Copyright 2008 SiPM Place, date Version x PROCUREMENT PLAN CLIENT

Procurement plan: process 2 Wx+3 Wx+2 High-level conclusions Discussion CEO High-level conclusions Discussion CEO Interviews Stakeholders Interviews Stakeholders Interview Buyer(s) (Benchmark) Interview Buyer(s) (Benchmark) Data analysis SiPM Data analysis SiPM Consolidation SiPM WxWx +1 Wx Problem definition and data collection Problem definition and data collection Advice and final presentation 1. Preparation 2. Analysis & Options 3. Conclusion

Objectives Procurement Plan 1.Scan of current procurement (department) 1.Benchmark 2.Opportunities 3.Barriers to change 2.Options 3.Advice 1.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 SiPM 6 INTRODUCTION: METHODOLOGY USED

7 SiPM procurement benchmark: main view 0% 5% 10% World-Class Operational excellence Catching up Savings Time = 10% net reduction in 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% Coverage CATCHING-UP 94% WORLD-CLASS 1% OPERATIONAL EXCELLENCE 5% BronzeSilverGold 100% * 94% of other companies worldwide in catching-up phase

Strategic Level Tactical Level Operational Level 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, … SpecificationsRFQ/RFI Negotiation Contract Cont. Improvement

Copyright 2008 SiPM 11 INTERNAL ANALYSIS

Scan: Skills and Coverage  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 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 TopicTime spend % Strategy0% Selection process20% Continuous Improvement 0% Operational tasks 80% 100% Skills

17 Gold Silver Bronze Skills: summary Summary (max 3 bullets)

Scan: Skills and Coverage  Skills 2.  procurement coverage

x% of turnover is being spent with suppliers 19 Conclusion:xxx 25% 38% xM€

xM€ is relative easy/difficult to manage There are x suppliers x % suppliers  x% expenditure 20 Conclusion/advice: 20 leveranciers = 64% uitgaven

xM€ is relative easy/difficult to manage x categories cover y % of expenditure 21 Conclusion/advice:

Purchasing 20% Other Divisions Coverage of total spend 22 Conclusion:

WINS: combination Skills and Coverage 23 0% CATCHING -UP WORLD-CLASS OPERATIONAL EXCELLENCE Mission Skills 40% 80% Coverage CATCHING-UP WORLD-CLASS OPERATIONAL EXCELLENCE BronzeSilverGold 100% Client x%

Conclusion Internal Analysis Procurement Client has relative low/high benchmark score –xxx xxx 24 *: reduction workingcapital, kaizen, performance measurements…)

Copyright 2008 SiPM 25 OPTIONS & ADVICE

26 Skills Coverage 0% 40% 80% BronzeSilver Gold SiPM has developed 3 options Client Option 1 Ex. “Logistic Partner” Option 1 Ex. “Logistic Partner” Option 2 Ex. “Strategic Procurement” Option 2 Ex. “Strategic Procurement” Option 3 Ex. “Supply Chain Leadership” Option 3 Ex. “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  Xxx  Title: 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 CEO Production Replenisher Financial Logistics

29 1.Mission: By 2012, xxx 2.Strategy: xxx 3.Organisation: xxx Option 2: Strategic Procurement CEO Production Procurement Manager Financial Logistics

1.Mission: By 2012, xxx 2.Strategy: xxx 3.Organisation: xxx Option 3: Supply chain leader 30 CEO Production Financial Supply Chain Director LogisticsProcurement

NPV and Discounted Cash Flow option 1, 2 and 3 31 NPV = xyz € Investment in organisation  limited return in jaar 1 Option 1 mainly process improvement: “traditionally savings are difficult to measure” Option 3 Option 2

Impact on nett margin option 2 and 3 32 Current xk€ NPV = 3,2M€ NPV = 3,5M€ Option 3 Option 2

Pro & Con’s 3 options Logistic partner 2. Strategic Procurement 3. Supply Chain leadership Pro  xxx  Investment: x  xx  Investment: y  xxx Con  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 Coverage 0% 40% 80% BronzeSilver Gold * = nett, including investment in new organisation Client

Short-term actions (6-9 months) Recruitment –xxx Next: xxx –Xxx 35 Complexity High Low High Low Potential Start with these categories Interim 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 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. Step 2: savings per option

40 Step 3: Discounted Cash Flows Financials

41 Step 3: Discounted Cash Flows (continued) Financials

42 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 SpecificationsQuotationsNegotiationsContract

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

Strategic Level Tactical Level Operational Level 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