Working together to find extra profit

Dr. Alex SacharoffERA-Director

Questions for Today’s Meeting

1. Who is Expense Reduction Analysts (ERA)?

2. How can we help you?

3. Which cost categories would produce the best results?

4. How does the ERA process work?

5. Is there an opportunity to work together?

6. Where do we go from here?

How can we help you?

• What are your top initiatives this year?

• What seem to be the obstacles to achieving them?

• What metrics measure success or failure?

• How will achieving them impact your business?

• What do you need to achieve them?

• How might savings from your non-core cost categories help you achieve your initiatives?

Logistics•Small Package Freight•Domestic Freight•International Freight

Insurance•General/Worker’s Comp•Health

Services•Equipment Maintenance•Janitorial Services•Payroll Processing•Printing •Records Management•Temporary Labor•Uniforms•Waste Management

Expense Category Opportunities

Supplies•Chemical•Cleaning•Food Services•Lab and Medical•MRO/Factory Consumables•Packaging and Shipping•Printing•Stationery and Office

Telecommunications •Data•Mobile

•Voice

Merchant Card Fees

Leasing

The ERA Process

The ERA Process

Our fees are half of the actual savings for 24 months following project implementation

Calculation Savings ERA FeeAnnual savings of 20% based on 12 month spend of $300,000 ($5,000 per month)

60,000$

Total savings over a 24 month period($5,000 per month * 24 months)

120,000$

1st Contingency Fee Payment due upon presentation of a Successful Recommendation(10% of projected 24 months savings: $120,000 * 10% = $12,000)

12,000$

2nd Contingency Fee Payment is due upon Implementation of Savings(10% of projected 24 months savings: $120,000 * 10% = $12,000)

12,000$

Monthly ERA Fee is equal to 50% of actual savings in the month less 1/ 24 of Contingency Fee Payments ($120,000 / 24 * 50% ) - ($24,000 / 24) = $2,500 - $1,000 = $1,500 * 24 = $36,000

36,000$

Total fees paid to ERA (50% of actual savings) 60,000$

For example, on a $300,000 annual spend with 20% savings achieved, the fees would be calculated as follows:

Column1

Current20% CostReduction

IncreaseSales

Revenue $ 100 $ 100 $ 140

Direct operating costs $ 35 $ 35 $ 49

Labor costs $ 35 $ 35 $ 49

Non-core indirect costs $ 20 $ 16 $ 28

Net profit $ 10 $ 14 $ 14

Alternative Approaches to Higher Profits

20% cost reduction or 40% increase in sales revenue both yield a 40% increase in Net Profit

Working together to find hidden profitNo savings = No fee

Expense Reduction Analysts Our clients

Analyze the client’s current costs and service environmentIdentify and help implement hard-dollar savings options for our clients utilizing our:

proprietary process;expert resources; and benchmark pricing data;

Provide post-implementation support services throughout the review period Operate with integrity and respect for our client’s personnel and supplier relationships

Allow ERA the opportunity to present a successful recommendation and earn a share of the savings during the review period;Provide timely access to information;Have sole right to select which of the successful recommendations is the best fit for themselves;Implement within 30 days of presentation if ERA delivers at least one successful recommendation;Do not solicit any offers from suppliers or duplicate ERA’s work, and refer all unsolicited inquiries or offers from suppliers to ERA.

A successful recommendation is:

1.A lower cost solution from an incumbent supplier(s); and/or2.A lower cost solution with savings above an agreed to minimum, from a non-incumbent supplier who provides equal or greater products/service/quality; and/or3.A solution from a non-incumbent supplier that our client elects to implement even though it does not meet the criteria above; and/or4.Provides savings realized from approved changes in methodologies or process

Ongoing services during review period

Expense Reduction Analysts Our Clients

Continue as a resource to improve and optimize service and price.Monitor client’s usage trends and identify key changes that might impact service or savings.Review supplier invoices for accuracy and compliance. Document client’s activities and savings results and provide this information using e-mail and periodic on-site meetings.

Communicate to ERA:Service or performance issues or changes. Proposed pricing or supplier agreement changes.

Provide ERA access to G/L and invoice details to assure all project activity is included in reviews.

Objectives

1.Identify additional savings opportunities as usage and market conditions evolve.2.Monitor performance of:a) Suppliers’ compliance with contractual and financial commitments.b) Client’s purchases to ensure proper fit with contract structure.c) Changes in market and supplier conditions.3.Document activity, savings and incremental recommendations.

Next Steps

1. Select initial categories for review (gather G/L data)

2. Schedule Stakeholder meeting

3. Sign the Client Engagement letter

4. Find extra profit for your business

5. Implement and measure savings for 24 month term

6. Use savings to achieve company’s objectives

Common Concerns and Comments

• How much of my time, and my staff’s time, is this going to take?

• If we worked with you, would we have to switch vendors?

• What is your relationship with the Suppliers you recommend?

• Will you help us with cost savings projects we have underway?

• Can I stop the project at anytime?

• Who monitors the Supplier’s performance against contract terms?

No savings, no fee

“You guys have done what I’ve been trying to do for three years, but couldn’t. Either I didn’t have the time, or the energy, or the expertise.”

Senior Vice President/General Manager, Gleason Industries