Maximizing Maintenance Stores Inventory Efficiency

1. APPA American Public Power Association Renaissance Hotel – SeattleMay 3, 2007 Identifying Savings Within Maintenance Stores Inventory Presented by: Pat Thoms, Platte River Power Authority & Jim Calvert, I.M.A. Ltd.

2. Agenda • Maintenance Inventory Facts • Benefits Realized from Clean Data • Return on Investment (ROI) • NorskeCanada Case Study • Platte River Case Study • Open Discussion

3. Maintenance Inventory Facts

4. Maintenance Inventory Facts • Inactive/Obsolete (Emotional Inventory) represents at least 38%-40% of Inventory Value • 10%-20% Excess-Active Inventories exist -- “A” items overstocked • Active Inventory Value • Annual Spend : is typically a 1:1 ratio

5. Maintenance Inventory Facts • Duplicate Items exist: @ 10%-20% per Single plant @ 20%+ across Multi-plant corporations • Industry Standards suggest that Spot Buy/Direct Purchases represent up to 30% of Annual Spend • Spot Buys/Direct Purchases usually incorporate a 10% premium over unit cost

6. OEM 40% MRO 60% Fluid Power 15% Instrumentation12% P.V.F. 12% Bearings 21% Excess Active 20% Electrical 26% Inactive 53% Ind. Supplies 14% Required Active 27% Critical Spares 15% Slow Moving Stock 22% Obsolete Materials 16% APPA American Public Power Association Inventory Segmentation Electrical 26%

7. Benefits Realized from Clean Data

8. Benefits Realized from Clean Data • User-friendly data for everyone (Maintenance, Stores, Procurement) • Opportunity to Standardize on Manufacturers/Products • Potential to Consolidate the Vendor base/Leverage Unit Cost • Opportunity to Reduce Inventory Investment and Free up Cash

9. Benefits Realized from Clean Data • Consistent structure & nomenclature throughout the database • Opportunity to Identify and eliminate duplicate items • Complete, generic item descriptions (McMaster-Carr, Grainger) • “Virtual” warehouse of inventory across the corporation (Corporate Catalog) • Opportunity to Share Critical parts, Spares, etc.

10. Return on Investment (ROI)

11. Return on Investment (ROI) • Virtually Every Project Requires ROI Support • Companies Require 6-12 Month ROI to Justify Spend • Companies are Required to Invest Time & Resources to the Recovery Process • I.M.A. can Work with Suppliers re Disbursement of Overstock • Internal Experienced Resources are also Necessary • Address items lacking proper information • Adjust min/max stocking levels • Identify obsolete parts

12. Return on Investment (ROI) Sample Client Data: • Multi-site client (7 plants) • > 240,000 total sku’s • 15,000-40,000 sku’s per plant • No Single Corporate MRO Catalog • Corporate Supply Agreements

13. Return on Investment (ROI) Single Site Data: • 17,671 sku’s • $11,623,737 Total Inventory Value • 68% of inventory is inactive • 32% is active (valued at $3,719,596) • Annual spend value $3,599,887(1:1 ratio)

14. Return on Investment (ROI) Single Site Data: • Eliminate duplicates • 13% of inventory has excessive on-hand quantities • Return parts to vendor for credit • Value of the Excess is $911,113 (24% of active inventory)

15. Return on Investment (ROI) Single Site Data: • Reduce Supplier base • 299 MRO vendors • Bearings & PT = 28 • Electrical = 97 • PVF = 30 • Air, Hydraulics, Fluid Power = 111 • Industrial Supplies = 61 • Mobil Equipment = 5 • Instrumentation = 75 • Consolidate product lines • Leverage purchase volumes within/across sites • Reduce Spot Buy purchases • 3,762 annual purchase orders generated • Spot Buy purchases @ 12% = $431,986

16. Return on Investment (ROI) Single Site Data: • Project cost: ~$90,000 • Savings: >$911,113 • minimum ROI is 10:1 • Similar savings are found at each site across the company

17. I.M.A. Value Proposition: • We help companies seize control over their MRO inventory. Our services consistently generate a greater than 10:1 return on investment and improve maintenance efficiency.

18. Catalog Management Cleansing Analysis ROI Facilitation I.M.A. Services The Total Solution

19. Platte River Power Authority (PRPA)Case Study

20. Platte River Case Study

21. Platte River Case Study Why the Need? • PRPA was in search of new Maintenance Management System • Old system had 26 characters for part description (+ long description field) • Descriptions were inconsistent (20 years of different employees entering items) • Maintenance was having a hard time finding parts they needed for a job

22. Platte River Case Study

23. Platte River Case Study What We Did • Core team considered 6 systems • Soon short listed to 3 --- presentations • Purchasing/Inventory/AP modules not included in initial plans • But, why buy the puzzle when 3 key pieces were missing?  scope changed

24. Platte River Case Study What We Did • Avantis system selected • Avantis offered the option for cleansing inventory parts (I.M.A. Ltd.) • System had >200 character description, ability to attach drawings, pictures, etc. to items

25. Platte River Case Study What We Did • Up-front cleaning on our own • Populated missing manufacturer names • Corrected spelling mistakes, dashes, hyphens, etc. • Cleaned up vendor names

26. Platte River Case Study

27. Platte River Case Study

28. Platte River Case Study

29. Platte River Case Study What We Did • For Data Cleansing, we worked with I.M.A. Ltd. • 9,232 sku’s • Submitted 2 reports: • on-hand inventory • vendor purchase history (4 years)

30. Platte River Case Study Results • Cleansed data was loaded into our system • Awesome new descriptions • Now parts can easily be found • Low duplicate part ratio (<1%) • New Avantis system allows drawings and pictures to be attached to item, which really helps planners

31. Item # Item # 203957 203957 Mfg Name Mfg Name TIMKEN TIMKEN Mfg P/N Mfg P/N Description Description BEARING, TAPER ROLL BEARING, CONE/CUP, TAPERED ROLLER, CONE P/N HM807049, CUP P/N HM807010 Control # 1000005 Platte River Case Study Before & After Samples: Before After

32. Platte River Case Study

33. Item # Item # 209784 209784 Mfg Name Mfg Name FAFNIR FAFNIR Mfg P/N Mfg P/N 209KRR3 Description Description BEARING, TAIL PULLEY BEARING, BALL, 1.7717” ID X 3.3465” OD X 1.0629” WD SINGLE ROW, CONRAD, 2 SEALS, WIDE RACE, TAIL PULLEY Control # 1000005 Platte River Case Study Before & After Samples: Before After

34. Platte River Case Study

35. Item # Item # 208859 208859 Mfg Name Mfg Name ALLEN BRADLEY ALLEN BRADLEY Mfg P/N Mfg P/N 1747-L531 Description Description SWITCH LIMIT OIL TIGHT NEMA 4/13 SWITCH, LIMIT, LEVER SPRING RETURN 600V 550/600VDC 10A AC 0.1A DC 2NO 2NC NEMA 4/13 SERIES F Control # 1010092 Platte River Case Study Before & After Samples: Before After

36. Platte River Case Study

37. Item # Item # 300292 300292 Mfg Name Mfg Name ALLEN-BRADLEY ALLEN BRADLEY Mfg P/N Mfg P/N 802T-ATP Description Description ALLEN BRADLEY PROCESSOR PROCESSOR, SLC 5/03 4096 INPUT 4096 OUTPUT 500MA @ 5VDC 175MA @ 24VDC 8K MEMORY Control # 1000148 Platte River Case Study Before & After Samples: Before After

38. Platte River Case Study

39. Item # Item # Item # Item # 207015 207015 203700 203700 Mfg Name Mfg Name Mfg Name Mfg Name FISHER FISHER CONTROLS FISHER CONTROLS Mfg P/N Mfg P/N Mfg P/N Mfg P/N IE569X0072 IE569X0072 1E5629X0072 IE569X0072 Description Description Description Description GASKET, 2 X 2 1/2 X 1/32 GASKET, 2” ID X 2-1/2” OD X 1/32” THK GASKET 2 X 2 1/2 X 1/32 GASKET, 2” ID X 2-1/2” OD X 1/32” THK Control # Control # Control # 1008561 1008561 Platte River Case Study Before & After Samples: Duplicates

40. Open Discussion

41. Thank-you for this opportunity & for your time!