Beyond Surviving Optimizing Profitability

1. Beyond Surviving Optimizing Profitability

2. M&A Activity in Wholesale Distribution * Excludes transactions in the retail consumer markets Source: Pembroke Consulting

3. Distribution Trends – EBITDA Multiples 2007 2005 2006 2004 Source: MDM, Vol38, No. 4, February 25, 2008

4. Top 10 Public Distribution Firms By ROIC% Source: MDM, Vol38, No. 4, February 25, 2008

5. The ROI Equation Financial Statements  “Balance Sheet” &“Income Statement” encapsulate the results of the above activities

6. DistributionBusiness Process Framework

7. Educational Session Deliverables

8. Supply Chain Planning Key Performance Indicators (KPIs) Business Process Framework Supplier Customer

9. Business Process Groups – Summary

10. Financial Framework

11. Financial Drivers

12. Optimizing Distributor ProfitabilityMethodology

13. Optimizing Distributor Profitability – Methodology

14. Performance Assessment

15. Best Practices Framework Best Practices Good Practices Performance Common Practices Time

16. Process Assessment

17. Custom Process Assessment Report – Sample

18. Process Assessment Workbook – Applications • Workbook can be used to • Assess other branches / regions, hence set company-wide process benchmarking • Assess acquisition targets’ process potential • Custom report identifies process and financial gaps

19. Cross-Channel Financial Benchmarking

20. Cross-channel Financial Benchmarking Report

21. Optimizing Distributor Profitability – Methodology

22. Connecting Processes and Shareholder Value $hareholder Value

23. Distributor Profitability Framework – Concept

24. Distributor Profitability Framework

25. Optimizing Distributor Profitability – Methodology

26. Source Group Analyzer – Schematic Diagram

27. Optimizing Distributor Profitability – Methodology

28. Best Practices Roadmap – Sample

29. Best Practices Roadmap – Sample

30. Optimizing Distributor Profitability – Methodology

31. Balanced Score Card (Kaplan & Norton)

32. Linking Implementation Components

33. Implementation – Complexity vs. Decision-making • Low ROI • Low Level of Acceptance • High ROI Complex Models • High ROI • Need Training • Low ROI • Lack of Local Knowledge Simple Models Majority of distributors De-centralized Decision-Making Centralized Decision-Making Everything should be made as simple as possible, but not one bit simpler - Albert Einstein

34. Supply Chain Planning Support Services ODP Methodology IDENTIFY GAP MAP SHAREHOLDER VALUE ASSESS PROFITABILITY UNDERSTAND BEST PRACTICES ENABLE & IMPLEMENT Process Framework

35. Source – Supplier Management – Supplier Stratification Best Practices Good Practices • Loyalty, Profitability, Services, Performance • Risk/Exposure – supply availability, technical requirements, financial factors, technological factors and environmental issues • Landed Cost (TCO) • Combination Methodology • Segmentation based on COGS by supplier • Pareto framework (80%-20%) Performance Common Practices • Purchase price variance • Landed cost • Lacks segmentation framework Time

36. Supplier Stratification

37. Supply Chain Planning Support Services ODP Methodology IDENTIFY GAP MAP SHAREHOLDER VALUE ASSESS PROFITABILITY UNDERSTAND BEST PRACTICES ENABLE & IMPLEMENT Process Framework

38. Linking SOURCE Processes to Shareholder Value Process Group Process Process Metric Financial Elements Financial Metrics

39. Supply Chain Planning Support Services ODP Methodology IDENTIFY GAP MAP SHAREHOLDER VALUE ASSESS PROFITABILITY UNDERSTAND BEST PRACTICES ENABLE & IMPLEMENT Process Framework

40. Source Analyzer – LT & LT Variability – Schematic Diagram Basic Input Parameters Additional Revenue EBITDA Lead Time LT Var Expected Turns P&L and Bal. Sheet Safety Stock % of re-investment RONA GMROII Turns YES Re-invest ? Average Inventory NO

41. Source Group Analyzer – On-Time Delivery

42. Potential Profitability – Olympic Distribution

43. Potential Profitability – Olympic Distribution

44. Potential Profitability – Olympic Distribution

45. Supply Chain Planning Support Services ODP Methodology IDENTIFY GAP MAP SHAREHOLDER VALUE ASSESS PROFITABILITY UNDERSTAND BEST PRACTICES ENABLE & IMPLEMENT Process Framework

46. Sell – Sales Management – Customer Stratification Best Practices Good Practices • Based on multiple factors – CTS, Business Potential, Relationship, Customer Lifetime Value, Net Profit, Loyalty • Combination methodology • Based on single factor – Sales, Gross Margin, Business Potential Performance Common Practices • No customer stratification • Customer groups based on – Market Type or Product Line • Top customers based on revenue Time

47. Customer Relationships

48. Sell – Pricing Management – Pricing Methods Best Practices Good Practices • Pricing Optimization • Pricing matrix based – Customer Stratification, Seller’s Item Visibility, Buyer’s Item Visibility and Cost Levels & Margin Levels • Pricing Rules / Heuristics • Value based pricing • Pricing matrix based on customer stratification and seller’s item visibility Performance Common Practices • Cost Plus Pricing • Cost Plus Driven Matrix Pricing • List Price or List-Less Pricing Time

49. Potential Profitability – Olympic Distribution

50. SELL Real World Example