Copyright © 2012 Rockwell Automation, Inc. All rights reserved. 1Q12 Supplier Communication Meeting...

Copyright © 2012 Rockwell Automation, Inc. All rights reserved.

1Q12 SupplierCommunicationMeeting

Rockwell AutomationFebruary 6 & 7, 2012

Copyright © 2011 Rockwell Automation, Inc. All rights reserved. 2

Agenda

Opening Comments M. JacobsVP Strategic Sourcing

RA Business Overview D. Fowler- 1Q12 Recap VP Finance- 2012 Outlook

Supplier Performance M. ToddDir., Supply Management

New Product Introduction M. ToddDir., Supply Management

Supplier Change Productivity B. PhillipsDir., Supplier Risk

Key Takeaways M. JacobsVP Strategic Sourcing

Q & A All Attendees


Fiscal Year 2012First QuarterConference Call

Dick FowlerVice President, FinanceFebruary 6 & 7, 2012

Q1 Key Messages

Copyright © 2012 Rockwell Automation, Inc. All rights reserved.4

• Solid year-over-year sales growth of 8% – Mixed results across the regions

• Strong process sales growth of 22% year over year

• EPS of $1.27 – 22% growth year over year

• Return on invested capital of 31.5%

Q1 Results: Rockwell Automation Total

($ millions) ($ millions)

$222.0

$283.8

0

50

100

150

200

250

300

Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12

$1,365.8$1,473.9

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12

Sales Segment Operating Earnings

• Sales increased 8% YOY, including 1 pt from acquisitions; currency translation reduced sales 1 pt

• Sales decreased 11% sequentially primarily due to the timing of solutions sales; currency translation reduced sales 2 pts

• Segment operating earnings up 28% YOY

• Segment operating margin expanded 3.0 pts YOY to 19.3%, primarily due to volume leverage


Q1 Results: Architecture & Software

($ millions)


($ millions)

$613.9$650.5

0

100

200

300

400

500

600

700

Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12

$186.3

$153.1

0

40

80

120

160

200

Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12

• Sales increased 6% YOY; currency translation reduced sales 1 pt

• Sales decreased 5% sequentially; currency translation reduced sales 2 pts


• Segment operating margin expanded 3.7 pts YOY to 28.6%


Q1 Results: Control Products & Solutions

($ millions)


($ millions)

$68.9

$97.5

0

20

40

60

80

100

120

140

Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12

$751.9$823.4

0

100

200

300

400

500

600

700

800

900

1,000

Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12

• Sales increased 10% YOY, including 2 pts from acquisitions offset by 1 pt currency translation

• Sales decreased 15% sequentially; currency translation reduced sales 2 pts


• Segment operating margin expanded 2.6 pts YOY to 11.8%



AdjustedReported % Change For Currency

Region Sales vs. Q1 '11 % Change

U.S. 717.6$ 8% 8%

Canada 105.2 10% 11%

EMEA 315.0 11% 13%

Asia-Pacific 213.2 1% 0%

Latin America 122.9 8% 14%

TOTAL 1,473.9$ 8% 9%

Q1 Results: Regional Sales

($ millions)

8

Fiscal 2012 Guidance

Sales

Sales Increase (Excluding Currency Translation)

Currency Translation

Segment Operating Margin

Diluted EPS

Free Cash Flow*

*After a discretionary pre-tax pension contribution of $300M to the company's U.S. pension trust.

~18%

~75% of Net Income

$5.05 to $5.45

$6.2B to $6.5B

(1)%

5% to 9%

Note: As of January 25, 2012



Agenda







Q & A All Attendees


Supplier Performance

Mark ToddDirector, Supply ManagementFebruary 6 & 7, 2012

Copyright © 2012 Rockwell Automation, Inc. All rights reserved. 12Applicable Facilities: CAM, DOM, TEC, SGP, CGN, DUB, LAD, MAN, MEQ, MKE, RCH, SUM, TWB, MMC, GNL

DM 95.4 96.8 97.1 97.3 96.1 96.8

FP 91.4 95.3 95.2 95.7 95.1 95.3

DM 790 456 441 424 504 456

FP 843 475 509 489 427 475

Supplier Performance – 2012 Consolidated Scorecard

Key Takeaways:• Record delivery performance across markets

- Mechanicals ~97%- Electronics ~97%- Factored Products ~95%

• Significant reduction in late deliveries >5 days past due, needs continued root cause focus

• Stay in front of supply/demand shifts- Continue monitoring forecast, usage,

economic indicators, RA guidance• Assure safety stock position for repeat spend

parts/material- Continued improvement, needs acceleration

Are you reviewing your monthly scorecard? Monthly Safety Stock status report?

Copyright © 2012 Rockwell Automation, Inc. All rights reserved. 13Applicable Facilities: CAM, DOM, TEC, SGP, CGN, DUB, LAD, MAN, MEQ, MKE, RCH, SUM, TWB, MMC, GNL

DM 21.1 18.5 18.9 19.6 17.0 18.5

FP 28.3 25.5 25.0 25.3 26.3 25.5

DM 1006 1190 2686 950 1938

FP 3933 1996 311 1100 1154

Supplier Performance – 2012 Consolidated Scorecard

Key Takeaways:• 3 day lead-time improvement over Q1

- Electronic reduced ~20% to 21 days- Mechanical reduced ~5% to 16 days- Factored reduced ~10% to 26 days- Still longer than 3Q ’09 levels

• Parts with Lead-times > 45 Day- Assure focus on long lead-time parts- 6+ day reduction in Q1- Received 33% less parts than in Q4

• Need increased Quality focus- PPM only slighter better than goal- 3 stop orders vs. annualized goal of 10

Need continued acceleration of supplier safety stock positions to facilitate lead-time reduction to “transit” for repeat spend parts/material


Agenda






Key Takeaways M. JacobsVP Sourcing

Q & A All Attendees


15

New Product Introduction (NPI) - Sourcing Project Management

Mark ToddDirector, Supply ManagementFebruary 6 & 7, 2012

16

New Product Introduction Sourcing Project Management

(Confidential – For Internal Use Only) Copyright © 2010 Rockwell Automation, Inc. All rights reserved. 19

Ability to Influence Supplier Selection during CPD Process

High

Low

Time

INITIATION FEASIBILITY EXECUTION RELEASE

1 2 3 4

AR1PAR2

AR2PAR3 DOE AFC

Design Flexibility /Ability to InfluenceSupplier SelectionImpacts: Price, Lead-Time, Delivery, Quality . . .

New Timing - RA Supplier Selection

Scope:• Focused NPI Sourcing Project Management Team

• 8 Sourcing Project Managers on-board• Aligned with business unit product development• Planning additional Sourcing Project Managers

to cover business projects• Engagement with suppliers during feasibility phase • Supply chain assessment is now a required CPD

milestone • Beginning component level risk assessment• Balanced Scorecard is in place

Key benefits:• Increased leverage of RA preferred suppliers

- Differentiated supplier performance- Collaborative engineering support

• Lower material costs and improved lead-times at start of new production introduction

• Decreased supply risk

(Confidential – For Internal Use Only) Copyright © 2010 Rockwell Automation, Inc. All rights reserved. 18

Sourcing TouchpointsDuring CPD Process

Sour

cing

Tou

chpo

ints

• Supplier Assessment Plan (Factored)

• Intellectual property review (Factored)

• Import / Export Compliance

• Initial Cost Estimates

• Supplier Evaluation

• Supplier Selection / Agreement (Factored)

• Make vs Buy Assessment

• Supply Initial Order Release

• Order Management

• Supply Chain Assessment

• Supplier Capability Review (required step)

• MRI Risk Assessment

• Supplier Selection / Agreement (Dir Materials)

Early supplier selection key element of Early supplier selection key element of improved supply chain performance and improved supply chain performance and decreased future riskdecreased future risk

Early supplier selection key element of Early supplier selection key element of improved supply chain performance and improved supply chain performance and decreased future riskdecreased future risk


17

NPI Sourcing Project Engagement

Making immediate impact:•NPI Sourcing Project Managers are now engaged with ~60+ top projects across the company

•Most projects were already in execution phases

• Success despite late involvement• 34 parts moved from Approved

to Preferred suppliers• 18 Parts moved from New to

Preferred/Approved suppliers• 47 Parts moved from No New

Business and Exit to Preferred/Approved suppliers

• 59 Parts moved to improved technology/lifecycle alternatives (no stratification changes)


BU and/or Site Consider. Initiation Feasibility Execution Release CloseoutAPBC XAPBC XAPBC XAPBC XAPBC XAPBC XAPBC XAPBC XAPBC XAPBC XAPBC XCVB-MAY XCVB-MAY XCVB-MAY XCVB-MAY XCVB-MAY XCVB-MAY XCVB-MAY XCVB-MAY XCVB-MAY XStd Drives XStd Drives XStd Drives XStd Drives XStd Drives XStd Drives XStd Drives XStd Drives XStd Drives XStd Drives XSSCB XSSCB XSSCB XSSCB XSSCB XSSCB XSSCB XSSCB XSSCB XSSCB XMotion XMotion XMotion XICB XCVB-MKE XICB XLV MCC XLV MCC XLV MCC X

18

NPI Sourcing Project Management - Balanced Scorecard

Key Performance Indicator

FY11

Baseline

FY12

AOP **

2013+

Targets

Baseline Metrics• New parts awarded to Preferred suppliers (%)• All parts awarded to Preferred/Approved/New suppliers (%)• All parts with a lead time <= 25 days (% in CPD Closeout Phase)

66.2%96.8%64.7%

85%99.3%90%

90%100%95%

Productivity• Purchased material BOM cost avoidance (%) 2%* 10% 10%+

Supplier Risk• Component Resiliency Index n/a TBD TBD

Stakeholder Satisfaction• Prototype & pilot builds without material availability delays (%)• NPI Stakeholder VOC Index

66%*n/a

100%TBD

100%TBD

* Estimate based on the Voice of Customer (VOC)

** Measured at Project CompletionCopyright © 2012 Rockwell Automation, Inc. All rights reserved.

Key NPI Takeaways

• Creation of a focused NPI Sourcing Project Management team– Increasing spend going to Preferred Suppliers– Target transit lead times by project closeout– Risk mitigation– Cost reduction

• Aligned with Business Unit development teams• Shift supplier selection and contracting earlier in development process• Sourcing engagement earlier in the process (Feasibility)• Clear ownership of NPI supplier decisions within sourcing organization • Increasing concentration of spend with smaller # of high performance

Preferred Suppliers

Tight linkage between Preferred Supplier Strategy and New Product Introduction Project Management provides a competitive advantage



Agenda






Key Takeaways M. JacobsVP Sourcing

Q & A All Attendees


Supplier Change Productivity

Brad PhillipsDirector, Supplier RiskFebruary 6 & 7, 2012

Supplier Change Productivity

• Productivity that is achieved through the successful implementation of a significant supplier change event such as:

– Supplier Transition– Change in Product Physical Characteristics – Form, Fit and Function– Change in Product Material selection or manufacturing process– Component change/elimination

• ‘Change Productivity’ expands our current collaborate program to include standard part transitions

• Low success rate for implementing productivity ideas with smaller savings• Difficultly in current process in providing timely supplier feedback on projects• Commodity focused approach does not align well with BU resource allocations

Program Definition

Why Change?

Supplier Change Productivity Idea Management

OES CommodityProductivity

TeamsEng Services, SSO

BU Productivity Teams

Lean Champions, Continuation Eng.

Change Productivity Data Table

• Product Portfolio Strategy• Competitive Benchmarking • RoHS2 Schedule• Product Improvement Schedule

Integrated Supplier Change Productivity Portfolio

• Better able to align productivity opportunities with BU project schedules• Team has the ability to identify and target products where change is more likely to be

accepted• Technically feasible ideas will be retained in hopper to be grouped with other ideas• Ideas will be available “on demand” via a tool that has widespread usage in the

technical community

• • Standard Part Transitions

Key Improvements

Inputs Inputs

• Complete BU product schedule integrated with all change productivity opportunities

Output

Summary and Next Steps

Summary:•OES and the BUs are committed to the change productivity program as part of our toolkit in order to drive continuous improvement•Improved process in place for better feedback and results•Dedicated resources are in place to support this initiative

– Kim Riedel, Sourcing Manager- Change Productivity

Going forward:•How do we continue to grow the Supplier Generated Pipeline?

– Sharing innovative technology, manufacturing processes, and productivity ideas– Regular scheduled idea generation/ brainstorming meetings with your commodity manager &

the collaborate team•Regular supplier communication and feedback on program progress

Right processes are in place … need idea pipeline filled!Right processes are in place … need idea pipeline filled!


Agenda







Q & A All Attendees


Key Takeaways

Mike JacobsVice President, Strategic SourcingFebruary 6 & 7, 2012

1Q Supplier Webex - Key Takeaways

• Top line results continue to show good YOY growth– Seasonality, mixed results by region during 1Q– Full year RA FY12 guidance remains unchanged at 5-9%

• Supplier performance at record levels during 1st quarter– Keep up the good work !!!– Sustain current levels while reducing longest lead-times focus for FY12

• 2 key strategic initiatives for FY12 – Sourcing / Supplier engagement in NPI and Supplier Change productivity– Engage with your commodity teams to identify mutually beneficial opportunities

• Closely monitor your forecasts / order rates during 2Q (and beyond)– If something doesn’t make sense, ASK !


Excellent 1Q performance . . . Improved focus on strategic initiativesExcellent 1Q performance . . . Improved focus on strategic initiatives


Agenda







Q & A All Attendees


29

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