RFI’s, RFQ’s, SOW’s and Contracts Including SLA’s

1. RFI’s, RFQ’s, SOW’s and Contracts Including SLA’s October 17, 2007 - Seminar Austin, Texas – Hilton Austin Airport Gailen Vick President Reverse Logistics Association

2. Welcome and introductions Outsource decisions and building the RFQ’s 3PSP responding to the RFI/RFQ’s Outsourcing/Service best practices Exercise and break Contract requirements and RL components Understanding the Statement of Work Agenda

3. “Real knowledge is to know the extent of one's ignorance.”  Confucius

4. Objective: • Offer both a client/service provider perspective • Cover key points of success and failure • Opportunity to share best practices • Provide a reference point while building agreements

5. REVERSE LOGISTICS DEFINED Supply Chain - After Market Supply ChainPRODUCT LIFE CYCLE FORWARD LOGISTICS END USER / CONSUMER REVERSE LOGISTICS CORPORATE IDENTITY CHANGE New ProductDevelopment Material Management Manufacturing & Distribution Aftermarket Customer Services • Customer Service (Helpdesk) • Depot Repair/Screening • Service Logistics (Field Service) • Transportation/Warehousing • Spare Parts Management • RMA Management • Replacement Management • End-of-life Manufacturing • Fulfillment Services • IT Process Management • Recycling/Refurbishment • Warranty Management • Asset Management • Environmental Resources •Design Development•Technology Roadmaps•ASIC Development•Mechanical Design•PCB Layout•Prototyping•New Product Introduction •Vendor Relations•Planning•ProcurementInventory Planning•Component Fabrication •PCB Assembly•Box Assembly•Volume Manufacturing•Integration•Configuration•Final Testing•Distribution to Customer•Customer Fulfillment•Transportation “Anytime money is taken from a company's Warranty Reserve or Service Logistics budget, we define that as a Reverse Logistics operation.”

6. Good relationships equal success Management participation at all levels Clear measurable objectives Agreement on business requirements Commitment to mutually solve problems Metrics performance vs. expectations Continuous communication/Improvement Trusting, open and honest relationship Winning at Reverse Logistics

7. Developing the Outsourcing Model Internal vs outsource true cost relationships What the 3rd Party Service Provider Needs in the RFQ RFP the key components, What the 3PSP needs to know RFP selecting the 3PSP RFP the 3PSP response Best Practices in building a long term relationship Unique components of a reverse logistics contract Components of the SOW Course Contents, Expected Results

8. Outsourcing Documents RFI - Request for Information RFQ Request for Quote Statement of Work RFI Contract SOW RFQ Relationship Partnership

9. The Outsource Decision Executive Operations Manager Finance Manager Development Facilities Purchasing HR Prod Prod IT Logistics Acct. Legal Labor Cross-departmental outsourcing investigation team • Sponsorship • Understand business objectives • Quantify scope/schedule/resources of investigation • Establish a decision process

10. Outsourcing Decision Matrix Weight Department Item Functional Issues Business Fund. Risks Cost Cost Tracking Accounting Invoicing Problem Resolution Process Control Reporting IT Real Time Data Repair Tracking Transaction Capability Returns Mgt. Purchasing Materials Inventory Control Import/Export Scrap Control Process Doc Control Engineering Process Eng. Repair Expertise Test Expertise ESD Control Organization Practices Quality Meterology Document Control Training/Documentation Warehouse Environment Facilities Power Stability Expansion Senior Mgt. Operations Mgt. Management Operations Flexibility Cost Reduction Efforts Production Flexibility The Outsource Decision

11. TheOutsource Decision Single vs. Multiple Suppliers OEM/Retailer 3rd Party Program Mgt. 3rd Party Location 3rd Party Location 3rd Party Location 3rd Party Location OEM/Retailer 3rd Party 3rd Party 3rd Party 3rd Party 3rd Party

12. Business objective statement. Contract & Statement of Work definition. Operations history and forecasts Process flowchart and process times. IT Requirements and reporting Material handling requirements. Product specifications/BOM if pertinent Building the RFI/RFQ

13. Create a 3PSP selection team Outline the selection/RFQ process Understand the 3PSP RFQ requirements Develop a ranking matrix Same information is available to all 3PSP candidates. Outline and offer due diligence to sensitive information Ensure the RFQ process is published to 3PSP’s Building the RFI/RFQ

14. Beginning RFQ Process Selecting a Service Provider Who are the service providers? Where are they located? Can they meet our immediate needs? Are they reliable? Can they grow and stay competitive?

15. Beginning OEM RFQ Process RL Quote dramatically simplifies access for Reverse Logistics Services Create Detailed RFP/I/Q Register as an RLA User RL Quote is a powerful sourcing tool for access to the Reverse Logistics world RFI Emailed to 3PSPs Sourcing service providers with RL Quote is free for OEMs Receive Quotes from 3PSPs Simple; just complete the quick registration process Feedback to 3PSPs Global exposure, feedback for 3PSPs

16. Beginning OEM RFQ Process • RFI’s are Released by OEMs & Retailers • OEMs & Retailers Find 3PSP for Free • 3PSPs Receive the RFIs www.RLTinc.com

17. Department Item Business Objective Critical Issues Risks Corporate business strategies and objectives Cost Tracking Accounting Invoicing Problem Resolution Process Control Reporting IT Real Time Data Repair Tracking Transaction Capability Returns Mgt. Purchasing Materials Inventory Control Import/Export Scrap Control Process Doc Control Engineering Process Eng. Repair Expertise Test Expertise ESD Control Organization Practices Quality Meterology Document Control Training/Documentation Warehouse Environment Facilities Power Stability Expansion Senior Mgt. Operations Mgt. Management Operations Flexibility Cost Reduction Efforts Production Flexibility Outsourcing Matrix

18. 3PSP Ranking Matrix

19. OEM Outsourcing Expectation Adjustments Managing the Service Provider takes a different set of management skills Lines of Communication are different & more difficult Understanding and measuring the performance of the Service Provider Extra expense due to startup/transfer costs and follow-up costs 3PSP “has its own priorities”, perceptions, business objectives Market allegiance, security, strategic direction Building the RFQ

20. Service Provider RFQ Response Know the critical issues behind the RFQ Know the product/service roadmap: History & Future Eliminate boilerplate/sales jargon in the presentation Prepare a project plan to describe the startup plan Provide a statement on security operations Building the RFQ Response

21. 3PSP understands the business Understanding of the price components and assumptions Creative solutions Cost reduction possibilities IT integration & reporting capability Program management and headcount Commitment to Continuous Improvement OEM Expectations

22. The first ten pages – what are they about Your Company, the Business, or the Client Executive Summary – 3 to 5 reasons why your service is the best solution for the Client Don’t be passive: don’t say “We can do this” – be definitive in your statements Let the Client know your process on the first page Don’t forget the things you don’t know The 3PSP RFQ Response

23. The 3PSP RFQ Response • The Service Provider must present he understand the business: • Experience in performing the service, or the talent to create the business • The financial capability to invest in the future, to grow and to build infrastructure • It has unique capabilities in technical knowledge or the expert knowledge to carry the project forward • There is the skilled personnel available and a formal training plan to grow & train the workforce to be flexible • Solid Reputation in the market, references from current clients. Active participation in the industry

24. Program Management Model Call Center 3rd Party Program Mgt. Logistics 3rd Party Program Mgt. 3rd Party Location 3rd Party Location Repair Location OEM Repair 3rd Party Location 3rd Party Location Fulfillment Vertical Relationships Horizontal Relationships

25. OEM’s agree – IT is a big deal Prepare a 3-5 page overview of IT capabilities and reporting Describe in-depth all current IT operations Describe the IT Strategy with a 2-3 year plan Respond in detail with the IT options available to the OEM Provide sample reports The Importance of IT

26. Continuous Improvement • Continuous effort on Cost Reduction & Cost Control • OEM Executives push their organization • Pro-Active 3rd Party actions are very positive • OEM expects vendor efficiency over time • Repair costs must be related to the retail sales price • How ? • Look to reduce Touch Time and indirect labor • Improve the process, improve quality, increase yields • Reduce scrap, improve asset management • Meet or exceed future environmental regulations

27. Communicate often Metrics: Before, regularly, and final Acknowledge the difference between qualification units and high volume units Plan on follow up visits & audits. Self audits, Client audits, executive on-site reviews. Sponsor and publish success stories Project Startup Best Practices

28. On-Going Best Practices • Maintain/Push the idea of Partnership • Communication between all levels of the organization • Single point of contact for business escalation process • Insist on regular Communication (QBR’s, Pricing reviews, audits and weekly performance reports) • Partner in Goals and Objectives in 1, 2, 3 years in the future • Be up front about problems / mistakes and be pro-active in suggesting corrective action

29. On-Going Best Practices • Defined 3 year Business Plan and Strategy. • Defined program for Employee Training, skill development and technical advancement • Continuous review of cost competitiveness when measured against: • Other client or provider internal programs • Other regional vendors • OEM new product cost • Overall return costs (warranty mgt & logistics) • Offshore / Worldwide Vendors • Analyze the returns and suggest process changes or changes in product management rules

30. Contract Management Service Level Agreements

31. What Comes First RFI - Request for Information RFQ Request for Quote Statement of Work RFI Contract SOW RFQ Relationship Partnership

32. Business services to be provided and the process of service(s) What is the definition, how will it be done and who is responsible? Original Product Warranty determination What will happen if there is a design issue? On-going analysis of design improvements Responsibility for Asset Management Scrap decisions, when and how scrap is determined What is the definition of BER (Beyond Economic Repair). Record keeping and archiving. The Service Contract

33. Process changes – no changes without approval vs. ability to change Resolution of performance issues Material/Product/Equipment Ownership Special Material / Chemical requirements Document handling and security Invoicing, payment terms and problem invoice resolution The Service Contract

34. The Relationship A definition of the business relationship Repair Warranty Statement. A statement of the warranty offered Cost Reductions How to divide the “spoils” of cost reduction Property # 1 Define the use and 3rd Party responsibilities Property #2 (Test Equipment) Define who is responsible for maintenance Inventory Loss. What happens when there is an inventory loss The Service Contract

35. Epidemic Failure Dealing with Failures outside the expected failure profile EOL & Bufferstock Purchases by 3rd Party Obligations related to the purchase of inventory Excess Materials (Scrap). Method of disposal by required regulations Disengagement Operational statement on handling products, equipment and materials Termination of the Agreement Statement on termination for cause The Service Contract

36. Should be a flexible document, not within the Contract. Receiving, Order fulfillment, Shipping processes & accuracy Metrics and reporting methods Transaction timing & accuracy Repair Process & Equipment Business coverage requirements Security & Environmental Requirements The Statement of Work

37. Product After tax Profits Are They Measured Right Product Production Cost Returns Take Away From Bottom Line Profits Reverse Logistics Management RL in Your Finance Calculations Your Company Manufacturers 1 Million Units Per Year Revenue per Unit is $1 or $1,000,000 Profit per unit is 5% After Tax or $50,000 Return Rate Average is 10% or 100,000 units Returns Represents $100,000 of Sales or $50,000 negative to bottom line Reverse Logistics Recovers 80% of the Returns or $80,000 to company bottom line Company’s After Tax Profit is $30,000 So who is most important, the VP of Marketing/Sales that took $50K from your Company or the Reverse Logistics Professional that gave you $30K of After Tax Profit?

38. Thank You