Unleashing Hidden Cash Flow: Recover & Optimize Supplier Relations

1. How You can Recover Hidden Cash Flowfrom Your Supplier Base Ed Flanagan CPA / MBA / Director February 21, 2019

2. Expense Reduction Analysts A Global Company Finding extra cash flow within your supplier base and putting it back to work in your business.

3. Agenda What’s the Real Opportunity for You? What are the Obstacles? What Can You Do about it? Q & A

4. Is this Relevant to You? Thinking it’s still possible that you’re leaving significant money on the table? Curious if you are, how much it might be, where it is, and how to get it? You’re probably doing a good job of managing expenses Some important initiatives may be under-funded? You could put Additional Cash Flow to good use

5. The Opportunity ERA’s Experience with over 17,000 client projects tells us: Most companies are still leaving 10%-30% on the table across large expense categories 20% 10% 15% 30% What could Your Company do with an additional 20% added back into your budgets?

6. How is this Possible? 1 The Goal of any Supplier is to win as much business as they can, at the highest margin that they can & make it difficult to get lowest price Most companies don’t realize that the greatest leverage comes from understanding their Suppliers’ industries as well as their own. 2 3 It can be impractical to dedicate equal resources to less strategic cost categories. May have it in COGS, less likely in O/H expenses. 4 Most companies lack real time market pricing data that creates the benchmark to know what pricing is really possible. Most use their budget. 5 There are many Misconceptions about Procurement Best Practices.

7. Top 10 Common Misconceptions 02 01 TWO ONE Your strategy and expertise in purchasing in one cost category will produce similar results in another Suppliers give similar pricing to similar clients and customers 04 03 FOUR THREE Supplier loyalty translates to best pricing and service National pricing agreements are always better than local or regional agreements with the same Supplier

8. Top 10 Most Common Misconceptions 06 05 SIX FIVE More volume always gets you a better deal Getting three bids will get you to the best price 08 07 EIGHT SEVEN You’re asking the right questions in your RFPs Group purchasing will always get you the lowest costs

9. Top 10 Common Misconceptions IS YOUR ORGANIZATION LIMITED BY SOME OF THESEBELIEFS? 09 NINE Lower price means lower quality and service 10 TEN Lowest price is the same as lowest cost

10. You Can Find Additional Cash Flow Top 10 Best Practices in the Path to Exceptional EXCEPTIONAL GREAT BETTER GOOD

11. The Path to Exceptional: Getting Started 02 ANALYZE Analyze your actual purchasing history---It’s NOT what you think 01 COMMIT Develop a strategy and a plan

12. The Path to Exceptional: Understand Yourself 03 DEFINE QUALITATIVE NEEDS Understand the qualitative requirements for each cost category – It’s NOT all about price 04 UNDERSTAND YOUR BUYING ASSUMPTIONS Many of the Assumptions & processes that drive supplier requirements are no longer valid, appropriate, or necessary.

13. The Path to Exceptional:Understand Suppliers Market Trends, Pressures, Cycles New Developments & Alternatives Terminology & Jargon Business Practices & Unique ways to Contract Cost/Price Drivers Pricing & Terms Behavior for Similar Companies, with Similar Spends, in Other Geographies Their True Differentiation Among Their Competitors 05 SUPPLIERS & THEIR INDUSTRIES Understand each of your suppliers’ businesses and their industries like you understand your own

14. The Path to Exceptional: Re-evaluate 06 RE-EVALUATE Re-evaluate your current supplier relationships with these new insights 07 GO TO MARKET Go to market with written bids, proper frequency and ask the right questions

15. The Path to Exceptional: Execute 09 DECIDE, IMPLEMENT, MONITOR Implement quickly This is equivalent to a cash leak! Fight Price Creep Many mistakes—many line items and human error on both sides Processes---e.g., Off-contract purchasing Publish pricing & SKU changes Rebates, incentives, credits, etc. Suppliers have many methods to recover margin Continue to Optimize over time 08 NEGOTIATE Negotiate More Effectively Leverage all your new insights Separate negotiator & relationship owner Use pricing behavior benchmarks Help the supplier save money Know all the contracting options

16. The Path to Exceptional: Sustain it 10 CHANGE THE CULTURE Embed a real expense controlmindset into the company culture Mindset first – techniques, policies and procedures second. No cost is sacred Do they spend money like it’s their own? Do they understand the real Impact on the company, e.g., $1,000 Saved = $5-10,000 in Sales? Are cost-saving suggestions encouraged and pursued? Integrated into your reward systems?

17. How You Can Recover More Cash Flow 2 4 Understand your qualitative requirements for each cost category Develop a strategy and a plan 1 3 Analyze and validate your actual purchasing history Understand Your Assumptions & Processes 5 Re-evaluate supplier relationships Negotiate Better Go to market better Understand your suppliers and their industries like your own 8 7 6 9 Decide, implement and monitor Embed the expense control mindset into the company culture 1 0 1 0

18. Next Steps • As Promised: High-Level Analysis No Fee for Attendees Could You be Leaving Money on the Table? If so, Want to Know How Much? Where it might Be? How You Can Get It?

19. Expense Reduction Analysts Topic: How to Recover Significant Cash Flow from Your Supplier Base Speaker: Ed Flanagan, Director, Expense Reduction Analysts Attendee Name ____________________________ Company _________________________ Email Address _____________________________ Phone ___________________________ Check if You are Interested in: • Following up on ERA’s Special Offer • Learning more about ERA Services • Invitations to other ERA presentations • ERA Blog & Case Studies Y N TIO

20. Question & • Answers