Optimize Working Capital: Strengthen Trading Partner RelationshipsBrook Ballard – Sysco CorporationScott 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 Factors External Factors

Size and growth rate Banking ServicesOrganizational structure Interest ratesLevel of working capital management

Technology and products

Borrowing and investing positions and activities

Economy and competitors

Industry challenges

3

Industry challenges

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

88

Technology to improve AP processes

Source: IAPP 2008 Member Benchmarking Survey

Adoption of submitting electronic invoices is increasing.

0%

10%

20%

30%

40%

50%

60%

70%

2006 2007 2008 2009 2010 2011 2012

Source: PayStream Advisors, Q1 2009

Paper invoices

Electronic invoices

1010

B2B payments study

-5.3%

6.7%

7.4%

9.1%

9.7%

-10.0% -5.0% 0.0% 5.0% 10.0% 15.0%

Checks

T&E cards

Wires

P-Cards

ACH

Growth

Paym

ent t

ype

Source: Aberdeen Group, June 2009

Paper62%

How payments are made

Trends over the past 18 months

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“Best in class” payment mix

Source: IAPP Member Benchmarking Survey

Sysco’s Annual Payment Tender Type

450K or 18%

2M or 82%

5K or 0%

Check ACH

Wire

Maturity framework of electronic payments

13

Definition of Maturity Class

Mean Class Performance Cost*

Best-in-Class:Top 20% of aggregate performers

80% of overall payments processed by electronic methods

$3.533.5 days to process

Industry Average:Middle 50% of aggregate performers

30% of overall payments processed by electronic methods

$11.1916.0 days to process

Laggard:Bottom 30% of aggregate performers

7% of overall payments processed by electronic methods

$35.5627.1 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

2010 Current Period Change

AP 1,900,000 2,000,000

DPO 17.05 17.70 .65

Cost of a Day 111,437 112,994 73,446

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

output4.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

Mandatory Optional Annual Spend D & BDBA Site ID Early Payment Discount (%) Vendor IDEarly Payment Discount Threshold (days)

Contact Name

Payment Type Address (City, State, Zip) TXN Count MCC Code Vendor ID Tel  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 file

•Analysis segmentation

•Enrollment strategy

•Build marketing campaign

•Execute outreach campaign

•Relationship activation

•Payment 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

QuestionsBrook BallardSysco CorporationPhone: 281-584-1334Email: Ballard.Brook@corp.sysco.com

Scott HughesWells FargoPhone: 770-551-4663Email: Scott.Hughes@wellsfargo.com