1. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 1 Why Procurement Matters Increase your profit – through effective procurement Birmingham, June 15th, 2011

2. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 2 Agenda About INVERTO Why procurement matters

3. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 3 INVERTO is an international management consulting firm specialised in procurement cost optimisation We deliver real, sustainable savings which directly impact on our client‘s operating profit.

4. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 4 INVERTO is 100% focused on improving its clients’ procurement performance Services Assets SpecialistsKnow-howTools INVERTO’s Co-Sourcing approach ExpertiseKnowledge bankSoftware Team -Sourcing® Fast reduction in costs of purchased goods and services Consulting Improving strategy, process & organisation Training/Coaching Up-skilling and development of resources e-Sourcing Suite of professional procurement management tools

5. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 5 With the experience, scale and reach to deliver large, international projects 1) Outsourcing in 2007 2) Global Sourcing Offices UK London India Sourcing Office: Mumbai TeamFormer retail, industry and consulting executives ClientsGermany, Belgium, The Netherlands, Austria, Swiss, locations around the globe ProjectsGlobal purchasing MarketsEurope, Asia, America China Sourcing Offices: Hong Kong and Shanghai U.A.E. Branch: Dubai Poland Sourcing Office: Warsaw Benelux Rotterdam Germany Head Office: Cologne Number of employees (average p.a.) Germany 0908070605020403 IT 1) 10 Turnover (€m p.a.) 02030405060708 1009 3,3 4,6 8,0 11,5 22,5 23 20,5 2,4 25,0 21 29 42 70 68 70 15 20 30 33 48 79 91 90 87 20 ~ 120 International 30 7 21 22 17 New office 2011 Munich

6. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 6 Private Equity Investment Consumer Goods Retail, Wholesale Automotive Mechanical Engineering Other Industries Pharma/ Health care Our clients are leading mid-cap companies, large corporate groups and some of the world’s top private equity businesses

7. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 7 INVERTO´s proprietary leading- edge e-Sourcing solution; “e-Contor”; Manages the entire strategic sourcing process Rapidly conducts large, complex tenders e-Sourcing Software We deliver results in the shortest possible time through a unique combination of skills, knowledge and tools INVERTO consultants with specific category experience to; Co-ordinate each work stream Support the buying organisation on-site and Execute delivery Sourcing Experts Local sourcing offices in: Warsaw (Eastern, SE Europe) Mumbai (South Asia) Hong Kong and Shanghai (China, SE Asia) In-country supplier research, audits, negotiations, ongoing operational supplier mgmt. Global Sourcing Offices High speed implementation Global supplier/ benchmark database with comprehensive data on currently over 85.000 qualified suppliers, including: Audit reports Performance records Price benchmarking Production capability INVERTO Supplier/ Benchmark Database „Hands-on“ „Managed“

8. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 8 Agenda About INVERTO Why procurement matters

9. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 9 Procurement in context Price deflationary pressures from new competitors Suppliers consolidating and increasing prices Commodity price volatility driving up costs Labour related costs optimised Company margins squeezed P&L and Balance Sheet impacted Declining EBITDA Your Customers YOU Your Suppliers

10. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 10 External expenditure is responsible for more than 75% of a company's costs Company (Example) Total costs (%) Labour Material costs Other 100 RetailAssemblyManufacturingService 60-70% 50-60% 10-20% 40-50% Direct purchasing costs per sector (%) Direct materials Indirect materials ≈ 30% ≈ 60% ≈10%

11. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 11 Effective procurement adds value to any business - It really is that simple Reduction of external purchased costs... Purchased costs Labour 60 % £60m purchasing volume 50 % addressable 7.5 % savings Bottom-line impact = £2.25m Result equivalent to a revenue increase of 75 % or £75m EBIT Simplified 3 % 30 % 7 % Other expenses EBIT +75 %... leads to significant profit improvement £100m

12. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 12 Procurement influence within the organisation Procurement evolution over time/ Savings realisation Companies are improving their procurement, and driving out savings Focus is “on-time, to budget” Savings through price reduction Procurement managed by professional resources Suppliers recognised as a external sources of knowledge Savings through a Total Cost of Ownership approach Supply Chain Management and strategic partnerships with key suppliers Savings through cost-out and value-add Procurement strategy recognised as a integral part of company strategy Procurement and supply base as a source of Added Value No savings Category management based on effective processes Part-time sourcing, in the business Availability Focus Price Focus Cost Focus Savings Value Focus

13. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 13 Many companies have started initiatives to elevate procurement No senior management awareness Procurement still undeveloped Lack of management expertise/capability within procurement Lack of investment in support tools Procurement not integrated into all business functions Percentage of Low-Cost Country Sourcing still comparatively low Procurement involved too late in business decisions Too little focus on “Indirect Spend” …but Our experience shows that procurement is still under-leveraged … which leads to…. …high levels of opportunity for significant EBIT impact

14. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 14 What could procurement improvement do for your business?

15. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 15 Driving profitability through procurement at HUGO BOSS Case Study Birmingham, June 15th, 2011

16. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 16 Agenda About HUGO BOSS The Role of Procurement

17. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 17 Corporate Sales€1,686 m. Net Income €112 m. Employees9,593 Market Presence110 countries HUGO BOSS Shops1,389 DOS*330 Point of Salesover 6,100 *directly operated stores

18. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 18 The Times They Are-A-Changing Decline in sales approx. -7% in 2009 Strong decline of annual net profit approx. -27% in 2008 Retailers adjusting strategies Owner Permira (Private Equity) still has high profit expecations Urgent need for corrective action in 2010 Times are changing! Continuous sales growth approx. +10 % p.a* Continuous EBIT growth approx.+13% p.a.* Worldwide store expansion approx. +25% p.a.* Successive adjustment from franchise to DOS Strong brand development and licensing of several products The past! *from 2004 to 2008

19. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 19 HUGO BOSS has largely neglected Non-Production Material Spend for years Purchasing volume of Non-Production-Material HUGO BOSS AG (HB) in 2008 approx. 274 m. € (amounts to 1/6 of total sales!) Approx. 2,700 suppliers Non-Production-Material (NPM) Total spend structured in 12 categories – 94 subcategories NPM has been neglected by management over the years Approx. 35 % of purchasing volume sourced locally Approx. 78 % of purchasing volume sourced in Germany Approx. 5 % A-Suppliers HUGO BOSS: Initial situation of procurement of indirect spend (Non-Production Material)

20. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 20 Agenda About HUGO BOSS The Role of Procurement

21. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 21 Introducing 5 principles to NPM Procurement at HUGO BOSS Procurement is a core process in the HUGO BOSS value chain » « Procurement increases the company value » « Our buyers are as important as our sales people » « Procurement activities must be sustainable » « ´Sourcing Governance´ to ensure compliance » « 1 2 3 4 5 Procurement of Non-Production Material

22. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 22 Changing global parameters lead to a strategic role for procurement Globalisation Scarce resources Shorter innovation cycles Increased competitive pressure forces companies to focus on core competencies => More products and services procured externally Spend increases and procurement starts to play pivotal role in value chain Strategic tasks of procurement dept.: - Define procurement strategies - Supplier management - Internal pooling of demand Clear cut procurement processes (strategic, transactional) Central procurement organisation Requirements 1

23. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 23 “Procurement makes half the profit” 2 Reduction of external spend... External spend Labour 50 % €274 m NPM volume 50 % addressable 15 % savings Bottom-line impact = €20m Result equivalent to a revenue increase of € 133m EBITDA Simplified 20 % 25 % 5 % Other expenses EBIT +15 %... leads to significant profit improvement 100% Procurement responsible for prices and payment terms which significantly influence cash flow and thus, company value

24. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 24 Change perception of procurement – shape up the image! 3 Despite of its increased importance in recent years, procurement is still neglected in many companies and does not hold the position it deserves Often, a negative image of procurement is reflected in budget, remuneration and motivation Clear metrics to measure performance and success in procurement (share of profit derived from cost avoidance for production and non-production materials) Management attention (install CPO or direct report to CFO) Motivate high potentials – show career path in procurement

25. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 25 Sustainability – buyers will become supplier networkers, who safeguard and maximize yield 4 Globalisation Increasing cluster risk Decreasing vertical integration (therefore increased supplier dependance) Concentration of supplier markets Professional SRM Establish long-term relationships with suppliers Improve procurement through centralisation, training, inter- nationalisation Determining factors for procurement in the future

26. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 26 Get a grip on compliance risks in procurement 5 Study shows 1) : With 45% procurement is one of the departments most susceptible to corruption 64% of corruption cases are systematically planned, 37% are recurring cases Culprits mostly men (aged 41-60 years) with higher qualification, who occupy same position for 6-10years Procurement is responsible for identification and evaluation of risks along the supply chain and to mitigate the damage potential Suppliers are stakeholders who define the image of a company „Four-eyes-principle“ between procurement and the demand owner Introduce „Sourcing Goverance“ 1) IIR Study on corruption in procurement, 2006

27. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 27 Case studies - Procurement in a company like yours Increase your profit – through effective procurement London, September 22nd, 2010

28. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 28 Extensive experience sourcing over £3bn in direct and indirect spend categories across all industries Shopping trolleys for retailers Steel tubes for the automotive industry Mannequins for department stores Electric motors for automotive suppliers Logistics services and equipment Industrial robots for automotive suppliers Textile fashion for retailers Gears for machine tool manufacturers Dairy for discounter Blister packaging for pharmaceutical

29. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 29 Case study: Packaging – FMCG company Industry: FMCG - Production and retailing Turnover: €3.6 bn Employees: 12,500 Locations: 4 production locations, 1000 stores Demand Total project spend: €790 m. Packaging: €23.1 m. Number products: 282 Number suppliers: 12 Procurement situation Complex product requirements 23 products with 282 different print specifications 12 suppliers across 5 European countries Long and close supplier relations Supplier selection done by head of procurement and production Initial situation Implementation Data analysis/validation Analysis of current contracts Aggregation of demand data into 3 product groups Product group strategy Bundling Reduction of number of suppliers Enhancement of competition Implementation Tender with 60 suppliers from 7 countries (D, I, GR, TR, PL, A, CH) 2 negotiation rounds with 19 suppliers, 3 site visits Identification and implementation of 2 new suppliers (D, PL) Project duration: 7 months savings: 2,1 m. € (9%) Closure of 18-month contracts (Price indexation) Reduction of suppliers from 12 to 9, with the introduction of 2 new suppliers Results

30. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 30 Company: Retail chainstore Turnover: ca. €1,700m Employees: > 9,000 Stores: > 1,000 stores in 21 countries Demand: Total project: €10.6m -Catalogues, Brochures, Mailings -Number of services: 42 -Number of suppliers: >40 Sourcing situation: Decentralised and independent procurement in each country Sourcing responsibility of marketing functions Different sourcing approach, process and professionalism in each country Incomplete and non-existant specifications Initial situation Implementation Data analyis/validation: Analysis of each individual product requirement Analysis of the process and requirement for each individual user Product group strategy: Bundling of similar/standard requirments Pool of preferred suppliers defined Standard process defined Implementation: Setup IT tool with catalogue Tendered complete requirements Selection of 10 suppliers in 7 countries Setup of strategic and operational purchase teams Project duration: 4 Months Savings: €1.3m (12.5%) Number of suppliers reduced from 40 to 10 Seperation of strategic sourcing from local procurement, ensuring long term sustainability Results Case study: Marketing – retail company

31. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 31 Savings: €263k from €2.2m over 7 product categories (11.8%) Supplier consolidation: -4 new key suppliers introduced to improve competition -Traders were identified and switched to producers where possible. Extensive analysis and benchmarking of 13 categories Identified 7 categories with saving potential through China sourcing Defined goals, strategies, product specifications, quality and production requirements Identified potential Chinese and Asian suppliers in each of the categories Preparation I Tender II Managed tender programme for 7 product categories (524 products) engaging directly with more than 150 Asian suppliers More than 30 pre-audits and supplier visits of current and potential suppliers Direct communication with suppliers before, during and after the tender to ensure maximum efficiency and outcome Implementation IV Negotiation Language and culture difference continue to be the biggest barrier negotiating with Chinese suppliers Client representation ensured through a deep understanding of the client and their business requirements Fast and highly targeted negotiations speaking “the language of suppliers“ Sourcing Process III China Sourcing China Sourcing III IV I II Case study: Low-Cost Country Sourcing – Cosmetics Manufacturer

32. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 32 Company: Department store Turnover: ca. €3,500m Employees: > 25,000 Stores: 123 stores in 2 countries Demand: Total project: €38,0m -Loose inserts (newspaper) -Radio ads -Ads in class magazines -Newspaper ads -Number of services: 4 -Number of suppliers: 1 media agency Sourcing situation: Procurement of media services through inhouse agency which is responsible for all formats Client had to accept corporate prices Client assumed that inhouse agency didn´t have market prices Initial situation Implementation Data analyis/validation: Analysis of every single advertising medium including publication date, price, circulation Identification of all relevant media agencies Invitation of 27 media agencies to pitch Media pitch: 1 rd.: qualitative evaluation of agencies through case study incl. first price indication 2. rd: detailled quotation of > 14,000 individual prices by 4 top agencies 3. rd: price negotiation with 2 agencies Project duration: 4 months Savings: €10,4 m (27,4%) Award to new external agency Considerable increase in service level Results Case study: Media spend – Department store

33. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 33 Case study: Steel Tubes – Automotive company Initial situation: Commodity: Precision steel tubes Purchasing volume: €24m p.a. 61 parts for 9 plants worldwide 6 existing suppliers, partly local Centralised sourcing from HQ Preparation RFQ/RFI Implementation Step 1 Implementation Step 2 Negotiation 260 suppliers pre-qualified Product groups/ specifications developed RFQ with open- book-calc. set up Market price level Supplier strategy, RFQ concept Sustainable competition Savings short-term Savings mid-/ long-term 2 Months1 Month 12 Months1 Month 4.1m05.1m4.1m (17.1%)02.4m01.0m2.4m (10.0%)2.4m Savings (€ m) Existing suppliers New suppliers 14 supplier negotiations held Samples, target prices passed to suppliers Suppliers evaluated by team 27 qualified quotations received All major suppliers worldwide identified TCO-benchmarks set up Price agreements fixed with current and new suppliers Refusal sent to remaining suppliers Release process (Samples, assembly tests, series start) accompanied Barriers removed as ”Moderator“ Review/ Re-Negotiation after 24 months generates additional € 0.5m

34. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 34 Case study: Facility management (cleaning) – manufacturing company Industry sector: Mechanical engineering Sales: € 1,524m Employees: 4,617 Sites: 3 plants Demand: Project total indirect spend: € 200m Cleaning: € 1.8m -No. of items: 60 -No. of suppliers: 10 -Demand pattern: 89% janitorial cleaning, 11% industrial cleaning Sourcing situation: Decentralised buying from local sites No uniform procurement guidelines/functional specifications for supplier requests Large number of small suppliers Initial situation Implementation Data analysis/validation: Data retrieval from SAP system Aggregation of data Validation of data base and definition of functional service specifications Category strategy: Consistent approach for facility management Bundling of demands Reduction of no. of suppliers Increasing competition Implementation: Tender with 60 suppliers Site inspections/supplier day Negotiations with 10 suppliers Project duration: 10 months Savings: €640k (36%) 18 month contracts Decrease of no. of suppliers to 4 Increased knowledge of specific service requirements Strong negotiation position based on full understanding of cost drivers Results

35. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 35 Tools, Techniques, Knowledge Increase your profit – through effective procurement Birmingham, June 15th, 2011

36. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 36 Agenda Spend – how much, on what, with whom? Tactical cost reduction techniques Strategic supplier management Containing supplier price increases

37. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 37 Definition of comprehensive procurement strategy Development of category management approach Streamlining of purchasing processes - Strategic sourcing - Operational purchasing Resource development and training analysis program Action plan Project management Resourcing Procurement strategy & organisation Implementation road map Prepare sourcing initiatives (wave 1, 2, 3) - Aggregation of demand data - Analysis of relevant supply markets Develop and implement “quick wins” Full sourcing and tender pipeline Train staff „on-the-job“ in approach and e-sourcing tools Negotiate contracts Analysis - Categories - Suppliers & contracts - Strategies - Organisation, processes - Systems Results - Spend cube - Savings potential per category - Levers - Effort/barriers - Team organisa- tion, resources - Planning Opportunity analysis Immediate cost reduction initiatives Savings generated by systematically extending terms of payment and re-negotiating discounts for all suppliers Co-Sourcing projectsWorking Capital Program First tangible results after 2-3 months Typical INVERTO Project Nearly all our assignments start with a spend analysis Phase 2 (6 – 12 months) Phase 1 4 – 6 weeks

38. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 38 …and are based on detailed data collection and analysis The spend cube provides answers to the questions: who buys what, from whom, at what price? Categories Suppliers Business segments/ Functions Marketing … Manufacturing IT Volume Value Function Department... 123……… Accounts payable master 123……… Cost drivers / Cost analysis 123……… Material group codes Supplier Cost types on cost analysis page Cost analysis from the profit and loss account Master data Purchasing volumes Material group key Supplier Purchasing volume subsidiary 1 subsidiary 2 subsidiary … …... Finance Material management

39. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 39 Buyers Categories Transparency requires three dimensions of analysis (a) Suppliers (b) Buyers (c) Categories Identification of key suppliers; Company Business Unit Category Contracts by annual value by volume by parts Identification of who is buying, and for whom Suppliers Understanding your spend is the foundation of successful procurement Identification of key cost categories; Categories Sub-categories Identification of key metrics; Preferred suppliers Non-contract spend Pareto analysis The output is a complete understanding across the entire organisation; „who buys what, from which supplier, at what price“

40. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 40 and allows you to quantify the financial opportunity Leverage Savings potential Bundling Internat. Sourcing Increase competiotn System supplier Speicifikat. Standardis. Process optimization Know How- Transfer Supplier developm. Sub-category from [£k] to [£k] % Pur. Vol. [£k] £347k – £502k TOTAL 7.3%–10.6% £4,741k Prio Maintenance & Support 8-12825.066.099.0 2 Oracle 6-9819.549.173.8 3 Agency Contractors 5-9378.718.934.1 2 Network Equipment 5-7344.217.224.1 2 Applications 4-6337.313.520.2 3 Server & Network Software 12-15320.238.448.0 3 Storage Devices 8-12312.825.037.5 1 Consultancy/Development 10-14296.529.741.5 2 Laptops 8-12290.723.334.9 1 Network Equipment (Sun) 5-7219.411.015.4 2 Network Equipment (Intel) 5-7112.85.67.9 2 PC’s / Workstations 8-12211.316.925.4 1 Peripherals 5-7103.35.27.2 1 Consumables 18-2288.816.019.5 1 Lines Phones, Faxes 14-1780.411.313.7 1

41. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 41 Agenda Spend – how much, on what, with whom? Tactical cost reduction techniques Strategic supplier management Containing supplier price increases

42. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 42  Price Evaluation  Price leveling  Price benchmarking  Comparison of terms and conditions  Target price calculation Focus on your Leverage suppliers and use tactical commercial levers Cost Reduction Levers Price evaluation Demand aggregation Product optimisation Competitive leverage Optimisation of value-add 3 1 2 Process optimisa- tion Commercial LeversCross-functional Levers  Demand aggregation  Volume consolidation  Supplier rationalisation  Extend contract scope/duration  External aggregation in procurement communities  Competitive leverage  Extension of supply base  Competitive leverage  Global sourcing  Development of new suppliers  Product Optimisation  Standardisation  Design-to-cost  Specification review (no nice to have’s, simplification) Process Optimisation  Supplier development  Simplification of interfaces and processes  Improved procurement logistics  Optimisation of Value-Add  Elimination of intermediate levels/dealers  Re-tailored supply scope (split, merger) Cost Reduction Levers of Procurement 3 1 2

43. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 43 235 9 4 1-4 Invited suppliers Proposals provided 1. round negotiation 2. round negotiation No of potential suppliers Detailed market research (INVERTO DB) Comprehensive tender documents Start tender, motivate suppliers Evaluation of proposals, negotiation Screening, audits, trials Tender award, contract 122 44 29.09.200912.10.200914.10.2009 Audit/ implementation Registered suppliers 11.11.200921.11.2009 23.12.2009 Example Co-sourcing ensures delivery of results for clients through; resource, skills, expertise, technology, fee model To convert savings into £££ P&L impact - execution is everything Tender process

44. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 44 Agenda Spend – how much, on what, with whom? Tactical cost reduction techniques Strategic supplier management Containing supplier price increases

45. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 45 Categorising your key suppliers will help you define the best approach to each Each segment will have a different strategy Annual expenditure Market difficulty High Low 0££££ Critical suppliers Acquisition suppliersLeverage suppliers Strategic suppliers

46. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 46 Categorising your key suppliers will help you define the best approach to each Acquisition suppliers Annual expenditure Market difficulty High “Streamline administration” Move to Leverage: Bundle volumes Consolidate suppliers Agree volume rebates Simplify and automate: Catalogues and transaction platforms Automate – minimise day-to-day effort Low 0££££ Critical suppliers Acquisition suppliersLeverage suppliers Strategic suppliers

47. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 47 Categorising your key suppliers will help you define the best approach to each Critical suppliers Annual expenditure Market difficulty High Low 0££££ Critical suppliers Acquisition suppliersLeverage suppliers Strategic suppliers “Reduce the risk” Move to Acquisition: Market analysis – find alternatives Seek substitution options Risk and vulnerability analysis Manage the risk: Enter into co-operation Guarantee delivery Back-up supplies Hold safety stock

48. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 48 Categorising your key suppliers will help you define the best approach to each Strategic suppliers Annual expenditure Market difficulty High Low 0££££ Critical suppliers Acquisition suppliersLeverage suppliers Strategic suppliers “Create competitive advantage” Move to Leverage Review specifications Develop new suppliers Unsettle existing suppliers Guarantee stable relationships Exclusive agreements JV’s, partnerships Board to board contact Push for performance and value-add

49. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 49 Categorising your key suppliers will help you define the best approach to each Leverage suppliers Annual expenditure Market difficulty High Low 0££££ Critical suppliers Acquisition suppliersLeverage suppliers Strategic suppliers “Minimise price” Maximise competition vs. Preferred Supplier Use market power – hard negotiation No/short contracts Maximise competition – RFPs/e-Auction Change suppliers often

50. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 50 Agenda Spend – how much, on what, with whom? Tactical cost reduction techniques Strategic supplier management Containing supplier price increases

51. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 51 Pro-Active Re-active Cost avoidance and containment – PARC it! P A R C Pre-empt Research Shelter Forecast Condition Co- ordinate Avoid Ignore Minimise Substitute Eliminate Reject “No” – outright “No” – LOA Delay Deny Challenge Impose Contain Negotiate Escalate Postpone Offset Justify Evaluate

52. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 52 Supplier for wooden pallets calls for price increase of 3% due to higher material costs Steel price increased Wood price dropped significantly £10.00 Wood Production Transportation Steel Wood Production Transportation Steel (+60%) 0.80 Should-cost pricing Wood Production Transportation Steel (+60%) 0.50 0.90 3.10 5.50 0,90 € 3.10 4.30 0.90 Price (£/piece) Initial situation Supplier price request £10.30 (+3%) £9.10 (-9%) 5.50 3.10 (-22%) “prices should reduce by 9%” 0.80 Description Example: wooden pallets Justify: “Price is a policy, cost is a fact”

53. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 53 Thank you!

54. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 54 Panel Session – Q&A Increase your profit – through effective procurement London, September 22nd, 2010

55. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 55 Retail – Direct Spend: Significant tangible savings for brand / private label merchandise Merchandise CategoryProduct class Savings p.a. [k €] Savings p.a. (%) Ø Duration (months) Lever Examples 2707,0%8Increased competition 1477,0%3Increased competition 3368,0%5Increased competitoin 25712,0%4Increased competition 19010,0%6supplier management 24811,0%5increased competition 41621,0%6LCC Programme 5187,0%5Increased competition 5918,4%9LCC Programme 1123,5%5supplier managment 1.4005,8%9supplier managment Purchsg. vol. p.a. [k €] 3.850 2.103 4.200 2.140 1.900 2.250 1.980 7.402 7.000 3.250 24.000 2.850863,0%4supplier managment Kitchen storage (bags, containers,...) Nutritional supplements Laundry Surface care Fresheners /Deodorisers Insect / Pest Control Tableware (disposable) Pet food (shelf stable) 4206,0%4Increased competition7.000Baby hygiene (diapers, pads etc.) Gen. personal hygiene (paper, tissues etc.) Feminine / Nursing hygiene Hair products Oral hygiene Pet care / Food Metal products Homecare Household / Kitchen Merchandise Baby care Metal products Beauty / Personal Care / Hygiene 25413,0%3Increased competition1.950Baby furniture

56. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 56 Retail - Direct Spend: 3 examples of INVERTO´s approach Pet Care / Food Pet Care Pet Welfare/Hygiene Pet Nutr. Supplements Pet Accessoires Pet Food Pet Food/Drinks Pet Drinks Beauty / Personal Care / Hygiene Skin Products Hair Removal Products Hair Products Hair Care Products Cosmetics/Frangrances Personal Hygiene Products General Personal Hygiene Feminine / Nursing Hygiene Oral Hygiene Body Products Cotton Wool Products Antiperspir. /deo Toilet Paper Customer Purchsg. vol. in m € Action takenSavingsMain lever Nat´l super- market chain Demand Private label dog food: Dry/canned, biscuits, treats 3.230 Int´l tender with 64 pre-qualified suppliers 630 T€ = 19,5% Preassure on current supplier: Increased competition through 34 alternative qualified proposals Customer Purchsg. vol. in m € Action takenSavingsMain lever Wholesale Hair Products Demand Hair Care Products (Brand product): Hair care assort- ment of int´l brand 6.733 Data analysis, negotiation with supplier 808 T€ = 12,0% Transparency of price components and calcu- lation through detailed analysis. Well prepared negotiation. Customer Purchsg. vol. in m € Action takenSavingsMain lever Discounter Demand Private label toilet paper 3.114 Int´l tender with 48 pre-qualified suppliers 452 T€ = 14,5% Identification of a new highly qualified supplier in Slovenia Excerpt

57. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 57 Retail – Direct Spend – Fashion / Non Food Produkt KategorieProduktklassen EKV p.a. T. € Ein- sparung T. € Ein- sparung p.a. (%) Dauer (Monaten) Wesentlicher Stellhebel Plastic, rubber products 22001768%8LCC Programme Candles 2.1031477%3Increased competitionFoils Metal products 3.20069024%9supplier developmentUnderwear (seaml.) 6.4001.15018%12LCC ProgrammeT-Shirts 12.6002.20818%6supplier developmentBras 5.6401.62029%5increased competition Stockings 6.36388614%6supplier developmentJeans/Denim Fashion (Private Label) Household articles Toiletries / misc. articles 7.4025187%2Increased competitionPet food 7.0004206%2Increased competitionTissues Metal products 180.00014.4009%9supplier managmentWomenswear 109.0009.8008%12supplier managmentMenswear 14.0008005,5%6supplier managmentChildrenswear 47.0001.4003%5supplier managment Accessoires Fashion (brands) …...... Back Examples

58. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 58 Retail/ FMCG - Indirect spend: significant savings potential across all categories INVERTO Projects (Indirect Spend) Purchsg. vol. p.a. in m € Savings p.a. (m €) Savings p.a. (%) Ø Duration (months) Product classes (Excerpt INVERTO database)Category 29,43,712%3 Packaging machines, cleaning machines, escalators, refrigeration units, bale press machines etc. Capex 48,08,818%5 Advertising / marketing agency, POS agency, printing (magazines, brochures, flyer), lithography, image processing, outdoor advertising Marketing 20,13,919%5 Cleaning services, cash transportation, safes, alarm systems, store detectives, waste disposal, utilities Facility Mgmt.3,50,720%4 Printing paper, toner, ink, stationary, foils Office Supplies10,33,231%7 Hardware, Network, IT Services, Software, Licensing, Handheld Mobile Devices (outlets) IT / Telecommunication 58,45,59%5 Shopping bags (PE, paper), transportation packaging, paper, paletts, crates, cases, containers, adhesive tape etc. Packaging 14,01,712%4 Construction work, lighting,fixtures, shlef systems, X-Mas decoration, manne- quins, fittings etc. Shop fitting101,012,112%6 Sea freight, containers, truck logistics, warehousing, air freight etc. Logistics 7,70,810%3 Working Capital, “rapid cash”, auditors, leasing, A/P recovery etc. Financial Services27,73,212%6 Management, skilled, unskilled labor Temporary Labor 10,40,76%2 Electricity, gas, waterUtilities 32,01,86%6 Car rental, leasing, travel management, airlines etc. Vehicles / transportation Examples

59. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 59 Industrial - Direct spend – deep sub-category experience in metal components Savings p.a. [Mill. €] Savings p.a. [%] Ø duration [months] Total vol. [Mill. €] Sub category 3,60,38%4 Aluminium profiles, steel profiles (non-alloy), steel parts, metal parts, shafts with profiles, mast profiles Profiles Products, services (excerpt) 5,00,918%5 Equipment locker Chassis10,10,99%11 Consoles, discs, rod end bearings, angular sheets, bottom parts, forks, brackets, stamping parts, drawn parts, bearing plates, unlocking devices Stamping parts91,84,85%6 Rod end bearings (precision steel), piston rods, squeezed tubes, bended tubes, precision steel tubes, pipes (seamless) Rods, tubes44,54,410%6 Fork tines, chain cables, eyebolts, chain holders, gear housings, wheel hubs, etc. Forging parts0,60,047%3 Springs for motors, coil springs, saucer springs Springs34,21,34%6 Sheets, belts, plates (aluminium), mild steel (plate, flat, round, angle) Sheet metal parts2,60,415%3 Fasteners, sleeves, pins Fasteners0,40,0513%5 Gearing parts Gears2,40,625%4 Jigs, tools, moulds Tools, moulds 62,36,510%5 Iron casting, spheroidal iron casting, magnesium die casting, sand casting, aluminium casting, zinc die casting, hook blocks, counterweights Casting parts 66,85,28%7 Ball pins, turning parts, precision turning parts, milling parts, pistons, bearing parts, valve seating Turning partsTotal348,327,48%624,02,08%6 Aluminium pistons, steel pistons Pistons Purchased spend (direct spend) Examples

60. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 60 Industrial - Direct spend – electronics and electrical components Compressors 2,50,14%6 Electric standard motors, DC motors, lifting units for cranes (DC motors), hydraulic motors (AC motors) DC/AC-motors3,00,310%9 Heavy duty connectors, plug cords, power supply lines, isolators Electrical connectors2,10,314%5 Convertors, power supply units, transformers Transformers4,10,410%4 Control systems Steering systems1,50,320%8 Electric cables, electrical goods, conductors, switches, circuit breakers Cables, conductors3,30,26%3 Ultrasonic sensors Sensors0,30,133%3 Electronic subassembly, PCBs Electronic subassembly 14,51,410%6 Electronic devices, electrical assembly, integrated circuits Electrical, electronic systems 19,51,47%6 Control cabinets, control cabinet mountings Control cabinets3,90,38%5 Wiring harnesses 14,01,712%6Total68,76,59%6 Purchased spend (direct spend) Total vol. [Mill. €] Savings p.a. [Mill. €] Savings p.a. [%] Ø duration [months] Products, services (excerpt)Sub category Examples

61. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 61 Industrial - Direct spend - plastic parts, raw materials and additives 30,31,03%5 PA, PE, PC, PP, ABS, PMMA, HFFR Compounds, etc. Polymers13,60,97%6 Brake pads, plastic/rubber/foam parts Plastic parts23,82,511%7 Flexible hoses, fibre-reinforced hoses Hoses12,71,08%6 Solid rubber wheels Tires0,30,133%7 Brake rings, duroplastic parts Pressing parts25,13,514%9 Piston rod guides, ball cups, guide bushings, return elements, oil cushion units, spring cages, separating pistons, bumpers, housing parts Injection moulded parts 8,60,910%7 Stamped gaskets, foamed gaskets, shaft seals GasketsTotal84,18,910%7 Plastic parts 11,71,210%5 Master batches, additives, dye Polymer additives Raw materials, additives Total42,02,25%5 Purchased spend (direct spend) Total vol. [Mill. €] Savings p.a. [Mill. €] Savings p.a. [%] Ø duration [months] Products, services (excerpt)Sub category Back Examples

62. Source: INVERTO © INVERTO 2011 | IOD | 15.06.2011 | Slide 62 Industrial - Indirect spend categories Purchased spend (indirect spend) Total vol. [Mill. €] Savings p.a. [Mill. €] Savings p.a. [%] Ø duration [months] Sub category, products, services (excerpt)Category 66,07,712%3 Carrying systems, ducts, cleaning machines, construction works, cooling systems, electrical systems, forwarding systems, packaging machines etc. Technical equipment, machinery 219,135,216%5 Advertising material, flyers, labels, mailings, marketing services, package inserts, print media etc. Marketing products, services 37,76,317%5 Cleaning services, production services, office services, green area services, catering, pest control, security services, waste disposal, working clothes Facility Management9,01,820%5 Copying paper, office supplies, sales slip rolls, printers, copiers, toner cartridges Office supplies16,13,019%4 IT hardware, WAN services, mobile phone services, software licenses, network operating/services IT/Telco139,811,99%5 Bags, cases, cardboards, containers, IBCs, folded boxes, labels, packaging ser- vices, pallets, paper, plastic boxes/foils/trays, profiles, tapes, tins, wire, wood, etc. Packaging241,023,010%6 CEP services, road freight (FTL, LTFT, bulk, silo, containers, tanks), sea freight (forwarders, carriers), warehousing, inbound logistics Logistics services8,51,214%3 Credit insurance, interest rates, derivates, leasing, payment terms, insurance Financial services64,35,5´9%5 Skilled labour, unskilled labour, On-Site management, contract for services and labour Temporary labour10,30,77%2 Electricity, gas, water Energy 42,93,17%5 Fuel, industrial trucks, prepaid gas cards, tires, travel management, vehicle leasing, car rental Fleet911,7Total108,412%544,45,713%9 Processing machines, handling equipment Maintenance, repair 4,81,940%7 HR services, IT services, logistic services Business process outsourcing 7,81,418%4 Tax consulting, certification services, auditing, engineering consulting, in-house trainings, professional trainings, legal services Consulting services Examples