Supply Chain
Steve
Conaway
–
Supply
Chain
Manager
Ryan
Kilcullen
–
Supply
Chain
Engineer
Investor/Analyst
USA
Tour
–
10
&
11
September
2012
Exhibit 99.3

AGENDA
•
Supply
Chain
Overview
–
Primed
and
ColorPlus
®
Models
•
Evolution of Order Entry
•
Production Planning
•
Manufacturing Models
•
Distribution Network
•
Transportation Optimization

SUPPLY CHAIN
•
Demand Planning
•
Capacity Matching
•
Made to Inventory
•
Made to Order
•
JH Warehouses
•
Customer Channel
•
VMI
•
Reload Centers
•
Customer Orders
•
Distribution Replenishment Orders
•
Rate Optimization
•
Mode Optimization
•
Spot Market Pricing
•
Centralized & De-centralized
Supply Chain Structure
Order Entry
Production
Planning
Procurement
Manufacturing
Distribution
Network
Transportation

Lower
Complexity
Supply Chain
Higher
Complexity
Supply Chain
SUPPLY CHAIN
Primed Supply Chain
ColorPlus
®
Supply Chain
•
Relatively small SKU set
•
Low complexity orders
•
Made to inventory
•
14 day lead times
•
Full pallet orders
•
7 manufacturing locations
•
Large SKU set
•
High complexity orders
•
Made to order
•
8 day lead times
•
Orders to the piece
•
4 manufacturing locations

SUPPLY
CHAIN
–
ORDER
ENTRY
Evolution of Order Entry
Manual
Order
Entry
EDI
HardieLink
•
Gives customer ability to order material, check order status, obtain
pricing and view technical support / training real time
•
Option to use EDI which provides immediate feedback on order errors
•
Electronic Data Interchange
•
Allows for customer to enter order in their system and electronically send
to JH system
•
Historically high error rate
•
Phone, fax or emails received and processed by customer service rep
•
Slow process (up to 1.5 days to enter order)

SUPPLY
CHAIN
–
PRODUCTION
PLANNING
Demand Planning
3 to 10
Years
<3
Years
<12
Months
<3
Months
-
# and Location of Manufacturing Sites
-
Basis is Plan for Category and Market Share Growth
along with Housing Market Assumptions
-
Capacity and Product Specific Additions
-
Basis is mid range demand forecast
-
Sales and Operations Planning Process
-
Monthly review
-
Capacity Control Charts
-
Weekly Adjustments and Demand Sourcing
Long Term Planning
Mid Term Planning
Short Term Planning
Short Term Planning

SUPPLY CHAIN –
PRODUCTION PLANNING
Production Planning
•
Capacity Planning Processes
–
Advanced Planning and Optimization (APO)
•
Made to order model
•
Products
utilizing
ColorPlus®
Technology
•
VMI replenishment
–
Core inventory planning method
•
Made to inventory model
•
Flat sheets planning method

JH FLAT SHEET PRODUCTION PLANNING & SCHEDULING
The
JH
business
model
continues
to
evolve
from
a
primed
model
to
a
model
featuring
ColorPlus
®
Technology
and
a
more
differentiated
product offering
This has impacted our production planning in the following ways:
•
Shorter customer lead times
•
Increased number of SKUs
•
Increased complexity in changeover set-ups
•
Greater disaggregation of our inventory
While still using our “primed”
model production planning logic, we
began to see concerning trends in our network:
•
Inconsistent on-time service performance
•
Sub-optimal production sequencing on our manufacturing lines
•
Regional imbalances in short-term manufacturing capacity

CHANGING OUR APPROACH
A current-state gap analysis was conducted and identified two
primary drivers of our problems:
1.
We were running a completely centralized model when significant
efficiencies could be gained from local control
2.
We lacked a robust system to react quickly to regional changes in short-
term capacity
A pilot program was designed and implemented at one of our
manufacturing sites to address these deficiencies

KEY ELEMENTS OF OUR RE-DESIGNED PROCESS
Production scheduling was decentralized to the plant-level to achieve
the following benefits:
•
Faster response to changes in demand trends with continuous planning
•
Optimal production sequencing with a greater understanding of
manufacturing costs
•
More forward looking planning tools to enable the plant to better manage
labor and scheduled production hours
A proactive approach to short-term capacity management was
developed
•
Variation in week-to-week demand is buffered by “core”
SKUs
–
This enables consistent production schedules with minimal inventory buffer
•
Regional capacity is managed via capacity control charts with established
action limits that trigger capacity moves

CONNECTING PLANNING TO CAPACITY MANAGEMENT
Week
1
Week
2
Week
3
Week
4
Week
5
Week
6
Manufacturing Block Schedule
Capacity Control Chart
Upper Control Limit
Lower Control Limit
Target
NC
C
NC
C
NC
NC
NC
NC
C
C
C
C

A SAMPLE OF PILOT PROGRAM RESULTS
Pilot Plant Weekly On-Time Service Results
Pilot Plant Make-Item Inventory Level
Pilot Plant Sleeve Consumption
Time
Time
Time

MANUFACTURING PLANNING NEXT STEPS
•
We are currently implementing the plant production scheduling
program in all plants
•
We are capacity control charting all flat sheet plants
•
Next steps:
–
Develop line-specific control charts where necessary
–
Implement control charting in non-flat sheet manufacturing processes

MANUFACTURING
–
SUPPLY
CHAIN
•
Made to Inventory Model
–
Primed Model
–
14 day lead times
–
Full pallet orders
–
Single sourced products
•
Made to Order Model
–
ColorPlus
®
Model
–
Orders to the piece
–
8 day lead times

DISTRIBUTION
NETWORK
–
SUPPLY
CHAIN
•
7 Manufacturing
Locations
(4
with
ColorPlus
®
Technology)
•
Vendor Managed Inventory Sites (VMI)
–
Enables ColorPlus
®
Technology business by improving customer
access to product and full SKU range
–
Improved demand signal
–
Improved line of sight on end sales data
•
Reload Centers
–
Enables freight optimization
–
Reduces lead time on customer orders and distribution replenishment

DISTRIBUTION
NETWORK
–
SUPPLY
CHAIN
Reload
VMI
Plants

TRANSPORTATION
–
SUPPLY
CHAIN
Primed Products
ColorPlus
®
Technology Products
7 Manufacturing Locations
Full Truck Loads
<500 mile shipping radius
4 Manufacturing Locations
Less Than Full Truck Loads
>500 mile shipping radius
Multi-stop loads
Higher rate lanes / regions
Cross-docking

MODE
OPTIMIZATION
–
SUPPLY
CHAIN
Rail and Truck
Truck, Rail, Intermodal
Utilize rail/intermodal for long
distances to reload distribution
centers
Truck to customers
Cross dock to minimize
necessary inventory at reload
distribution centers

MULTI-STOP
OPTIMIZATION
–
SUPPLY
CHAIN
Bead Approach
Lollipop Approach

SUMMARY
–
SUPPLY
CHAIN
•
Increased
supply
chain
complexity
with
ColorPlus
®
Technology
•
Utilize supply chain to provide value to channel
•
Order entry process has evolved with order complexity
•
Planning process focused on long, mid and short term demand
•
Change to core inventory planning method
•
Optimize transportation and distribution to minimize cost

Questions