COMPUTER PRODUCTS, COPIER SUPPLIES, LASER PRINTER PARTS

2 1S05_617 PRESENTATION PREVIEW V. Recognizing “Blind Spots” in Traditional Contracts II. Office Products - Stats and Facts III. Technology Supplies – The Unique Characteristics IV. The Traditional Contract Evaluation Process VI. An Alternative Contract Evaluation Approach VII. Next Steps – The Discovery Process I. Overview

3 1S05_617 Overview

4 1S05_617 WHO WE ARE 1.Laser Printer Parts & Imaging Supplies Distributor 2.Privately Owned 3.1,400 Employees – Small Business 4.Financially Stable * Fiscally Responsible * Appropriately Financed 5.$20 Million Inventory 6.Technology Focused 7.Highly Valued Relationships

5 1S05_617 We align ourselves with manufacturers who represent the industry leaders in technology and market dominance. PRODUCT LINES

6 1S05_617 Office Products: Stats and Facts

7 1S05_617 OFFICE PRODUCTS Traditional Supplies: Writing Utensils (Pens, Pencils) Folders / Binders Staples / Staplers Clips / Clamps Envelopes Stick-On Notes Tapes Writing Pads Technology Supplies: Printer / Fax Supplies Magnetic Media (Back Up Tapes) Copier Supplies Printer Ribbons Computer Accessories Labels / Transparencies SIMPLE DEFINITIONS

8 1S05_617 OFFICE PRODUCTS Technology Supplies NOW = 50%+ of Total Office Supply Spend 1990’s 55 % 45% % 55% 1980’s 75 % 25% Technology Supplies Spend Traditional Supplies Spend THE SPREAD

9 1S05_617 OFFICE PRODUCTS BUT Technology Supplies BUT Technology Supplies Make Up Greater Expense Traditional Supplies Technology Supplies Annual Spend per Employee $150 $300 $450 $600 $750 $900 $1,050 Traditional Supplies Offer More Line Items 35 Traditional Supplies Technology Supplies Line Items Offered (in 1000’s) THE SPEND

10 1S05_617 OFFICE PRODUCTS 7 % CAG $ Technology Supplies Technology Supplies Is Growing Expense – Avg. 7% Growth Annually Traditional Supplies Is NOT Growing Expense – Avg. 0% Growth Annually CAG = Compounded Annual Growth 0 % CAG Traditional Supplies $ THE EXPENSE GROWTH

11 1S05_617 OFFICE PRODUCTS - THE SPEND, Case Study Company: Fortune 100 Publishing Company Employees: Office Supply Contracts: Traditional Supplies Vendor core items Technology Supplies Vendor – 80 core items Technology Supplies Traditional Supplies Office Products Total Spend $105,000$130,000 THE SPREAD, THE GROWTH

12 1S05_617 OFFICE PRODUCTS - THE SPEND, Case Study Company: Fortune 1000 Bank Employees: 52, Office Supply Contracts: Traditional Supplies Vendors – 2000 core items managed Technology Supplies Vendors – 500 core items managed Technology Supplies Traditional Supplies Office Products Total Spend $6,500,000 $7,500,000 THE SPREAD, THE GROWTH

13 1S05_617 Technology Supplies: The Unique Characteristics

14 1S05_617 TECHNOLOGY SUPPLIES Rapidly Changing Costs … At home, we expect and see technology products like (Televisions, DVD Players, Stereos, and Appliances) to drop in price over time. At the office, shouldn't we expect the same from technology products like (Back-up tapes, Copier Supplies, and Laser / Ink Jet Supplies)? UNIQUE CHARACTERISTICS

15 1S05_617 TECHNOLOGY SUPPLIES Rapidly Changing Costs … If (You) the consumer are not seeing price reductions from your technology supplies distributor (Vendor), your vendor’s margins (Profit) are going up over time as your prices stay the same. Conclusion: Fixed Pricing = Increasing Vendor Margins = Lost Consumer Savings Opportunity! UNIQUE CHARACTERISTICS

16 1S05_617 TECHNOLOGY SUPPLIES MEDIA BRANDTYPE Price % Change HP4 mm 120 M$3.72$ % IBMDAT72$18.95$ % ImationDLT IV$52.00$ % ImationLTO 2$69.95$ % MaxellDVD-R$1.50$ % OEM PRINT BRANDTYPE Price % Change Xerox Toner6R926$71.05$ % Xerox Toner6R903$49.35$ % HP PaperQ1785A$23.19$ % OKI Drum $78.10$ % OKI Drum $96.20$ % * Prices based on standard market wholesale costs Rapidly Changing Costs … UNIQUE CHARACTERISTICS

17 1S05_617 TECHNOLOGY SUPPLIES $ Customer Price Fixed Rapidly Changing Costs … One Product At A Glance Item: Imation LTO 2 (Magnetic Media) Distributor Cost (03-09): $69.95 / per crtg. Distributor Cost (03-10): $50.15 / per crtg. (-29%) Contracted Sell Price: $71.00 / per crtg. (Contracted – Fixed Sell Price) $ Distributor Profit Increasing % UNIQUE CHARACTERISTICS

18 1S05_617 Alternative Products Can Provide 30% - 55% Savings Without Sacrificing Product Performance ! TECHNOLOGY SUPPLIES Alternatives to OEM Products Include … - Compatible Products (Xerox for HP) - Remanufactured Products(Premier for HP) - Other OEM Products (Sony for Fuji) Several Alternative Product Options UNIQUE CHARACTERISTICS

19 1S05_617 TECHNOLOGY SUPPLIES Several Alternative Product Options UNIQUE CHARACTERISTICS Savings % Over OEM OEM Brand100 Series200/500 Series Brother32%45% Canon Fax28%50% HP43%56% IBM/Lexmark51%63% Imagistics55%65% Panasonic42%52% Sharp40%

20 1S05_617 TECHNOLOGY SUPPLIES Savings Realized $400,000 28% Several Alternative Product Options Case Study: Fortune 1000 national bank with 900+ locations Annual Technology Supplies Spend $200,000 $600,000 $1,000,000 $1,400,000 $1,800,000 Year 1Year 2 $1.8 Million $1.4 Million UNIQUE CHARACTERISTICS

21 1S05_617 Traditional Contract Evaluation Process

22 1S05_617 THE TRADITIONAL CONTRACT “The One Source Solution” Evaluation Process Evaluate entire office product line at same time same way Combine traditional supplies & technology supplies Traditional Supplies 45% Technology Supplies 55% EVALUATION

23 1S05_617 THE TRADITIONAL CONTRACT The Traditional Process 1)Submit (RFI) Request for Company (Vendor) Information 2)Submit (RFQ) Request for Quotation - Top Moving Products 3)Establish “Critical Vendor Requirements” E-Commerce Ordering Capabilities National Distribution Large Inventory (high fill rates) Manufacturer Relationships Financially Sound General Infrastructure/Support 4) Request “locked in (guaranteed) pricing” for 1-3+ years 5) Re-Evaluate Pricing as Needed EVALUATION

24 1S05_617 Recognizing “Blind Spots” in a Traditional Contract

25 1S05_617 RECOGNIZING THE CONTRACT The Traditional Contract Problems DOES NOT account for rapidly dropping technology supplies cost. DOES NOT provide cost savings plan. DOES NOT target the significant spend area (technology supplies). In brief, the traditional contract DOES NOT recognize the uniqueness of technology supplies. BLIND SPOTS

26 1S05_617 SUPPLIER CONFLICT Average Margins Traditional Supplies Technology Supplies 25% + 17% Average Cost-To-Do Contract Stationer Independent I.P. Dealer 19% 12%

27 1S05_617 RECOGNIZING THE CONTRACT A thoughtful, well negotiated Technology Supplies Contract must be developed (independent of the Traditional Supplies Contract)... Traditional Supplies 45% Technology Supplies 55% … with a vendor capable and willing to manage the uniqueness of a Technology Supplies Contract. BLIND SPOTS

28 1S05_617 Alternative Contract Evaluation Approach

29 1S05_617 THE ALTERNATIVE CONTRACT The Alternative Process Create Two Separate Contracts & Manage To The Uniqueness Of Each Traditional Supplies Contract 1) Establish “Vendor Critical Requirements” 2) Submit RFQ – “Request for Quotation” 3) Request FIXED Pricing Plan 4) Redevelop Contract YEARLY Technology Supplies Contract 1) Establish “Vendor Critical Requirements 2) Submit RFQ – “Request for Quotation” 3) Request PERPETUAL Pricing Plan 4) Review Contract QUARTERLY EVALUATION APPROACH

30 1S05_617 THE ALTERNATIVE CONTRACT Key Concept – “Real Time Pricing” “Real Time Pricing” occurs when a distributor receives a price decrease and the distributor passes a price decrease from manufacturer to the consumer. Example: Manufacturer drops prices to distributor by 10%, so the distributor (Vendor) drops prices to consumer (You) by 10% EVALUATION APPROACH

31 1S05_617 THE ALTERNATIVE CONTRACT Customer Price $ “Real Time Pricing” Applied One Product At A Glance Item: Imation DLT IV (Magnetic Media) Distributor Cost (03-09):$52.00 / per crtg. Distributor Cost (03-10):$29.80 / per crtg. Contracted Sell Price:Decreases by 39% over Time Distributor Profit $ Decreasing Fixed (-39%) EVALUATION APPROACH

32 1S05_617 THE ALTERNATIVE CONTRACT Key Concept – “Product Watchdog” “Product Watchdog” occurs when the dealer researches the technology supplies market, looks for cost-saving options and alternatives, and informs the consumer of these options. Result: Consumer (You) benefit through new cost saving options available in market. EVALUATION APPROACH

33 1S05_617 THE ALTERNATIVE CONTRACT Key Concept – “Product Watchdog” One Product At a Glance Toner Cartridge: OEM (HP) Item: C4127X$ / each Compatible (Xerox) Item:6R926$65.26 / each – 38% Compatible (Premier) Item:200-27X$48.10 / each – 54% $0.00 $0.01 $0.02 HPXeroxPremier Cost per Printed page EVALUATION APPROACH

34 1S05_617 The Traditional & Alternative Contract Compared THE ALTERNATIVE CONTRACT EVALUATION APPROACH Need Characteristics Traditional Contract Solution Alternative Contract Solution Vendor Critical Requirements MetYes “One Source Solution”YesNo Perpetual Competitive PricingNoYes All Savings Opportunities RealizedNoYes Frequent (Quarterly) ReviewsNoYes

35 1S05_617 TECHNOLOGY SUPPLIES Full Imaging Supplies Product Offering 5,000 Items Field Rep And Customer Service Support Complete Monthly Reporting Quarterly Rebates On 15% + Margin 99.9% Order Accuracy & 98% Same Day Fill Rate Auto Product Substitution – On Approval 100% User Product Satisfaction CUSTOMER PROPOSITION