Beyond Conflict Materials for High Tech Companies: Turn Compliance into a Competitive Opportunity

The Dodd-Frank Wall Street Reform and Consumer Protection Act, Section 1502, requires organizations to disclose the use of conflict minerals in their products or in the materials used in their manufacturing processes. By rule of the SEC, compliance is about disclosure. Capgemini and Pegasystems envision supply chain transformation far beyond mere compliance. This paper provides an overview of what is required for compliance and Capgemini’s vision to get you there and beyond.

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Beyond Conflict Minerals for High Tech Companies: Turn compliance into a competitive opportunity November 13, 2014 2 The information contained in this document is proprietary. Copyright © 2014 Capgemini. All rights reserved. Your Presenters Aaron Fromm, Senior Solutions Leader Pegasystems Aaron is a Senior Solutions Leader with Pegasystems, helping to drive operational efficiencies and digital transformation for leading enterprises in Manufacturing and High Technology. Aaron brings over 20 years of experience in the Manufacturing, Software and High Technology sectors. He holds a Masters in Business Administration in International Business, Bachelor of Science in Computer Science and Bachelor of Arts in Economics from the University of Colorado. Jambu Deviprasad, Senior Manager Supply Chain Technology Practice Capgemini Jambu Deviprasad is a Senior Manager with Capgemini’s Supply Chain Technology practice. He has 20+ years experience delivering technology-enabled supply chain planning and execution transformation and associated change management globally across multiple industries. Jambu is a graduate of Case Western Reserve University in Cleveland, Ohio. Greg Price, Intelligent Business Process Management (iBPM) Leader Capgemini Greg Price is the iBPM (Intelligent Business Process Management) Leader in North America for Capgemini and excels in BPM strategy, delivery and client enablement. He brings 20 years of experience in business process enabling technologies across multiple industries. 4 The information contained in this document is proprietary. Copyright © 2014 Capgemini. All rights reserved. The Law – SEC Disclosure Organizations are obligated to comply where:  Files with SEC under Exchange Act  Conflict minerals are necessary to the functionality or production of a manufactured product STEP 1 Understand Obligation Where organizations establish an obligation for compliance, they must conduct country of origin inquiry to determine whether conflict minerals originated in DR Congo or adjoining countries  Where conflict minerals did not originate from DR Congo or adjoining countries, or originate from “Green” mines, organizations must: ‒ Disclose findings and methods for investigation in annual report ‒ Post disclosure on web site  Where conflict minerals did originated from DR Congo or adjoining countries or is unable to determine if minerals are conflict free: ‒ Disclose in annual report and web site. ‒ File Conflict Minerals Disclosure Report STEP 2 Investigate Origin Where conflict minerals did originated from DR Congo or adjoining countries or is unable to determine if minerals are conflict free:  Conduct supply chain due diligence.  Create and post on its Web site a Conflict Minerals Report , includes: ‒ Description of due diligence performed ‒ Description of the products manufactured and facilities where conflict minerals used ‒ Certified independent private sector audit report  Obtain an independent private sector audit (part of due diligence).  Furnish report as exhibit to annual report on Form 10-K  Disclose auditor‘s conclusion in annual report STEP 3 Disclose Conflict Minerals 5 The information contained in this document is proprietary. Copyright © 2014 Capgemini. All rights reserved. Findings ‒ Initial Filings in 2014 Significantly fewer companies filed disclosures than either the industry or SEC anticipated: Costs higher than anticipated to implement SEC Rule: NGOs criticized broad failure of companies to determine conflict status of products: Most companies did not provide smelter information in their disclosures: Source: http://www.bdlaw.com/news-1637.html  1300 out of an estimated 6000 companies filed a For SD conflict minerals disclosures  1000 out of an estimated 4500 companies filed full Conflict Minerals Reports  The SEC anticipated that 75% or covered issues would require a Conflict Minerals Report  In practice this was closer to 80%  Fewer companies were able to avoid heighted due diligence based on a conclusion they had “no reason to believe” minerals were sourced from the covered countries than anticipated leading to higher costs  The SEC rule allows companies to describe their products as “DRC conflict undeterminable” for the first two years, from May 2014, while they develop and implement their reporting compliance programs  The SEC is still issuing guidance  The SEC rules keep changing  Only 25% of reporting companies supplied smelter information  The SEC (backed by the D.C. Circuit ruling) require that smelter information be provided 6 The information contained in this document is proprietary. Copyright © 2014 Capgemini. All rights reserved. Expectations in 2015 Expectations for 2015 summed up in one word: A process that can do the following is necessary:  Track  Adapt  Plan for Change CHANGE 7 The information contained in this document is proprietary. Copyright © 2014 Capgemini. All rights reserved. “Green” 3TG traceable by barcode SEC Requirements for Dodd-Frank – Conflict Minerals T a n t a l u m , T i n , T u n g s t e n , G o l d ( 3 T G ) SCM PLM Purchasing Necessary Conflict Minerals? End Conflict Free? End Due Diligence Filing Process Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun Lorem ipsun odem dotem Disclosures Conflict 3TG from DR Congo and adjoining countries 8 The information contained in this document is proprietary. Copyright © 2014 Capgemini. All rights reserved. Beyond Compliance Tantalum Tungsten Tin Gold Conflict Minerals Free Supply Chain Transformatio n Agenda Global Adaptively (design anywhere, build anywhere, deliver anywhere – any product) Growing Complexity & Rising Customer Expectations Increased Stretch – Global Visibility & MFG SC Velocity Growing Importance of Sustainability Rising Volatility Accelerating Cost / Price Uncertainty Conflict Minerals High Tech Manufacturing Challenges 9 The information contained in this document is proprietary. Copyright © 2014 Capgemini. All rights reserved. Transformational Framework Global Strategy  Establishes clearly defined CM Free SC strategy across the enterprise  Facilities utilizing key SC performance attributes to establish competitive separation  Goals & objectives are defined for strategic metrics to measure to desired performance  Ensures executive priorities and imperatives are aligned across the enterprise Global Operating Model  Dedicates where and how the critical work gets done across the enterprise  Links strategy, detailed organization and operational execution design  Delivers goals for partners, customers, products, and channels Global Common Operational Enablers & Governing Policies  Accelerates time-to-value and ensures a standardized and stable solution  Core operational enablers following pre-configured solution blueprint in Pega  Overarching policies which set & govern functional execution Global Process, Data & Technology Model  Conflict Minerals Free Supply Chain Reference model ensures synchronized and orchestrated solution design principles, elements and leading practices  Supported by design standards across the enterprise to support the global common template and operating model Strategy Operating Model Enablers Policies Process Data Tech Governance Pega 7 10 The information contained in this document is proprietary. Copyright © 2014 Capgemini. All rights reserved. Optimizing Performance Conflict Minerals Supply Chain Performance Attributes Fast Response Reliability Return on Assets Predictability SC Costs Flexibility Fast Response Agility to serve customers (product development manufacturing responsiveness, and delivery lead time) Reliability Delivering the correct product, to the right place, at the correct time, with the quality agreed with the customer, and with the correct documentation. (Perfect Fulfillment) Return on Assets Effectiveness in managing Assets (equipment and inventory) working capital Predictability Degree to which a correct prediction or forecast of a system’s state can be made either qualitatively or quantitatively Supply Chain Costs Efficiency in managing the costs associated with operating the chain Flexibility Chain ability to respond to market and supply changes (volume, data, mix, behaviors, etc.) DESIGN for CONFLICT MINERALS FREE MANUFACTURABILITY CONFLICT MINERALS FREE SUPPLY BASE OPTIMIZATION FACTORY FLOOR CONFLICT MINERALS FREE MANUFACTURING OPERATIONS CONFLICT MINERALS FREE INTERGATED INBOUND MATERIALS MANAGEMENT 11 The information contained in this document is proprietary. Copyright © 2014 Capgemini. All rights reserved. DEMO 12 The information contained in this document is proprietary. Copyright © 2014 Capgemini. All rights reserved. $600K $40K / yr MG Manufacturing Company Overview  Building block supplier to the High Tech Industry ‒ Manufactures printed circuit boards and finished components  $5B / year revenue  200+ global suppliers Business Imperative  Efficiently Perform Conflict Minerals Compliance by May 31, 2014 ‒ Form SD, Conflict Minerals Report Exhibit  Establish Sustainable Processes & Systems for Ongoing Compliance ‒ “DRC Conflict-Free” as a Key Differentiator Cost of Compliance Activity Cost Establish Processes & First Report Out $1.2M Ongoing Management & Reporting $200K / year  Rapid attestation using industry best practices and supplier self-service  Focus limited resources on high risk cases  Leverage existing Systems of Record 50% 80% 13 The information contained in this document is proprietary. Copyright © 2014 Capgemini. All rights reserved. MG Manufacturing Cathy performs a Conflict Minerals Attestation for EC Tech, an MG supplier  Based on EICC/GeSI template (industry best practices)  Integration with external systems of record (Supplier, Product)  Dynamic Case Management drives the necessary Conflict Minerals outcomes (Form SD, Conflict Minerals Report)  Auto expiration & renewal of attestation Cathy Compliance Analyst Marv reviews supplier status and progress toward May 2014 Conflict Minerals reporting  Dashboard for progress  Reports to facilitate Form SD & Conflict Minerals Report preparation Marv Compliance Manager 14 The information contained in this document is proprietary. Copyright © 2014 Capgemini. All rights reserved. 15 The information contained in this document is proprietary. Copyright © 2014 Capgemini. All rights reserved. Key Takeaways Business Imperative  Efficiently Perform Conflict Minerals Compliance by May 31, 2014 ‒ Form SD, Conflict Minerals Report Exhibit  Establish Sustainable Processes & Systems for Ongoing Compliance ‒ “DRC Conflict-Free” as a Key Differentiator Cut Cost of Compliance  Rapid attestation using industry best practices and supplier self-service  Focus limited resources on high risk cases  Leverage existing Systems of Record 16 The information contained in this document is proprietary. Copyright © 2014 Capgemini. All rights reserved. Presenter Contact Information: aaron.fromm@pega.com www.pega.com Thank you for attending today’s webinar! Aaron Fromm jambu.deviprasad@capgemini.com www.capgemini.com Jambu Deviprasad greg.price@capgemini.com www.capgemini.com Greg Price The information contained in this presentation is proprietary. © 2014 Capgemini. All rights reserved. www.capgemini.com About Capgemini With almost 140,000 people in over 40 countries, Capgemini is one of the world's foremost providers of consulting, technology and outsourcing services. The Group reported 2013 global revenues of EUR 10.1 billion (more than $13 billion USD). Together with its clients, Capgemini creates and delivers business and technology solutions that fit their needs and drive the results they want. A deeply multicultural organization, Capgemini has developed its own way of working, the Collaborative Business ExperienceTM, and draws on Rightshore ®, its worldwide delivery model. Rightshore® is a trademark belonging to Capgemini
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