1A- Lean Como Orientação Estratégica

Parker Hannifin
Candido Lima
Presidente - Grupo Latino Americano
 Agenda

 A Parker Hannifin
 Estratégia Lean da Parker
 Resultados e Lições Aprendidas

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 Parker - Líder Global em Movimento e Controle
do Movimento

 $13.0 Billhões em Vendas

 865,000 Produtos
 452,000 Clientes
 58,000 Funcionários
 13,000 Distribuidores/Lojas MRO
 1,100 Mercados
 139 Divisões
 341 Fábricas
3
 49 Países (Dados do Ano Fiscal 2013)
 Solucionando os Maiores Desafios
de Engenharia do Mundo

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 Parker Hannifin - Tecnologias

Exoesqueleto

5
 Parker na América Latina
Mais de 40 anos no Brasil
Funcionários 1,600

Plantas de Manufatura 9

Distribuidores 500

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 Agenda

 A Parker Hannifin
 Estratégia Lean da Parker
 Resultados e Lições Aprendidas

7
 Estratégia Win da Parker - 2002

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 Parker Lean System – 2002
O Início

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 Parker Lean System – 2002
Brasil

 Foco na manufatura

15 16

14
13 17
11 19
18
12
20

07 24
08 23

09 22
06
25 10 21
05 26
01

TPM Kanban 03
04
02 27

Manufatura Celular
Rotas de Abastecimento

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Parker Lean System – 2004
Evolução
Manuf.
Supply Pricing
Chain

Lean
Finanças TI
Enterprise

Engenharia RH
Vendas e
Mkt
 Parker Lean System (PLS)
Dias Atuais - 2014

Baseado no sistema
Toyota de Produção,
criamos o PLS com a
linguagem voltada à
nossa realidade, e
abrangendo toda a
organização (Lean
Enterprise)

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 Parker Lean System
Treinamentos Contínuos

 E todos participam dos treinamentos, voluntariamente...

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 Parker Lean System Hoje - Melhorias Em Todas as Áreas

Trabalho Padronizado nos Escritórios

Células de Mercado em Vendas

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Manufatura Antes x Depois
 Jornada Lean – Exemplo
Divisão Filtração

2006 - Início – treinamento em

todas as ferramentas do
Parker Lean System para
100% dos funcionários

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 Jornada Lean – Divisão Filtração
Implementação

1 A3 - Solução de Problemas
Estabilizar

5 2
Nivelar Padronizar

Nivelamento de Produção

Trabalho Padrão
Manufatura e Escritórios

4 3
Puxar Fluxo

Sistemas Puxados
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Mapas de Fluxo de Valor Manufatura e Escritórios
 Jornada Lean – Divisão Filtração

Em 2011, recebemos o prêmio

de planta modelo Lean de
nossa Corporação. Foi a
segunda nomeação dentre
mais de 340 plantas em todo o
mundo.

17
 Jornada Lean – Divisão Filtração
Resultados

Aumento de Vendas: 16,5% a.a.

Atendimento ao Cliente: > 95 %

Produtividade: aumento de 55%

Inventário: < 35 dias

Qualidade (RPPM): < 200

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 Em 2013 Adotamos o Hoshin
A3 Estratégico

Orientação “Catchball” final com

Flávio Picchi, Lean Institute

Apresentação de cada A3 Divisional e Horizontal

Oportunidades, esclarecimentos, interação entre os
A3 Divisionais e Horizontais
19
 A3 Estratégicos

Vendas Macro
Brazil Hydraulics Division FY14-FY18 Strategy A3 Approval:

Subject: Profitable Growth. Sales of $117M by FY18, with 16,5% ROS Future State:
$123M
Performance, Gaps:
CAGR FY14-FY18 STRETCH : 8.7 %

CAGR FY14-FY18: 7.6%

CAGR FY10-FY13: 4.4%

Less $10.1 milion in sales

(FY12 vs FY13)

How we win:
Vision $117M by FY18 - Motion & Control Leader in Latin America

Strategic
Core Business Future Growth Organizational Health
Context: Focus
In FY09, the Hydraulics Division developed its Strategic Plan to grow sales from $88M in FY10 to $157M in FY15. Many
q Premier Customer q Strategic Market
factors led
Fluid Connectors the division
Brazil to a Strategy
FY14-FY18 gap of $72M
A3 in sales (planned in FY10 vs probable FY13). Approval: ER ML EI SS Experience
MA (EdevaDM VT RN q Best Place to Work
Added to that, the ROS is also underperforming in the past 3 years, achieving a gap of 13.3% between what was planned l do Bonfi m) Growth
CS EG (Uwe Kraus)
in FY10 (19.2%) versus probable ROS to be achived in FY13 (5.9%). (Edevaldo Bonfim)
q Division + Sales Co.
We have seen that the competition in many of our products and value streams have increased in past 4 years, mainly in
Subject: Profitable Growth. Sales of $73M by FY18, with 14.5% ROS Future State: Alignment q Operational
mobile cylinders but also in valves ans pumps. This scenario brought a huge price competition to our business.
Initiatives q Acquisitions
( Sergi o Montei ro)
(Tadeu Nunes)
Excellence
Performance, Gaps:
Analysis: Mobile cylinders FY10-FY15
are design LA Strategy Plan q Channel Strategy (Marcelo Lopes)
Growth
Future

90
control items. having a Lack CAGR
of cost FY14-FY18:
reduction (Al exa ndre La ba t) q Accountable Mgmt
Mobile Cylinders

$80M 0.19
r = + $6.7M r = - $0.3M r= - $7.9M
6.8% / Six q Innovation
Gear Pumps

80
commodity characteristics
r cum = + $6.6M r cum = + $6.3M r cum = - $1.6M innitiatives (e.g. VAVE Process
CAGR FY10-FY13: 70
0.17
q Margin Protection
0.15
Sigma) (Wi l s on Ri coy)
(Luciano Gomes)
11.2% 60
Poor (Marcelo Lopes)
r =effectivenss
- $ 0.1M in quality
0.13
tools
50 application (e.g.PFMEA Win Strategy
Sales

not40used as preventive tool)

Poor
0.11effectivenss in quality Foundation
tools application (e.g.PFMEA
0.09
(Win Certification, Pricing, Procurement)
30

Not
20 enough cost reduction
not0.07
used as preventive tool)
business
Core

innitiatives
10 to support price 0.05
0 competition Lack
0.03 of strategic review of Prioritized Actions:
FY10 FY11 FY12 FY13 FY14 FY15
past decisions (e.g.bushing Item Task
New products development strategy focused in OEM
Metrics
New product sales
Impact Owner Date

PSP Plan Actual ROS Actual ROS PSP 1 U$1026K Nelson Castro Jan-14

Lack of focus to develop new pumpsHow localization)

we win:
2
customers (Valves and Manifolds)

Improve supply chain focused in cost reduction

(U$)
Cost reduction
U$180K
Gison
Dec-13
savings (U$) Matzembacher

customers (e.g. Excavators) Vision $73M by FY18 - Best Source for Conveying Pressurized Fluid in Brazil
3 Introduce new product launching flawlessly (Valves)
New products
COPQ
- Nelson Castro Jul-13

Context: 4 Implement VAVE comitee / Six sigma innitiatives (Valves)

VAVE / Six Sigma
U$270K Samuel Sabin Oct-13
Lack of pricing Strategic
strategy for

RH
savings (U$)
Organizational

In FY09, Fluid Connectors BadDivision has developed

cost accounting methodits Strategic Plan to grow sales from Core Business
5 Review supply chain manufacturing strategy
Future Growth
Small OEM LISC - Samuel Sabin
Organizational Health
Sep-13

OEM'sFocus
Health

BCC sourcing Gison

$38M in FY10 to $80M inleading
FY15. Preparation was in
very meticulous, resulting in thorough Brazil Filtration Division FY14-FY18 Strategy A3 Approval:
6 Sourcing decision based on BCC ( Best cost country) analysis. U$275K Jan-14
to poor results 7
Review make or buy analysis considering BCC (China and
savings (U$)
BCC sourcing
Matzembacher

q Strategic Market
U$287K Joacir Machado Feb-14
and well thought Plan. The outsourcing
actual figuresdecisions
show that sales has remained flat around $50M Increase of supporting q Premier CustomerExperience
India) savings (U$)

8
Do business plan to produce accumulators internaly, using
cylinders assets to improve fixed costs absorption
Accumulators net
sales (U$) q Best Place to Work
-
Jeferson
Sbalchiero
Feb-14

in the last 3 years while the ROS has presented a reduction from almost 13% to 9%. costs (Sales Co & division (Marcos Venanzi / Danilo Miranda ) Growth Mobile cylinders Jeferson
Lack of cost reduction innitiatives Subject: Profitable Growth. Sales of $120M by FY18, with 20.1% ROS,@US$=BRL2.00 Future State:
Industrial Hydraulics

9 Adjust overhead, support and factory labor

expenses) Sales/EE (Carolina
-
Sosnowski)
Sbalchiero
TBD

However, we are $1.6M below (e.g. of our/ cumulated

VAVE Six Sigma) target. Lack of focus on other key 10
(Marcos Venanzi)
Reduce RPPM and interruption at assembly cell
Mobile cylinders
-
Everton
Mar-14

initiatives and ineffective deployment/tracking are some of the flaws to be addressed in Lack of quotation accuracy q Division + Sales Co.
RPPM Carriconde
Mobile Valves

11 Improve productivity by 5%
Mobile cylinders
U$90K
Jeferson
May-14
Instrumentation Latin America FY14-FY18 Strategy A3 Approval:
FY14-FY18 BFD Strategy Plan
Sales/EE Sbalchiero

the future so as to ensure proper timely execution. (Price/GM quoted vs Alignment Gear pumps thrust Gison
$120M Automation Brazil FY14-FY18 Strategy A3 Approval:
12 Improve supply chain focusing in cost reduction U$92K
q Operational
plate savings (U$) Matzembacher
Jan-14
Performance, Gaps: 140.0 25.0%
accomplished) q Acquisitions
& Cylinders

Lead times not aligned with small ( Ma rcos Vena nzi

13) Do make or buy analysis for cast machining parts area
Casting parts
-
Jeferson
Sep-13
savings (U$)
Excellence
Sbalchiero
120.0 19.4% 20.1% Subject: Profitable Growth. Sales of $20M by FY18, with 15% ROS
OEM's demands 14 (Eduardo Rampinelli) PTO net sales (U$)
Implement local manufacturing strategy for PTO´s -
Jeferson
Mar-14
18.2% 37.1 20.0%
Analysis: Lack of market knowledge
Initiatives (Eduardo Ikeda)
Sbalchiero

100.0 15.8%
17.0%
17.9 -
- Subject: Profitable Growth. Sales of $52.8M by FY18, with 15% ROS Future State:
for some products (e.g.
15 Implement VAVE comitee VAVE savings (U$) - Nelson Castro Feb-14
14.6% 29.6
q Channel Strategy 2.5 9.2 - 4.9 15.0% Gaps:
Performance, Future State:
Everton
80.0 -

Sales
Denison pumps)
16 Reduce customer RPPM Gear pumps RPPM -
Carriconde
Feb-14
- 3.8 4.1 4.4
(Ma rcos Vena nzi
17)
Develop pricing strategy for OEM customers (according to Gear pumps OEM´s
- - 2.5

ROS
Lack of different pricing strategy BBFY14) SPI
- Denis Sarmento Mar-14
60.0 10.0% ING LA Plan by Country Performance, Gaps:
for OEM's Poor quality performance 18
Review internal supporting costs and sales company
Cost of sales for IH -
Gustavo
Aug-13
40.0
q Accountable Mgmt
allocation Meneghello

25000 $75.8M
in Power Gen. market and 19 Improve quotation accuracy
% accuracy (Quoted vs
- Giovani Zat Sep-13
78.0 78.0 5.0% 80 0.25
q Innovation 78.0 78.0 78.0 78.0
accomplished)

Industrial Cyllinders 20 Introduce new product launching flawlessly IH COPQ

Process -
Gustavo
Meneghello
Sep-13 20.0 r = -$ 18.7M
q Margin Protection (Ri ca rdo Necha r) 20000
2,000
70
r cum= -$ 36.3M
Net Sales of products

Lack of copetitiveness when

21 Review competitive alignment by product line
aligned (U$)
- Denis Sarmento
(Sergio Scassola)
Sep-13
- 0.0% 1,800
1,198
r = -$ 9.9M 0.2
(Ma rcos Vena nzi
22 ) Improve project management process IH LISC - Richard Traut Dec-13 1,005 60 r = -$ 0.1M r cum= -$ 16.5M
comparing to China for exportation Poor on ti me delivery FY13 Fcst FY14 FY15 FY16 FY17 FY18 15000 1,500 r cum= -$ 6.6M
markets performance on key customers 23 Improve after-sales structure
Comisioning and
services net sales (U$)
- Mario Arruda TBD
851
r = -$ 6.5M
0.15
1,200
50
(e.g. Al ston a nd Schenk)
Foundation
Win Strategy JOP Sales Organic Growth Strategic Initiatives Acquisitions ROS
10000
987
693
696

16,000
18,000
CIC Brazil FY14-FY18 Strategy A3 Approval:
40 CAGR FY10-FY13: 0.1 CAGR FY14-FY18:
No product development strategy / (Win Certification, Pricing, Procurement)
7.90%
13,300
Lack of market focus 30
approach to new products and Follow-up: Plan follow-up on a quarterly basis 5000
1,073
429
9,370
11,200
Subject: Profitable Growth. Sales of $11.229 by FY18, with 9,6% ROS Future State: 1.10% 0.05
trends (e.g. load sense valves) strategy/deployment 5,471 20
FY14-FY18 BFD Strategy Plan - Engine & Mobile FY14-FY18 BFD Strategy Plan0- Hydraulic 900 1,000 0
309 300
FY10 FY11
500
FY12
700

FY13 FY14 FY15

Performance, Gaps: 10
Prioritized Actions: $76M 0 -0.05
80.0 30.0 $25M CAGR FY14 - FY18 OF 9,8 %
16.9 Argentina Brazil Chile Pan Am FY10 FY11 FY12 FY13 FY14 FY15
9.1 19.6 r = -$5M
4.3 25.0 5.9 r cum = -$6M
60.0 1.5 7.8 PSP Plan Actual ROS Actual ROS PSP
2.4 2.6 2.9 20.0 2.1 4.0
1.0 2.2 0.2 How we Win:
40.0 15.0 1.2 1.3 1.4 1.5 1.6
Core Business (75%) Context: Context: How we win: Vision $52.8M by FY18 - Motion & Control Leader in Latin America
10.0
C1 q Jacarei site: Long delivery leadtime - Weight: 15% 20.0 53.5 53.5 53.5 53.5 53.5 53.5 Parker’s Instrumentation Group has traditionally relied upon Sales Companies efforts in region to grow its business. This has led to three major consequences:
In FY09, BFD developed its Strategic Plan to grow sales from $50M in FY10 to $135M in FY15. 5.0 15.6 15.6 15.6
limited growth rates with shrinking and less value-added distribution, focus on valves, fittings and tubing sales and non-diversified penetration of markets.
15.6 Efforts15.6 15.6
by these sales companies have been isolated from each other rarely exchanging experiences and success models throughout the region.
Cause Current Status Countermeasure Benefit Champion Target Completion
Strategic
Core Business Future Growth Organizational Health
- Current situation: over than 60 days. - a Long Internal processes from Inquiry to shipment Reduce Inquiry to shipment Macro lead time to 15 days on standards Increase revenue, satisfy customers C Grez December-15 Focus
- Market expectation: less than 30 days Root Impact Target Initiatives as acquisition, Oil&Gas, Life Sciences and NPD were implemented but expected results - In Brazil, with the acquisition of an important industrial valve and fitting manufacturer, Detroit, in 2008 a manufacturing footprint was established to support
the domestic demand for local content. The sales plan was left in the hands of the newly created Brazil Sales Company resulting in a limited focus on
Lack of commercial and logistics alignment between sales Align Commercial strategy within the region and manufacturing Context:
q Strategic Market
Item Task Metric Champion FY13 FY14 FY15 FY16 FY17 FY18 FY13 FY14 FY15 FY16 Instrumentation
FY17 dueFY18
b companies and manufacturing divisions strategy with WW group Improve asset utilization C Grez June-13
q Premier CustomerExperience q Best Place to Work
- Main impacted segments: industrial and aftermarket Cause $ Date were not achieved, and there is a shortfall of $19M, as part of this value $17M in FY13.
to its particularities and day-to-day business. The Oil & Gas market facing team and Service Center brought in new resources at an Lack of focus and training to the sales force inside Brazil Train every sales company and dedicated sales resource into all In FY09, Automation Brazil along with the Latin American Group developed its Strategic Plan to grow sales from $44M in FY10 to $75M in FY15. Growth
Fcst Fcst expensive rate not commensurable with sales growth. c and out Instrumentation products at least once a year Increase revenue M Catto June-14 (Joao Vilela / Eliana Guimaraes) (Carolina Sosnowski)
C2 q Jacarei site: Price is not competitive ( Parker's price is around 25% more expensive
In FY13, the Group is expected to achieve sales of $11.3M, with negative ROS of 6%, cash flow of 1%. Over the last 10 years, sales grew at 17% CAGR including
the acquisition.
d Price and delivery mismatching the competition
Gross margins only analyzed at month's end (after the
Review all local price lists based on competitive alignment Margin protection, volume M Catto December-13
Preparation was very meticulous, resulting in thorough and well thought Plan. However, only some of the planned initiatives were properly (Joao Vilela)
0.32M Win Rate JOP Sales Organic Growth JOP Sales Organic Growth
Profitability is affected by low volumes/low absorption, high setup times and labor rates, new management resources and low m argins on some legacy items e fact) Daily GM reports and weekly analysis of price exceptions Margin protection A Viapiana July-13
implemented, such as EM and distribution growth, and actual figures show a substantial shortfall of $36M vs. Plan. Poor focus on other key q Division + Sales Co.
than competitors) - Weight: 75% 1 PFEP Implementation for 80/20 items C1 Danilo Miranda Dec-13 Revise all core A parts to align breakeven quantities with economic Improve earnings and asset
Sales Lead time sold to Petrobras and Invensys. Alignment q Operational
C3 q Jacarei site: Excess of complexity - internal processes (FY13 - LISC = 85.3%), large Strategic Initiatives Acquisitions Strategic Initiatives Distributors account for 55% of sales in Brazil and more than 90% of sales outside of Brazil. The division is located in an old leased facility in the south of Sao
Acquisitions
f
g
Plant not aligned with economic lots
Lack of mapping of competitor activities
lots
Map all major regional competitors with FTE and inventory
utilization
Fill white spaces
F Delben
C Grez
December-13
September-13 initiatives and ineffective deployment/tracking are some of the flaws to be addressed in the future so as to ensure proper timely execution. q Acquisitions
Paulo. Distribution in Brazil has traditionally competed with Parker for the large bids and capital projects while dedicating little attention to the MRO business. Lack of alignment, incentive and knowledge of PES Develop a plan to insert Instrumentation Engineering capabilities for
(Joao Vilela)
(Luciano Gomes)
Excellence
range of products (11,500 PN) and large quantity of small direct customers - 147 C1 Parker is the #2 player in the sector with an estimated regional market share of 11%. Our sales force is not dedicated to Instrumentation and the Brazil division h capabilities and reach value added projects at PES Increase revenue C Grez June-14 (Sergio Scassola)
C2 0.11M Win Rate Initiatives
customers that represent 20% of total customers (720) and only 0.7% of total revenue) 2 Develop local source for key products currently imported Ricardo Nechar Jun-14
has plans to gradually replace the legacy industrial fitting line with localized Parker single and double ferule fittings. A large portion of the Brazil inventory Lack of a penetration plan for strategic long term growth
How we win: q Channel Strategy
C11 (ROS) Lead time Analysis: consists of legacy products that used to compete against Parker. The division needs to adopt best practices in supply chain, LEAN, marketing, manufacturing i markets (i.e.: Life Sciences) Execute channel strategy Diversify and increase volume C Grez June-14

$600M by FY18 - Analysis:

from IPD and IPDE while including sub-assembly and final assembly of value added products from the rest of ING divisions. Lack of an acquisition pipeline at group level, not aligned Schedule visits to preliminary candidates, fill a prospect pipeline to (Joao Vilela)
- C13 j with WW manufacturing groups present to LAG Grow via strategic acquisitions C Grez
Context:
June-13 Vision Motion & Control Leader in Latin America
Weight: 5% product specialist support to Sales Company and Distributors
C4 q Insufficient C2 Win Rate
Core Business How we win: No culture of continuous feeddback. PA process seen as a Commited people for growth and
Core Business q Accountable Mgmt
0.11M
k distraction Close FY13 PA process on time with synchronization in talent review sustainability K Itoi September-13
CIC Brazil division was formed after last LAG PSP has been established. The division did not reach a minimum of stability even improving Strategic q Innovation
q Engine & Mobile: Transportation market retraction in the second half of FY12 due Core Business Futureleadtime
Growth not aligned
Organizational Health
Execute development program. Mandatory product training in a
3 Develop low cost sources for strategic raw materials C12 Margin Ricardo Nechar Jun-14 Process
C5 q Division and Sales Company are not properly aligned in order to support business (ROS) Engine &Mobile Dislodged training and development programs. Not joined continuous monthly schedule. Monitor HPT's two new ones every
financial
June-14 results. The business units synergy were not explored and the division was not fully integrated in the Jacareí site. Division staff Focus 1- Delivery with the market 2- Poor customer retention q Margin Protection (Shigueo Enamoto)
C13 PPI Analysis: l in a university type structure year Engaged and accountable personnel C Grez (Edson Iwamura)
strategy to EURO 5 emission standard implementation - Implement actions to increase market share at Transportation market and aftermarket Poor working conditions at the Diadema plant,
is not consolidated and the team has to be developed, a business strategy must be established to support the division growth plan. q Premier Customer q Strategic Market
(Debora Horta / Gilfredo Correa)
C2 Win Rate
- Develop 400/600 ECO and new media and modules Core Business m ergonomics and well being Execute investment program Motivated shop floor C Grez June-13
q Best Place to Work
C6 q Some field salesmen not focused on Fluid Connectors business 4 Source from LCC Divisions on competitive products C12
0.52M
Margin Marcos Venanzi Jun-14 q Engine &Mobile and Hydraulic: Delay on launching lube filters for FPT ($1M), no new a - Long Internal processes from Inquiry to shipment n
Lack systemic internal communications at Parker and
throughout the region
Monthly meetings, engage admin personnel into operational
meetings
Accountable, engaged personnel
with growth plan C Grez December-13 Experience (Luiz Moura) Growth
3- Lack of focus from Sales Co 4- Poor internal support to Sales Co Win Strategy
C13
Sales
PPI - Develop new lube and final fuel filters, following LEIF and ECO concepts Information systems out of date and cumbersome to Resolve all JDE Operational issues and package management reports Reduce leadtimes increasing
(Uwe Kraus) -$20.4M Foundation
C7 q Direct sales force acting on customers based on Distribution customer profile development neither product localization for off-highway equipment ($3M) - Increase productivity by implementing new assembly line for spin-on and filter element
- Current inventory policy reduces flexibility o reach operational excellence throughout the organization available capacity and productivity C Grez August-13
Analysis: q Division + Sales Co. (Edevaldoare
Bonfim) (Win Certification, Pricing, Procurement)
C3 - More focus on internal processes than in VOC develop plan to consolidate monthly self audits aligned with Win Continuous improvement (salesmen generalists) (internal sales and product specialists)
C8 q Poor dedicated structure at Parker in order to support Distribution 0.40M LISC Hydraulic
p Lack of a culture of continuosu self audits Certification sustainable T Silva December-13
Alignment
5 Customers rationalization C7 Marcos Venanzi Dec-13 - Lack of expertise on development of lube filters, both Parker and FPT - Silo mentality and lack of synchronization between areas Not incorporating Kaizen event conclusions into daily Schedule One Kaizen event a month and a monthly lessons learned Continuous improvement Core Business q Operational
C9 q Lack of incentive programs and performance evaluations to Distributors Sales Win Rate - Take advantage of being the only international company manufacturing in LA to increase share on OEM
- Lack of proper tools to enhance communication and customer relationships q activities meeting sustainable T Silva July-13
Initiatives q Acquisitions
C10 q Poor quotation follow-up
C10
- No new application of hydraulic filters by S.Co team b - Lack of commercial and logistics alignment between sales companies and manufacturing divisions
r Weak S&OP process Align Daily production meetings with a robust S&Op Process better forecast, improve earnings C Grez
q Low competitiveness ( Product line ) FROM
July-13
TO ( Sergi o Montei ro) Excellence
- Product localization will be the most important competitive tool Parker Market Potential
5- (Tadeu
Distribution
Nunes) network not properly structured 6 - Channel strategy not clearly defined Prioritized Actions: 8

c - Lack of focus and training to the sales force inside Brazil and out A q Channel Strategy (Marcelo Lopes) 1 3

C11 q High dependence of imported products (high exposure to exchange rate fluctuations) 0.07M Win Rate
6 Logility Implementation C1 Danilo Miranda Jun-14 q ROS below plan 6p.p. due to: - Take advantage of S.Co capilarity to strenght Parker penetration - Lack of product specialists COMPONENTS
Parts per year Total Sales (USD)
Price
average
Parts per year
Total Sales
(USD)
Price Parts per year
Total Sales
(USD)
Price
(sales, engineering, inventory, services...) FY1 2 v s FY0 5
(too many small customers buying direct)
12a 4 5 7c

q Accountable Mgmt
15

Sales Lead time RC2 + AC3 RC + AC

USD
RC2 + AC3
RC + AC
average USD RC2 + AC3
RC + AC
average USD
(Al exa ndre La ba t)
Sa les dro p o f
14
10

C12 q Jacarei Site: Margin decrease due to slow price increase implementation (analysis and
$ 1 ,6 2 2 K
- Provide service to steel mills, oil &gas and pulp & paper sub-segments
9d

d - Price and delivery mismatching the competition q Innovation

Impact
or 13% 11 6 7b 13b 13a

Expansion Valves 8.868 419.040,37 47,25 142.478 4.365.542,37 30,64 17000 599.014,26 35,24

- Gross Margin reduction of 3.5 p.p. as a consequence of non-recovered costs increased

7a

q Margin Protection
9b

Process
12b

Solenoid Valves 1.628 100.081,31 61,48 87.517 2.514.489,00 28,73 2000 66.082,30 33,04
negotiations too slow for OEM accounts) Effective price increase for key OEMs customers and price 0.83M
SPI & MCR - Diagnosys , Prevention and Theraphy concepts - Inexistent business to business electronic platform
Filter Driers 16.412 136.663,87 8,33 350.430 2.026.447,00 5,78 35000 232.755,45 6,65 Item Task Metric Champion
Target ROS and Sales
2

(Luiz Moura)
9a
Date Impact
7 C12 Bad Factor Marcos Venanzi Jun-14 - No strategic procurement resources - Foster sales to MRO and small HPU manufacturer through Sales Agent - Retail program not prepared to service customers direct Pressostatos 1.405 14.829,91 10,56 57.433 1.542.538,00 26,86 12000 370.641,00 30,89
(Wi l s on Ri coy) 7- Significant increase of material cost Lopes) 8- Inflation not offset by productivity
Current FY13 Gross Margin - 34.5% (rolling) x 38.5% (plan) lists Sales
- No system to grow closer to distribution with reporting and accountability Prioritized Actions: Liquid Indicator 3.308 60.662,95 18,34 60.302 755.535,00 12,53 5000 72.042,82 14,41
(Marcelo 1
Implement logistics and inventory strategy for main pneumatic items
(cylinders, valves, FRL´s and accessories) aligned with market
Sales J. Vilela Oct-13 $1.0M 9c

Margin
C13 q Poor procurement initiatives CAGT Ball Valves 4.412 138.474,15 31,39 67.878 2.086.351,00 30,74 12000 424.167,53 35,35
as % Win Strategy
of sales improvements or passed on to customers
Customer

- No pricing strategies in place

2 Implement market focused cells at order entry E. Guimaraes Jan-14 Effort
- High Brazil labor costs and logistics not competitive in the region Retention

Win Rate - Develop Breathing Air system to sell in coutries other than Brazil in LA e - Gross margins only analyzed at month's end (after the fact)
Solid core and filter drier 7.251 183.883,03 25,36 68.380 758.068,00 11,09 12000 152.988,28 12,75
Foundation 3 Rearrange regional sales teams by technology Sales E. Bonfim Jun-14 $1.2M

Future Growth (10%) 8 Products rationalization

C1 0.20M
Lead time Marcos Venanzi Jun-14 - Lack of tools such as FGV-data
Shell filter drier 266 22.603,32 84,97 8.071 411.392,00 50,97 130 7.620,26 58,62
(Win Certification, Pricing, Procurement)
C3 Sales - Provide service to oil refineries and oil &gas sub-segments - Quoting and pricing process not centralized at Pricing Cells Oil Separator ( hermetic/ Flage ) 806 40.908,07 50,75 7.278 716.741,00 98,48 1200 135.903,08 113,25 4 Assign 4 EM product specialists to regional sales offices Sales J. Vilela Jan-14 $2.0M

F1 q Sales plans are not deployed accordingly LISC

GasGen f - Plant not aligned with economic lots Total 44.356 1.117.146,98 849.767 15.177.103,37 96330 2.061.214,97
Future Growth
F2 q Poor Marketing initiatives
- Sales expenses and agent comission increase as a consequence of investments in platforms Sporlan Products Essen Tech Alternative Supplier development
5 Implement distribution tiering strategy Sales A. Labat Dec-13 $0.8M

- Keep offering local made N2 Generators for Oil & Gas Off Shore application q Customers Complaints ( Late deliveries) Prioritized Actions:
Provide interaction and technological exchange of Lead time other than Engine &Mobile and Hydraulic 9- Costs not competitive 10- Lack of clear strategy for key markets 6 Implement customer rationalization, moving small customers to distributors Sales E. Guimaraes Oct-13 $0.4M

F3 q Lack of skilled people to prospect potential acquisitions, due diligence and integration 9 F6 - Eduardo Rampinelli Jun-15 - Strength relationship with engineering companies by assigning the product specialist for that B
engineering with other Fluid Connectors Divisions LISC Future Growth 7a Accelerate PCI implementation with local suppliers Material Cost D. Horta Dec-13 $0.4M

process (defense and growth on strong markets)

- SCo allocation increase, actually division goes itself to some specific customers on CAGT - Capital project managment through PES - No mapping of what the market id requiring and/or major opportunities 7b Increase BCC items as a % to total spending Material Cost D. Horta Oct-13 $0.2M

F4 q Poor sales growth through system solution initiatives (only IPT project) Career plan: Project with Aon Hewitt concerning Salary vs Productivity Process - Lack of product specialists oriented to markets 7c Leverage material cost savings through supplier symposium Material Cost D. Horta Mar-14 $0.5M

F5 q Focus on product sales as opposed to value added system solutions

10 O1 -
support
Carolina Sosnowski Jun-14 and Process Platforms. - Conclude product specialist team restructuring g - Lack of mapping of competitor activities Implement price increases for contracts, historical prices, T&B aftermarket,
Position structure 11- Lack of clear growth plan for PES 12- Lack of long term vision related to product
8
tail and bad factor as identified on POP event
ROS G. Correa Jul-13 $0.8M

Distribuição
- Lack of innovation in value added services, oriented to end of year results

Divisão 2
1. Lack CIC statistics
F6 q Lack of competitiviness due to technological gap on manufacturing process - Redefine market priorities 9a Global FRL launching ROS J. Vilela Sep-13 $0.3M

Divisão 1 Divisão 3
- Poor interaction between divisions in the region

Divisão 4
Productivity Increase at Assembly areas and TBO > 8% by 0.11M Miscelaneous C q Sales and market follow througt 2. Lack of project backlog development / innovation
h - Lack of alignment, incentive and knowledge of PES capabilities and reach
9b Implement P1E cost reduction project ROS S. Enamoto Dec-13 $0.2M

Organizational Health (15%) 11 O4 Productivity Eduardo Ikeda Jun-14

FY14 End (ROS) - Develop and implement succession plan - Improper absorption method for systems and projects Organizational Health 9c Implement P1A cost reduction project ROS S. Enamoto Dec-13 $0.1M
3. Lack of customers gap analisys 95

O1 q Career development plan is not effective, affecting motivation and engagement and,
100
87

- Assigning dedicated teams for each filtration platforms to help on management and decision making:i - Lack of a penetration plan for strategic lomg term growth markets (i.e.: Life Sciences)
90

Future Growth
79
80 Accelerate six sigma implementation through one addtional black belt and
73 9d ROS S. Scassola Mar-14 $0.2M

Improve absorption on the machining area through additional Future Growth 13- Work environment does not foster employee 70
69 67
6466
14- Lean enterprise implementation pace
two green belts

Percent Favorable
60

consequently, productivity/ROS. Current situation: 14% of employees expecting to be 0.11M Absorved - Poor acquisition integration team allocation 60
57
53 54
57

- BDMs, non-manufacturing cells

52 52
48 Execute Win Map and create strategy to defend and grow on Aluminum,
12 Eduardo Ikeda Jun-14
O5
q Acquisition (Hydraulic): HDA lack of sales due to industrial segment retraction and
50 46 10 ROS J. Vilela Dec-13 $0.5M
41 43 41 41 Steel Mill and Mining markets

recognized according to their job performance (Gap: 86%) volume on the product mix (ROS) hours
- Properly allocations
- Poor due diligence in place for prospects D q Lack of business strategy for CIC LA ACTIVITY STEPS
motivation and engagement OWNER A-G TARGET DATE
40

30
32

not aligned with division challenges 11 Create growth strategy for value added systems and services through PES ROS L. Gomes Sep-13 $1.0M

j - Lack of an acquisition pipeline at group level, not aligned with WW manufacturing groups
20

1 Develop an A3 LISC to support performance improvement Adriano Oliveira B May/13

loss of sales on some MROs and OEM Industrial ($3M), once we believed S.Co Organizational Health
10

O2 q Managers don't have a clear communication with employees related to targets, Rationalize bar stock at Nocams in order to reduce number 0.05M
- Outsource IT support to provide softwares to matches' needs and acquire existing software to help on product Follow-up: 2 (Global Survey / Labor Litigation)
Develop a tooling or bench marking with seal division to implement Tatical or similar report to CIC division Fernando Santos C August/13
0
Outcomes Reward and
Recognition
Senior
Leadership
Tools and
Resources
Two-way
Communication
12a
Assign resident application engineer to work at MAN / other transportation
customers
Sales S. Enamoto Mar-14 $3.0M

13
of Setups and increase productivity
O4
(ROS)
Set-up time Ricardo Nechar Jun-14
would be in charge of that. development Organizational Health Target
FY13 FY14
E q Quality - Refrigeration lack of Quality Certification ( ISO 9001 2008 ) 3 Project Backlog development Carlos Costa C July/13
Parker Hannifin Overall
Best In Parker
Auto-Brazil Automation
Diversified Industrial Norm
Belo Horizonte
12b Establish roadmap for hybrid technology introduction to mobile market Sales G. Batista Jun-14 $0.6M

performance and business strategy who affects a proactive behavior and, - No social responsibility or sustainability plan at group level, only spots of individual effort
Cause Task Focus Initiative Priority Champion Completion Q4 Q1 Q2 Q3 Q4 4 GAP analisys report development Carlos Costa C July/13
- Structure strategic purchase team Premier Customer 13a Front gate, reception and locker rooms renovation
Empowerment
Survey
L. Gomes Dec-13

consequently, productivity/ROS ("Senior leadership gives employees a clear picture of k - No culture of continuous feeddback. PA process seen as a distraction a Reduce Inquiry to shipment Macro lead time to 15 days on standards Core Business Experience 1 T Silva Dec-14
Copper Filter Supplier Process not appropriated 5 Distribution, Representatives and new Customers development in order to support sales growth
15- Poor deployment and focus hinder
Carlos Costa
strategy execution
D August/13

Establish new communication channels between managers q Organic Growth (CAGT): Breathing air project did not reach expected results due to lack of - Take advantage of pricing activities to support Sales Empowerment
Train every sales company and dedicated sales resource into all 13b Finalize and implement job title / salary project C. Sosnowski Dec-13
Survey
E
Parker
6 Develop a quality certification plan for Refrigeration VS Adriano / Sergio December/13
the direction in which Parker is headed" - Senior Leadership Dimension: 38%). - Lack of cross regional opportunities open/transparent throughout the organization c Instrumentation products at least once a year Core Business Channel Strategy 1 M Catto Jun-14
Market Potential
and employees, e.g.: monthly business meetings, quarterly Productivity - Review S.Co allocation criteria - Trainee program not expanded to students or part time apprentices
d
f
Review all local price lists based on competitive alignment
Revise all core A parts to align breakeven quantities with economic lots
Core Business
Core Business
Margin Protection
Margin Protection
1
1
M Catto
F Delben
Dec-13
Dec-13 Parts per year Total Sales (USD)
Price Parts per year Total Sales (USD) Price Parts per year Total Sales
Price
7 Copper Filter supplier process improvement, new supplier development or insourcing Marcos Correa F July/13 14
Accelarate Lean implementation through partnership with Lean
Institute Brasil
ROS S. Scassola Jun-14 $0.4M

O3 q Working conditions and environment are not suitable for basic needs (locker room, 14
journal, PPP feedback, etc. Create "rewards and
O1 -
support
Carolina Sosnowski Jun-14 response from LINDE ($2M) - Implement "Road Show" and "Blitz" activities to promote products/technologies l - Dislodged training and development programs. Not joined in a university type structure p
develop plan to consolidate monthly self audits aligned with Win
Certification
Organizational
Health
Accountable Mgmt
process 1 T Silva Dec-13
COMPONENTS
Filter Driers
RC2 + AC3

16.412
RC + AC

136.663,87
average
USD
8,33
RC2 + AC3

350.430
RC + AC

2.026.447,00
average USD

5,78
RC2 + AC3

35000
(USD)
RC + AC
232.755,45
average USD

6,65
8 Dry test implementation for Fluid Control process Amarildo Moraes F August/13
15
Improve strategy deployment and execution through management
standard work, layered audits and stand up meeting redesign
Timely
Execution
E. Iwamura Aug-13

Potential G
Organizational 9 Improve the current work conditions, office, workstations, desks, etc.. Marcos Correa July/13

restaurant, parking, equipment, etc.), affecting pride to work at Parker and, recognitions" program to reinforce the good performance. - Diverse and not common benefits throughout the organization q Schedule One Kaizen event a month and a monthly lessons learned meeting Health Operational Excellence 1 T Silva Jul-13
Organizational F Share parts Share U$
Share Share 10 To hire process engineering ( FC and CF VS´s process improvement ) Marcos / Carolina G June/13

consequently, productivity/ROS. Environment Survey: Implement actions mapped by the q Greenfield project (Process Filtration): Lack of market knowledge and skilled people to run m - Poor working conditions at the Diadema plant, ergonomics and well being r Align Daily production meetings with a robust S&OP Process
Prepare plan to restructure and stand alone as a division in Brazil. Include
Health
Organizational
Operational Excellence 1 C Grez Jul-13
parts U$ 10 To hire a product and marketing specialist for Fluid Control VS Marcos / Carolina D-G June/13

n - Lack systemic internal communications at Parker and throughout the region s site, opex, shared resources Health Operational Excellence 1 C Grez 13-Dec 4,68% 6,74% 14,67% 18,23% 11 Develop a PPP, PA and include all employees of site talent development Marcos / Carolina G July/13
O4 q Poor productivity at Assembly areas with avg 20pcs/hr/ee for hose assemblies and "Focus Group" for improving organizational environment, Productivity this business ($3M) - Poor visibibility on inventory inside and outside the organization
Develop a plan to insert Instrumentation Engineering capabilities for value
G
Follow-up: Plan follow-up on a quarterly basis
12 Include team at FY14 talent process and assessment Marcos / Carolina Sep/13
15 O1 - Carolina Sosnowski Jun-14 h added projects at PES Future Growth Innovation 2 C Grez Jun-14
Fluid Control VS Lisc and productivity low performance
50pcs/hr/ee for Tube Bending. Poor productivity iniciatives at machining area (Avg prioritizing working conditions (locker rooms, restaurant, support o - Information systems out of date and cumbersome to reach operational excellence i Execute channel strategy Future Growth Strategic Market growth 2 C Grez Jun-14
13 Monthly meeting, results up date and celebration Marcos / Carolina G May/13

Nocam Set-up time of 155 min) equipments). p - Lack of a culture of continuosu self audits o
Resolve all JDE Operational issues and package management reports
throughout the organization
Organizational
Health Operational Excellence 2 L Fernando Aug-13
14 Develop an independent structure for main positions ( Process Engª, Quality, FC Customer Service ) Marcos Correa G June/13

q - Not incorporating Kaizen event conclusions into daily activities 15 Positions, wages and benefits analisys and corrections Marcos / Carolina G June/13

O5 q Absorption of items outsourced to Divisions and phased out (9404 quick coupling) was Organizational Health e Daily GM reports and weekly analysis of price exceptions Core Business Margin Protection 3 A Viapiana Jul-13 Team not seem properly motivated mainly due to work conditions

20
16 CIC site integration ( Include CIC division in site information e events ) Carolina Sosnowski G on going
- Excessive level of interruptions in the administrative and productive flows Execute development program. Mandatory product training in a continuous Organizational
Organizational team not enough ( Product & Marketing specialist, lean)
l monthly schedule. Monitor HPT's two new ones every year Health Operational Excellence 3 K Itoi Jun-14 17 To hire a dedicated people for lean innitiavies Marcos / Carolina G July/13
- Lack of standardization of daily activities and engagement between commercial and production side
q Acquisition: Incomplete integration process due to lack of resources to manage it
Organizational
not replaced by other additional volume in the local manufacturing mix m Execute investment program Health Best Place to Work 3 C Grez Jun-13
Lack of formal assessment PA, PPP and Feedback 18 Product line analisys, current items and volume, new items and volume suggestion, total Market our participation and opportunities Carlos Costa D July/13
r - Weak S&OP process Organizational
G No talent development 18 Product line analisys, current items and volume, new items and volume suggestion, total Market our participation and opportunities Fluid Control D July/13
O6 q 1Q & 2Q Hose Assembly Volume Shortage (1Q & 2Q FY13 -18% vs. 4Q FY12) - Lack of analysis of risks in our plans and preparation of contingency actions
n Monthly meetings, engage admin personnel into operational meetings Health Operational Excellence 3 C Grez Dec-13
Team do not properly recognized and rewarded
Follow-up: q Organic Growth: Lack of resources to manage capital projects and division has lost talents
Align Commercial strategy within the region and manufacturing strategy with Division/Sales Co
b WW group Core Business alignment 4 C Grez Jun-13
No independent structure just commum service, partial support On Schedule
-Excessive mentality of producing numbers to please management without business fundamentals
Slipping
- No due analysis of all resources required to attain goals g Map all major regional competitors with FTE and inventory Future Growth Strategic Market growth 4 C Grez Sep-13 Positions, wages and benefits not updated
to the Group and competitors - no succession plan in place - Lack of analysis of interactions between simultaneous projects at group, division and sales company level j
Schedule visits to preliminary candidates, fill a prospect pipeline to present
to LAG Future Growth Acquisitions 4 C Grez Jun-13 Site CIC team integration ( Indicators and events )
Late
Organizational Accountable Mgmt
k Close FY13 PA process on time with synchronization in talent review Health process 4 K Itoi Sep-13
No Lean initiatives Follow-up: Plan Monthly follow-up
q No dedicated team for each filtration platform, other than sales team Follow-up: Plan follow-up on a quarterly basis
q Limited IT support related to EDI, RFQ, Pricing and tools to speed process up
Team not seem properly motivated mainly due to work conditions
Organizational team not enough ( Product & Marketing specialist, lean.. )
Lack of formal assessment PA, PPP and Feedback
No talent development
Team do not properly recognized and rewarded
No independent structure just commum service, partial support
Positions, wages and benefits not updated
Site CIC team integration ( Indicators and events )
 Agenda

 A Parker Hannifin
 Estratégia Lean da Parker
 Resultados e Lições Aprendidas

21
 Produtividade

Aumento de
79%

22
 Inventário

Redução de
37%

23
 Atendimento ao Cliente
Entrega em Dia (%)
Aumento de
5 p.p.

24
 Qualidade

Redução de
99%

25
 Metas claras e
mensuráveis

26
 TRABALHAR EM TIMES...
Vision $1B Sales - #1 Motion & Control Company in Latin America

Strategic Focus Core Business Future Growth Organizational Health

Premier Customer Experience

Strategic Market Growth Best Place to Work

Division + Sales Co. Alignment

Initiatives Acquisitions Operational Excellence

Channel Strategy

Innovation Accountable Mgmt Process

Margin Protection / Improvement

Win Strategy
Foundation
(Win Certification, Pricing, Procurement)

 The same strategy

 The same way

 One supporting each other

27
 EXECUÇÃO
DISCIPLINADA E...

...PRESENÇA
NO GEMBA
28
 Engajamento e Envolvimento das Pessoas

29
OBRIGADO!