Oriflame Purchasing Management Workshop Module 2 – Cost & Cash Oriflame Financials Cost Analysis...

Oriflame Purchasing Management WorkshopModule 2 – Cost & Cash

• Oriflame Financials• Cost Analysis• Cost Trends• Supply Data• Spend Coverage• 2006 Purchasing Goals• Financial & Service Level Purchasing Performance

Oriflame Purchasing Management Workshop2

Purchasing Workshop Module 2

© The Delos Partnership 2005

Oriflame Financial Results

0100200300400500600700800

2003 2004 2005

Years

€m Sales

Profit before tax

Variable Cost

Sales, Profit & Variable Costs




Cost Analysis

0

50,000

100,000

150,000

200,000

250,000

300,000

2003 2004 2005

Selling & Marketing Expenses

Cost of sales

Administrative Expenses

Inventories

Tangible Assets

Financial Expenses

Capital Expenditure

Variable & Fixed Cost Breakdown




Cost Analysis Trends

• Selling & Marketing #1 Cost – Up 18%

• Cost of Sales #2 Cost – Up 5%

• Administration #3 Cost – Up 4%

• Inventories #4 Cost – Up 8%

• Tangible Assets – Up 25%

• Capital Expenditure – Down 36%

From 2003 Baseline to Extrapolated 2005 FY Costs




Oriflame Supply Side Data

• External Spend of >€m

• Thousands of Suppliers

• Tens of Thousands of supplier invoices/pa

• >10 People with a high Purchasing content to Role

• Many other Oriflame “Buyers”

Headlines




Finished Products & Services – Toll Conversion Category • covers products & services that the business has chosen not to manufacture but to

source from a third party supplier. Products and Services can be made to the business specification or purchased as a generic.

Raw Materials & Consumables Category • covers items that typically consumed or used within a manufacturing or assembly

process (direct materials) and are normally held as an inventory item by the supplier (VMI or Kanban). Purchase price variance, usage and spoilage are key category measures.

Packaging Category • covers both inner packaging such as cans, bottles, closures, cartons & labels used to

protect, decorate and identify the product and outer packaging such as corrugated, stretch wrap, strapping, pallets and tote bins used for product transportation.

Procurement – Categories




Energy & Utilities Category • covers Electricity, Gas, Oil, Water, Effluent and Waste disposal.

CEMRO Category • covers capital equipment, engineering and maintenance, repair and operating

expenditure – typically electrical, mechanical and pneumatic items such as switches, pumps, valves, freezers, instruments, compressors, heating, ventilation etc.

Logistics & Freight Category • covers internal and external warehouses, off site storage, inbound freight,

outbound freight, (sea, air, road, rail) couriers, duties, transport hire and the cost of producing & paying for import and export documentation and clearance.





Technical & HSE Category

• covers R&D & Quality spend on pilot equipment, glassware, equipment, calibration, servicing, laboratory consumables (reagents, gloves etc), laundry, gases, safety equipment, testing and maintenance services, archiving etc.

Goods & Services Category

• covers catering & vending, I.T. hardware & software, telecoms, office equipment, stationery, photocopiers & fax, cars (lease & hire), fuel, travel & accommodation, conferences & exhibitions, consultants, auditors, business corporate communications, legal, property, leases, rates, subscriptions, books & magazines, cleaning, security, insurance, printing & artwork, market research, advertising, post, credit cards, entertainment etc.

People Category

• covers recruitment, temporary workers, clothing, professional fees, private medical, training, courses, relocation and functional outsourcing etc.





Procurement – Assets & Cash Flow

Stocks – Inventories

Creditors

Land & Buildings

Plant & Equipment

Capital Expenditure & Disposals

Expenses

Authorisation Channels & Control




Workshop Task – Spend Coverage

Spend Categories

Oriflame Purchasing / Supply Chain Involvement Other Function

& ”Maverick buyer” Spend Involvement

Purchasing Centre Factories Offices R&D

Finished Products – Toll Conversion

Raw Materials & Production Consumables

Packaging

Capital, Engineering MRO (CEMRO)

Energy & Utilities

Logistics & Freight

Technical & H.S.E.

Goods & Services

People Spend

Cash – Assets / Capital / Creditors Low/No Purchasing involvement Purchasing

involvement




2006 Purchasing Budget & Plans

Business Strategies• New Range – Oriflame Colour

• New Products

• Sales Force numbers / productivity

• More Catalogues/More frequently

• World Childhood Foundation commitment

• Product Availability

• Service Levels

• CIS Supply Centre

• China Manufacturing

Purchasing Focus & Goals

Purchasing Focus & Goals to support Business Strategies




2006 Purchasing Budget & Plans

Spend CategoriesFinished Products – Toll Conversion

Raw Materials & Production Consumables

Packaging

Capital, Engineering MRO (CEMRO)

Energy & Utilities

Logistics & Freight

Technical & H.S.E.

Goods & Services

People Spend

Cash – Assets / Capital / Creditors

Purchasing Focus & Goals

Purchasing Focus & Goals to increase Spend Coverage




Focus on Cost & Cash - Top Suppliers

Top 10 Suppliers = €m and X% of Total

Spend Category 2004 12 Months Spend (€)

2005 Planned Spend (€)

2006 Forecast Spend (€)

Centre / Region / Factory / Function Managed

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

TOTAL

Ensure there is a Value Plan and Ownership for each and then extend to the Top 20 +




Integration Pyramid

Suppliers Product/Service Spend €m Owner

Insurance Insurance Company Secretary

Audit Audit Finance Director

ERP/ Microsoft / PC’s / Phones / Raw Materials / Packaging

ERP/I.T./ Telecoms/Data/Mobiles

I.T. Director

Suppliers Product/Service Spend €m

Owner

Goods & Service Outer Packaging Supply Chain

Goods & Service Tickets Secretary

Goods & Service Printing & Business Cards User

Goods & Service Waste Removal Plant Manager

Goods & Service Health Care HR

Group - Centre Led

Country Function Led - with Group

Support

Plant / Office Led

- with support

SingleUser

Suppliers Products & Services

Spend €m Owner

Raw Materials Key Ingredients & Product Packaging

R&D / Manufacturing/ Customers

Energy Gas & Electricity Operations

Logistics & Freight Trucks / Couriers Supply Chain




Questions ?

Oriflame Purchasing Management Workshop Module 2 – Cost & Cash Oriflame Financials Cost Analysis...

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