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Think Big, Start Small in Self Funding Waves. TM Energy Cost Management Overview.

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Presentation on theme: "Think Big, Start Small in Self Funding Waves. TM Energy Cost Management Overview."— Presentation transcript:

1 Think Big, Start Small in Self Funding Waves. TM Energy Cost Management Overview

2 2 Confidential Value Based Solutions, LLC Value Based Solutions Introduction Focused service offerings that deliver value Long standing relationships with client executives offering innovative diagnostics, ideas and business insights Breadth and depth of industry capability Lean team of experienced professionals Collaborative approach working as part of your team Objective and independent in our actions Commitment to the Cleveland community 100% of client base stands as a reference Think Big, Start Small in Self Funding Waves

3 3 Confidential Value Based Solutions, LLC Value Model Material Cost Inventory/Carrying Cost Overhead/Expenses Headcount Freight Asset Utilization Revenue Enhancement Tax Liability Cash Flow Value Levers Customers Suppliers Organization and Structure Systems All of our consulting efforts focus on moving one of nine value levers for our clients in a positive direction. The value levers are uniquely impacted by customer and supplier relationships, business processes, systems, organization and company structure. Plan Innovate Sell Source Make Deliver Service Account

4 4 Confidential Value Based Solutions, LLC Value Levers Revenue Enhancement Customer profitability Product profitability Channel profitability Sales force effectiveness Account expansion and retention Product innovation Headcount Fixed cost - Direct (plan, make, source, deliver…) - Indirect (sales, finance, HR, IT …) Variable cost Benefits Insource vs. outsource Inventory/Carrying Cost Inventory: FG, WIP, raw material Carrying cost: Storage, labor, cost of capital Demand and supply variability Product lifecycle management Material Cost Direct: FG, WIP, raw materials Indirect: MRO, office supplies… Manage purchase price variance Low cost markets/sourcing Overhead/Expenses SG&A expense Hardware, software, service contracts Energy, utilities, insurance, etc. Telecommunication spend Travel and expense Freight Inbound Inter-company Outbound Mode: Parcel, LTL, TL, etc. Asset Utilization Equipment: (M achines, tooling, trucks, etc.) Facilities: ( DC network, plants, offices, etc.) Asset maintenance Cash Flow AR (DSO) AP (DPO) Treasury management Banking relationships Invested capital Tax Liability Local State Federal Taxes on telecommunication spend Unclaimed property Major components of the nine value levers are listed below:

5 5 Confidential Value Based Solutions, LLC Our Approach DiagnosticsWorkshopsValue HypothesisProjects j Map to Value Levers Identify Areas of Opportunity j Measure Success (KPIs) j Value Enhancing Strategies Validate Business Benefit Develop a Plan Validate Success Our approach to unlocking value at our clients is to start with an initial diagnostic, workshop, value hypothesis or small, structured project. The goal is to identify areas of opportunity and map to one or more value levers. We then work with our clients to validate the business benefit, create improvement strategies and develop a plan to attain and measure the ongoing benefit.

6 6 Confidential Value Based Solutions, LLC Strategic Sourcing Diagnostic Sample Spend Categories 15-25%Print Advertising 20-30%Direct Mail 10-20%Uniforms and Contract Services 10-20%Corrugated/Packaging 5-20%Overnight/Express Freight 5-20%LTL, Truckload and Small Package Freight 5-20%Maintenance, Fasteners, MRO Items 10-20%Payroll Processing 15-25%Temporary Staffing/Contract Labor 10-40%Software Maintenance 10-40%Hardware Maintenance 10-15%Telephone Systems and Services 5-15%Professional Services 10-20%Printing, Forms and Labels 15-30%Office Equipment 15-30%Office Supplies Improvement RangeSpend Category SAMPLE

7 7 Confidential Value Based Solutions, LLC Sourcing Approach Key Activities Define Objectives and Scope Gather Data and Analyze Define SpecificationsUnderstand Supply Market Develop Sourcing Strategy Sourcing Event Analysis and Negotiation Secure and Manage Contract Manage Supplier Relationship Targets, Performance Measures and Metrics Enterprise Purchasing Strategy and Vision Capture Spend Execute Negotiation Manage and Track Savings

8 8 Confidential Value Based Solutions, LLC 1.Capture Spend and Identify Improvement Opportunities 3. Manage and Track Savings 2. Execute Negotiation Strategies and Capture Savings Data gathering and analysis Review contracts, invoices and vendor reporting as appropriate Meet with spend category experts as appropriate Benchmark pricing Set target savings range Prioritize opportunities Develop individual negotiation strategies and tactics Create vendor letters Conduct discussions with individual vendors Track/report status of vendor interactions Negotiate savings (e.g. incumbent negotiations, RFP, etc.) Finalize negotiations/contract Develop savings tracking model Report status/monitor savings Knowledge transfer Measurement and compliance checkpoints Sourcing Approach Key Tasks and Activities It takes 8-12 weeks to capture the spend, identify opportunities and execute the negotiation strategies

9 9 Confidential Value Based Solutions, LLC Strategic Sourcing Diagnostic Third Party Advantages Provides experienced resources to attack initiative with a special project focus Brings tools and templates to accelerate the project Assists with actual negotiations to allow company to maintain positive relationship with vendor Completes project with minimal time commitment from company resources Significant benefit realized from minimal investment of time Recurring savings to the company bottom line Capture Spend Information 1.Spend capture 2.Data analyzer 3.Vendor letters Execute Negotiation Strategies 1.Best practice negotiating considerations 2.Product/commodity specific knowledge 3.Negotiation/education workshop Manage and Track Savings 1.Inventory of all vendor interactions 2.Regular status reports on progress 3.Savings tracking toolkit

10 10 Confidential Value Based Solutions, LLC Engagement costs are contingent on realized contract savings Strategic Sourcing Diagnostic Third Party Advantages Scott Richter Partner River Oaks Drive Suite 2600 Rocky River, OH Tel: Fax: Think Big, Start Small in Self Funding Waves Jeff Moore Partner River Oaks Drive Suite 2600 Rocky River, OH Tel: Fax: Think Big, Start Small in Self Funding Waves


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