Business Group OperationsBurns Burns Business Group Operations Ursula Burns
Global Business and Chain Group Xerox Strategic Services ServicesWimAppelo Paper Supplies & Supply Group Wim Appelo Paper Supplies & Supply Chain Wim Appelo Global Purchasing Syme Global Purchasing Ken $7.8B $7B Global Purchasing Ken Syme $7B

Product Related Purchasing $3.5B

Indirect Goods and Services $4.3B

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Presented by Craig Laudadio @ Xerox 585-2655131

Organizational Design for Sourcing in Emerging Regions Business Environment

Xerox Global Purchasing established ICM (Integrated Commodity Management) office in Hong Kong in 1995. Obtain quotes Point negotiations Quality Surveys and audits Expedite and problem solve

Supplier Base Management and Commodity Strategy, Remained in the USA. Most of our sourcing was in USA and European Union.

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Business Environment & Challenges Early 2000s

Disruptive Technology in Products. Fiercely Competitive industry. Negatively Sloping Product Cost Curves. Formidable Global Competitors. Mostly Asian Manufacturing. Strong Financially. Moving Assembly Plants to low cost countries.

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Xerox Global Purchasing Business Environment, Sourcing Trends

100 90 80 70 60 50 40 30 20 10 0
% Sourced in Asia (product related)

Sourcing Southeast Asia

2003
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2004

2005

2006

2007

Presented by Craig Laudadio @ Xerox 585-2655131

Global Purchasing Business Environment Dollars Spent by Supplier Location

Production $3.5B Supplier Spend
Europe 4% North America 10%

Indirect Goods and Services $4.3B Supplier Spend

Other 3% Canada/Brazil 7%

14% Other
31% Europe 86% Asia
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59% U.S.

Xerox Global Purchasing Organization Pre-transformation

Office of President and CEO Jim President & UrsulaUrsula Firestone Ursula Burns Business Group OperationsBurns Burns Business Group Operations Ursula Burns
Global Business and Chain Group Xerox Strategic Services ServicesWimAppelo Paper Supplies & Supply Group Wim Appelo Paper Supplies & Supply Chain Wim Appelo Global Purchasing Syme Global Purchasing Ken $7.8B $7B Global Purchasing Ken Syme $7B
Xerox Designed Products Fuji Xerox Procurement Operations Product Cost Engineering

OEM Designed Products

Corporate Procurement Services

Business Process Outsourcing

Supplier Quality Assurance

Product Purchasing $3.5B

CPS / BPO $4.3B

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Organizational Design for Sourcing in Emerging Regions Solution development

Global Purchasing Senior Staff team Checked Job Titles and Current roles at the door. Used Good to Great approach.

Posed the question, If we started this all over again and didnt have the limitations of the existing infrastructure around us, how would we do this?

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Organizational Design for Sourcing in Emerging Regions Solution development

We studied the activities of Global Purchasing personnel. Buyers/Supplier/Commodity Managers Supplier Quality Assurance Engineers Advanced Manufacturing Engineers Product Cost Engineers

We studied their roles and identified activities that should be located with Product Delivery Teams and Business Teams and activities that should be located with suppliers. In late 2006 we transferred ALL activities to Asia that could / should be managed from Asia.

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Total Acquisition Cost

Unit Cost + Duty Insurance & Freight + Hurdle rate = Total Acquisition Cost Hurdle rates include
Communication & travel cost. Premium Freight. Increased Inventory Holding. Scrap, rework, obsolescence. Compliance Monitoring.

IP protection.
Business Resumption Plans.

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Other Considerations and related decisions

Before we restructured

We purchased and studied research by Aberdeen, Everest, Forrester and Gartner on procurement outsourcing. We commissioned a Study at Portland State University. Considered whether to further Invest in Asia or whether to outsource procurement and buy the service. Had to decide on which side of the procurement outsourcing movement Xerox should be positioned. We concluded that Xerox had the necessary scale, scope and some unique processes and expertise (particularly in product related purchasing) that made internal investment prudent.
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Xerox Global Purchasing Asian Procurement Ops Project Timeline

Complete Hiring in Asia 1Q 07

GP Management Strategy May 06

Canvas Stakeholders July 06

Corporate officer approval Aug 06

Begin Hiring in Asia and restructure Oct 06

GP Management Business Plan Formulated July 06

Communicate to GP employees Worldwide Sept 06

Complete Restructuring Dec 06

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Global Purchasing Realignment of Product Purchasing Resources (headcount) to Asia

Before After

Europe12

Brazil Canada 6

Europe 8

Asia 47

Rochester 122
Portland 79

Asia 108

Rochester 85

Portland 65
*266 heads in 2008
Presented by Craig Laudadio @ Xerox 585-2655131

*266 heads in 2006

* Does not include Indirect Purchasing headcount
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Xerox Global Purchasing Organization Pre-transformation

Office of President and CEO

Jim President & UrsulaUrsula Firestone Ursula Burns Business Group OperationsBurns Burns Business Group Operations Ursula Burns
Global Business and Chain Group Xerox Strategic Services ServicesWimAppelo Paper Supplies & Supply Group Wim Appelo Paper Supplies & Supply Chain Wim Appelo Global Purchasing Syme Global Purchasing Ken $7.8B $7B Global Purchasing Ken Syme $7B
Xerox Designed Products Fuji Xerox Procurement Operations Product Cost Engineering OEM Designed Products Corporate Procurement Services Business Process Outsourcing

Supplier Quality Assurance

Product Purchasing $3.5B

CPS / BPO $4.3B

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Presented by Craig Laudadio @ Xerox 585-2655131

Xerox Global Purchasing Organization Post-transformation

Office of President and CEO Jim President & UrsulaUrsula Firestone Ursula Burns Business Group OperationsBurns Burns Business Group Operations Ursula Burns
Global Business and Chain Group Xerox Strategic Services ServicesWimAppelo Paper Supplies & Supply Group Wim Appelo Paper Supplies & Supply Chain Wim Appelo Global Purchasing Syme Global Purchasing Ken $7.8B $7B Global Purchasing Ken Syme $7B
Asian Procurement Operations Global Purchasing for Xerox Office Group Fuji Xerox Procurement Operations Global Purchasing for Production Systems Group Procurement Outsourcing Services Corporate Procurement Services Business Process Outsourcing

Global Purchasing for Xerox Global Services CPS / XGS / BPO $4.3B

Product Purchasing $3.5B

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Presented by Craig Laudadio @ Xerox 585-2655131

Xerox Global Purchasing Team Co-Located with Suppliers

Xerox Asian Procurement Operations (APO) own Xerox Global Sourcing Strategy.

ICM Offices Previously

Project manage ( new and resourced) Expedite and Problem Solve Obtain Quotes Negotiate Costs Some PCE Estimating SQA Survey approvals Audits

APO Currently also

Develop Global Commodity Strategy Manage the supplier base Contracting for Asian suppliers PCE estimating for Asian sourcing All SQA and AME support for Asia All sourcing activities in Asia

Key message: Supplier base management decisions and Contract approvals will be in Asia.
Acronym Footnote: PCE Product Cost Engineering; SQA Supplier Quality Engineering; AME Advanced Manufacturing Engineering

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Xerox Global Purchasing Asian Procurement Design Centers and APO Office Locations
Welwyn, UK Wilsonville, OR Webster, NY Hong Kong Shenzhen India Korea Japan

Malaysia Singapore

Design Centers APO Offices

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Xerox Global Purchasing Team Co-Located with Business Groups

Global Purchasing, Xerox Office Group Organization
Global Purchasing for for Global Purchasing XOG
Administrative Assistant Administrative Assistant

Global Purchasing, Production Systems Group Organization

Global Purchasing for PSG Global Purchasing for Production Systems Group
Administrative Assistant Administrative Assistant

Xerox Office Group Marty Annas

Solid Ink Materials Solid Ink NPI (Wilsonville) (Wilsonville) Eric Walters Electronics Procurement Electronics Procurement (Wilsonville) (Wilsonville) Chris Campbell

Sue Leavenworth

Diane OConnor

Judy Williams

FX & Contracts FX & Software (Wilsonville) (Wilsonville) Kevin Hoffman Samsung

Xerox Designed Products Xerox Designed Products Mike Ryan Supplies Consumables Tom Viola

Contract Manufacturing Judy Taylor & Spares

Strategic OEM (Webster)

John Mostyn

Procurement Engineering Procurement Engineering Ernest Wilson

APO Engagement Processes Solid(Wilsonville) Ink Purchasing (Wilsonville) Charley Burnett Cost, Operations, OEM Suppliers

Welwyn Garden City (Europe)

(Europe) Dan Sullivan

Welwyn Garden City

Cost, Operations, PCE

(Wilsonville) (Wilsonville)

Acquired Products Acquired Products Bob Zeman Other OEM Suppliers

Key Activities for Co- located Teams

Early Supplier Engagement for New Technologies Procurement for prototype development hardware Coordinate material procurement activities Design change management with suppliers Transition to RPP management. Develop supplier tooling cost budget and controls Tooling spend approval and PO issue Best of Breed benchmarking Participate in Global Commodity Strategy development

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Presented by Craig Laudadio @ Xerox 585-2655131

Xerox Global Purchasing Team Co-Located with Suppliers

Xerox Asian Procurement Operations own Xerox Global Sourcing Strategy.

Key Activities for Co- located Teams

Asian Procurement Operations David Partridge Administrative Assistant Rose Chng Hong Kong Office China / Taiwan Supplier Base Mike Krasnozon Singapore Office Malaysia / Singapore Supplier Base Choo Swee Hock

Develop Global Commodity Strategy Manage the Supplier Base Contracting for Asian Suppliers PCE Estimating for Asian Sourcing Identify Benchmarks and Drive Productivity

Korea Office Korean Supplier Base Jae Nam Cho

India Office India Supplier Base Dinesh Raghav

All SQA and AME Support for Asia

Flextronics Contract and Asia Procurement Governance Crystal Martin

Japan Office Japan Supplier Base Jerry Hatch

All Sourcing Activities in Asia

Expediting and Problem solving

Financial Planning and Analysis Silvia Fung

Key Message: Supplier base management decisions and Contract approvals will be in Asia.
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Xerox Global Purchasing Asian Procurement Ops Headcount Location Profile

Asian Procurement Operations David Partridge Administrative Assistant Rose Chng

Hong Kong (25)

Hong Kong Office China / Taiwan Supplier Base Mike Krasnozon

Singapore Office Malaysia / Singapore Supplier Base Choo Swee Hock

Singapore (32)

Korea Office Korean Supplier Base Jae Nam Cho

India Office India Supplier Base Dinesh Raghav

China (12) India (10) Malaysia (15) Korea (9) Japan (5) TOTAL HEADCOUNT 108

Flextronics Contract and Contract manufacturing Asia Procurement and Asia Procurement Governance Governance Crystal Martin

Japan Office Japan Supplier Base Jerry Hatch

Financial Planning and Analysis Silvia Fung

HEADCOUNT LOCATION BASED ON:

SPEND PROFILE
SUPPLIER PROXIMITY INDIA (ASIAN EXPANSION) MALAYSIA NEW OFFICE SHANGHAI CLOSED END DECEMBER 2006 KOREA POSITIONED TO SUPPORT SAMSUNG/FXK/SR

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Xerox Global Purchasing Asian Procurement Ops Employee Functional Profile

INF (13) CM (34)
Site Malaysia Singapore Hong Kong China Japan Korea India Total

Headcount Functional Profile 08 Plan

Buyer CM 4 8 10 3 3 3 3 34 AME 2 7 7 2 0 1 2 21 Function SQAE PCE 5 3 6 6 0 5 5 1 1 0 4 0 2 2 23 17 Inf / Admin 1 5 3 1 1 1 1 13 Total 15 32 25 12 5 9 10 108 Local 15 27 24 12 4 9 10 101 Expat 0 5 1 0 1 0 0 7

PCE (17)

SQAE (23)

AME (21)

OFFICE EXPANSION AVAILABLE IN BOTH CHINA AND MALAYSIA OFFICES

TOTAL HEADCOUNT 108

NEW EMPLOYEE DEMOGRAPHICS DEGREE LEVEL, AVERAGE AGE 32 YEARS, AVERAGE EXPERIENCE 9 YEARS, AVERAGE SALARY $30K PREVIOUS EXPERIENCE CELESTICA, SANMINA SCI, DELPHI, FLEXTRONICS, TREND, PANASONIC, HP, RICOH, EPSON, FOXCONN, DELTA, JOHNSON MOTORS

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Description of Job Functions

Commercial Buyers/Commodity Managers Industry Research Commodity Strategy Sourcing Sourcing Includes Prototype/Preproduction parts Support TTM Deliverables Negotiation Contracting Supplier Management Lead CSI Activities Enable Spares Procurement Business Reviews Productivity Management EOL Support Procure Production Tooling Negotiate Design Change Impacts

Procurement Engineering SQA (Supplier Quality Assurance) MQA Supplier Surveys Process Certification Process Audits Performance Management Warranty PCE (Product Cost Estimating) Cost Estimating Target Setting Competitive Analysis Best of Breed Opportunity Identification AME (Advanced Mfg. Eng.) Part Introduction/Qualification Sourcing Support Drawing Translation/Interpretation Specification Study Design for Manufacture

Acronym Footnote: EOL End of Life; CSI Continuous Supplier Involvement; TTM Time to Market; MQA Materials Quality Assurance
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Xerox Procurement - Transformation Results

What we planned to Achieve Clock Speed Time to Market Better Supplier Relationships Access to Emerging Technology Increased Supplier productivity Reduced Procurement Operation Costs Transfer of procurement functions to suppliers time zone What we Actually Achieved Clock Speed Time to Market Better Supplier Relationships Access to Emerging Technology Increased Supplier productivity ($23M in yr 1 ) Reduced Procurement Operation Costs (>$3M/Yr) Transfer of procurement and other functions to suppliers time zone Increased Supply Chain Flexibility / Responsiveness Tax Optimization Opportunity More robust supervision of suppliers Business Growth Opportunity

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Xerox Global Purchasing Asian Procurement Ops

APO Legal Entities
XC Trading Singapore PTE. LTD. (Incorporated in Singapore, Aug 2007) XC Trading (Shenzhen) Co., Ltd. (Incorporated in China, Rochester, Plan 2Q08)
NY Korea Japan Hong Kong Shenzhen Malaysia Singapore India

XC Trading Hong Kong Limited (Incorporated in Hong Kong, Oct 2007) XC Trading Japan GK (Incorporated in Japan, Nov 2007) XC Trading Korea (yuhan hoesa) (Incorporated in Korea, Feb 2008) XC Trading Malaysia Sdn Bhd (Incorporated in Malaysia, Dec 2007) No new Indian Entity was required
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Xerox Procurement - Transformation Results

What we planned to Achieve What we Actually Achieved

Clock Speed Time to Market Better Supplier Relationships Access to Emerging Technology Increased Supplier productivity Reduced Procurement Operation Costs Transfer of procurement functions to suppliers time zone

Clock Speed Time to Market Better Supplier Relationships Access to Emerging Technology Increased Supplier productivity ($23M in yr 1 ) Reduced Procurement Operation Costs (>$3M/Yr) Transfer of procurement and other functions to suppliers time zone Increased Supply Chain Flexibility / Responsiveness Tax Optimization Opportunity More robust supervision of suppliers Business Growth Opportunity

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Procurement Outsourcing
Aberdeen Group in their 2006 Procurement Outsourcing Benchmarking Report noted: Large enterprises led the way 38% outsource now and 13% plan to within two years leaving those who dont in the minority at 49%. Medium 24% now and 21% plan. Small 20% now and 16 plan. Gartner drew a Hype Cycle and noted that steady growth will make BPO non-controversial eventually

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Procurement Outsourcing; What do companies want out of it?

Aberdeen Noted drivers of outsourcing as: Access to Improved pricing Lower transactional processing costs and fewer burdens Access to supplier intelligence. Fewer Full time Procurement employees. Gartner Noted Cost as the primary motive (through transaction and vendor leverage). The Everest Institute noted that the impact of procurement outsourcing can be up to five times the benefit of other BPOsa game changer Aberdeen also noted that while Enterprises are more apt to outsource management of indirect spend categories, the outsourcing of direct materials was also coming into play.

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Procurement Outsourcing at Xerox unanticipated benefit of our Transformation

Because of scale, scope and unique capability Xerox had elected not to outsource.

Soon after establishing our infrastructure we received an unsolicited request from one of our own suppliers to help them source. We are now partnering with HCL Technologies Ltd to provide procurement outsourcing. HCL Technologies Ltd already have an established BPO service for transactional procurement, Xerox will provide sourcing expertise for HCL.

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Key to Successful Transformation

Planning Understand Scale, Scope and Capability Consider your relative strength and BPO opportunity Stake Holder Buy-in Calculated & documented Business Case Detailed Transition Planning Flawless execution, backed by teamwork and genuine commitment. Governance, Ethics and Training. Corporate Culture transplant.

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Xerox Global Purchasing Asian Procurement Ops Governance

Business Ethics 100% Trained using Xerox CD 100% staff signed Xerox Code of Conduct Gift and Gratuity letter written and sent to suppliers (taken from Global Purchasing Business Practices) Xerox Security Contract Management Distributed Confidential Disclosure Agreement/Non-Disclosure Agreement Training done PC Security part of audit process Personal / Security and Safety Safety training done Safety audits performed at each office BRP (Business Resumption Plan) written and filed for each office. Financial & Budgetary Controls

Travel Hiring Auditing

Presented by Craig Laudadio @ Xerox 585-2655131

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Key to Successful Transformation

Planning Understand Scale, Scope and Capability Consider your relative strength and BPO opportunity Stake Holder Buy In Calculated & documented Business case Detailed Transition Planning Flawless Execution backed by teamwork and genuine commitment. Governance, Ethics and Training. Corporate Culture transplant.

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Presented by Craig Laudadio @ Xerox 585-2655131

Xerox Global Purchasing Asian Procurement Ops International Talent Acquisition

Hire International Students and Cycle through existing locations. Reduce Skills learning curve Highest Concentration of International: Establish relationships between APO Staff and Value Chain Partners 1. India Transplant Global Purchasing culture, tools and processes

Reduce our dependence on expatriates

Partnerships with local Universities Portland State, Rochester, Buffalo and Syracuse. Purchasing modules added to MBA curriculum. University of Rochester Example 216 Full time MBAs (720 apply 30% Acceptance) 39% International Students Average Student Age 27, work experience 4 years
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2. China

3. South Korea

4. Japan

If your are thinking about something similar..

Assess work that needs to be done and where it could best be accomplished. Pay attention to your scale and expertise Dont just be in one offshore location, provide yourself options and associated protection against future risk and economic changes. Dont ignore the trends towards procurement outsourcing. Decide, should you perform yourself or manage through a provider? Compare processes, skills, expertise and leverage.

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Xerox Global Purchasing Asian Procurement Operations (APO)

APO Highlights We built a highly motivated, enthusiastic, skillful and empowered team in Asia. They own our supplier strategy, and make key decisions locally. Same time Zone, no delays. Happy Employees. Better managed suppliers. Better results. Lower costs. Improved velocity. Better Supplier relationships
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APO Activities Identify best suppliers. Manage supplier strategy. Identify Benchmarks. Drive productivity.

Drive improvements in quality.

Improve supply flexibility. Negotiation support. Technical support. Contracting. Qtrly Productivity Business Reviews.

Procurement Outsourcing alliance with HCL Presented by Craig Laudadio @ Xerox 585-2655131

Xerox Global Purchasing Asian Procurement Ops

Transition Planning Making it Work 10% Expatriates or Permanent Transfers The right person to lead it. The right skills balance in Expatriate team Hire the best people Buy in / strategy ownership at home. Upfront and clear strategy communications.
Sustaining & Improving Communicate, Communicate, Communicate Sustain strong relationships between home teams and remote locations. Acquire talent and reduce dependency on expatriates.

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Xerox Global Purchasing Asian Procurement Ops Summary of Management Strategy

Business environment changed and we responded to it. Purchasing co-located with suppliers delivers benefits (same time zone, increased supplier productivity, lower purchasing operations cost). Senior / empowered staff located in the region. Rapid learning and continuity and synergy during restructure achieved through 7 expatriates support and 2 permanent transfers to Asia. On-going synergy across locations supported by student hiring strategy. Continuing to evaluate additional functions that could be more effectively managed when co-located with suppliers. Positioned Xerox as a provider in the Procurement outsourcing business in partnership with HCL Technologies

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Thank you

Craig Laudadio Procurement Solutions Manager Xerox Corporation 585 265 5131 craig.laudadio@xerox.com

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Presented by Craig Laudadio @ Xerox 585-2655131