PROCUREMENT PLAN CLIENT Place date Version x Copyright

PROCUREMENT PLAN CLIENT Place, date Version x Copyright 2008 Si. PM www. sipm. com

Procurement plan: process 1. Preparation Problem definition and data collection Wx Data analysis Si. PM 2. Analysis & Options Wx Interviews Stakeholders Interview Buyer(s) (Benchmark) Wx+ 1 Consolidation Si. PM Wx+2 High-level conclusions Discussion CEO 3. Conclusion Wx+3 Advice and final presentation We thank the following people for their constructive input at the interviews: –xxx: function –Xxx: function 2

Objectives Procurement Plan 1. Scan of current procurement (department) 1. Benchmark 2. Opportunities 3. Barriers to change 2. Options 3. Advice 1. Mission, incl. potential (€) 2. Strategy 3. Procurement Organisation structure incl. R&R 3

Process § Step 1: Internal analysis Methodology - WINS world-class benchmark Financial … Production Sales § Procurement 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 4

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 5

INTRODUCTION: METHODOLOGY USED Copyright 2008 Si. PM www. sipm. com 6

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

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

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

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

INTERNAL ANALYSIS Copyright 2008 Si. PM www. sipm. com 11

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

Skills 1. 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 2. Leadership Procurement – xxx • Xx 13

Skills 3. Support of Tactical procurement process – Mainly ad-hoc, few structure • Xxx 4. Supplier Selection process – Xxx 14

Skills 5. Supplier relationship management – Xxx 6. Strategic Cost Management – xxx 30% 70% Current focus Here is the prize to be taken. Seems easy but many companies fail. 15

Skills 7. Capital productivity – Xxx 8. Operational Process – xxx Topic Time spend % Strategy 0% Selection process 20% Continuous Improvement 0% Operational tasks 80% 100% 16

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

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

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

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

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

Coverage of total spend Purchasing 20% Other Divisions Conclusion: 22

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

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

OPTIONS & ADVICE Copyright 2008 Si. PM www. sipm. com 25

Si. PM has developed 3 options Option 3 Ex. “Supply Chain Leadership” Coverage 80% Option 2 Ex. “Strategic Procurement” 40% Option 1 Ex. “Logistic Partner” Client 0% Bronze Silver Gold Skills 26

Options 1. Logistic partner Objective Output Organisation Time to implement 2. Strategic Procurement 3. Supply Chain leadership § xxx § Lowest total costs § Xxx § Innovative netwerk of suppliers: fast TTM, product development § Procurement will diliver: § Xxx § Procurement will diliver: § Supplier selection and improvement § Xxx § Procurement will diliver: § Xxx § Hybrid § Xxx § Title: “replenisher” § Central procurement § xxx § Title: Procurement Manager: Senior buyer § Central procurement § > 80% of spend via procurement § Xxx §Title: Director of Supply § 2 year § 3 -4 year § 5 - … year 27

Option 1: Logistic partner 1. Mission: By 2012, xxx 2. Strategy: xxx 3. CEO Production Financial Logistics Organisation: xxx Replenisher 28

Option 2: Strategic Procurement 1. Mission: By 2012, xxx CEO 2. Strategy: xxx Production 3. Organisation: xxx Financial Logistics Procurement Manager 29

Option 3: Supply chain leader 1. Mission: By 2012, xxx 2. CEO Strategy: xxx Production 3. Organisation: xxx Financial Supply Chain Director Logistics Procurement 30

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” 31

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

Pro & Con’s 3 options 1. Logistic partner 3. Supply Chain leadership § xxx § Investment: x § xx § Investment: y § xxx Pro 2. Strategic Procurement § xxx § Investment: z Con 33

Advice Si. PM Option 2: Strategic Procurement • 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 Coverage 2010 2009 40% Client 0% * = nett, including investment in new organisation Bronze Silver Skills Gold 34

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

APPENDIX All calculations are in excel file 36

Option 2: Profile Procurement Manager • xxx – Xxx 37

Financials Start Step 1: Investment 38

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. 39

Financials Step 3: Discounted Cash Flows 40

Financials Step 3: Discounted Cash Flows (continued) 41

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

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

Skills: definitions and methodology • Definition By buying smarter, you will be buying more efficient, cheaper and be protected against market fluctuations. We have been measuring your procurement against a benchmark on 8 different topics, ranging from strategic intent to … supplier relationship management. • Methodology Interviews + questionnaire 44

Organisation: definitions Strategic Level Tactical Level Operational Level Central organisation: tactical process mainly (>60% of spend) driven by procurement Decentral organisation: tactical process mainly (>60% of spend) driven by local departements Hybrid organisation: For a number of categories, the tactical process is managed by procurement, for other categories by the local departments All structures but the central structure are suboptimal in terms of efficiency. However, this does not imply that other structures are not good. A hybrid structure for example is the most desirable options for most multinationals, as this currently fits better with the culture of the company. 45