Supplier Your Customer Firm MANAGING THE SUPPLY CHAIN THE SECOND WAVE - CONTINUING TO HARVEST VALUE Driving Costs Out of Shared Activities Delivers 4% to 8% Per Year Savings Supplier Your Firm Customer Shared Activities Shared Activities 4200 Montrose, Suite 590  Houston, TX 77006 (713) 522-9656 Phone  (713) 522-9661 Fax www.wjmurray-assoc.com

THE VALUE (SUPPLY) CHAIN STRETCHES FROM THE BEGINNING OF YOUR SUPPLIER’S SUPPLY CHAIN THROUGH ALL OF YOUR PROCESSES THAT CREATE VALUE FOR YOUR CUSTOMERS. SUPPLIER’S PROCESSES R & D Design Make Store Deliver Invoice Sales THE FIRM’S PROCESSES Procure Design Specify Request Purchase Receive Store Issue Pay Make/ Sell Install Make Maintain Store Deliver Invoice Shutdown Dispose Sales End User Pay

MANAGEMENT COMMITMENT GETTING STARTED - MANAGEMENT COMMITMENT Phase I Commitment I. Value Chain Leadership Team (Senior Management Team) A. Management Commitment Consensus on the goal - 4% to 8% year-on-year improvement in total spend Manpower resources Endorse the process Sponsor task force teams Ground rules for counting savings B. Empower Discovery Team Team leader Procurement expert Content experts 1. Operations 2. Technical Change management consultant

MANAGEMENT COMMITMENT GETTING STARTED - MANAGEMENT COMMITMENT Phase I Commitment II. Discovery Team A. Identify High Potential Cost Savings Opportunities Total spend Expected growth Past experience Critical to the business Potential for process simplification Market discontinuities

MANAGEMENT COMMITMENT GETTING STARTED - MANAGEMENT COMMITMENT Phase I Commitment II. Discovery Team (continued) B. Recommendations to Value Chain Leadership Team Target areas for Phase II definition 1. Project definition 2. Recommended expense budget for Phase II projects 3. Examples Freight Tank maintenance Professional services Personal computers Electric motors Catalyst C. Agreement and Commitment to Proceed to Phase II or Stop

I. Assemble Task Force Teams Phase I Commitment Phase II Development SOLUTION DEVELOPMENT I. Assemble Task Force Teams A. Sponsor B. Team Leader C. Procurement Expert D. Content Expert Operations Technical E. Finance F. Change Management Consultant II. Define Scope of Initiative A. Team Charter B. Identify Stakeholders C. Case for Action D. Deliverables E. Potential for Supplier Engagement F. Budget Management Process G. Initiate Preliminary Data Gathering H. Plan and Timeline

III. Solution Development Phase I Commitment Phase II Development SOLUTION DEVELOPMENT III. Solution Development A. Initiate Team Process Ground rules, agenda Clarify roles and responsibilities, time commitment Identify sacred cows and paradigms Barriers Resources B. Assess Baseline Performance Define and flow chart current processes Determine key process measures Identify quick hit opportunities Define all associated external expenditures Assess existing and potential supplier base Determine current contract status Engage key suppliers as needed Determine total process cost Initiate benchmark/best practices

IV. Identify and Analyze Future State Solutions Phase I Commitment Phase II Development SOLUTION DEVELOPMENT IV. Identify and Analyze Future State Solutions A. Engage Suppliers As Needed B. Generate Solution Alternatives C. Evaluate Risks and Rewards D. Define Risk Mitigants E.. Evaluate Scenarios F. Identify Critical Success Factors G. Rank Scenarios

V. Finalize Proposal and Implementation Phase I Commitment Phase II Development SOLUTION DEVELOPMENT V. Finalize Proposal and Implementation A. Develop Future State Process Flowchart B. Validate Solution Meets Stakeholder Requirements C. Define New Future State Procedures/rights D. Identify Process Enablers E. Define Information Required to Manage the Process F. Define Necessary Skills for the Process G. Identify Necessary Resources to Operate H. Identify Organizational Changes Required I. Obtain Preliminary Commitment From Key Suppliers J. Define Preliminary Implementation Plan and Schedule K. Determine Implementation Cost of Proposed Solution L. Identify Potential Implementation Barriers

VII. Approval and Funding Phase I Commitment Phase II Development SOLUTION DEVELOPMENT VI. Final Report Out A Package Business Case to Pursue B. Deliver Final Report C. Document Key Learnings VII. Approval and Funding A. Provide Decision Information B. Execute Budgeting C. Initiate Change Communication Plan

I. Assemble Implementation Team Phase I Commitment Phase II Development Phase III Implementation IMPLEMENTATION I. Assemble Implementation Team A. Sponsor B. Team Leader C. Procurement Expert D. Content Expert Operations Technical E. Finance F. Change management consultant G. Selected Suppliers

IMPLEMENTATION II. Implementation Phase I Commitment Phase II Development Phase III Implementation IMPLEMENTATION II. Implementation A. Critical Success Factors B. Metrics C. Project Time Lines D. Infrastructure Support IT enablers Resources/manpower budgets E. Project Teams Internal staffing Supplier involvement Timelines Milestones

III. Supplier Involvement Phase I Commitment Phase II Development Phase III Implementation IMPLEMENTATION III. Supplier Involvement A. Strategic Alliance/Joint Venture/Sole Source/Other B. Supplier Agreement Scope Objectives Contributions/benefits Commitments Performance measures Terms and conditions Exit/clause

IMPLEMENTATION IV. Training V. Reporting Phase I Commitment Phase II Development Phase III Implementation IMPLEMENTATION IV. Training A. New Processes B. New Skills/Competencies C. Curriculum D. Facilities E. Instructors F. Mediums G. Target Audience H. Scheduling V. Reporting A. Key Metrics B. Progress Towards Future State C. Information to Key Stakeholders

IMPLEMENTATION VI. Knowledge Capture VII. Deliverable Phase I Commitment Phase II Development Phase III Implementation IMPLEMENTATION VI. Knowledge Capture A. IT Support Infrastructure B. Architecture C. Data Input Sources D. Accessibility E. Updating F. Integrity VII. Deliverable A. 4% to 8% Year-On-Year Savings in Total Spending