Managing a global supply chain with the use of local sourcingSøren F. KnudsenSales and Marketing Director

EWEC, Athens, 1 March 2006 . Side 2

It has been said that arguing against globalization is like arguing against the laws of gravity.

Kofi Annan

Globalisation in the wind turbine industry

EWEC, Athens, 1 March 2006 . Side 4

What is globalisation?

EWEC, Athens, 1 March 2006 . Side 5

Globalising the industry

• Geographic market diversification

• Global wind turbine manufacturers

• Exchange rate differences

• Rising shipment costs

• Requirements for local production

• Optimising the supply chain

Stronger demand for global productioncapacity among sub-contractors

EWEC, Athens, 1 March 2006 . Side 6

Market growth outside Europe

2%

20%

53%

25%

2005E

Europe

America

Asia

Rest of the world

2%

7%

87% 4%

2000

4,496 MW

Approx. 11,000 MW

EWEC, Athens, 1 March 2006 . Side 7

Globalisation at LM Glasfiber

1%5%78%

16%

2000

15%

19%

30%

36%

2005

11%

15%

49%

25%

2005

3%

9%

76%

12%

2000

Europe

America

Asia

Rest of the world

Sales: Employees:

EWEC, Athens, 1 March 2006 . Side 8

Challenges

• International expansion strategy

• Organisation and learning

• Management of subsidiary

• Systems, flexibility and response times

• Supply chain

Our customers must be able to buyblades of a consistently high

quality everywhere in the world

EWEC, Athens, 1 March 2006 . Side 9

Value chain changes - before

EWEC, Athens, 1 March 2006 . Side 10

Value chain changes - today

EWEC, Athens, 1 March 2006 . Side 11

Partnering on the demand side

Before:• Standard blades for several customers• Annual negotiations • Fixed orders• Closed R&D

Now:• Custom-made blades• Framework agreements for up to ten

years• Forecast• Integrated development with many

iterations• Local production

EWEC, Athens, 1 March 2006 . Side 12

Partnering with a few major suppliers

Before• Many vendors• Short-term contracts• Looking for the best price performance• Vendor based R&D• European based vendors• Inventories in 3 locations

– Vendor, supply chain, LM Glasfiber

• Fixed terms/quantities• Order per delivery

Now:• Manufacturing close to our sites

– Plans for India

• Long-term contracts 2-3 years• Consignment stock• Joint development• Tailor-made to LM specification• Global production• 1 stock

– Consignment

• Electronic forecasting and EDI• Market share based

EWEC, Athens, 1 March 2006 . Side 13

Hardware and software in the supply chain

Hardware:• Components and materials specified

centrally by R&D• Local and global suppliers qualified

and audited in an ongoing process• Comprehensive access control at all

locations• Ongoing auditing to ensure

compliance with QA procedures

Software:• Local procurement and logistics

functions upgraded with respect to resources and know-how

• Training in joint LM standards and procedures

• Benchmark and knowledge sharing among our companies

LM Glasfiber sources a consistently high quality to all our plant locations from local suppliers or from global suppliers with a local presence, which is one of

the reasons why we can supply a uniform product worldwide

EWEC, Athens, 1 March 2006 . Side 14

Benefits for the wind turbine manufacturers

We optimise the supply chain for the wind turbine manufacturers by offering:

• Reduced market risk • Local supply opportunities in local

currencies • Local employment at the lowest cost• Reduced shipment costs• Lower working capital • Lower CAPEX requirements

Triple-Win situation for local area, wind turbine manufacturer and LM

EWEC, Athens, 1 March 2006 . Side 15

Partnerships lead tocomplext relations

Supplier WTMLM Glasfiber

Before

Now

Supplier WTMLM Glasfiber

KAM

R&D

Q

Logistics

Finance

Service

Purchase

R&D

Q

Logistics

Finance

Service

SB

R&D

Q

Logistics

Finance

Service

KAM

R&D

Q

Logistics

Finance

Service

Our strategy and vision

EWEC, Athens, 1 March 2006 . Side 17

Value chain changes - tomorrow

www.lmglasfiber.com