Oriflame Purchasing Management Workshop Module 2 – Cost & Cash Oriflame Financials Cost Analysis Cost Trends Supply Data Spend Coverage 2006 Purchasing Goals Financial & Service Level Purchasing Performance

Purchasing Workshop Module 2 © The Delos Partnership 2005 Oriflame Purchasing Management Workshop2 Oriflame Financial Results Sales, Profit & Variable Costs

Purchasing Workshop Module 2 © The Delos Partnership 2005 Oriflame Purchasing Management Workshop3 Cost Analysis Variable & Fixed Cost Breakdown

Purchasing Workshop Module 2 © The Delos Partnership 2005 Oriflame Purchasing Management Workshop4 Cost Analysis Trends Selling & Marketing #1 Cost – Up 18% Cost of Sales #2 Cost – Up 5% Administration #3 Cost – Up 4% Inventories #4 Cost – Up 8% Tangible Assets – Up 25% Capital Expenditure – Down 36% From 2003 Baseline to Extrapolated 2005 FY Costs

Purchasing Workshop Module 2 © The Delos Partnership 2005 Oriflame Purchasing Management Workshop5 Oriflame Supply Side Data External Spend of >€m Thousands of Suppliers Tens of Thousands of supplier invoices/pa >10 People with a high Purchasing content to Role Many other Oriflame “Buyers” Headlines

Purchasing Workshop Module 2 © The Delos Partnership 2005 Oriflame Purchasing Management Workshop6 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. Procurement – Categories

Purchasing Workshop Module 2 © The Delos Partnership 2005 Oriflame Purchasing Management Workshop7 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. Procurement – Categories

Purchasing Workshop Module 2 © The Delos Partnership 2005 Oriflame Purchasing Management Workshop8 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. Procurement – Categories

Purchasing Workshop Module 2 © The Delos Partnership 2005 Oriflame Purchasing Management Workshop9 Procurement – Assets & Cash Flow  Stocks – Inventories  Creditors  Land & Buildings  Plant & Equipment  Capital Expenditure & Disposals  Expenses  Authorisation Channels & Control

Purchasing Workshop Module 2 © The Delos Partnership 2005 Oriflame Purchasing Management Workshop10 Workshop Task – Spend Coverage Spend Categories Oriflame Purchasing / Supply Chain Involvement Other Function & ”Maverick buyer” Spend Involvement Purchasing Centre FactoriesOfficesR&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

Purchasing Workshop Module 2 © The Delos Partnership 2005 Oriflame Purchasing Management Workshop Purchasing Budget & Plans Business Strategies New Range – Oriflame Colour New Products Sales Force numbers / productivity More Catalogues/More frequently World Childhood Foundation commitment Product Availability Service Levels CIS Supply Centre China Manufacturing Purchasing Focus & Goals Purchasing Focus & Goals to support Business Strategies

Purchasing Workshop Module 2 © The Delos Partnership 2005 Oriflame Purchasing Management Workshop 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

Purchasing Workshop Module 2 © The Delos Partnership 2005 Oriflame Purchasing Management Workshop13 Focus on Cost & Cash - Top Suppliers Top 10 Suppliers = €m and X% of Total Spend Category Months Spend (€) 2005 Planned Spend (€) 2006 Forecast Spend (€) Centre / Region / Factory / Function Managed TOTAL Ensure there is a Value Plan and Ownership for each and then extend to the Top 20 +

Purchasing Workshop Module 2 © The Delos Partnership 2005 Oriflame Purchasing Management Workshop14 Integration Pyramid SuppliersProduct/ServiceSpend €mOwner Insurance Company Secretary Audit Finance Director ERP/ Microsoft / PC’s / Phones / Raw Materials / Packaging ERP/I.T./ Telecoms/Data/Mobiles I.T. Director SuppliersProduct/ServiceSpend €mOwner Goods & ServiceOuter PackagingSupply Chain Goods & ServiceTicketsSecretary Goods & ServicePrinting & Business CardsUser Goods & ServiceWaste RemovalPlant Manager Goods & ServiceHealth CareHR Group - Centre Led Country Function Led - with Group Support Plant / Office Led - with support Single User SuppliersProducts & ServicesSpend €mOwner Raw MaterialsKey Ingredients & Product Packaging R&D / Manufacturing/ Customers EnergyGas & ElectricityOperations Logistics & FreightTrucks / CouriersSupply Chain

Purchasing Workshop Module 2 © The Delos Partnership 2005 Oriflame Purchasing Management Workshop15 Questions ?