Think Big, Start Small in Self Funding Waves.TM

Energy Cost Management

Overview

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Value Based Solutions Introduction

• Focused service offerings that deliver value

• Long standing relationships with client executives offering innovative diagnostics, ideas and business insights

• Breadth and depth of industry capability

• Lean team of experienced professionals

• Collaborative approach working as part of your team

• Objective and independent in our actions

• Commitment to the Cleveland community

• 100% of client base stands as a reference

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Value Model

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Value Levers

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Organization and Structure

Systems

All of our consulting efforts focus on moving one of nine value levers for our clients in a positive direction. The value levers are uniquely impacted by customer and supplier relationships, business processes, systems, organization and company structure.

Plan

Innovate

Sell

Source

Make

Deliver

Service

Account

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Value Levers

Revenue Enhancement• Customer profitability• Product profitability• Channel profitability• Sales force effectiveness• Account expansion and retention• Product innovation

Headcount• Fixed cost

- Direct (plan, make, source, deliver…)

- Indirect (sales, finance, HR, IT …)• Variable cost• Benefits• Insource vs. outsource

Inventory/Carrying Cost• Inventory: FG, WIP, raw material• Carrying cost: Storage, labor,

cost of capital• Demand and supply variability • Product lifecycle management

Material Cost• Direct: FG, WIP, raw materials• Indirect: MRO, office supplies…• Manage purchase price variance• Low cost markets/sourcing

Overhead/Expenses• SG&A expense

• Hardware, software, service contracts• Energy, utilities, insurance, etc.• Telecommunication spend• Travel and expense

Freight• Inbound• Inter-company• Outbound• Mode: Parcel, LTL, TL, etc.

Asset Utilization• Equipment: (Machines, tooling,

trucks, etc.)

• Facilities: (DC network, plants, offices, etc.)

• Asset maintenance

Cash Flow• AR (DSO)• AP (DPO)• Treasury management• Banking relationships• Invested capital

Tax Liability• Local• State• Federal• Taxes on telecommunication spend• Unclaimed property

Major components of the nine value levers are listed below:

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Our Approach

Diagnostics Workshops Value Hypothesis Projects

jMap to Value Levers

Identify Areas of Opportunity

jMeasure Success (KPI’s)

jValue Enhancing Strategies

Validate Business Benefit

Develop a Plan

Validate Success

Our approach to unlocking value at our clients is to start with an initial diagnostic, workshop, value hypothesis or small, structured project. The goal is to identify areas of opportunity and map to one or more value levers. We then work with our clients to validate the business benefit, create improvement strategies and develop a plan to attain and measure the ongoing benefit.

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Strategic Sourcing DiagnosticSample Spend Categories

15-25%Print Advertising

20-30%Direct Mail

10-20%Uniforms and Contract Services

10-20%Corrugated/Packaging

5-20%Overnight/Express Freight

5-20%LTL, Truckload and Small Package Freight

5-20%Maintenance, Fasteners, MRO Items

10-20%Payroll Processing

15-25%Temporary Staffing/Contract Labor

10-40%Software Maintenance

10-40%Hardware Maintenance

10-15%Telephone Systems and Services

5-15%Professional Services

10-20%Printing, Forms and Labels

15-30%Office Equipment

15-30%Office Supplies

Improvement RangeSpend Category

SAMPLE

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Sourcing ApproachKey Activities

Define Objectives and Scope

Gather Data and Analyze

Define Specifications Understand Supply Market

Develop Sourcing Strategy

Sourcing Event

Analysis and Negotiation

Secure and Manage Contract

Manage Supplier Relationship

Targets, Performance Measures and Metrics

Enterprise Purchasing Strategy and Vision

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1.1. Capture Spend Capture Spend and Identify and Identify Improvement Improvement OpportunitiesOpportunities

3.3. Manage and Manage and Track SavingsTrack Savings

2.2. Execute Execute Negotiation Negotiation Strategies and Strategies and Capture SavingsCapture Savings

• Data gathering and analysis

• Review contracts, invoices and vendor reporting as appropriate

• Meet with spend category experts as appropriate

• Benchmark pricing

• Set target savings range

• Prioritize opportunities

• Develop individual negotiation strategies and tactics

• Create vendor letters

• Conduct discussions with individual vendors

• Track/report status of vendor interactions

• Negotiate savings (e.g. incumbent negotiations, RFP, etc.)

• Finalize negotiations/contract

• Develop savings tracking model

• Report status/monitor savings

• Knowledge transfer

• Measurement and compliance checkpoints

Sourcing ApproachKey Tasks and Activities

It takes 8-12 weeks to capture the spend, identify opportunities and execute the negotiation strategies

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Strategic Sourcing DiagnosticThird Party Advantages

• Provides experienced resources to attack initiative with a special project focus

• Brings tools and templates to accelerate the project

• Assists with actual negotiations to allow company to maintain positive relationship with vendor

• Completes project with minimal time commitment from company resources

• Significant benefit realized from minimal investment of time

• Recurring savings to the company bottom line

Capture Spend Information

1. Spend capture

2. Data analyzer

3. Vendor letters

Execute Negotiation Strategies

1. Best practice negotiating considerations

2. Product/commodity specific knowledge

3. Negotiation/education workshop

Manage and Track Savings

1. Inventory of all vendor interactions

2. Regular status reports on progress

3. Savings tracking toolkit

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Engagement costs are contingent on realized contract savings

Strategic Sourcing DiagnosticThird Party Advantages

Scott RichterPartner

21690 River Oaks DriveSuite 2600Rocky River, OH 44116-3108

Tel: +1.440.823.6421Fax: +440.331.0360

Email: srichter@value-based-solutions.com

Think Big, Start Small in Self Funding Waves

Jeff MoorePartner

21690 River Oaks DriveSuite 2600Rocky River, OH 44116-3108

Tel: +1.216.401.5004Fax: +440.331.0360

Email: jmoore@value-based-solutions.com

Think Big, Start Small in Self Funding Waves