Budgeting for Volatility Webcast 080708...

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Budgeting for Volatility Budgeting for Volatility Webcast July 22 2007 July 22, 2007 This report has been prepared by Boston Strategies International at the request of CLIENT for the purpose of establishing its operating strategies. It may not be appropriate for other purposes or audiences. This report contains forward-looking statements and projections with respect to anticipated future performance of CLIENT, suppliers, customers, and/or general or specific economic conditions and factors that are based on Boston Strategies International’s analysis of market trends and external data. Forward-looking statements and projections are not guarantees of future performance and involve significant business, economic and competitive risks, contingencies and uncertainties, which are difficult to predict. Accordingly, these projections and forward-looking statements may not be realized and actual results may vary up or down. This report may not be reproduced or distributed without express written approval from Boston Strategies International.

Transcript of Budgeting for Volatility Webcast 080708...

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Budgeting for VolatilityBudgeting for VolatilityWebcast

July 22 2007July 22, 2007

This report has been prepared by Boston Strategies International at the request of CLIENT for the purpose of establishing its operating strategies. It may not be appropriate for other purposes or audiences. This report contains forward-looking statements andprojections with respect to anticipated future performance of CLIENT, suppliers, customers, and/or general or specific economic conditions and factors that are based on Boston Strategies International’s analysis of market trends and external data. Forward-lookingstatements and projections are not guarantees of future performance and involve significant business, economic and competitive risks, contingencies and uncertainties, which are difficult to predict. Accordingly, these projections and forward-looking statements maynot be realized and actual results may vary up or down. This report may not be reproduced or distributed without express written approval from Boston Strategies International.

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Who We Are

IndustryResearch

Cost and Price Analysis

Supply Chain ConsultingResearch Analysis Consulting

®

Page 2© 2008 Boston Strategies International, Inc.

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Relatively steady demandEXCERPT

US Demand for Chemicals

Index250%

300%

Synthetic RubberPlastic ProductsIndex

(1997=1.0)

150%

200%Plastic ProductsPVCCalcium OxideBenzene

50%

100% Ind. Organic Chem.PolystyrenePolypropyleneEthylene

0%97:1 99:1 01:1 03:1 05:1 07:1 09:1 11:1

y

Source: Boston Logistics Group analysis of Global Insight data

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Relative job securityEXCERPT

AccountantsB k

SkydiversSt k

Safe Not Safe

BankersLawyersPurchasing

Stock car racersStunt menFiremenPurchasing

AgentsOperations

FiremenIntelligence officers

managersForecasters

Roofers

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Risk & uncertainty: the new enemyEXCERPT

Percent Change in Natural Gas Price, November 2005 – April 2007

60%

40%

50%

10%

20%

30%

-10%

0%N-05 D-05 J-06 F-06 M-06 A-06 M-06 J-06 J-06 A-06 S-06 O-06 N-06 D-06 J-07 F-07 M-07 A-07

Sources: Energy Information Administration, Boston Logistics Group-40%

-30%

-20%

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Budgets are off; variance is increasingEXCERPT

Expense: 50% are over-budget, 62% worseningCapital: 60% are over-budget, 73% worseningCapital: 60% are over budget, 73% worsening

40%

45%

20%

25%

30%

35%

Percent of Respondents

Expense

Capital

5%

10%

15%

20%Respondents

0%

Under 25‐50%

Under 15‐25%

Under 5‐15%

Under 5‐0%

On Budget

Over 0‐5%

Over 5‐15%

Over 15‐25%

Over 25‐50%

Budget Variance

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Budget Variance

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Biggest concerns: energy, metals, laborEXCERPT

Reasons for Budget Variance Biggest Budgeting ConcernCurrency

3%Metals7%

Reasons for Budget Variance

Metals

Biggest Budgeting Concern

Energy27%

Other Material

20%Currency

3%

Other Material

36%

Metals23%

Internal33%

Labor10% Energy

29%

OthLabor6%33% Others

3%6%

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Stability as important as low costEXCERPT

90%

100%

60%

70%

80%

40%

50%

60%

Percent of Respondents

StablePrices

10%

20%

30%Stable Prices

Low Cost

0%

1 2 3 4 5 6 7 8 9 10Importance

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Big decisions, little scienceEXCERPT

B i dDiversify suppliers

Methods for Handling Price Volatility

No tools usedAssign confidence levels

Buy in advance

Use a flexible budgetHire a consultant

Buy futures contracts

Partner with core suppliersRely on a panel of experts

Simulate scenarios

0% 10% 20% 30% 40% 50% 60%

pp

Percent of Respondents

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Identify risk-prone categories of spendEXCERPT

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Global Supply Chain EconomicsBoston Strategies International helps supply chain executives make critical supply chain decisions that involve investment and risk by forecasting the evolution of supply markets and technologies. Our mission is to help our clients develop globally competitive supply networks that maximize Supply Chain Value.™ Our products and services include:

Industry Research that helps investors and policy makers identify emerging issues that affect their supply chains• Industry Research that helps investors and policy makers identify emerging issues that affect their supply chains, and quantify the impact that they will have

• Cost and Price Analysis that helps financial and operational managers plan and budget by providing benchmark, best practice, and forecast data tailored to their companies' supply chains

• Supply Chain Consulting services that help supply chain leaders make high-stakes decisions related to mergers & acq isitions market entr capital in estments o tso rcing off shoring and make or bacquisitions, market entry, capital investments, outsourcing, off-shoring, and make-or-buy

David Jacoby: djacoby@bostonstrategies com

Boston, MA, USA445 Washington St

Wellesley, MA 02482 USA

Dubai, UAEExecutive SuiteP.O. Box 121601

Sharjah, United Arab Emirates (U.A.E.)

Shanghai, China31F Jin Mao Tower88 Shi Ji Avenue

Shanghai 200120, China

Page 11© 2008 Boston Strategies International, Inc.

David Jacoby: [email protected]