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Sourcing Decision Tool (SDT) & Total Landed Cost Training

Sourcing Decision Tool (SDT) & Total Landed Cost Training. Novita Gan, Manager – Logistics Information Network Tom King, Team Leader – Ground Transportation. Sourcing Decision Tool. Framework for Financial Analysis of Sourcing Decisions Compares alternatives to current supplier “Base Case”

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Sourcing Decision Tool (SDT) & Total Landed Cost Training

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  1. Sourcing Decision Tool (SDT)& Total Landed Cost Training Novita Gan, Manager – Logistics Information NetworkTom King, Team Leader – Ground Transportation

  2. Sourcing Decision Tool • Framework for Financial Analysis of Sourcing Decisions • Compares alternatives to current supplier “Base Case” • Cash Flow Analysis • Evaluate the cash flow associated with each alternative • Calculate internal rate of return on incremental cash flow (ROI) • Includes all Costs and Capital • Costs: Spend, Transition, Logistics, Customs, etc • Working Capital: A/P, Inventory • Capital Assets: Tooling • Includes Tax Implications of Depreciation

  3. SDT Assumptions • ROI is Calculated Over Life of the Contract • Tax Rate: 35% • Inventory Carrying Cost: 14% • Single Currency Model • All Suppliers Provide Same Parts • “Level Playing Field” • No Change in Sales Revenue Due to Decision • Ongoing Concern • Re-quote to parts at the end of the contract

  4. “Read Me” Tab Summary Tab “Notes” Tab ROI Tab Sourcing Decision Tool Structure Input/Calculation Calculation/Output Admin. Comm Mgr Tab - Spend - Contract Terms - Pmt Terms - Lead Time - Customs Rates Inventory Tab - Current Inv. Level - Safety Stock - Inventory $ Logistics Tab - Freight Costs - Transit Time - Expedites - Logistics Cost Transition Tab - Tooling - One Time Costs - Travel - Transition Costs

  5. Commodity Manager Tab Inputs are Entered into Green Cells, White Cells are Links or Calculations

  6. Inventory Input Tab

  7. Inventory Calculations =22.3K*86.3K/133.6K INPUT =2/360*86.3K From Comm Mgr Tab =1/360*86.3K =From Logistics Tab =30/360*86.3K Total Adjusted Inventory INPUT =20%*22,286 Year 1 Impact Only Risk Adjusted Total Inventory

  8. Logistics Input Tab

  9. Tooling Input Tab

  10. Transition Input Tab

  11. Summary Tab

  12. Summary Tab Calculations From Comm Mgr Tab From Comm Mgr Tab From Comm Mgr Tab From Logistics Tab From Comm Mgr Tab =Spend *Pmt Terms/360 From Comm Mgr Tab From Inventory Tab = Inventory * 14% =Spend * Duty Rate From Comm Mgr Tab From Transition Tab =Tooling Assist $ * Duty Rate From Transition Tab =Tooling Transfer $ * Duty Rate From Transition Tab

  13. ROI Tab

  14. ROI – Capital Investments Year 0: Current Supplier + Capital Investment Year 1: Alternate Supplier Risk Adjusted Inventory Year 2+: Alternate Supplier Non-Risk Adjusted Inventory

  15. ROI-Expenses Calculate the Rate of Return on this Cash Flow Stream

  16. Sourcing Decision Tool Summary • Tool requires Supply Chain Team Approach • Procurement, Inventory, Logistics, Customs… • The Tool is Flexible Enough to Consider Most Decision Dimensions. • This is Merely a Tool! Common Sense is Required to Avoid “Garbage In, Garbage Out” • The Tool is Published on the Emerson Procurement Website and Maintained/Updated by Emerson Procurement.

  17. Landed Cost Calculator- Agenda • Objectives & Overview • Request Process Flow • Mandatory Fields • Q & A

  18. Landed Cost Calculator- Goal & Objectives • Design and Develop a System to Compute the Total Landed Cost of a Material/Part • Support Sourcing Decision Tool – Can be used to populate the logistics data field of the SDT • Ease of use for Procurement The Goal is to Automate the Calculator as we Develop a Centralized Rate Database and OTM

  19. Landed Cost Calculator- Overview • Air • Origin Charges • Air Freight • Destination Charges • Fuel Charges • Accessorial Charges • Ocean • OriginCharges • Ocean Freight • X-Dock • Brokerage • Destination Charges Output • Division Input • Incoterm • HTS codes • Shipping mode • Suppliers • Final Destination • Product End Use • Annual Spend (USD) • Packing Dimension • (LxWxH cm and Groos Weight kg) • Required: critical data elements • Landed Cost • Breakdown • Online or • Export to • SDT Tool • FTL/LTL • LTL: CZAR-Lite + Division Discount • FTL: Contract Rate • Custom Clearance • Brokerage • Overtime Charges Duty / Tax Warehouse Landed Cost Calculator Central Rate Database is Critical in Enabling an Automated Landed or “ALL IN” Cost Calculation

  20. Landed Cost Calculator- Request Process Flow • Download Template “Landed Cost Calculator” from (a) Corporate Logistics (b) Corporate Procurement - eSourcing • Read Sheet “Instruction” • Select appropriate worksheets (a) Intra North America (b) Global (c) Intra Europe (coming soon) • Fill in Section “Division/Requester Input” • Send the completed form to a delegated person at GMDC • GMDC will respond with a Request ID to the requester within 4 hours • Total landed cost completed in 2-5 working days. Form is returned to requester (via email) with cost details in Section “Logistics Team/Embedded Formula” Refer to Sheet “Process Flow” for details

  21. Landed Cost Calculator1a. Download Template “Landed Cost Calculator” • Go to Corporate Procurement : http://corp.emrsn.com/procurement/ • Select eSourcing Tab • Click “Landed Cost Calculator” link to divert to Logistics Web Site

  22. Landed Cost Calculator1b. Download Template “Landed Cost Calculator” • Go to Corporate Logistics Home Page : http://sps.emrsn.com/sites/logistics/default.aspx • Home Page • Click “Landed Cost Calculator” link • Select File “LandedCostCalculator_Template” and Save on your computer Launch Date: Dec 15, 2007

  23. Landed Cost Calculator2. Read Sheet “Instruction” Objective & Contact Person Step-by-Step Instruction Highlight Mandatory Fields & Important Note Field Descriptions & Format

  24. Landed Cost Calculator3. Select appropriate worksheet a. Sheet “Intra North America”: - supplier's manufacturing location and Final Destination (ie. EMR Site) are in US, Canada or Mexico eg. Mexico to McAllen - Fill in fields from rows 3 - 40 b. Sheet “Global” - all other locations eg. Shanghai to Sidney or Shenzhen to Manila • Fill in fields from rows 3 – 35 • Allows up to 5 items per request • Fills in Section “Division/Requester Input”

  25. Provide Additional Information or explanationsin Remarks Landed Cost Calculator3. Select appropriate worksheet Example 1 Put “China Custom Port” on Remarks if Air Shipment in China Intra North America Global Supplier Example 2 Dangerous Goods: Toxic Chemical Special Certification Required: Farmington Certification Example 3 Country of Origin : Hong Kong if the supplier is a distributor or trading company Example 4 Shipping the entered parts together

  26. Drop Down For Ease of Filling Form Contact Kerry Tong if dropdown value is missing or incorrect Critical Data Elements Note: Pls. re-submit the file if any changes on shipment details

  27. Landed Cost Calculator4. Fill in section “Division/Requester Input” 14 Mandatory Fields: * Nice to have Zip Code * * Validity and Integrity of the Results are driven by ACCURATE and COMPLETE input data

  28. Gross Weight Height Height Length Width 1 1260 pieces (eg. 36 boxes per pallet x 35 pcs per box ) Length Total Quantity in piece or each Width Landed Cost CalculatorOutside Package Dimension: Qty& LxWxH (cm) & Gross Weight (kg)

  29. Landed Cost Calculator5. Email completed form to Delegated Person at GMDC • Rate Issues: Ken Villaflor JohnKenneth.Villaflor@emerson.com • Technical Issues & Suggestions: Kerry Tong kerry.tong@emerson.com • Suggestion or comment regarding this template is most Welcome

  30. Landed Cost Calculator6. Issue & Return a RequestID for communication • Upon submission of a request for landed cost, you will receive a reference number within 4 hours • If there is insufficient or missing data • You will receive an email with the attached request highlighting the areas requiring clarification • If the form is complete, the calculation request will be processed • Processing Time: • 2 working days where contract rates are available • Max 5 working days for lanes we have no established pricing DO NOT PROCEED any request with missing mandatory fields

  31. Landed Cost Calculator7. Provide Total Landed Cost This Tool is Work-In-Progress and will evolve into an Automated System with the Centralization of Contract Management and Implement OTM

  32. Landed Cost Calculator14 Mandatory Fields Nice to have Zip Code * * * Landed Cost is dependent on accurate and complete data from Y O U!

  33. Q & A Email your name and division to kerry.tong@emerson.com after this training

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