Cost & Cash Slide 1 © The Delos Partnership 2005

Supplier Relationship Management Supplier Relationship Management Module 2 – Cost & Cash

• Financials• Cost Analysis• Cost Trends• Supply Data• Spend Coverage• 2006 Purchasing Goals• Financial & Service Level Purchasing Performance

Cost & Cash Slide 2 © The Delos Partnership 2005

Financial ResultsFinancial Results

0100200300400500600700800

2003 2004 2005

Years

€m Sales

Profit before tax

Variable Cost

Sales, Profit & Variable Costs

Cost & Cash Slide 3 © The Delos Partnership 2005

Cost Analysis Cost Analysis

0

50,000

100,000

150,000

200,000

250,000

300,000

2003 2004 2005

Selling & Marketing Expenses

Cost of sales

Administrative Expenses

Inventories

Tangible Assets

Financial Expenses

Capital Expenditure

Variable & Fixed Cost Breakdown

Cost & Cash Slide 4 © The Delos Partnership 2005

Cost Analysis TrendsCost Analysis Trends

– Selling & Marketing Costs? – Cost of Sales Costs? – Administration Costs? – Inventories ? – Tangible Assets?– Capital Expenditure?

From 2003 Baseline to Extrapolated 2005 FY Costs

Cost & Cash Slide 5 © The Delos Partnership 2005

Supply Side DataSupply Side Data

• External Spend of >€m

• Thousands of Suppliers

• Tens of Thousands of supplier invoices/pa

• >X people with a high Purchasing content to Role

• Many other “Buyers”

Procurement Headlines

Cost & Cash Slide 6 © The Delos Partnership 2005

Finished Products & Services – Toll Conversion Category • covers products & services that the business has chosen not to manufacture but to source

from a third party supplier. Products and Services can be made to the business specification or purchased as a generic.

Raw Materials & Consumables Category • covers items that typically consumed or used within a manufacturing or assembly process

(direct materials) and are normally held as an inventory item by the supplier (VMI or Kanban). Purchase price variance, usage and spoilage are key category measures.

Packaging Category • covers both inner packaging such as cans, bottles, closures, cartons & labels used to

protect, decorate and identify the product and outer packaging such as corrugated, stretch wrap, strapping, pallets and tote bins used for product transportation.

Spend Categories Spend Categories

Cost & Cash Slide 7 © The Delos Partnership 2005

Energy & Utilities Category • covers Electricity, Gas, Oil, Water, Effluent and Waste disposal.

CEMRO Category • covers capital equipment, engineering and maintenance, repair and operating

expenditure – typically electrical, mechanical and pneumatic items such as switches, pumps, valves, freezers, instruments, compressors, heating, ventilation etc.

Logistics & Freight Category • covers internal and external warehouses, off site storage, inbound freight,

outbound freight, (sea, air, road, rail) couriers, duties, transport hire and the cost of producing & paying for import and export documentation and clearance.

Spend Categories Spend Categories

Cost & Cash Slide 8 © The Delos Partnership 2005

Technical & HSE Category • covers R&D & Quality spend on pilot equipment, glassware, equipment, calibration, servicing,

laboratory consumables (reagents, gloves etc), laundry, gases, safety equipment, testing and maintenance services, archiving etc.

Goods & Services Category • covers catering & vending, I.T. hardware & software, telecoms, office equipment, stationery,

photocopiers & fax, cars (lease & hire), fuel, travel & accommodation, conferences & exhibitions, consultants, auditors, business corporate communications, legal, property, leases, rates, subscriptions, books & magazines, cleaning, security, insurance, printing & artwork, market research, advertising, post, credit cards, entertainment etc.

People Category• covers recruitment, temporary workers, clothing, professional fees, private medical, training,

courses, relocation and functional outsourcing etc.

Spend CategoriesSpend Categories

Cost & Cash Slide 9 © The Delos Partnership 2005

• Stocks – Inventories• Creditors • Land & Buildings• Plant & Equipment • Capital Expenditure & Disposals • Expenses• Authorisation Channels & Control

Assets and Cash FlowAssets and Cash Flow

Cost & Cash Slide 10 © The Delos Partnership 2005

Task – Spend Coverage Task – Spend Coverage

Spend Categories

Purchasing / Supply Chain Involvement Other Function & ”Maverick buyer”

Spend InvolvementPurchasing

Centre Factories Offices R&D

Finished Products – Toll Conversion

Raw Materials & Production Consumables

Packaging

Capital, Engineering MRO (CEMRO)

Energy & Utilities

Logistics & Freight

Technical & H.S.E.

Goods & Services

People Spend

Cash – Assets / Capital / Creditors

Low/No Purchasing involvement Purchasing involvement

Cost & Cash Slide 11 © The Delos Partnership 2005

Business & Purchasing Budget Business & Purchasing Budget

Business Strategies• New Products • New Services • Sales Force numbers / productivity• More Catalogues/More frequently• Supply Chain / Product Availability• Service Levels• Supply Centre• Outsourced Manufacturing

Purchasing Focus & Goals

Purchasing Focus & Goals to support Business Strategies

Cost & Cash Slide 12 © The Delos Partnership 2005

Purchasing Budget & Plans Purchasing Budget & Plans

Spend Categories• Finished Products – Toll Conversion• Raw Materials & Production Consumables• Packaging • Capital, Engineering MRO (CEMRO)• Energy & Utilities• Logistics & Freight• Technical & H.S.E.• Goods & Services• People Spend

• Cash – Assets / Capital / Creditors

Purchasing Focus & Goals

Purchasing Focus & Goals to increase Spend Coverage

Cost & Cash Slide 13 © The Delos Partnership 2005

Focus on Cost & Cash - Top SuppliersFocus on Cost & Cash - Top Suppliers

Top 10 Suppliers = €m and X% of Total

Spend Category2004 12 Months

Spend (€)2005 Planned

Spend (€)2006 Forecast

Spend (€)

Centre / Region / Factory / Function Managed

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

TOTAL

Ensure there is a Value Plan and Ownership for each and then extend to the Top 20 +

Cost & Cash Slide 14 © The Delos Partnership 2005

Integration PyramidIntegration Pyramid

Suppliers Product/ServiceSpend

€m Owner

Insurance Insurance Company Secretary

Audit Audit Finance Director

ERP/ Microsoft / PC’s / Phones / Raw Materials

ERP/I.T./ Telecoms//Mobiles/RM

I.T. Director

CEO, P.D.

Suppliers Product/Service Spend €m

Owner

Goods & Service Outer Packaging Supply Chain

Goods & Service Tickets Secretary

Goods & Service Printing & Business Cards User

Goods & Service Waste Removal Plant Manager

Group - Centre Led

Country/Function Led - Group Support

Plant / Office Led - with support

SingleUser

Suppliers Products & ServicesSpend

€m Owner

Raw Materials Some Ingredients & Product Packaging

R&D / Manufacturing/ Customers

Energy Gas & Electricity Operations

Logistics & Freight Trucks / Couriers Supply Chain

Cost & Cash Slide 15 © The Delos Partnership 2005

Questions ?Questions ?