Boston Scientific

Michel Darnaud

President - Europe

Agenda

• Background

• BSE Customer Service and Logistics Objectives

• GHX contribution

• GHX Implementations

• Summary

• Questions

Corporation Profile

Boston Scientific Corporation (NYSE: BSX) is a medical device company dedicated to less-invasive therapies with 14,000 employees and 15 manufacturing facilities

Its products and technologies reduce risk, trauma, cost, procedure time and the need for aftercare

Driven by the needs of the medical community for innovative products, the Company grew from revenues of $2 million in 1979 to approximately $3 billion in 2002

Boston Scientific in Europe

• 3700 Employees– 800 Sales/Marketing/Customer Service– 2900 Manufacturing, Research & Development

• Strong Country presence– Direct sales organization in 20 countries

– Marketing & Clinical support in all major markets

– Local language customer service

Boston Scientific in Europe

Local SitesManufacturing Sites :Galway, Cork, Lisnenan - Ireland

European Distribution Center :Maastricht - The Netherlands

European Headquarters :Paris - France

Boston Scientific Portfolio

Interv. RadiologyVascular SurgeryOncology

GI Endoscopy

Interv. CardiologyCardiovascularPeripheral Vascular

Cardiac Electrophysiology

Neurovascular Interventions

Urology

Distribution Model

Beek Distribution Centre

Local SalesEntity

Manufacturing Sites USA Distribution Centre

Customer

Customer

Customer

Customer

GOODS

ORDER

Distribution Centre Performance

Key Performance Metrics

125 Employees > 1500 Orders per day> 99.9% In time handed over to carrier> 96% Next day delivery> 99.6% Stock accuracy at DC < 0.05% Service complaints

Boston Scientific Europe CS and Logistics

Objectives

Objectives

• Reduce the level of returns due to human error

• Reduce the level of service complaint

• Reduce DSO level

• Reduce past due Receivables

• Reduce Logistic costs by increasing the units per order

• Change business practices to match changing balance

of control at the customer

GHX contribution

Boston Scientific and GHX

In 2000, Boston Scientific joined GHX, an international, supply-side B2B exchange which was created in order to eliminate inefficiencies in the health care supply chain and streamline purchasing of products and services

It is a web-based, B2B approach, enabling cost savings for both providers and suppliers

Returns / Service Complaints

GHX - AllsourceTM Catalogue ensures that correct manufacturers’ part numbers and pack quantities are on orders

Target - Reduce the level of returns to below 1%

– Currently at 1.4%

Target - Reduce service complaints to below 2.5%

– Currently at 2.65%

DSO Levels

Target - Reduce DSO level

GHX - Invoice queries are reduced due to all processed transactions being price verified and all part numbers being correct due to the AllsourceTM Catalogue

40.284

20

30

40

50

60

70

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

199719981999200020012002

Past due Receivables

GHX - All processed transactions are price verified and a better relationship exists with our customers

0%

20%

40%

60%

80%

100%

Nov-01 Dec-01 Jan-02 Feb-02 Mar-02 Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02

121+ DAYS PAST DUE

91 - 120 DAYS PAST DUE

61 - 90 DAYS PAST DUE

31 - 60 DAYS PAST DUE

0 - 30 DAYS PAST DUE

CURRENT

0

50

100

150

200

250

300

350

400

Units

Deliv

eries

.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

Frequency

Cumulative %

GHX - Transactions can be combined across departments / hospital

– eg. Leeds 40 orders per week to 2

Ordering PatternsTarget - Increase lines/units per order

Supplier Relationship

Target - Change business practices to match changing balance of control at the customer

CustomerService

Manufacturing

R & D

Operations/Planning

Sales Marketing

Boston Vision

COMMERCIAL

TECHNICAL

Purchasing &Supply

Clinicians

GHX - Much greater communication between all sides involved in the purchasing chain leading to more of a partnership

Additional Benefits

Changes in Customer Service/Logistic Departmentfollowing GHX implementation

• If we can change the routing of orders into the company this will relieve frontline customer service pressures

• It will also give us the opportunity to re-evaluate the type of positions we have within the group (more VAS orientated)

• All orders processed via GHX due to its integration direct into the purchasers’ and suppliers’ systems will carry a minimal cost

• Reduction in shipments (by increasing the units/order) will reduce drastically Logistic Costs (Pick - Pack and Ship) and assist in achieving environmental targets

Additional Benefits

– GHX versus EDI

– EDI is a point-to-point technology. GHX consolidates the connections and is therefore more cost effective to implement.

– EDI requires catalog updates for each provider. GHX requires one catalog update by supplier and provider.

– GHX more cost effective than EDI.

GHX Implementations

UK and Germany

Implementation Summary UK

Leeds– Implementation took 3 months Oct to Dec

2001 including testing

Plymouth– Implementation took 1 month May 2002

including testing

Durham / Teeside– Implementation took 3 weeks Nov 2002

including testing

Live Transactions UK

So far for the Boston Scientific UK has processed a total of:

– over 300 Orders total value of $750 K– zero return– zero price queries

Implementation Summary Germany

St. Johannes, Dortmund– Implementation took 3 months Dec 2001 to

Feb 2002 including testing

Helios, Erfurt– Implementation took 1 month May 2002

including testing

Medizinische Hochschule Hannover– Implementation took 2 weeks July 2002

including testing

Live Transactions Germany

So far for the Boston Scientific Germany has processed a total of:

– 300 Orders total value of $250 K– 1 return ( exchange of consignment )– zero price queries– Full product range ordered by the hospitals

via GHX

Catalogue Clean

This is probably the single most important part of the implementation if good results are to be obtained

It is your opportunity to have a discussion with your customers regarding the state of your business with them

It is also where most of the easily achieved savings can be made through less invoice errors and returns

Going Forward

Assist Customers in implementing GHX across other departments and sites as required

Make full catalogue available for uplift as required, otherwise continue to approach in a sectional manner

Develop and test the procedure for the incorporation of new products and the removal of discontinued products

GHX Benefits to Customers

– More regular order flow– Simplified administration for the hospital– Staff released to direct patient care– Less out of stock risks– More reliable deliveries– Reduced number of invoices– Streamlined payments and collection– Boston CS focussed on support for the

customer rather than order processing

GHX Benefits to Boston Scientific

– It’s what our customers want (Added value)– Accurate & reliable order fulfillment– Facilitates streamlined ordering and logistics -

taking costs out of the system and improving profitability

– Improves cash flow through reduction in invoice issues

– Improved service levels– Catalogue cleansing prior to GHX going live is

time well spent, leading to elimination of order/invoice queries thus improving payment collections

– More time managing relationship

Take Home Messages

For Boston Scientific GHX implementation has been a good thing for a number of reasons– It has bought us closer to our customers and will

continue to do so– As implementation speeds up it will allow us to

reconfigure the way we do business– Fits into our strategy of taking cost out of the

supply chain and order/ invoicing for ourselves and our customers

– We are developing a preferred supplier status through innovative solutions to help our customers improve patient care by improving productivity and clinical outcomes

– More functionalities to come (e-invoicing, Consignment…)

Any Questions ?