Optimize Working Capital: Strengthen Trading Partner Relationships Brook Ballard – Sysco Corporation Scott Hughes – Wells Fargo April 4, 2011

Working capital management  Goal: Fund necessary day to day operations and invest assets optimally  Inventory, cash, receivables and payables management are all levers of WCM Internal FactorsExternal Factors Size and growth rateBanking Services Organizational structureInterest rates Level of working capital management Technology and products Borrowing and investing positions and activities Economy and competitors

Industry challenges 3

 How do you extend Days Payable Outstanding (DPO)?  How do you shorten Days Sales Outstanding (DSO)?  How do you optimize Days Inventory Outstanding (DIO)? 4

Industry challenges (cont.)  94% of CFOs consider cash flow optimization to be important or very important 1.  59% of CFOs rated better cash management as their top priority 1. 1.The Working Capitalist, REL, YEAR

 Management Buy In  System Enhancements  Customers willingness to accept change  What is in it for me?  Check to ACH  Check to Card  Maintain check but extend terms Challenges to Converting Accounts Payable to more Cost Efficient Methods

Managing Working Capital can be a Real Bear 7

8 8 Technology to improve AP processes Source: IAPP 2008 Member Benchmarking Survey

Adoption of submitting electronic invoices is increasing. Source: PayStream Advisors, Q Paper invoices Electronic invoices

10 B2B payments study Source: Aberdeen Group, June 2009 Paper 62% How payments are made Trends over the past 18 months

11 “Best in class” payment mix Source: IAPP Member Benchmarking Survey

Sysco’s Annual Payment Tender Type

Maturity framework of electronic payments 13 Definition of Maturity Class Mean Class PerformanceCost* Best-in-Class: Top 20% of aggregate performers 80% of overall payments processed by electronic methods $ days to process Industry Average: Middle 50% of aggregate performers 30% of overall payments processed by electronic methods $ days to process Laggard: Bottom 30% of aggregate performers 7% of overall payments processed by electronic methods $ days to process Source: Aberdeen Group *Overall processing cost per payment

 How does Sysco Calculate the value of AP?  AP-DPO calculation Calculating Cash Flow Impact 2010Current PeriodChange AP1,900,0002,000,000 DPO Cost of a Day111,437112,99473,446  Why is this important?

Trading partner tension Maintain or extend DPO Inefficient trading partner relationships results in higher cost of procurement & payables Inability to forecast accurately Paper intensive processes Inability to capture early payment discounts Resource intensive purchase to pay Reduce fraud Buyers’ Objectives Aim to reduce DSO Inefficient receivables posting, cash application and collection processes. Heavy use of Lockboxes Inability to forecast accurately Paper intensive invoice delivery and receivables Manual/inefficient dispute resolution Resource intensive order to cash Suppliers’ Objectives VS.

Payables Optimization Analysis  Payables focused, demonstrates how much liquidity can be realized by improving the purchase-to-pay processes  Provides intelligent routing to expedite payment, minimize costs and DSO but maintain DPO  Provide insight for dynamic discount management  Factors in time value of money

Payables Optimization Analysis Overview 1.Gather Data 2.Control Data Review 3.Intelligent payment routing output 4.Recommended Actions 1.Gather Data: Master Vendor File is uploaded 2.Control Data Review: Cost per disbursement, DPO, float, cost of funds, discounts available, average ticket, quick pay vs. slow pay. 3. Output shows total hard dollar savings, broken out by payment issuance savings, cost of funds impact, additional rebate and early payment discount all based on a best-in-class target mix 4. Recommended actions are tailored to improve trading partner relationships

Payables Optimization Analysis: Data elements needed MandatoryOptional Annual SpendD & B DBASite ID Early Payment Discount (%)Vendor ID Early Payment Discount Threshold (days) Contact Name Payment TypeAddress (City, State, Zip) TXN CountMCC Code Vendor IDTel TIN

Example output: Potential Hard Dollar Savings

Example output: Optimum spend mix

 Segregated Vendor Population  System Rollout  Training  Resistance to change  Negotiating Terms Sysco Payment Conversion Challenges

Supplier Onboarding  Migrate suppliers from check to more beneficial payment forms and terms  Reduced disbursement costs  Optimized DPO  Payment status visibility for suppliers  Improved Vendor Relations and Maintenance of supplier payment information 22

Supplier Analysis & Onboarding support 4 Extract master vendor fileAnalysis segmentationEnrollment strategyBuild marketing campaign Execute outreach campaignRelationship activationPayment and remittance 23

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Recommendations for success  Involvement of executives is critical to achieve goals  Segmentation of vendors  Tracking working capital metrics  Automation and standardization of payment processes  Creation of a compensation system based on improving working capital

Questions Brook Ballard Sysco Corporation Phone: Scott Hughes Wells Fargo Phone: