“Learn From The Best”

Supply Chain Pioneer Presentation

Supporting Innovation In The Supply Chain

Larry Golen

Vice President & General Manager

North America 1

Lennox International OVERVIEW (2013)

Refrigeration Heating & Cooling

Residential

Products Split Systems

Indoor Air Quality Rooftop Package

Split Systems

Rooftop Package Chillers / Terminal

Split Systems

Food Preservation

Industry Cooling

Geography US / Canada US / Canada Europe MEA Global

2013 Revenue US $ million

$ 1583 $ 844 $ 772

$3.2B in revenue

Source: Lennox International 2013 results 2

Commercial

3

Heatcraft Worldwide Refrigeration GLOBAL PRODUCT BRANDS

Americas Europe Asia Pacific / Australia

Global Operations NORTH AMERICA

4

Heatcraft North America – Commercial Refrigeration Stone Mountain, Georgia, USA

Brands Bohn Larkin Climate Control Chandler

Manufacturing Locations Stone Mountain, GA Tifton, GA

Region North America

Global Operations NORTH AMERICA

5

Heatcraft North America – Supermarket Stone Mountain, Georgia, USA

Brands Kysor/Warren case Kysor/Warren systems

Manufacturing Locations Columbus, Georgia (2) Mexico City, Mexico

Region North America

Global Operations MEXICO (JOINT VENTURE)

6

Bohn de Mexico Mexico City, Mexico

Brands Bohn FB (coils, doors, transport)

Manufacturing Locations Queretaro, Mexico Merida, Mexico (systems) Monterrey, Mexico

Region Mexico

• Restaurant • Convenience • Institutional

• Grocery • Hypermarket • Drug / Dollar

• Processing • Storage • Distribution

• Process Cooling • Data Center • Energy

Global End Markets GLOBAL CUSTOMERS

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Food Service Supermarket Cold Storage Industry Cooling

Company names are trademarks or registered trademarks of their respective companies

8

Strategic Supply Chain Approach

Supply Alignment (SA) Value Analysis & Engineering (VAVE)

1

2

3 4

5

6 Value

Engineering

Design

For X

Collaborative

Product

Development

Supply Chain

Reconfiguration

Value

Stream

Analytics

Taxonomy

Strategy

• Strategic suppliers strategy

• Make versus buy strategy

• Supplier ops improvement

• Integrated supply chain

• Supply market analysis

• Cost driver analysis

• Should-cost analytics

• Joint cost improvement

• Common characteristic

part families

• Enterprise volume pooling

• Supply base segmentation

• Voice of customer

• Complexity reduction

• Alternative design

• System optimization

• Product platforming

• Materials substitution

• Specification

rationalization

• Manufacturability

• Quality and Warranty

• Supplier engagement in

early PD process

• Design optimization with

suppliers

Innovating

with the

Supply Chain

Innovation Process DEVELOPMENT STRATEGY

Development Process:

High-level Planning Process:

Vision

Discovery

Objective:

Objective:

3 Year Product Plan

Build Business Case

Execute external search

Expand set of external options

Evaluate options

Identify best option

Identify integration needs

Identify near-term shopping list

Strategy

Scoping

Broaden option set:

Expand definition of need

ID “ideal solution”

Explore internal sources

Identify potential external options

Prioritize need for external search

Identify long-term wish list

Product Roadmap

Development

Conduct due diligence

Structure/negotiate the deal

Integrate

Expand near-term shopping list as

required

Value Analysis and Value Engineering PROCESS OVERVIEW

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Taxonomy

AQFD Supplier

Workshops

Design for X

Value Stream

Analytics & Cost

Modeling

Modularity

Breakdown

into Sub-

systems

Prioritized

Sub-systems

Prioritized

Characteristics

Supply Chain

Re-

configuration

Complexity

Reduction

Supplier

Collaboration

& Pricing Idea collection &

Implementation

SCM Strategy,

Total Cost of

Ownership

Structure Product

Breakdown for

Analysis

Create Options

& Prioritize

Evaluate Options Costing Of

Priorities/ Targets

Implementation

Component-

level Teardown Idea

Generation

Open Innovation COMMERCIALIZATION SUCCESSES

Composite Machine Enclosures

Innovative solution for large refrigeration rack systems

Approximate 40% reduction in cabinet structure weight

Robust structural design using stress skin composite panels

High resistance to chemical / environmental conditions

Sustainable design: no VOCs used

Fewer structural seams reduce opportunity for water leaks

SunSource for Refrigeration

Enables grid-free operation during times of peak energy usage

Pairs a Heatcraft microchannel condenser with the Lennox SunSource solar energy system

Cuts energy bills, lowers emissions and reduces refrigerant charge

Supplies excess electricity to the building or power grid

70% reduction in refrigerant charge with microchannel heat exchanger

EC Motors from Treadmills

Energy efficient motors from outside our traditional supply chain

Up to 75% efficient

Most energy efficient motor available for evaporators

Drop-in replacement for existing shaded pole and PSC motors

Typical payback on motor replacement 18-24 months

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Thank you for your attention!

Questions?

Heatcraft Worldwide Refrigeration OVERVIEW