Procurement Plan Client

1. Procurement Plan Client Place, date Version x

2. We thank the followingpeoplefortheirconstructive input at the interviews: xxx: function Xxx: function Procurement plan: process Problem definition and data collection Wx Data analysis SiPM Interviews Stakeholders Interview Buyer(s) (Benchmark) Wx Wx+1 Wx+1 Consolidation SiPM Wx+2 High-level conclusions Discussion CEO Wx+3 Advice and final presentation

3. Objectives Procurement Plan • Scan of currentprocurement (department) • Benchmark • Opportunities • Barriers to change • Options • Advice • Mission, incl. potential (€) • Strategy • ProcurementOrganisationstructure incl. R&R

4. Process • Step 1: Internal analysis 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 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

5. 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

6. Introduction: methodologyused

7. SiPM procurement benchmark: main view Savings World-Class = 10% net reduction in total expenditure 10% Operationalexcellence 5% Catching up 0% Time

8. 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: 1. Skills 2.  procurement coverage How professional do we *1 manage expenditure (“people - process - systems”, Measured on 8 segments). * 1: throughout the company What % of expenditure is being influenced by procurement

9. WINS program 100% WORLD - CLASS WORLD-CLASS 1% 80% Mission OPERATIONAL EXCELLENCE OPERATIONAL EXCELLENCE 5% Coverage 40% CATCHING-UP 94% CATCHING - UP 0% Bronze Silver Gold Skills * 94% of other companies worldwide in catching-up phase

10. Definitions • Procurement process can be splitted into strategic/tactical/operational Strategies : mission, organisation, make or buy/category strategies, off-shore sourcing… Specifications RFQ/RFI Contract Negotiation Cont. Improvement Order to payment process, replenishment, inventory, performance tracking, …

11. Internal Analysis

12. Scan: Skills and Coverage 1. Skills 2.  procurement coverage

13. Skills • 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 • Leadership Procurement • xxx • Xx

14. Skills • Support of Tactical procurement process • Mainly ad-hoc, few structure • Xxx 4. Supplier Selection process • Xxx

15. Skills • Supplier relationship management • Xxx • Strategic Cost Management • xxx 30% Current focus Here is the prize to be taken. Seems easy but many companies fail. 70%

16. Skills • Capital productivity • Xxx • Operational Process • xxx

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

18. Scan: Skills and Coverage 1. Skills 2.  procurement coverage

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

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

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

22. Coverage of total spend Conclusion:

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

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

25. Options & Advice

26. SiPM has developed 3 options Option 3 Ex. “Supply ChainLeadership” 80% Option 2 Ex. “StrategicProcurement” Coverage 40% Option 1 Ex. “Logistic Partner” Client 0% Gold Bronze Silver Skills

27. Options

28. Option 1: Logistic partner • Mission: • By 2012, xxx • Strategy: • xxx • Organisation: • xxx

29. Option 2: StrategicProcurement • Mission: • By 2012, xxx • Strategy: • xxx • Organisation: • xxx

30. Option 3: Supply chain leader • Mission: • By 2012, xxx • Strategy: • xxx • Organisation: • xxx

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

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

33. Pro & Con’s 3 options

34. Advice SiPM Option 2: StrategicProcurement • 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) 80% 2011 2010 Coverage 2009 40% Client 0% Gold Bronze Silver * = nett, including investment in new organisation Skills

35. Short-term actions (6-9 months) • Recruitment • xxx Next: • xxx • Xxx High Publicity Subcontracting Complexity Raw Materials Transport Rent cars Start with these categories Fuel Interim Low Low High Potential

36. APPENDIX All calculations are in excel file

37. Option 2: Profile Procurement Manager • xxx • Xxx • xxx • Xxx

38. Financials Start Step 1: Investment

39. Financials Step 2: savings per option • - 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.

40. Financials Step 3: Discounted Cash Flows

41. Financials Step 3: Discounted Cash Flows (continued)

42. Savings: 2nd benchmark • Next to WINS benchmark, there is a 2nd detailed benchmark • Results are similar: in year 5, the margin would xxx Double of current profit

43. Specifications Quotations Negotiations Contract Coverage: definitions and methodology • Definitions Which of the following tactical steps can be influenced by procurement? • Methodology Source: buyers (Interviews and questionnaire)

44. Skills: definitions and methodology • Definition Bybuyingsmarter, youwillbebuying more efficient, cheaper and beprotectedagainstmarketfluctuations. We have been measuringyourprocurementagainst a benchmarkon 8 different topics, rangingfromstrategicintent to … supplierrelationship management. • Methodology Interviews + questionnaire

45. Organisation: definitions Centralorganisation: tactical process mainly (>60% of spend) driven by procurement Decentralorganisation: tactical process mainly (>60% of spend) driven by local departements Hybridorganisation: For a number of categories, the tactical process is managed by procurement, for other categories by the local departments All structuresbut the centralstructure are suboptimal in terms of efficiency. However, this does notimplythatotherstructures are notgood. A hybridstructureforexample is the most desirableoptionsfor most multinationals, as thiscurrently fits betterwith the culture of the company.