Documenting Value to our Customers

1. Documenting Value to our Customers NAW – Large Company CEO Panel Discussion September 24 & 25, 2008

2. Purpose of Documenting and Selling Solutions • Margin Erosion • Steel, energy, plastics and other costs are going up; • Customers are putting pressure on suppliers for a lower price; • Every dollar of margin lost translates to a direct dollar loss in profitability; • How have these market trends • impacted your profits? 2008 NAW Large Company CEO Conference

3. Purpose of Documenting and Selling Solutions • Contractual Savings • More end-users are relying on TCO savings to meet cost-reduction targets; • How many millions of dollars in sales do you have tied to contractually guaranteed savings? • In many cases companies have dropped prices to meet these goals or even paid the customer cash penalties; • Tools for documenting value result in higher margins and satisfied customers. 2008 NAW Large Company CEO Conference

4. Purpose of Documenting and Selling Solutions End-users were asked if the ability for a distributor to provide documented cost savings would enable the distributor to earn a larger portion of their business: 26 % - No 74 % - Yes 2008 NAW Large Company CEO Conference Source: Value Added Partners

5. Purpose of Documenting and Selling Solutions Benefits • Establishes a clearly defensible competitive position; • Creates long-term partnerships with key customers; • Results in increased profit opportunities; • Opportunities for share gains. Key Consideration • Choosing the right customers; • Who and who not to offer the services to; 2008 NAW Large Company CEO Conference

6. Assessing the Opportunity Identifying the right accounts*; Partner vs. Price; • Creating and documenting value takes time and commitment on both sides; • Long-term alliances; • Access to multiple levels of contact; • Focused on value and not simply transactions; • Genuine desire for win-win relationships. *John Monoky, Univ. of Michigan; Strategic Account Management 2008 NAW Large Company CEO Conference

7. Sales Strat Value Documentation 2008 NAW Large Company CEO Conference

8. Sales Strat Value Documentation 2008 NAW Large Company CEO Conference

9. Documenting Value How many ways can we reduce TCO? • IT investments have helped many companies find new and unique ways to create value. • Activity-Based Costing software helped Lewis-Goetz identify; • those accounts where we should focus our TCO savings efforts; • And, those where we should not. 2008 NAW Large Company CEO Conference

10. Profit and Loss Scorecard Strategic Customer Case Study 2008 NAW Large Company CEO Conference

11. Order History Strategic Account Case Study • Activity-Based management has been able to identify unprofitable, time consuming orders. 2008 NAW Large Company CEO Conference

12. Conclusions Strategic Account Case Study • Numerous orders were small and timely. Over a three week period the following occurred: • 32 orders processed; • Total revenue - $7,178; • Average Order Size - $224; • 18 orders were under $100. • Each order required work to be done by inside sales, administrative, and hydraulic shop personnel. This results in substantial costs at both Lewis-Goetz and the customer. Lewis-Goetz uses Activity-Based Costing management as both an internal analytical tool as well as an external value-added tool. 2008 NAW Large Company CEO Conference

13. Conclusions • Key customers are demanding TCO reductions; • Clearly understand which customers deserve and value a TCO approach; • Focusing on TCO reductions takes emphasis off price; • Opportunity for longer-term relationship; • More difficult for business to be taken. • Investing in IT tools will help with; • Identification of accounts that should be a focus of TCO documentation; • Identifying unique ways to create value; • Documenting the value that is created through your supply partnership. 2008 NAW Large Company CEO Conference

14. Thank you. September 24 & 25, 2008