Source One Management Services, LLC 724 Fitzwatertown Road Willow Grove, PA 19090 (215)-902-0200 www.sourceoneinc.com

1. Procurement Service Provider and Supply Chain Management Training: -Lesson 3: Innovation and Opportunity-Lesson 4: The Three-to-Five Year Outlook Source One Management Services, LLC 724 Fitzwatertown Road Willow Grove, PA 19090 (215)-902-0200 www.sourceoneinc.com

2. Lesson 3 Introduction • A 1 percent reduction in the cost of purchased materials is equivalent to a 12 to 18 percent rise in sales growth • Several reasons why that reduction is possible • New and better technology • More companies and countries from which to source (globalization) • Increasingly sophisticated approaches to managing the supply management function (Procurement Service Providers such as Source One Management Services, LLC for example)

3. Maturing and Scaling of Procurement Technology • Procurement Technologies can: • Help curtail rogue spending • Work efficiently with wider range of suppliers • Simplify the sourcing process • Help actively manage total costs Free E-Commerce tools such as www.WhyAbe.com provide Reverse Auctions, RFx, and Supplier Management

4. E-Sourcing Capabilities • Becoming more sophisticated and popular • Have become more integral to e-procurement initiatives • Specialized capabilities are evolving: • Facilitating easier interaction concerning contract language • Evaluating numerous variables on a large scale

5. PLM and RFID Systems • RFID (Radio Frequency Identification Systems) • Provides real-time defective product data, improves item tracking, aids supplier-managed inventory processes • PLM (Product Life Cycle Management Systems) • Manipulates the relationship between the product life cycle and cost reduction opportunity

6. Global Sourcing and Supply Management Three major recent developments in the evolution of global sourcing: • More companies pursuing global supply base • Increase in number of countries viewed as sourcing candidates • Increase in quantity and variety of available products

7. Why Alternate Supply Sources? • Worker Education • Size of Domestic and Export Market • Market Liberalization • China’s admission into the WTO has assured commitments to reduce high tariffs • Abundance of low-wage labor available • China’s average hourly manufacturing wage is 60 cents an hour with a able workforce of 941 million

8. Global Sourcing Challenges • Identifying and establishing new supplier relationships • Less advanced IT systems and information sharing • More research and due diligence must be done on overseas suppliers • Incorporating local business culture into negotiation strategy

9. Approaches to Global Sourcing • International Supply Management Office • Local Joint Ventures • Work with in-country enterprise to establish presence • Trading Agent • “sourcing brokers”

10. Procurement Outsourcing • Cost reductions of 5 to 18 percent can result from an organization’s ability to: • Drive contract compliance • Source effectively • Connect with a larger supplier base • Operate more efficiently • Address complex services spend • Leverage technology more effectively Procurement Service Providers, such as www.SourceOneInc.com can supplement internal procurement departments without risk.

11. Government Sourcing Practices • Practice Cost Avoidance • Identify rogue spending and eliminate unnecessary cost adders • Know the Market • Be knowledgeable about what you’re sourcing • Overcome Legislative Burdens • Cut through the Red Tape • Build Confidence in Strategic Supply Management • Manifest trust of the end users in the system • Improve Supplier Management • Monitor supplier performance and adherence to contract terms • Leverage Purchasing Power • NYCDOE as example of consolidating smaller spends to leverage pricing with suppliers

12. Financial Services Practices • Optimize Sourcing • Make intelligent and informed sourcing decisions • Rebuild the Procure-to-Pay Model • Streamline processes • Increase Use of Electronic Tools • Apply Best Practices to Overlooked Spend Categories • i.e. Legal fees, advertising, market research • Maximize Compliance • To realize optimum cost reduction and efficiency • Develop Shared Services Programs • Outsource Supply Management Functions • Complex strategies make outsourcing an attractive option

13. Chapter 4 Introduction • The Three-to-Five Year Outlook • CEO expectations for supply management • CPO expectations for supply management • How do we reach these goals?

14. CEO Expectations • Cost and Price Focus • Take advantage of opportunities and strive for 100% compliance with initiatives • Brand Focus • More than just the bottom line • How do we get our name out? • Technology Stagnation • Systems and software can only go so far • Global Commerce Dominates Competition • Forward-thinking companies will have an edge • Mass Industry Consolidation • More takeovers and buyouts

15. Critical Supply Management Questions • What business are we in? • What are the ways to go to market? • What are the business models we could use? • What supply chains make sense in the given business model • How can I synthesize existing supply chains? • What next best practices should we create for competitive advantage?

16. Risk Management in Supply • Risk assessment and management is becoming increasingly important • Shift in focus from mitigation to optimization • How can we use risk analysis to our advantage?

17. How Do We Prioritize Supply Management? • Reach • Build a better business case for supply management • Measurement • How well do you perform against your competitors? • Innovation • Think outside the box • Extracting Value • Make sure you’re getting the most out of suppliers while remaining attuned to the market • Global Business • Think worldwide to optimize sourcing practices • Diversity • Expand the horizons of your supply base

18. Types of Supply Chain Executives • Entrepreneurs • Strategic Thinkers • Results-Drivers • Recruiters

19. Entrepreneurs • Broad thinkers • Long-term focus on profitability and cost management • Business acumen and financial knowledge

20. Strategic Thinkers • Strong communication skills • Knows when to develop new relationships and rekindle old ones

21. Results-Drivers • Defines, predicts, measures, and tracks benefits of supply management • Markets and sells supply management • Focuses on continuous improvement • Possesses market intelligence skills

22. Recruiters • Measures performance to recognize key people • Can identify right skills for any given position • Rotates team members to gather cross-functional experience • Brings out the best in others

23. In Closing… Supply Management in the next 3-5 years will focus on: • Creating value for customers • Eliminating waste in processes • Better defining connections between processes, customers, and suppliers • Working more collaboratively with suppliers

24. Resources for These Lessons:Lesson 3: Innovation and OpportunityLesson 4: The Three-to-Five Year Outlook The Supply Management Handbook:Seventh Edition: McGraw-Hill Source One Management Services, LLC www.sourceoneinc.com