Supply Chain Risk Management John OConnor Director Supply

Supply Chain Risk Management John O’Connor Director Supply Chain Risk Management Customer Value Chain Management Cisco Systems, Inc. Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. 1

Agenda Cisco & Risk Program Overview Continuity Planning Crisis Management Resiliency & Mitigation Programs Supply Chain Resiliency Index Financial Crisis Management Supply Chain Risk Leadership Council Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. 2

Welcome to Cisco: “Changing the Way We Work, Live, Play and Learn” § Worldwide leader in networking for the Internet Broad range of products and solutions: § Networking Systems § Headquartered in San Jose, CA § Data Center § More than 67, 000 employees in 140 Countries § Collaboration, Voice and Video § Mobility/Wireless § $39. 5 B FY’ 08 revenue § Security Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. 3

Cisco’s Complex Supply Chain Hybrid Production Model Wide range of Products (95% Outsourced) Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. Most Products Are Configured to Order Breadth of Customers Acquisition Integration (131 to date) 4

Supply Chain Risk Management Program Overview Crisis Management Product Resiliency Supply Chain Resiliency Business Continuity Planning Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. 5

BCP Program Cisco Supply Chain Partners/Suppliers Transportation, Distributors, SLCs 16 suppliers EMS 4 suppliers Component Suppliers/OEMs/ODMs 600+ suppliers BCP Light BCP Regular BCP Generic On-site crisis drills Plans Business Continuity Primary Mfg Locations BCP Validation Test of Supplier Site BCPs Supply Chain Resiliency Alternate Mfg Locations +Assessment TTRs Validation TTR Site scoresofand aggregate Supplier score Emergency Contacts Part Mapping Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. 6

Supply Chain Risk Management Dashboard Crisis Management Crisis Team activation Global monitoring of events that may disrupt Cisco’s supply chain Mapping capabilities to assess supply chain nodes within radius of an event Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. 7

Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. Cisco Confidential 8

SUPPLIER Site Name: Revenue: Emergency Contact: Email Contact: Alt Site Name: Alt Country: Max TTR Weeks: Part Site Mapping: EMS/ODM Logistics Component Supplier Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. Cisco Confidential 9

Risk Engine Inputs E 2 E Model Outputs Disruptions Understanding Risk Drivers Likelihood Site/Component/Region Events & Frequency Supply Chain Impact (Site & Component) Component Supply Disruption Quality Issue Bankruptcy Gulf Coast Hurricane Labor Taiwan Japan Disruption Earthquake West Coast Earthquake Flood Pandemic Time to Recover Understanding Geographical Concentration of Risk Expected Capacity Loss Supply Chain Redundancies Financial Impact Site/Region/Component Revenue Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. • Simulation Engine • ~4300 Individual Input Parameters • Simulates 1000 s of Scenarios 10

Likelihood Risk Engine Heat Maps Component Supply Disruption Quality Issue Bankruptcy Gulf Coast Hurricane Labor Taiwan Japan Disruption Earthquake West Coast Earthquake Moderate Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. Flood Severe Pandemic Extreme 11

How We Deliver Resiliency Mfg TTR Alternate site readiness Test TTR Lead-time programs and/or inventory for test equipment 2 nd source, alternate supplier site and/or inventory Component TTR T 0 TTR Goals Weeks T 75 Time to Recover (TTR): number of weeks required to restore 100% operational output following a supply chain disruptions Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. 12

FY’ 09 Mitigation Program: BU 1 Suppliers / parts (11 (24 / 33) 61) (6) Manufacturing sites (2) T&L Sites (0) (3) Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. 13

Resiliency Index Categories Resiliency Scorecard Key Categories Presentation_ID Component Resiliency 30% Supplier Resiliency 20% Manufacturing Resiliency 30% Test Resiliency 20% © 2008 Cisco Systems, Inc. All rights reserved. 14 14

Resiliency Index Definition Very Resilient 10 Index Categories Component Resiliency 30% 9 8 Supplier Resiliency 20% 7 6 5 4 Manufacturing Resiliency 30% 3 2 Test Resiliency 20% Key Metrics % of Single Sourced Average TTR for Single/Sole Sourced Parts Single/Sole Sourced Suppliers with Weak Financial Scores (Mitigate Y/N) % Single/Sole Sourced Parts on BOM # of Single/Sole Sourced Suppliers with Dual Standard PCBA Site (Y/N) Number of. Test Risk. Equipment Rated X(Monitor) Parts Weak. Build Financial Scores % of Risk Rated Poorly(Single Source) % of Suppliers with. PCBA Non-Compliant Qualified Preferred Alternate Supplier: Test Equipment Site (Y/N) BCP (Y/N) % of SS Parts without BCP Part Site Coverage % of single sourced components with Non Dual Test Equipment Build FA&T TTR Site (Y/N) -PSL Suppliers # of PNRs with Single Source ( Multi. Source Strategy) # of New Suppliers (New to Cisco) Manufacturing Standard Power. TTR (Y/N) Standard Chassis (Y/N) 1 Not Resilient Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. PCBA – Printed Circuit Board Assembly FA&T – Failure Analysis and Testing 15

Sample Score Card Business Unit 1 Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. 16

Design for Resiliency (Df. R) NPI Resiliency Product Design for Risk § TTR-based risk rating § BCP requiremnt Comp TTR § NPI risk scorecard Supply Chain Design for Risk § TTR-based SC design § Risk-based bus. awards Mfg TTR Test TTR First Customer Ship Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. 17

Resiliency Index Dashboard BU 1 BU 2 BU 4 BU 5 Very Resilient Very Resilient 10 10 10 9 9 9 8 8 8 7 7 7 6 6 6 5 5 5 4 4 4 3 3 3 2 2 2 1 Not Resilient Presentation_ID BU 3 1 Not Resilient © 2008 Cisco Systems, Inc. All rights reserved. 1 Not Resilient 18

Financial Risk Assessment Program ~1, 000 Direct Suppliers GSM GTM Test Eq Software GSCQ-IT WWRL/ T&L CBG SPVTG Single/Sole Source Suppliers >$MM Revenue Filter e Pu b at riv Review Monthly P Review Monthly lic Moody’s KMV Filter Review Financials & Meeting Results At-Risk SCRM Component Mitigation Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. 17 100+ Watch List 19

Supply Chain Risk Leadership Council An industry council comprised of world class supply chain firms working together to develop and share supply chain risk management standards and best practices www. scrlc. com Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. 20

Closing Discussion § BCP program is a necessary foundation § Effective crisis management requires coordination, playbooks & trigger points § Resiliency & mitigation programs require a priority election § Financial Crisis has relied heavily on SCRM analytics and processes Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. 21

Presentation_ID © 2008 Cisco Systems, Inc. All rights reserved. 22