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OTC ProjectCorporate ITS Meeting - OverviewOctober, 2013

MASTER STAMPSubject Title*FootnoteSource:SourceMASTER STAMPAgenda2Project IntroductionScope OTC SolutionProject ObjectivesProject PlanSolutionOTC Application MapIntegration Model SAP ECC, BW and IBISFinance Benefit from SD-FI/AR IntegrationOrganizational Structure External SystemsTruecommerceKencoVertexBWPPSIBIS

MASTER STAMP

Project Introduction Scope - OTC SolutionThe OTC solution is currently outsourced excluding the yellow items below. Excluding Warehousing Processes, UPS has approximately 20 resources supporting these processes today. These processes and people will be brought in house with a go-live date planned April 1st, 2014.Customer, Product, and Inventory Master File MaintenanceReturns ProcessingCash Receipts ApplicationDeductions ProcessingWholesaler Chargeback ProcessingOrder EntryPricingPerpetual Inventory Records & Distribution Resource PlanningSales & Use TaxPick, Pack & ShipInvoicingAccounts ReceivableCredit CheckCredit ManagementPrice Master File Maintenance3MASTER STAMPProject IntroductionProject Objectives4OTC Objective: Transition Order-To-Cash services to best-in-class process and systems to create maximum value for customers. Strategic goals and objectives: DELIVERABLESMake Bracco Easy To Do Business WithReduce recurring costs for managing supply chain costsDevelop internal expertise on AR & CB processesGain operational control over AR & CB processesImprove customer satisfaction by creating end-to-end view of account managementImprove corporate visibility to North American activities through use of SAPLeverage Best in Class Unity processes Share Best in Class BDI processes with other entitiesPartner with external warehouse to maximize benefits coming from economies of scale, LEAN and SIX-SIGMA projects.Increase reliability of the supply chain

MASTER STAMPProject IntroductionHigh Level Plan5Q4-12Q1-13Q2-13Q3-13Q4-13Q1-14Q2-14ChargebackSAP OTCBW/BO ReportingLimited Availability of Finance teamProject ManagementPlan/AnalizeTechnical ArchitectureKenco Operating Model Set UpDesignBuildTestDeploySupportChange ManagementPlan/AnalizeDesignBuildAnalizeDesignBuildEDI selection (3)JunDecJulyNovApr 1Go-LiveScope ConfirmationMayMarCredit Card selection (2)Chargeback selection (1)(1) Final decision on chargebacks (custom or package solution)(2) Contracting with Credit Cards vendors recommended Paymetric(3) EDI Outsourcer selection(4) Tax Vendor Selection Vertex or Sabrix Project activities to be done before 1 / 31TrainingJan Kick-offTax selection (4)MASTER STAMPAgenda6Project IntroductionScope OTC SolutionProject ObjectivesProject PlanSolutionOTC Application MapIntegration Model SAP ECC, BW and IBISFinance Benefit from SD-FI/AR IntegrationOrganizational Structure External SystemsTruecommerceKencoVertexBWPPSIBIS

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SolutionOTC Application Map (1/2)NPlatform (*)Description1ERP (ECC 6.0) The ERP selected is the Bracco Corporate SAP platform.2Business Warehouse (BW 7.0)The Reporting Suites selected is the Bracco Corporate BW & BO platform3IBISCertain Sales Sub-processes will be managed in the IBIS platform and interfaced to SAP4Logistic ProviderKenco has been selected5ChargebackiContracts has been selected6Tax ManagementVertex has been selected7EDI Truecommerce has been selected8Credit CardPrinceton Payment Solution has been selected7MASTER STAMP

The OTC solution foresees the usage along with the ERP (SAP ECC) of several softwares .The picture shows the high level Application Map that will need to be discussed and finalized during the Analyze and Design PhaseSolutionOTC Application Map 2/28Princeton Payment SolutionVertexTruecommerceMASTER STAMP

Revenue RecognitionAccrual Debit memo Credit Memo RequestCustomersMaterialsContract Pricing (Unity Feed)

Reporting & KPI

IBISBWFollowing Picture shows the integration between SAP ECC, IBIS and BW.Data Transfer

InterfaceSolutionIntegration Model SAP ECC, BW and IBIS (1/2)

The need of directing the invoice from BW to IBIS is required because of the volumes and data complexity required by the BDI flows.Bracco Application Maintenance will ensure the job meet the required SLA.*9MASTER STAMP

10

SAP MM Material ManagementSAP SD Sales and DistributionSAP FI - FinanceSAP CO - ControllingModuleProcess / FunctionalityACISTBDISAP MMMaterials ManagementXXSAP FI-GLGeneral Ledger Accounting (G/L Account Mgmt, Automatic Posting, G/L Transaction Processing)XXSAP FI-GLIntercompany Payables & ReceivablesXXSAP FI-ARCustomer Invoices Processing & PaymentsXXSAP SDSales Order and Delivery ManagementXXSAP SDCustomer Claims and Customer ReturnsXXSAP SDCustomer Credit & Debit ManagementXXSAP SDCustomer Invoicing and BillingXXSAP SDIntercompany BillingXXSAP SDBackorder ProcessingXXSAP SDSales Order and Delivery ManagementXXSAP SDCustomer Claims and Customer ReturnsXXSAP SDCustomer Credit & Debit ManagementXXSAP COControllingXXSAP ECC will own the process of Materials Management, Sales and Distribution and Finance & Controlling (in addition to the processes already developed for Unity).SolutionIntegration Model SAP ECC, BW and IBIS (2/2)

MASTER STAMPSolutionFinance Cross benefits from FI SD integration (1/2)OTC project enable a full end-to-end integration between Sales and Account Receivable processes supporting all the critical components of the process on one unique ERP platform (based on SAP solution)Main expected benefits from AR/SD integration

Full ownership and direct control of Finance and Sales processes through integrated view of all the critical info effecting the entire OTC process chain:Better Stock traceability (detailed reporting including info from Sales and Finance modules; better timeliness in monitoring stock level, improved reconciliation capability )Integrated view on all the components of Credit management process (possibility to block sales orders, deliveries, cross module reporting ) Improved Data quality:Direct control and better visibility on customer data info (availability of all the customer master data info in one single platform) Better Accuracy/Granularity for all the info critical to monitor the Business from an accounting perspective Improved Timeliness for all the relevant AR accounting events (COGS calculation, Revenue recognition, ) 11MASTER STAMPSolutionFinance Cross benefits from FI SD integration (2/2)Main expected benefits for FI AR processes

Credit management: improved capability to monitor and check all the components of the credit management process:Possibility to limit risk of credit exposure (direct control on credit limit management, blocking sales orders, deliveries, ..)Better visibility and control of credit exposure at different level (customer, parents)Improved reporting capability (detailed ageing reporting, dedicated credit management dashboard) Cash collecting: ownership and control of the entire process:Direct control on cash collecting process through direct integration with banking network (Lockbox integration, dedicated solution for credit card payments)Availability on the system of all the needed info to support reconciliation processesTax management: improved compliance for all the aspects concerning tax management process through the integration with a best in class software solution (Vertex):Better accuracy on tax calculation process (right taxability and jurisdiction code determination, monthly update and warning message about new tax authority requirements)Detailed reporting (reduced audit risk, strategic analysis on specific customer/product categories) 12MASTER STAMP13Operating ConcernPlant / Pur OrganizationUS00 BDI POrg

AC10 ACIST EU POrg

AC00 ACIST US POrg

CA00 EZEM POrg

NA00 Bracco North America Operating ConcernNA00 Bracco North America Controlling AreaBDIACISTEZEMUS00 Bracco Diagnostic Inc.US10 Bracco USA Inc.US20 Bracco Research USA Inc.US30 E-Z-EM, Inc. AC00 Acist Medical System, Inc.AC10 Acist Europe B.V.AC30 Acist JapanAC40 Bracco AMT, Inc.CA10 3023354 Canada Inc.CA04 Montreal CA05 - MississippiAC01 Eden PraireAC11- MaastrichtCA00 E-Z-EM CANADA Inc.Company Codes ControllingArea13US11 Bracco Diagnostic Inc.US31 Bracco Diagnostic Inc.US04 Bracco Diagnostic Inc.US21 Bracco Diagnostic Inc.OTC ScopeCA00 EZEM POrg

SMCSM01 (Eden Prairie)SM02- MaastrichtSM00Swiss Medical Care (Bracco Injeneering)SolutionSAP Organizational StructureMASTER STAMP14....ExistingStorage LocationUS00 Bracco Diagnostic Inc.US04 Bracco Diagnostic Inc.PlantCompany Codes GE01GeneralElectricBB01BraunCA01CanadaUPS1UPSUS04Monroe TownshipHO01HollisterNewStorage LocationKE0xKencoAC00 Acist Medical SystemAC01Eden PrairieEP01Eden PrairieUPSUPS..OthersKE0xKencoBDIACISTSAP Organizational Structure Logistic14MASTER STAMPSAP Organizational StructureSalesAC00ACIST Sales OrgZ5Z6Z7IntercompanyThird PartyBDI DistributionBD00BDISales OrgZ5Z6Third PartyNew Sales Entities created for OTC projectUnity EntitiesSales Org.Distribution ChannelServed by Kenco LocationCreated under ACIST PlantServed by Kenco LocationCreated under BDI PlantIntercompanyACIST Domestic A/RBDI A/RBDI Customer Service AreaBDI Account Receivable Area15MASTER STAMPAgenda16Project IntroductionScope OTC SolutionProject ObjectivesProject PlanSolutionOTC Application MapIntegration Model SAP ECC, BW and IBISFinance Benefit from SD-FI/AR IntegrationOrganizational Structure External SystemsTruecommerceKencoVertexBWPPSIBIS

MASTER STAMPSolutionExternal Systems - Truecommerce Integration 1/2INBOUND FLOWS Sales Order creation in SAP from a customer EDI850

ChargeBack Request Creation in SAP from an Icontract chargeback Request17

MASTER STAMPSolutionExternal Systems - Truecommerce Integration 2/2OUTBOUND FLOWSSales Order confirmation from SAP to Customers via EDI855

Advance Shipping Notice (ASN) from SAP to customers via EDI856

Billing Document from SAP to customers via EDI81018

MASTER STAMPSolutionExternal Systems - Kenco IntegrationThe shipping process will take place from the plant/shipping point of Kenco to the customers ship-to location.The Delivery is the document that the interface will trigger via IDoc from SAP ECC and converted in EDI format by SAP PI to WES (WMS of KENCO).Picking, packing and good issue/receipt data will be triggered via EDI from WES, converted in EDI format by SAP PI, and posted into the SAP Delivery.Delivery

Order

Good IssuePickingPackingShipment

The good receipt will take place in the plant/storage location of Kenco. The Purchase order is the document that the interface will trigger via IDoc from SAP ECC and converted in EDI format by SAP PI to WES.Good receipt, Transfer Posting and Physical Adjustments data will be triggered via EDI from WES, converted in EDI format by SAP PI, and posted into SAP ECC where, the Material Document are generated.

List of interface objectsFunctional areaProcess IDProcessEDIPurchasingMM-PUR-POPurchase Order transmission943Purchasing/InventoryMM-IM-GRGood Receipt data transmission944InventoryMM-IM-STInventory Movements947InventoryMM-IM-PIInventory Adjustments (Cycle Counting)947InventoryMM-IM-GRMBlind Good Receipt947ShippingLE-SHP-DLOutbound Delivery940Shipping/InventoryLE-SHP-GIGood Issue945ShippingLE-SHP-RDReturn Delivery 943Shipping/InventoryLE-SHP-GRGood Receipt from Return Order944

19MASTER STAMPSolutionExternal Systems - PPS IntegrationTokenizationSales OrderOutboundDeliveryBilling DocumentBDI(Merchant)

PPS/Clearing HouseAuthorization managementAR InvoiceSettlementIncoming PaymentAuthorization Request

Cardholder Statement Update Settlement processBankSAGECredit card information will be managed in SAP using a specific tokenization tools. This tool will avoid to store sensitive customer information on SAP database.The payment card interface is an application software that acts as a bridge between SAPs System and financial institutions software. SAP designed the payment card interface with remote function call (RFC) to provide customers functions to communicate with clearing houses, banks, credit card companies, and merchant services.

20MASTER STAMPSolutionExternal Systems - Vertex Integration

Sales Order Creation/BillingInvoice VerificationMaster DataIn the United States a tax is imposed by states and local jurisdiction. Tax jurisdiction in SAP represent government authorities to which taxes are payed. The external tax system VERTEX is used for the maintenance and the update of the tax rates.A call to Vertex is triggered during the pricing execution in SAP to retrieve (on a line item basis) the correct tax rates depending from: ship-to jurisdiction code, material tax classification, plant and freight condiction. Customer invoices will be released to FI automatically and tax percentages provided by Vertex are used to calculate the tax amount in FI document.During sales invoice verification Vertex sends to SAP the right tax percentage which have to be applied in the accounting document. Sales taxes are automatically post in finance.The tax jurisdiction code is relevant for all master data that contain an US address (Example: customer, vendor, plant, cost center, profit center). During master data creation/updating SAP sends to Vertex an RFC with the relevant address information needed to determine the right jurisdiction code to store in the master data. 21MASTER STAMPInvoice HeaderInvoice DetailInvoice Pricing ConditionsDelivery HeaderDelivery DetailSales order CountOpen Sales Order

Revenue RecognitionAccrual Debit memo Credit Memo RequestCustomersMaterialsContract Pricing (Unity Feed)

IBISBWFollowing Picture shows the integration between SAP ECC, IBIS and BW.Data Transfer

InterfaceSolutionExternal Systems - Focus on BW IBIS Interface

*Staging Tables

Invoice DeliverySales OrderInvoice pricing22MASTER STAMP

IBISFollowing Picture shows the integration between SAP ECC and IBISSolutionExternal Systems - IBIS Integration

IBIS will send two different Idocs in SAP ECC system to post:

DEBMAS Idoc Message type for Customer Master DataGeneral Data view;Sales Data View;Legacy Data View (Custom Fields);Company Data View;Credit Account Data.

COND_A Idoc Message type for Pricing Condition RecordAir Freight (Conditions ZFR6 and ZFR7)DEBMAS IdocCOND_A Idoc23MASTER STAMPDecision #1 Chargeback Solution- Capability outline - DescriptionBenefitAnalysis DimensionAlternative 1:Insource Build4,5Alternative 2: IContracts Hybrid6,25Alternative 3: Model N Hybrid4,25

Requirements CoverageFull coverageFull coverage after customizationFull coverageUser InterfaceCustom Built applicationMirrors IBIS UIComplexData Architecture / ComplexityBased on IBIS architectureMirrors IBIS architectureComplexFlexibilityFully flexible for new requirementsOpen to customize per Bracco requirementsNo customizations allowedMaintenability / UpgradesCostly and risky to maintain (skill dependency)Cloud solutionOn premise (SW/HW to be maintained internally)CostImplementation 500K$Recurring 60K$ (*)Implementation 250K$Licenses 80K$Recurring 80K$ (*)Implementation 780K$Licenses 500K$Recurring 90K$ (*)Risk / TimingNot feasibile within OTC timeline. No experience in-houseMarket leader low riskMarket leader low riskChargeback processes are currently managed through UPS system.Insourcing OTC processes requires a replacement of UPS chargeback system and processesChargeback capability is a prerequisite to run OTC processes in the US market.Recommended scenario(*) Starting 2014 SW recurring expenses will be coded to respective budgetsThese costs are reflected in ROI but not in project budget#24Decision # 2 EDI service providerAnalysis DimensionAlternative 1: Insource4,0

Alternative 2:IBM/Sterling Commerce4,0

Alternative 3:True Commerce6,5

Requirements CoverageFull coverageGood coverageFull coverageUser friendlinessNot planned to develop a highly user friendly EDI solutionGood Very good easy to handle also for a business userSupport & ServicesFull coverageSameSameTools and resourcesFull coverage when capability is developedFull coverage EDI market leaderGood coverageTrading partner & Pharma experienceNo prior experience in houseVery limited pharma experienceStrong Pharma experience and 60% of Bracco trading partners with established connectionCostImplementation 155K$2013 Salaries 383KRecurring Cost 31.900$/month (**) Implementation 196K$Recurring Cost 7400$/month (*)Implementation 98K$Recurring Cost 1600$/month (*)RisksResources to be hiredMarket leader low riskMarket leader low risk- Capability outline - DescriptionBenefitEDI processes are currently managed through UPS system.Insourcing OTC processes requires a replacement of UPS EDI system and processes.EDI capability is mandatory to exchange transactions with 35 different BDI trading partners (50% of the sales orders)Recommended scenario(*) Starting 2014 Services recurring expenses will be coded to respective budgets These costs are reflected in ROI but not in project budget(**) Salaries start in 2013 and are not charged to the project budget, will be charged to the annual salary budget#Decision # 3 Tax application- Capability outline - DescriptionBenefitAnalysis DimensionAlternative 1: Vertex4,0

Alternative 2: Thompson Reuters2,5

Requirements CoverageFull Coverage Market leader providerFull Coverage Market leader providerUser friendlinessVery goodGoodSupport & ServicesProvides both implementation and consulting services.Performed very well during RFP and Orals.Very low quality service demonstrated up to nowProposal not submitted, unwilling to offer consulting servicesCostImplementation 100K$Licences: 80K$Recurring cost: 45K$/year (*)Implementation 300K$ (**)Licences: unknownRecurring cost: unknownN/ARisksVery low market leader solutionSolution well established on the market but low support demonstrated by the vendor up to nowUS taxes are managed at jurisdiction code level. Hundreds of tax codes need to be maintained and updated regularly.Tax application and service capability allows integrating the OTC solution with an external application managed by leading vendors in this domain that guarantees the right taxes are applied at transaction levelFull compliance for BDI and ACISTReduction in day-to-day operating expenses through complete automated management of complex and labor-intensive tax processesSeamlessly interfaced with SAP making implementation efficient and cost-effectiveBetter visibility into tax processes, which will aid audit preparation and support strategic financial decision making

(*) Starting 2014 SW recurring expenses will be coded to respective budgets These costs are reflected in ROI but not in project budget(**) Based on ACN US benchmark, since TR often delivers consulting services in partnership with ACN US

Recommended scenario#Decision # 4 Credit Card paymentDescription- Capability outline - BenefitAnalysis DimensionAlternative 1: Paymetric5,25

Alternative 2: Princeton Payment Services (PPS)7,5

Requirements CoverageFull Coverage housed and maintained offsightFull Coverage housed and maintained offsightUser friendlinessVery GoodVery GoodSupport & ServicesImplementation and consulting services.Hosted Server maintains all credit card numbers.Includes 5 User Access SetupsImplementation and consulting services.Hosted Server maintains all credit card numbers.Includes Unlimited User Access SetupsIntegrationSeamless integration with SAPSeamless integration with SAPCredit Card Processor ServicesRequires additional third-party to provide credit card processing and banking servicesProvides Credit Card Processor Services and will monitor to maintain the lowest changes.ReportingNon-detailed reconciling reporting availableDetailed reconciling reporting availableCostImplementation/Consultation = $52KMonthly Fee = $2,3005 Additional User Setups = $500/mthImplementation/Consultation = $10KMonthly Fee = $2,000

RisksLow Risk Market LeaderLow Risk Market LeaderPayment interface software that provides PCI-Compliant encryption and tokenization of customer credit card numbers.PCI Compliancy for BDI and ACISTReduction in credit card transaction fees due to discounts available by providing additional data to customers.Automated processing of charges reduces errors.Recommended scenario#