Copyright 2008 SiPM Place, date Version x PROCUREMENT PLAN CLIENT.

Copyright 2008 SiPMwww.sipm.com

Place, date

Version x

PROCUREMENT PLAN CLIENT

Procurement plan: process

2

Wx+3

Wx+2

High-level conclusionsDiscussion CEO

InterviewsStakeholders

Interview Buyer(s) (Benchmark)

Data analysis SiPM

Consolidation SiPM

Wx Wx+1

Wx+1

Wx

Problem definition and data collection

Advice and final presentation

Objectives Procurement Plan

1. Scan of current procurement (department)1. Benchmark

2. Opportunities

3. Barriers to change

2. Options

3. Advice1. Mission, incl. potential (€)

2. Strategy

3. Procurement Organisation structure incl. R&R

3

Process

4

Step 2: options and advice

Mission procurement department (LT measurabel goals) Strategy to achieve mission Organisations structure, R&R and function profile Short-term action plan

Methodology- WINS world-class benchmark

Interviews:- Barriers?- Purchasing outside department?- View on Procurement?- Best practices?- Benchmark- Time spent buyer

Data-analysis:- ABC and portfolio analysis- Saving Potential

Step 1: Internal analysis

Executive Summary

• Max 3 bullet points (examples)• If client does not invest in procurement, they will be outperformed by competitors*

– There is no procurement department, merely an “order” department– xxx

• Strategic procurement will lead to– Comulative DCF of xxx€, which will double(?) the current margin– Improved risc management by process driven as opposed to current ad-hoc appraoch– xxx

• Current procurement– Is operational, not strategic nor tacitcal – Manages “only” 18% of total expenditure– Lacks essential procurement knowledge and support for new role. There will be external recruitment

* = Status quo scenario

5

Copyright 2008 SiPMwww.sipm.com

6

INTRODUCTION: METHODOLOGY USED

7

SiPM procurement benchmark: main view

0%

5%

10%

World-Class

Operational excellence

Catching up

Savings

Time

= 10% net reductionin total expenditure

Benchmark is based on WINS program

• World-Class Innovative Sourcing program• Yearly Objectives setting in function of long-term plan

• Evolution as opposed to revolution (continuous improvement)

• Simultaneously, disciplined and ruthless execution of 2 main steps:

8

What % of expenditure is being influenced by procurement

How professional do we *1 manage expenditure (“people - process - systems”, Measured on 8 segments). * 1: throughout the company

2. procurement coverage

1. Skills

WINS program

9

0%

CATCHING - UP

WORLD - CLASS

OPERATIONAL

EXCELLENCE

Mission

Skills

40%

80%

Co

ve

rag

e

CATCHING-UP 94%

WORLD-CLASS1%

OPERATIONALEXCELLENCE

5%

Bronze Silver Gold

100%

* 94% of other companies worldwide in catching-up phase

Definitions

• Procurement process can be splitted into strategic/tactical/operational

10

Strategies : mission, organisation, make or buy/category strategies, off-shore sourcing…

Order to payment process, replenishment, inventory, performance tracking, …

Specifications RFQ/RFI Negotiation Contract Cont. Improvement

Copyright 2008 SiPMwww.sipm.com

11

INTERNAL ANALYSIS

Scan: Skills and Coverage

12

1. Skills 2. procurement coverage

Skills

1. Strategic intent

– Max 3-5 bullets based on interviews– In absence of plan, lack of accountability and focus:

• xxx• No sense of urgency

– Conservative culture, difficulties with change

2. Leadership Procurement

– xxx• Xx

13

3. Support of Tactical procurement process

– Mainly ad-hoc, few structure• Xxx

4. Supplier Selection process

– Xxx

14

Skills

5. Supplier relationship management

– Xxx

6. Strategic Cost Management

– xxx

15

Skills

Price

Non

-Qua

lity

cost

sD

ispo

sal c

osts

Op

erat

ing

co

sts

Down time costs

Maintenance costs

Adverse Buy, Supp. Perf.…

Process costs

Price

Non

-Qua

lity

cost

sD

ispo

sal c

osts

Op

erat

ing

co

sts

Down time costs

Maintenance costs

Adverse Buy, Supp. Perf.…

Process costs

30%

70%

Here is the prize to be taken. Seems easy but many companies fail.

Current focus

7. Capital productivity

– Xxx

8. Operational Process

– xxx

16

Topic Time spend %

Strategy 0%

Selection process 20%

Continuous Improvement

0%

Operational tasks

80%

    100%

Skills

17

Skills Benchmark Horizon: Short Term - Middle Term - long Term

0,0

2,0

4,0

6,0

8,0

10,0

Operationalprocesses

Design of tacticalprocess

tender process Relationshipmanagement

Strategic costmanagement

Capitalproductivity

Strategic Intent Leadership

Gold

Silver

Bronze

Skills: summary

Summary (max 3 bullets)

Scan: Skills and Coverage

18

1. Skills 2. procurement coverage

x% of turnover is being spent with suppliers

19

Conclusion:xxx

0

5

10

15

20

25

Turnover Profit IndirectLabourCosts

DirectLabourCosts

Overhead Cost ofSales

Miljoenen

25%

38%

xM€

xM€ is relative easy/difficult to manage

• There are x suppliers

• x % suppliers x% expenditure

20

Conclusion/advice:

ABC Analyse Leveranciers

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

% Leveranciers

% U

itg

aven

Top 20 Leveranciers TotaalNEDAL ALUMINIUM BV € 1.119.034SERGE FERRARI SA € 935.300EMAX ALUMINIUM PROFIELEN NV € 755.066FORESCO NV € 476.328DMW METAALWERKEN NV € 443.256RACOR NV € 387.175ACOUSTIC EXTRUSION € 353.640SAPA RC PROFILES NV € 230.099TOTAL BELGIUM NV € 202.258PEETERS MARC BVBA € 193.734LENSSEN VERZINKERIJ NV € 188.836ACTIEF INTERIM NV € 162.428ME CONSTRUCT NV € 114.827GEBR. VAN DER WERFF B.V. € 110.417SKP NV € 104.193VAN LEEUWEN BUIZEN BELGIE NV € 99.163MARTENS TRAKTOR NV € 94.012STEEL SERVICE CENTER BREE NV € 91.861GEERITS VERHUUR NV € 89.260DISTEEL NV € 87.069Overige € 3.553.969Totaal € 9.791.926

20 leveranciers = 64% uitgaven

xM€ is relative easy/difficult to manage

• x categories cover y % of expenditure

21

Conclusion/advice:

Top 20 categorieën TotaalAankopen, Grondst. € 5.946.931Algemene onderaanneming € 1.544.695Lonen interims arbeiders € 332.678Transportkosten € 181.541Huur hulpmateriaal € 169.485Huur personenwagens € 147.130Publiciteit en advertenties € 142.973Brandstof bedrijfswagens € 136.127O & H., Gebouwen € 85.846Klein gerief € 83.063Aankopen werk en studie's € 79.581Huur hulpmateriaal LT contr. € 61.801Hotel & tickets arbeiders € 52.952Huur bedrijfswagens € 47.955Brandstof personenwagens € 45.821Electriciteit € 44.457Brochures & sales tools € 43.914Aankopen voor doorverkoop - Bi € 42.487Drukwerk en kantoorbehoeften € 38.341Verpakkingsmateriaal € 35.709Overige € 528.438Totaal € 9.791.926

Coverage of total spend

22

Conclusion:

WINS: combination Skills and Coverage

23

0%

CATCHING - UP

WORLD - CLASS

OPERATIONAL

EXCELLENCE

Mission

Skills

40%

80%

Co

ve

rag

e

CATCHING-UP

WORLD-CLASS

OPERATIONALEXCELLENCE

Bronze Silver Gold

100%

Clientx%

Conclusion Internal Analysis

• Procurement Client has relative low/high benchmark score– xxx

• xxx

24*: reduction workingcapital, kaizen, performance measurements…)

Copyright 2008 SiPMwww.sipm.com

25

OPTIONS & ADVICE

26

Skills

Co

vera

ge

0%

40%

80%

Bronze Silver Gold

SiPM has developed 3 options

Client

Option 1Ex. “Logistic Partner”

Option 2Ex. “Strategic Procurement”

Option 3Ex. “Supply Chain Leadership”

Options

1. Logistic

partner

2. Strategic

Procurement

3. Supply Chain leadership

Objective xxx Lowest total costs Xxx

Innovative netwerk of suppliers: fast TTM, product development

Output Procurement will diliver: Xxx

Procurement will diliver: Supplier selection and

improvement Xxx

Procurement will diliver: Xxx

Organisation Hybrid Xxx Title: “replenisher”

Central procurement xxx Title: Procurement Manager:Senior

buyer

Central procurement > 80% of spend via procurement XxxTitle: Director of Supply

Time to implement

2 year 3-4 year 5 - … year

27

Option 1: Logistic partner

28

1. Mission: By 2012, xxx

2. Strategy: xxx

3. Organisation: xxx

29

1. Mission: By 2012, xxx

2. Strategy: xxx

3. Organisation: xxx

Option 2: Strategic Procurement

1. Mission: By 2012, xxx

2. Strategy: xxx

3. Organisation: xxx

Option 3: Supply chain leader

30

NPV and Discounted Cash Flow option 1, 2 and 3

31

Cumulative Discounted Clash Flows

-200.000

-100.000

0

100.000

200.000

300.000

400.000

500.000

600.000

700.000

800.000

2009 2010 2011 2012 2013

NPV = xyz €

NPV = xyz€

Investment in organisation limited return in jaar 1Option 1 mainly process improvement: “traditionally savings are difficult to measure”

Option 3

Option 2

Impact on nett margin option 2 and 3

32

Impact Netto Marge

400.000

500.000

600.000

700.000

800.000

900.000

1.000.000

1.100.000

1.200.000

1.300.000

2009 2010 2011 2012 2013

Current xk€

NPV = 3,2M€

NPV = 3,5M€Option 3

Option 2

Pro & Con’s 3 options

33

1. Logistic

partner

2. Strategic

Procurement

3. Supply Chain leadership

Pro

xxx Investment: x

xx Investment: y

xxx

Con

xxx xxx xxx Investment: z

34

Advice SiPM

Option 2: Strategic Procurement

• xk€ cumulative DCF * on 5 years

• Investment : 1 manager, 2 buyers and 1 assistent.

• Simultaneous improvement of skills and coverage (3-4 yr evolution revolution)

Skills

Co

vera

ge

0%

40%

80%

Bronze Silver Gold

2009

2010

2011

* = nett, including investment in new organisation

Client

Short-term actions (6-9 months)

• Recruitment– xxx

Next:

• xxx– Xxx

35

Com

plex

ity

High

Low

Hig

h

LowPotential

Start with these categoriesInterim

Publicity

Subcontracting

Transport

Fuel

Raw Materials

Rent cars

APPENDIX

36

All calculations are in excel file

Option 2: Profile Procurement Manager

• xxx

– Xxx

• xxx

– Xxx

37

38

Financials

P&L company xTurnover 245.245.375COS 135.973.650 Materials 94.003.500 Dir Labour 41.970.150Gross margin 109.271.725 45%Overhead 62.342.100Ind. Labour 37.866.625Oper. Margin 9.063.000 4%

COST ORGANISATION Director Manager Buyer Replenisher Assistent Total FTE Total €/yrGross Salary/yr 140.000 100.000 70.000 60.000 50.000# people: option 1 1 1 2 150.000 option 2 1 1 1 3 260.000

Start

Step 1: Investment

39

Financials

- Gross and nett = exc. and inc. costs of new organisation- Savings = bottom line impact. Only 34% of traditional savings calculations are visible at the bottom line, hence multiply the figures times 3 to compare them with other companies.

WINS phase World-classyear 2009 2010 2111 2012 2013

Savings: option 1 1% 2% 3% 5% option 2 1% 3% 3% 6% 8%Gross saving: option 1 1.438.763 2.877.527 4.316.290 7.193.817 0 option 2 1.438.763 4.316.290 4.316.290 8.632.581 11.510.108Nett saving: option 1 1.288.763 2.727.527 4.166.290 7.043.817 option 2 1.178.763 4.056.290 4.056.290 8.372.581 11.250.108

SiPM benchmark WINS

Catching up Operat. excellence

Step 2: savings per option

40

Step 3: Discounted Cash Flows

Option 2: Discounted Cash Flows

1.193.299

2.338.415

3.307.336

5.177.4164.793.904

- €

1.000.000 €

2.000.000 €

3.000.000 €

4.000.000 €

5.000.000 €

6.000.000 €

2009 2010 2011 2012 2013

Option 3: Discounted Cash Flows

1.071.603

3.352.306 3.047.551

5.718.585

6.985.432

- €

1.000.000 €

2.000.000 €

3.000.000 €

4.000.000 €

5.000.000 €

6.000.000 €

7.000.000 €

8.000.000 €

2009 2010 2011 2012 2013

Financials

41

Step 3: Discounted Cash Flows (continued)

Cumulative Discounted Clash Flows

1.193.299

3.531.714

6.839.050

12.016.466

16.810.369

4.423.909

7.471.460

13.190.045

20.175.477

1.071.603

0

5.000.000

10.000.000

15.000.000

20.000.000

25.000.000

2009 2010 2011 2012 2013

Financials

42

Categorie Totaal Competitiviteit Past Focus Savings % SavingsAankopen, Grondst. € 5.946.931 2 2 5% € 297.347Algemene onderaanneming € 1.544.695 3 2 10% € 154.469Lonen interims arbeiders € 332.678 3 1 20% € 66.536Transportkosten € 181.541 3 2 10% € 18.154Huur hulpmateriaal € 169.485 3 2 10% € 16.948Huur personenwagens € 147.130 3 1 20% € 29.426Publiciteit en advertenties € 142.973 3 1 20% € 28.595Brandstof bedrijfswagens € 136.127 2 1 10% € 13.613O & H., Gebouwen € 85.846 3 1 20% € 17.169Klein gerief € 83.063 3 2 10% € 8.306… … … … … …Total € 9.397.553 € 761.158

8%

low estimate Competitiviteit

1 2 3Past focus 1 5% 10% 20%

2 2% 5% 10%3 1% 3% 5%

Double of current profit

Savings: 2nd benchmark

• Next to WINS benchmark, there is a 2nd detailed benchmark• Results are similar: in year 5, the margin would xxx

Coverage: definitions and methodology

• Definitions

Which of the following tactical steps can be influenced by procurement?

• Methodology

Source: buyers (Interviews and questionnaire)

43

Specifications Quotations Negotiations Contract

Category Supplier Spend 2007 No control Some control Full ControlRaw Materials QODOL OL 13.987.927 XRaw Materials GORGO JO 11.691.254 XRaw Materials OMOJ OLU 9.443.363 XRaw Materials JOROGWO 5.520.519 XRaw Materials DMW MOKO 5.465.357 XSubcontracting ROWOR QV 4.648.950 X

To be filled out by buyer

• Definition

By buying smarter, you will be buying more efficient, cheaper and be protected against market fluctuations. We have been measuring your procurement against a benchmark on 8 different topics, ranging from strategic intent to … supplier relationship management.

• Methodology

Interviews + questionnaire

44

Skills: definitions and methodology

45

Central organisation: tactical process mainly (>60% of spend) driven by procurement

Decentral organisation: tactical process mainly (>60% of spend) driven by local departements

Hybrid organisation: For a number of categories, the tactical process is managed by procurement, for other categories by the local departments

All structures but the central structure are suboptimal in terms of efficiency. However, this does not imply that other structures are not good. A hybrid structure for example is the most desirable options for most multinationals, as this currently fits better with the culture of the company.

Organisation: definitions