1. Working Capital - > 90 Day Delinquency Project – 0307-49-001 Heath Peacock Finance Tempe, AZ - CCC

2. 2 Background – Current Process n Within Business Unit, the opportunity exists to improve collector and manager effectiveness through enhanced system utilization and reporting n Average delinquency, 11.7% Customer A/R > 90 days delinquent n OMD / ARMS n 11.7% = $5.14 Million (June data) n Since June, Delinquency has increased to 14.0% or $6.1MM n Defect reduction goal from June was 70.0% or $3.6 Million n Savings based on 8.0% Cost of Capital Conversion to IOSC Collections – April 2004

3. 3 Project Definition n Problem Statement: There is an opportunity to reduce delinquency for Trade Collection accounts with > 90 day delinquency in Tempe, AZ CCC. Excess delinquency leads to increased borrowing costs, reduced cash collected and additional reserve requirements. n Project Definition: Implement a series of improvements designed to increase collector and management effectiveness, enhance system utilization and reporting to reduce 90 day delinquency. n Project Benefits Reduce borrowing costs, increase cash and reduce reserves $288,000 in reduced borrowing costs

4. 4 Project Team n Champion – Tom Sheehan / John Bartuska n Financial Analyst – Renate McLeod n Black Belt – Heath Peacock n Team Members: n Front Line Collector – Paula Smith n Front Line Collector – Sherry Van Luven n Collection Supervisor – Antoinette McDonald n Collection Supervisor – Rick Langston n Senior Manager of Collections – Greg Walston n Collection Manager – Mary Whitmer n Master Black Belt – Laura Wells Added team member to align with organizational structure

5. 5 DPMO Recalculation Former DPMO calculated on just month end data

6. 6 DPMO Recalculation n Former DPMO – 999,570 n It’s not that bad!!! n New DPMO based on 6.5% goal for April going forward n Avg %over goal of 6.5% was 3.5% Recalculated DPMO – 350,000

7. 7 Measurement System Analysis n Data type – Normal, continuous based on P =.536 n Data Source – Data pulled directly from ARMS n Goal – Verify Month end reported data is accurate n Procedure – Pulled random sample of delinquency bucket data and audited n Sample – 135 random accounts, 15 in each delinquency bucket n Result – 100% accurate Measurement System is Accurate!

8. 8 DPMO and Sigma Level n Initial Capability Analysis Outcome n Upper Specification Limit - 6.5% n Sigma is short term based on 11 data points at month end n DPMO – 350,000 based on delinquency in excess of Upper Spec Limit n Sigma Level – 1.88 n Average delinquency – 10.28%

9. 9 Data Collection Plan n Obtain calls by Collector – # of Calls, both incoming and outgoing n Delinquency Bucket by Collector n Number of Accounts and invoices by Collector n Time employed by IKON by Collector n Sample data from IOSC collections history – number of calls, Promise to Pay percentage and Percent Current Leveraging IOSC Collection Experience

10. 10 C&E Diagram & Matrix Results n Timeframe for marketplace follow-up (190) n Account listing - frequency, procedure and priority (190) n Aging Report (190) n Workload (190) n Department Structure (180) n Training (170) n Estimated Meter Reads (160) n Customer Service (160) n Productivity Report (150) n Marketplace Escalation (150) Top 10 Sources of variation and score

11. 11 Tempe Data Correlation Correlation Some Correlation Minimal Correlation between Key Process Input Variables

12. 12 Tempe Data Regression Analysis n Months with IKON – R-Sq (adj) – 0.4% n Customers Assigned – R-Sq (adj) – 0.0% n Total Invoices – R-Sq (adj) – 1.2% n Incoming Calls – R-Sq (adj) – 0.0% n But… We know, I know, the one thing that will most definitely affect over 90% is the number of external calls by collector…

13. 13 Tempe Data Regression Analysis !!!!!!

14. 14 Tempe compared to IOSC n Compared Collector Activity to IOSC Collector Activity n Ho = Call volume is same n Sample Size 175 and 168 over same time frame n Mean – 32 and 45 n Standard Deviation – 14 and 10 n 2 Sample – T test, P Value – 0.00 Reject the null Hypothesis

15. 15 Next Steps n Data is pointing out that the collectors may be on the phone but are not resolving the customers issues. n Establish new data collections n Who are the collectors calling n What issues are keeping them from collecting

16. 16 Results of Analysis n Avg number of customers for Tempe Collector =

17. 17 Project DMAIC Checklist/Status

18. Questions?