monsanto 07-12-05a

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World Class Seed ManufacturingWorld Class Seed Manufacturing“Transforming an Industry”“Transforming an Industry”

Mark LeidyMark LeidyExecutive Vice President, Executive Vice President,

Global ManufacturingGlobal Manufacturing

Investor MeetingInvestor MeetingJuly 12July 12thth, 2005, 2005

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Monsanto is Revolutionizing Monsanto is Revolutionizing Corn Seed ProductionCorn Seed Production

How is hybrid corn seed produced?How is hybrid corn seed produced?

How has biotechnology changed dynamics of corn How has biotechnology changed dynamics of corn seed production process?seed production process?

What has Monsanto done to make our production What has Monsanto done to make our production process a competitive advantage?process a competitive advantage?

What are the results?What are the results?

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Hybrid Corn ProductionHybrid Corn Production

♀♀

Detasseling RemoveDetasseling Remove♂♂ of♀♀ plant

Cross PollinationCross Pollination♂♂♂♂ with♀♀♀♀

♂♂

Tassel Tassel ♂♂

Creating Hybrid ProductsCreating Hybrid ProductsSynergistic performance Synergistic performance

AA xx BB = = CC

Key ComponentsKey Componentsof Corn Reproduction of Corn Reproduction

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260K Contract Acres Farmed Annually

R&D Hand-Off

Parent Seed

Seed ParentPurity

Parent Seed

Increase

Hybrid Field

Production

650 unitsequivalent

Finishand

Delivery

20 ears parent seed

2 unitsequivalent

50k units corn seed

Hybrid Seed

Harvest

50k units corn seed

Customer fulfillment

Research Seed Production Process

Complexity of Hand-Offs:Conventional Seed Corn Production ProcessConventional Seed Corn Production Process

12/01/03 03/31/04 02/28/05 04/15/05 9/10/05 12/01/05

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Monsanto’s capital investments Monsanto’s capital investments combined with bestcombined with best--inin--class class operational capabilities have operational capabilities have

transformed seed transformed seed production by improving:production by improving:

Product QualityProduct QualityProduct PerformanceProduct Performance

Production Cost Production Cost Product Life CycleProduct Life Cycle

Inventory ManagementInventory ManagementEmployee SafetyEmployee Safety

Since 1998 Monsanto has Since 1998 Monsanto has invested $400 million in invested $400 million in global facility upgradesglobal facility upgrades

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Seed Acquisitions in 1990s Required Seed Acquisitions in 1990s Required Redesign of Production ModelRedesign of Production Model

1998 1998 10 Separate Companies10 Separate Companies138 Sites138 SitesAged FacilitiesAged FacilitiesTraditional TechnologyTraditional TechnologyIndependent Supply ChainsIndependent Supply Chains

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Monsanto Redesigned Supply Chain Globally

2005 2005 1 Focused Organization1 Focused Organization67 Sites67 SitesUpgraded FacilitiesUpgraded FacilitiesLatest TechnologyLatest TechnologyIncreased Irrigated AcreageIncreased Irrigated AcreageImplemented Six SigmaImplemented Six Sigma

State of the Art Production FacilitiesState of the Art Production Facilities

Mechanized Field ActivitiesMechanized Field Activities HuskHusk--On Harvest On Harvest For Improved QualityFor Improved Quality

Vision TechnologyVision Technology

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Disciplined Manufacturing ManagementDisciplined Manufacturing Management

Apply Standardized Management Tools Across Varied Processes

Rapidly Leverage Improvements Globally

Portfolio ManagementSix Sigma Lean

Variability Efficiency Complexity

Cost Management

Model

Opportunity

Product Performance

Quality

Continuous Improvement

Teams

Global Manufacturing

Networks

Drive Business ResultsManufacturing

Finance

Tech

nolo

gy

Commercial

Product Teams

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Cost Management Process Clearly Cost Management Process Clearly Identifies OpportunitiesIdentifies Opportunities

Portfolio Management

Six Sigma

Lean

Cost Management

Model

Product Performance

2. Screen Expenditures For Value

LEVERAGE FACTORS

1. Expenditures Measured By Dollars

3. Evaluate For Opportunity

4. Focus ResourcesOn Opportunities

5. Track Metrics6. ImproveINTERNALEXTERNAL

7. ContinuousImprovement

Field production Field production yieldyieldFacility production Facility production yieldyieldProduct advancementProduct advancementInventory obsolescenceInventory obsolescencePeople productivityPeople productivity

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Inbred Yield And Plant Inbred Yield And Plant Conditioning Yield Is The Conditioning Yield Is The

Largest Cost LeverageLargest Cost LeverageRapid Implementation Rapid Implementation

of Best Practicesof Best Practices

Results in significant Results in significant production yield production yield improvementsimprovements

0

80

160

% o

f tar

get (

1993

= 1

00%

)

'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05

Inbred YieldsInbred Yields1993 1993 -- 100%100%

Competitive AdvantageCompetitive Advantage


Six Sigma

Lean

Cost Management

Model

Product Performance

Seed spacing and row width Seed spacing and row width improvementsimprovementsMolecular breeding to enhance Molecular breeding to enhance male pollen shed and female male pollen shed and female yields yields Timing pollen shed with silkingTiming pollen shed with silking

–– Data collection to assure Data collection to assure effective pollinationeffective pollination

–– Flaming to improve timingFlaming to improve timing–– Continuous learning and Continuous learning and

data collectiondata collectionSatellite imaging for field and Satellite imaging for field and grower selectiongrower selectionSterile female inbredsSterile female inbredsProduction facility yieldsProduction facility yields

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Leveraging Technology to Move Seed Leveraging Technology to Move Seed Production Into 21Production Into 21stst CenturyCentury

Female Population IncreasedFemale Population Increased

Pollen Efficiency Through FlamingPollen Efficiency Through Flaming

Grower Selection ProcessGrower Selection Process


Six Sigma

Lean

Cost Management

Model

Product Performance

Breeding Improvements in Sterility Breeding Improvements in Sterility (North America Seed Production)(North America Seed Production)

2000 2001 2002 2003 2004 2005

% S

teril

e Pr

oduc

tion

% S

teril

e Pr

oduc

tion

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Production Technology Improvements have Production Technology Improvements have Reduced Cost in North America by More than 35%Reduced Cost in North America by More than 35%


Six Sigma

Lean

Cost Management

Model

ProductPerformance

Six Sigma Improves Six Sigma Improves Field PerformanceField Performance

Six Sigma Ensures Six Sigma Ensures World Class ProductionWorld Class Production

Row Spacing OptimizationRow Spacing OptimizationPlant Spacing OptimizationPlant Spacing OptimizationPlanter Equipment CalibrationPlanter Equipment CalibrationSafety Stock OptimizationSafety Stock Optimization

Prescription Drying Prescription Drying Gravity Table ImprovementsGravity Table ImprovementsWarehouse OptimizationWarehouse Optimization

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Turning Art Into ScienceTurning Art Into Science

Six Sigma project measures Six Sigma project measures impact of greater uniformity in impact of greater uniformity in plantplant--toto--plant spacing per rowplant spacing per row

A 6% yield increase for each A 6% yield increase for each oneone--inch decrease in standard inch decrease in standard deviation of plantdeviation of plant--toto--plant plant spacing spacing

Reduced COGsReduced COGs121110987654321

20

10

0

Target=5.1

RowNumber

Plan

tSpa

cing

Constantine County Top 2002Doubles 5.3% Misses 14.0% StDev 3.14

121110987654321

20

10

0

Target=5.4

RowNumber

Plan

tSpa

cing

Constantine County Top 2003Doubles 2.9% Misses 8.1% StDev 1.87


Six Sigma

Lean

Cost Management

Model

ProductPerformance

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Site Consolidation has Improved Site Consolidation has Improved Productivity, Cost and Reliability of SupplyProductivity, Cost and Reliability of Supply

199819983,000 employees138 production locationsLow productivity soilsLow % irrigated farms

2005 2005 2,100 employees67 production locationsHigh productivity soils High % irrigated farms

Mfg. Productivity

0

1,000

2,000

3,000

4,000

5,000

'01 '02 '03 '0401020304050607080

Seed Headcount 100 Units/Employee


Six Sigma

Lean

Cost Management

Model

ProductPerformance

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3 Traits on 1 Hybrid line adds 7 new SKUs

Life Cycle PlanningLife Cycle Planning

Traits Add Complexity to Traits Add Complexity to Product Portfolio if Not Properly Managed Product Portfolio if Not Properly Managed

2002 2003 2004 2005

Forecast Variability

0%

50%

100%

150%

200%

250%

300%

350%

0 50,000 100,000 150,000 200,000 250,000 300,000

Forecasted Volume

Perc

ent of Fore

cas

t

Production Variability

0%

50%

100%

150%

200%

250%

300%

350%

400%

0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000

Target Volume

Perc

ent o

f Tar

get


Lean

Six Sigma

Cost Management

Model

ProductPerformance

SKU Potential w/Traits

Actual SKU Count

Corn shelf life is 3Corn shelf life is 3--5 years5 yearsProduction planning and Production planning and forecasting is critical to forecasting is critical to minimize obsolescence and minimize obsolescence and to maximize the freshness ofto maximize the freshness ofthe portfoliothe portfolio0

0.5

1

1.5

2

2.5

3

3.5

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5

New IntroductionOr Launch

Growth Mature Decline PhaseOut

Increasing Obsolescence

Decreasing Safety Stock

Yr 1-2 > 5%<20% DeclineFrom Peak

Up to 70%Decline

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Impact of Traits onImpact of Traits onSeed Business DynamicsSeed Business Dynamics

Product development is Product development is complexcomplex

Lumpy sales: 1 or 2 cycles per yr.Lumpy sales: 1 or 2 cycles per yr.

Production cycles long; 2Production cycles long; 2--3 years3 years

Product life cycles short; 1Product life cycles short; 1--5 years5 years

Short product shelf life; 1Short product shelf life; 1--3 years3 years

Long planning windows; 3Long planning windows; 3--5 years5 years

Highly competitive businessHighly competitive business

IncreasedIncreased

No ChangeNo Change

No ChangeNo Change

ShortenedShortened

No ChangeNo Change

IncreasedIncreased

IncreasedIncreased

BusinessImpact


Lean

Six Sigma

Cost Management

Model

ProductPerformance

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Consistent, High Quality ProductsConsistent, High Quality Products

Production Quality Improves Production Quality Improves Farmer Yield and ProductivityFarmer Yield and Productivity

Lean

Six Sigma

Cost Management

Model

Product Performance


Testing ProgramsTesting Programs

TransformationTransformation

Trait Development

Trait Development

Trait IntegrationTrait Integration

Pre-Foundation/ Breeders seed

Pre-Foundation/ Breeders seed

Commercial Seed

Commercial Seed

Farmer

Foundation seed

Foundation seed

400 Events

10 Events

Commercial Event

Commercial Event

Commercial Event

Test for Trait and Presence of Intended Event and Absence of

Unintended Commercial and Regulated Events

0

10

20

30

40

50

60

70

Perc

ent M

uch

Bet

ter o

r So

mew

hat B

ette

r tha

n ot

her

Bra

nds

Uniformity ofField

Emergence

Seedling Vigor

Plantability On Target tomeet Yield

Goal

Monsanto Seed Brands Marketing Horizons Corn Quality Survey Results

2001 2002 2003 2004

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World Class Seed Production Yields World Class Seed Production Yields Significant Improvement in GPSignificant Improvement in GP

50%

100%

1999

= 1

00%

FY99 FY00 FY01 FY02 FY03 FY04

0

80

160

% o

f tar

get (

1993

= 1

00%

)

'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05

NA Production Yield 1993NA Production Yield 1993--20052005

YG on female

NA Production Unit Cost 1999 NA Production Unit Cost 1999 -- 20042004

'01 '02 '03 '04 '05

# of

var

rietie

s

2

5

8

# of

opt

ions

Varieties Traits Options

NA Varieties/Trait Options 2000 NA Varieties/Trait Options 2000 -- 20052005

85

90

95

100

Em

erg

ence

(%

)

RM<96 RM 96-105 RM 106-112 RM>113Relative Maturity

MonsantoLeading Competitor

Seed Quality Measured by EmergenceSeed Quality Measured by Emergence

monsanto 07-12-05a

Economy & Finance

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