Axel Leijonhufvud, Executive Vice President, Supply

Cargotec Capital Markets Day, 21 September 2010, Stargard Szczeciński, Poland

Global footprint – local supply

Cargotec Supply

Mission and vision

Cargotec Supply drives efficiency in the supply chain. A world class supplier

with local presence, supporting Cargotec’s global business objectives.

21.9.2010 3

Ambition

Be the preferred supplier for Cargotec

business areas and product.

Objectives and targets

• Quality

• Speed and flexibility

• Cost competitiveness

• Continuous improvement

Mode of operation

21.9.2010 4

MAUMAU

Customers Markets Solutions Product Supply

Assembly

Unit

MAUMAUAssembly

Unit

MAUMAUAssembly

Unit

Project

Supply

supplier

supplier

supplier

supplier

supplier

supplier

supplier

supplier

supplier

supplier

supplier

Global Coordination

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21.9.2010 5

Prod

OHOutbound

freight Direct

LaborInbound

freight Direct

Material

Total

COGS

Optimising cost of Product Supply means optimising all

parts of cost of goods sold (COGS)

The Supply has developed

21.9.2010 6

Suppliers Suppliers Suppliers

Assembly

Unit

Assembly

Unit

Assembly

Unit

Customers Customers Customers

Local & independent plants

• No co-ordination between Hiab, Kalmar and MacGregor.

• Tradition manufacturing style (high level of buffers)

• Many small, local factories serving global product lines

• All factories worked in different ways and no common processes

• Sourcing, logistics and quality was locally driven

• One single Supply organisation

• A global network

• Lean production concept (reducing waste)

• Factories assemble a wide range of equipment

• New ways of working - One Company approach

• A global sourcing, logistics and supplier quality

organisation that take full advantage of the total

product volumes

Suppliers

Assembly

Unit

Assembly

Unit

Assembly

Unit

Global & collaborating network

From “Site oriented”… …to “Supply industrial system”

CustomersCustomers Customers

Outsourcing of component production

• Our core processes

• Assembly

• Sourcing

• Logistics

Component manufacturing is not a core process

We cannot be leader in component manufacturing

We need to increase our flexibility in order to handle volume volatility

Component manufacturing requires significant fixed assets and working

capital

The consequence is that we will outsource or divest our existing

component manufacturing over time

21.9.2010 7

Tampere

Raisio

Hudiksvall

Lidhult

Zaragoza

Bangalore

Chungbuk

Shanghai

Ottawa

Dundalk

Ipoh

Global footprint today

Narva

Stargard

San Antonio

Bispgården

Singapore

Tianjin

Kristiansand

21.9.2010 8

Supply strategy

Growth economies

Close to the customers

Competitive supplier

structure

MAUs with competitive

cost structure

21.9.2010 9

21.9.2010 10

Deliveries

• High flexibility and short

lead times

• Develop S&OP process

further

• Secure availability of

components

Quality

• Multi certificate

• Global Claim System

• Common Tools and

processes, ability to

track production related

quality cost

Cost efficiency

• Cargotec Production

System (CPS)

• Move from high to low-

cost countries

• Consolidation of

suppliers

Focus moving from downsizing and rebuilding to

deliveries, quality and cost efficiency

Cost/efficiency

• Downsizing, mainly in factories >

1,700 employees (47%)

Factory closings in 2009: Finland, US,

Sweden, the Netherlands and Indonesia

• Inventories -53%

Global footprint strategy

• MAU Stargard

• MAU Shanghai phase II

• Focus on assembly (outsourcing)

2009

2010

Production system Employment Customer Focus

To improve the efficiency of cargo flows

Teamwork• Cross functional teams

• Project teams

• Problem solving teams

• Continuous improvement

teams

---------------------------------------

• Values (understanding and

implementation workshops)

• MAU Performance Centre

• Std monthly report

• Morning meeting process

• Policy Deployment

• QDC process

5 S• A method to organize,

standardise and clean

to get more efficient

work places.

------------------------------------

• 5S work shops incl.

std. work

• Checklists / Audits in

place

• Whole plant to be

completed end 2010

Standard Work• Value add analysis (VSM)

• Work balancing

• Standardise instructions

• Process design

-------------------------------------

• AviX std. work

• Std. documentation

SCM• Integrate Supply and

Demand (Pull flow)

• Value chain analysis

• Product lifecycle

management

-----------------------------------

• S&OP

• Supplier forecast

• Lead-time / flexibility

std and targets

To be the world’s leading

provider of cargo handling

solutions

1121.9.2010

Lean production concept

Production system

Production system

• Involves using less of everything –

capital, inventories, time, human

effort – across all aspects of

production and service delivery

• Lean thinking concept, originally

developed by Toyota

• All MAUs have a Performance

Centre

21.9.2010 12

Responsible operational practices

• Our environmental, workplace health and safety

systems are based on international ISO standards.

• In building our sustainability reporting we rely on the

guidelines of Global Reporting Initiative (GRI).

• Our value chain is developed with our quality

management system.

• We also monitor the environmental management

principles of our suppliers.

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Towards a professional and global sourcing

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EMEA Eastern EU AMER APAC

2006 2009

Volume in USA decreased from 2006 to 2009 mainly due to weakening market

2011

Increasing sourcing from Eastern EU and APAC

1521.9.2010

Working with suppliers - more than price…

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Parts price

Lead time

Security and trust

Global footprint

Continuous improvements- products

- efficiency

Quality

Cooperation

10 biggest suppliers cover ~40% of total direct material

spend

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~3,000

suppliers

10 biggest cover

~40% of total

direct material

spend

5 of the

biggest are

Chinese

Steel structures

CastingsSteel

Steel structures

Cabins

Hydraulic cylinders

Castings

Hydraulics

Sourcing focus areas in 2010

21.9.2010 18

Focus area Actions taken/ongoing in 2010

1

3

4

2

Cost reduction • One Company synergies• Localisation• Supplier consolidation

• Volume forecasting & communication function established

• Critical supplier list by MAU• Capacity validation

Availability

Lead time • Localisation of supplier base in Eastern Europe and China

• Lead times increasing due to increased demand, example steel

• Supplier Quality Engineering• Proactive participation in R&D process• Common tools and processes

Supplier quality

On top on the agenda in supply 2011–2012

• Secure and safeguard deliveries

• Efficient S&OP plan in place (demand

forecasting)

• Finalise the on-going outsourcing activities

• Implement, sustain and verify new ways of

working and processes

• Painting system Europe

21.9.2010 19