Enhance Business Profitability Through “Cost and Profitability Analytics” Interval Analytics Helping companies achieve rapid profit improvement

Measures the interaction of the multiple business dimensions and how each contributes to the cost and profitability (loss) of the entity. Does so routinely and systematically. Analysis, Modeling, Systems  Vendors  SKU’s  Orders  Transactions  Work Activities  Business Processes  Sites  Products  Customers  Segments  Channels  Sales Reps  Etc Business DimensionsCost & Profitability Analytics Cost & Profitability Analytics – What?

Cost & Profitability Analytics – Why? Strategic: “Understanding where you are making and losing money is the first step to establishing an effective strategy. Any strategy established without firmly knowing the expense and profitability analytics of your business is very risky with possible dire results to the bottom line.” Dr. Robert Kaplan, Harvard, “Father” of modern cost management Tactical / Operational: Countless daily operating decisions demand a thorough understanding of costs and profits across multiple dimensions of your business: vendors; SKU’s; orders; transactions; work activities; product lines; customers; channels; etc. Put this information in the hands of your managers and get set for game- changing performance improvement.

Cost & Profitability Analytics – How? Objective: Improve the profitability of existing operations. How: By implementing a Profitability and Cost Management (PCM) System to identify and analyze the profit-making activities by specific dimension, such as customer, product, channel, vendor. Results: This knowledge helps to grow profitable business, eliminate neutral and unprofitable business, and drive continual profit improvement by helping understand how operational efficiency may be strengthened.

Improving the Bottom Line Begins by Creating PCM - Profit and Loss Statements PCM links financials to business processes and their operational drivers

Traditional P&L Analysis P&Ls By Corporation By Division By Region Decision P&L Analysis P&Ls By Customer By Product / SKU By Vendor PCM System Links financials to business processes and their operational drivers

Any Dimension Customers Products Channels Segments Process Provides Competitive Advantage Variability in Operational, Financial, & Transactional Data

Customer P&Ls Customer Negotiation Most profitable & why Least profitable & why Breakeven & Marginal Cost to Serve - Analysis By Invoice line item Supply Chain P&Ls Process Optimization High Cost / Low Cost Outsourcing What-If Simulation Capacity Resource Mgmt Product /SKU P&Ls SKU Rationalization Most profitable & why Least profitable & why Breakeven & Marginal Cost to Serve - Analysis By SKU Vendor P&Ls Vendor Negotiation Most profitable & why Least profitable & why Breakeven & Marginal Cost to Serve - Analysis By Purchase Order P&Ls PCM P&Ls provide visibility into hidden profit opportunities and competitive advantages unavailable today with Traditional P&Ls. Thousands of Customers Millions of SKUs Hundreds of Processes Thousands of Vendors ROI Opportunity is Dramatic Many companies achieve 5-15x payback within 12 months

PCM P&L’s provide the understanding and transparency that leads to action. Customer: Product: $ Thousands Rev (thousands) Oct 2009 YTD Revenue$% Repetitive29, % Non-Repetitive2, % Float1, % Total Revenue33, % Direct Cost of Service Customer Services / Customer Care13, % Production & Fulfillment % Implementation Activities4, % Application Maintenance & Compliance1, % Total Direct Costs20, % Direct Cost Margin13, %

Direct Support Costs Account & Sales Management Activities1, % Information Tech Workplace Support2, % Total Direct Support Costs4, % Direct & Support Costs Margin9, % General & Administrative Costs New Business Sales Activities1, % Administrative Activities2, % Facilities Management1, % Total G&A Costs5, % Controllable EBITDA3, % Depreciation & Amortization1, % Controllable EBIT1, %

PCM data allows for deep analysis in countless areas: Promote (increase market share) Price concessions (increase volume & profit contribution) Improve business processes Fire customers (variable/fixed cost analysis) Renegotiate price (value pricing) Renegotiate service levels Improve business processes Renegotiate price (value pricing) Renegotiate service levels Volume EBIT Plot Customers / Products and Develop Strategies

Can Your Company Benefit from a PCM System?  Multiple and diverse customers, product lines  Multiple selling / distribution channels  Varying service levels  Multiple high-cost business processes  Desire/need to compensate Sales reps on profitability, not sales volume  Existing cost system does not support management decision making or ongoing business improvement  Existing cost system does not adequately support Pricing decisions

Depending on organization size and requirements, a PCM system can take many forms ranging from:  Best-in-class PCM software fully integrated with your financial, operational, and reporting systems. These systems normally update and report results each month.  One-time analysis, normally based on 12 months of data, modeled in excel/access. The results are used to identify and develop improvement initiatives. Often, companies choose to update the model a year later to measure success of the initiatives.

Our Process for Project Implementation  On-Site Assessment: a one-day assessment to determine if your company is one that would benefit from a PCM system, and if so, to evaluate the skill set of your team, then gather the data to develop a high- level project plan with an estimate of fees (hourly, fixed fee, % of business improvements).  Detailed Project Plan: our implementations normally are of short duration (90 days typical for a mid-size project), due in a large part to the development of a detailed work plan with specific project steps, resource commitments, timelines. We measure progress against this plan – there will be no surprises.  System Development & Validation: we will manage and work closely with your team through each step of the process. A complete transfer of knowledge from us to your team will occur so at project end there are no issues with on-going system operation. The project is not complete until the results have been validated by your team and management.  Profitability Improvement Initiatives (optional): we can assist in analysis of the data and identification of specific improvement initiatives. Typically, companies achieve almost immediate significant profitability improvements by prioritizing actions.

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