The Workbook: Conducting a Supply Chain Opportunity Assessment

1. The Workbook:Conducting a Supply Chain Opportunity Assessment Supply Chain Optimization Team Project Kickoff - October 1998

2. Work Session Outline • Discussion Topics • I. Work Plan • II. Leveraging the Mobil Analysis • III. Mapping to Supply Chain Drivers • IV. Quantify the Benefits • Appendices - Project Result Examples • Solution Approach • Templates: • Crude Selection, Product Supply, Customer Segments • Deliverable Samples • Data Requirements for 12/31/98

3. 1 2 3 What Problem Are We Trying To Solve? What problem should we work? Problem Level “Optimize all networks” Maximize potential of one individual network “Make Things Happen Right Every Day” inside each operating unit of an individual network

4. 5. 2. 3. 4. Define Deliverables Where to Start on 10/15 October 15 Interpret Mobil Analysis Define Solution Approach 1. 3 Weeks MobilCheckPoint Define Project Workplan Present Results Process Improvement SE L E C T E D ME T H O D S Quick wins Identify Dollar Benefits Analysis Pilot After 12/31 Metrics Definition 8 Weeks Best Practices Research Specific Recommendations MobilCheckPoint December 31 Develop ChangeProjects

5. Overall Solution Approach Supply Network Orientation Project Team Physical Analysis Process Analysis “As-is” Analysis (Current Reality) Root-Cause Analysis “Ah-Ha’s” • Emerging Findings • Conclusions • News Items • “As-is” Decision Process • Mentions Analysis • “As-is” Metrics • Balanced scorecard Opportunity Identification &Analysis Supply ChainModel Sizethe Prize 12/31/98 • Network Analysis • Inventory Analysis • Manage N/B/D • Projected Benefits SpecificRecommendations 1 Best-Practices Define Change Projects 2 • Outside Oil Industry • Oil Industry • Best-Practice Principles Process Redesign Stakeholder Analysis 3 • Process Definitions • Metrics Development • Future State • Stakeholder Ident. • Stakeholder Needs • Strategy Draft What problem are we trying to solve?

6. What we have to work with Mobil Team research to date... I. NBU definition and detail II. Physical flows and system nodes III. High level processes and decision making maps IV. 30+ Decision processes, owners, stakeholders V. Improvement opportunities from Phase I & I VI. Some root cause analysis VII. Chesapeake modeling of one network’s processes VIII. A review of existing metrics - with misalignment noted

7. Leveraging Mobil Analysis Restoring “traction”... • Organize by supply network: • Team • All analysis 1 • Understand value drivers: • Physical • Process 2 Categorize networks by supply chain drivers 3 Quantify benefits Prioritize projects 4

8. Each Network is a “Different Animal” Analysis sequence is very important... Understand crude and product regulatory environment 1 Know all the assets: Facilities: refineries, pipelines, terminals, ports Knowledge: exchanges, processing, trading, markets 2 Know, model and anticipate your competitors: both facilities and strategies 3 • Have a solution approach - framework that manages: • Processes, Organization, Measures & Policies • Functions (and/or facilities) 4 Discover: Where are the benefits, how large Acknowledge: Change takes time, stepwise approach makes sense 5

9. Define the Supply Networks 6 Russell- Susan Ron & Lynn Supply - Trading 5A 4 Ex-Paulsboro 5B Joliet 1 Torrance as a Metrics Model Beaumont Retail Market Share Chalmette Greater than 20% 10-20% Less than 10% 2 3 Paul

10. Sponsors Brian Baker NAM&R John Simpson ST&T VP Team 1Torrance 2Beaumont 3Chalmette 4Joliet 5Paulsboro 6S&T Steering Team Crude Supply Mobil: PwC: P. Feder Ted Shore Greg Berry Ian Viney Work Team Tom Meador Frank Wilson Roger Conant Ed Sammler Ken Lorang Lisa Adams Ken Lorang Rick Ellison Susan Johnson Pat Daily Trading/Feedstock Mobil: PwC: L. Sievers DemandForecasting Mobil: PwC: R. Pell Other... Mobil: PwC: R. Brennan Organize by Network and Process Where do you best fit?

11. Network 2 Network 5 Trade, Exchange Schedule & Transport Crude - F/stocks Trade, Exchange Schedule & Transport Crude - F/stocks Trade, Exchange Schedule & Transport Crude - F/stocks Trade, Exchange Schedule & Transport Products Trade, Exchange Schedule & Transport Products Trade, Exchange Schedule & Transport Products Set Price &NotifyCustomers Set Price &NotifyCustomers Set Price &NotifyCustomers Develop Rack &Bulk Customers Develop Rack &Bulk Customers Develop Rack &Bulk Customers Set Price & Notify Customers Set Price & Notify Customers Set Price & Notify Customers Select & Acquire Crude - F/stocks Select & Acquire Crude - F/stocks Select & Acquire Crude - F/stocks Plan & Operate Refinery Plan & Operate Refinery Plan & Operate Refinery Develop an NBU - Network Context Model Torrance… A benchmark for the current Mobil metrics NBU NBU 1 NBU 2 NBU 3 NBU 4

12. Doing the Analysis - Physical 1Torrance 2Beaumont 3Chalmette 4Joliet 5Paulsboro 6S&T • Facilities • Refineries • Terminals • Owned • Other • Pipelines- Ports • Exchanges • Supply Volumes/Type • Crudes • Feedstocks • Products • Market Characteristics • Competitors • Customers • Price Setter • Mobil Characteristics • Strategy • Channels • Product mix • NBU Reporting • Organization See Appendix 5

13. Trade, Exchange Schedule & Transport Crude - F/stocks Trade, Exchange Schedule & Transport Products Set Price & Notify Customers Select & Acquire Crude - F/stocks Set Price &NotifyCustomers Develop Rack &Bulk Customers Plan & Operate Refinery Doing the Physical Analysis - Torrance • Facilities • Refineries • Terminals • Owned • Other • Pipelines- Ports • Exchanges • Supply Volumes/Type • Crudes • Feedstocks • Products • Market Characteristics • Competitors • Customers • Price Setter • Mobil Characteristics • Strategy • Channels • Product mix • NBU Reporting • Organization

14. Trade, Exchange Schedule & Transport Crude - F/stocks Trade, Exchange Schedule & Transport Products Set Price & Notify Customers Select & Acquire Crude - F/stocks Set Price &NotifyCustomers Develop Rack &Bulk Customers Plan & Operate Refinery Doing the Financial Analysis - Torrance Total for NBU • Fixed Capital Employed • Refineries • Terminals • Owned • Other • Pipelines- Ports • Inventories • Crudes • Feedstocks • Products • Other Working Capital • Receivables • Payables • Expenses • Fixed • Variable • Margin • Gross

15. Processes Identified Big hit potential Granular approach needed Trade, Exchange Schedule & Transport Crude - F/stocks Trade, Exchange Schedule & Transport Products Set Price & Notify Customers Select & Acquire Crude - F/stocks Set Price &NotifyCustomers Develop Rack &Bulk Customers Plan & Operate Refinery 30Processes

16. Processes Identified Big hit potential Granular approach needed Trade, Exchange Schedule & Transport Crude - F/stocks Trade, Exchange Schedule & Transport Products Set Price & Notify Customers Select & Acquire Crude - F/stocks Set Price &NotifyCustomers Develop Rack &Bulk Customers Plan & Operate Refinery 30Processes CrudeSelection TradingFeedstock

17. Processes Identified Big hit potential Granular approach needed Trade, Exchange Schedule & Transport Crude - F/stocks Trade, Exchange Schedule & Transport Products Set Price & Notify Customers Select & Acquire Crude - F/stocks Set Price &NotifyCustomers Develop Rack &Bulk Customers Plan & Operate Refinery 30Processes

18. Definitions: Processes Identified Big hit potential Granular approach needed Trade, Exchange Schedule & Transport Crude - F/stocks Trade, Exchange Schedule & Transport Products Set Price & Notify Customers Select & Acquire Crude - F/stocks Set Price &NotifyCustomers Develop Rack &Bulk Customers Plan & Operate Refinery Star Enterprise PW*Stars Koch Koch Refining PW*Stars Koch BPUSA+ Star Enterprise BPUSA + Star Enterprise Need a “Level 2.0” What’s Going on - by Process

19. The Action is at The Corners Breakdown A rated network = • Reduced inventory goal does not allow for product hedging strategies • Product traders global info not communicated to marketers or refinery • Plant operations has no idea of why a crude was purchased • Scheduling inside the plant not coordinated with crude selection process Global Trading Integrated Network Breakdown Breakdown Standalone Manufacturing • No one “owns” facilities needed to efficiently move product along a pipeline or common carrier • Spot product economics do not reflect margin deterioration in market

20. Semiconductor Paper Steel Asset Intensive = Improved Utilization Distribution Intensive = Reduce cost Define SCM Guiding Principles for each Network Best Practices • Support NAM&R Strategy (SOR) • 14% ROCE • Leverage Assets • Industry Cost Leader • Selective Growth in Attractive Markets • Process development to provide a mutually agreed customer service level: • Lowest laid down cost to the terminal rack • Optimum feedstock cost to refineries (location, quality, timing) • Maximize margins along an imbalanced supply chain • Flexibility, adaptability in a changing environment • Maximize economic utilization of assets (i.e. Inventory Management) • Facilitate Optimization of the supply chain • Capture the SAP potential moving to the next level • Fully aligned supply chain organization (Metrics) • Center of expertise/knowledge for: • Market intelligence • Logistics • Cost-to-produce (cost structure) • Optimization analytics • Decision Making (the science) • Leverage business relationships • Fully leverage ST&T partnership Best Practices Automotive Computers Material Intensive = Improve synchronization Best Practices Pharmaceutical Consumer Products Frito Lay

21. Downstream as a Supply Chain Asset Intensive Material Intensive Distribution Intensive Supply Push Demand Pull Plants Terminals Sites Crude Product Trading Exchanges Bulk Off The Rack ImprovedUtilization Improved Synchronization Cost Reduction • Lowest laid down cost to the terminal rack • Optimum feedstock cost to refineries (location, quality, timing) • Maximize margins along an imbalanced supply chain • Flexibility, adaptability in a changing environment • Maximize economic utilization of assets (i.e. Inventory Management) • Facilitate Optimization of the supply chain Process Improvements to Meet Customer Service Levels

22. Primary SCM Benefits Benefit Drivers OptimizeTrades& Exchanges ImprovedAssetUtilization Lower DistributionCosts Improved Customer Satisfaction ManageInventory Demand Planning Network 1 Network 2 Network 3 Network 4 Network 5 Network 6

23. Quantify the Benefits $ 3 MM ImprovedProcesses Best Practices NewMetrics Select Focus Areas $ 5 MM ImprovedProcesses NewMetrics Best Practices $ 10 MM ImprovedProcesses NewMetrics Best Practices Low Cross Network Selected Focus Areas High “To-Be” Value “As-Is” Value

24. PricewaterhouseCoopers Candidates Paul Feder (BSChE) • 31 years industry experience • 17 years consulting experience. • Expertise in crude selection, modeling & LP’s Robert Snell (BSChE, MBA) • 8 years experience with Exxon. • 10 years downstream consulting experience. • Expertise in strategy, operations and organization restructuring. Lynn Sievers (BA, MBA) • 15 years experience with Superior Burlington Resources, Torch Energy • 3 years consulting experience. • Expertise in oil/gas and NGL marketingand trading Ron Brennan (BSChE, BSCE) • 12 years technical experience. • 6 years consulting experience. • Expertise in decision support system design and implementation. Marty Stetzer (BME, MBA) • 18 years experience with Esso, Superior and Mobil. • 10+ years downstream consulting experience. • Expertise in downstream trading, supply and wholesale marketing. Susan Hulse (Europe) • 10 years industry experience with Exxon. • Range of roles in supply and distribution. • Expertise in supply-distribution operations and scheduling, transportation management. Russell Pell (BSChE, MBA) • 8 years experience with Exxon, 2nd year PwC consulting. • Refinery experience in planning, scheduling and process engineering. • Expertise in coordination of supply chain management, inventory management, demand and refinery planning.