Boston Scientific Corporation (BSC) Supplier Risk ...

1 Boston Scientific Corporation (BSC). Supplier Risk Management Program Northeast Supply Chain Conference October 1, 2007. Agenda Overview of Boston Scientific Corporation (BSC). Creation of Supplier Risk Management Program Scope Goals Program Migration Program Approach evolution 4-Step Risk Management Process Tool Example Benefits/Metrics Risk Alert and Communication System Next Steps 2 Confidential information of Boston Scientific Corporation . Do not copy or distribute. Overview of Boston Scientific Corporation Boston Scientific is a global, multi-billion dollar company focused on innovative medical devices and procedures Boston Scientific Corporation Profile General Facts: Product Innovation: 9,790 Patents issued worldwide Founded in 1979 with 38 employees, $2 million in sales. Now Fortune 500 $1B Million invested in R&D ('05).

2 Company. $6B in new technology last five years World's largest medical device company Financials: dedicated to less-invasive therapies $ Billion Revenue ('06). Portfolio of approx. 15,000 products, 29% CAGR1 ('02-'05). many with market leading positions $ Billion Gross Income2 ('06). The TAXUS drug-eluting coronary stent NYSE: BSX. has been the most successfully launched product in the history of the industry Demographics: Acquired Guidant Corp. in April 2006 to 28,000 Employees become world's largest cardiovascular Dedicated marketing and sales force in device company more than 45 countries Corporate HQ: Natick, MA 26 manufacturing, distribution and technology centers worldwide Regional HQs: Singapore, Paris, Tokyo Website: 1. Compound Annual Growth Rate 2. Excluding purchased R&D, litigation-related and other charges 4 Confidential information of Boston Scientific Corporation .

3 Do not copy or distribute. Boston Scientific 's mission is to improve the quality of patient care and increase health care productivity Boston Scientific 's Mission Statement Boston Scientific 's mission is to improve the quality of patient care and the productivity of health care delivery through the development and advocacy of less-invasive medical devices and procedures. Boston Scientific 's Quality Policy "I improve the Quality of Patient Care and all things Boston Scientific .". 5 Confidential information of Boston Scientific Corporation . Do not copy or distribute. Boston Scientific strives to provide value to patients and other stakeholders Boston Scientific 's Value Patients Less trauma Shorter recoveries Lower risks Physicians Nurses Safer procedures Fewer patient concerns Fewer complications More reliable products Higher productivity Improved patient focus Innovative treatment options Boston Scientific Payers and the value of Employers less-invasive medicine More productive workdays More treatment choices Shorter recoveries Lower costs Lower costs Better outcomes Hospitals Patient Families Shorter hospital stays Easier patient care Lower overall costs Shorter recoveries Less aftercare Lower stress General claims of added-value (benefits) of less-invasive medicine as compared to standard surgical treatments and therapies.

4 6 Confidential information of Boston Scientific Corporation . Do not copy or distribute. Boston Scientific products help treat a broad range of medical conditions throughout the body NEUROMODULATION NEUROVASCULAR. PERIPHERAL VASCULAR CARDIAC RHYTHM. MANAGEMENT. CARDIAC SURGERY ELECTROPHYSIOLOGY. VASCULAR SURGERY CARDIOVASCULAR. ENDOSCOPY GYNECOLOGY. ONCOLOGY UROLOGY. 7 Confidential information of Boston Scientific Corporation . Do not copy or distribute. Over 25 years of Innovation has led to a broad portfolio of more than 15,000 products Sampling of Boston Scientific 's Product Portfolio Detachable Coils Balloons Grafts Enteral Feeding Ablation Cardiac Mapping Pacemakers / ICDs Stents Stone Retrieval Embolic Protection Biopsy Systems Peripheral Dilatation Embolics Catheters / Guidewires Neurostimulation 8 Confidential information of Boston Scientific Corporation .

5 Do not copy or distribute. Some risks can be But it's the out-of-sight risks which anticipated should be front-of-mind Say What's a mountain goat doing Just stay in the cab, Vern maybe that way up here in a cloud bank? . 9. bear's hurt, and maybe he ain't. Confidential information of Boston Scientific Corporation . Do not copy or distribute. Definition Supply Risk Management is a proactive and systematic process for cost-effectively identifying and reducing the frequency and severity of unwanted events in the inbound supply chain that have an adverse affect on the business. Risk can also be the inability to capitalize on an opportunity. Risk and reward are the opposite sides of the same coin. 10 Confidential information of Boston Scientific Corporation . Do not copy or distribute. Creation of BSC Risk Management Identification of Program Requirements Risk Program Need Drivers Program SWOT Strategy Need to address Strengths Weaknesses Processes/Tools unknown potential Develop risk processes and tools to Strong reactive Focus on quality Supplier continuity identify high risk suppliers risk management and delivery only Develop auto alert process to flag issues Some disruptions Lack of market trend, environmental and Reactive to Risk averted coordination regulatory issues No analytical Events Manage/Coordinate Global BSC risk rigor Desire for Industry events, potentially impacting BSC.

6 Continuity of supply best practices for Opportunities Threats Resources Supply Chain/Global ERP. Sourcing Benchmarking Lack of 3rd party providers Positive resources feedback for Unable to Organization program creation package risk Engage Plants, Global Sourcing, R&D. data in a concise & Corporate Business Units format 12 Confidential information of Boston Scientific Corporation . Do not copy or distribute. Risk Program Design Communic Informatio Compilatio ation n n and Acquisition Action Business BSC Global Intelligence Sourcing Economic Regulatory Market Risk Supplier Management Suppliers Financial Systems Continuity Plan Environmental Tools Revenue Interest Misalign Part BSC Plants Number Lead time and BUs Contingency Plan Single/Sole 13 Confidential information of Boston Scientific Corporation . Do not copy or distribute.

7 Goals Program Goals 1. Be alerted to high risk suppliers that require attention using a variety of information and data 2. Identify and understand the specific drivers that increase Supplier risk 3. Proactively manage and mitigate supply chain risk 4. Measure risk mitigation and impact Scope: All BSC Direct Materials 14 Confidential information of Boston Scientific Corporation . Do not copy or distribute. BSC Risk Management Migration Reactive Risk Proactive Risk Identification Non- Validation and Migration Identification Model model (Future Process). (Current Process). Advantages Advantages Some disruptions averted Mitigation Accounts for multiple risk factors Relative/Absolute measure of risk Programs Capability for predictive planning Disadvantages Driven by revenue protection All risk areas not considered Less analytical rigor Driven by Supplier spend and high Disadvantages profile interruption Time from other projects Requires more resources Risk Reduction: Competitive Edge Program Goals Current Future Be alerted to high risk suppliers that require attention using data.

8 Identify and understand the specific drivers that increase Supplier risk . Proactively manage and mitigate supply chain risk . Measure risk mitigation and impact . 15 Confidential information of Boston Scientific Corporation . Do not copy or distribute. Program Approach Risk Management Process A formalized process is used to manage Supplier risk. Tra Ident Anal Mitig ck/. ify yze ate Con trol Purpose Develop Risk Determine Risk Analyze and Mitigation Plans to Track High Risk Areas Prioritize Risk Areas Address High Risk Areas Areas Complete Risk Analyze Data by Determine Risk Develop Metric Data Acquisition Risk Area (High, Mitigation Baseline Process Medium, Low) by Response Implement Plot 2x2 Risk Supplier Develop Business Mitigation Distribution Analyze Data by Continuity Plans Management Tasks Matrices Indicator Develop Process Validate External Contingency Plans Correct Deviations and Internal Data Prioritize from Planned Risk Mitigations using Actions Mitigation Prioritization Process 17 Confidential information of Boston Scientific Corporation .

9 Do not copy or distribute. Risk Tools Data / Overall Supplier Risk Survey Calculates Risk Event Calculates Calculates Risk Probability Inputs Category Index (RPI). Illustrative Very High Risk High Risk Medium Risk Low Risk Supplier Risk Wheel Very Low Risk 18 Confidential information of Boston Scientific Corporation . Do not copy or distribute. Risk Tools Supplier Risk Wheel Risk Distribution Matrix Supplier 2. Ultimate Risk Measure Supplier 1. Supplier 5. Supplier 3. Supplier 6. Illustrative Supplier 4. Note: Colors in the Risk Wheel do not correlate to the colors in the Risk Distribution Matrix Purpose: Factors in Supplier Purpose: Identifies High Risk Events Revenue to Measure Overall and Risk Categories for Action Supplier Risk 19 Confidential information of Boston Scientific Corporation . Do not copy or distribute. Output Example By Supplier Site Rev @ Risk Spend # of Parts Site 1 $180M $23K 1.

10 Site 2 $40M $212K 4. Site 3 $36M $11K 4. Totals: $256M $246K 9. Wheel Information Buyer Validation Quality Quality High likelihood of Site 1: 2 issues SCARs, disruption based on RTV. Poor response process change Site 2: No issues High # of SCARs Site 3: No issues Service & Delivery Service & Delivery Low Eng support Site 1: Capacity issue Slow to respond (extend LT); poor Low # of employees communication issue around delivery status Near capacity Site 2 and 3: None Tier 2 Stoppage Revenue at Risk Summary Organization does not fit the High likelihood of: Site 3: Surprised to learn Sole source the magnitude of revenue BSC Supplier profile. Miscommunication associated with this Supplier Raw material shortages 20 Confidential information of Boston Scientific Corporation . Do not copy or distribute. Supplier Comparison Provides ability for users to compare the highest / lowest indicators between suppliers and understand best practices.