Case Study - Heat Management Solutions Company

© Ted Landgraf Above the Standard Procurement Group, Inc., ATSPG Franchising, Inc. www.ATSPG.com

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Case Study - Heat Solutions Management CompanySeptember 17, 2012

We called in this company and found they had a cash flow issue and Above the Standard Procurement Group® (ATS) could help them with the sourcing of new suppliers to stay in business. On our initial visit

with the client, we listened to them about their financial position and how many of their suppliers were demanding cash payment up front, and what they knew they needed to do to stay in business (cut costs).

They shared with us about what they desired to do, but they did not have the staff, resources, and expertise to find new suppliers, negotiate Net terms, and reduce costs of these needed products to fulfill client orders. To become comfortable with the process, they asked us questions about how we do things, our approach, to determine if we could help them.

One of the practices ATS always engages in is how we approach each person, each prospective client, and each client. We value long-term relationships and believe that people are the most valuable asset in any organization as well as ATS. As we do on all conference calls or with in-person meetings, we share a little about who we are through our professional package (brochure, power point, and a few other items), talking about our several decade history, and how we have had the privilege to work with so many different industries, products, services, and projects.

The most important things we presented on the phone and in person to help them feel comfortable were:

� Introducing ourselves; � Asking them if an agenda where we shared about us and then, heard about

their challenges and needs would be okay (permission is important); � Providing a little history about ourselves and our mission of helping organiza-

tions improve their bottom line through cost reduction projects of the goods and services already being purchased without receiving any compensation until we perform; and

� Sharing our full services offering as we are a full procurement and financial services firm.

After sharing for a few minutes, we asked both the CEO and the Controller to share about themselves, their company, their challenges, and their goals. This is the most critical part of where ATS listened and took notes so that we understood their situation.

Company Name

Heat Manage-ment Solutions Company

Industry

High Tem-perature Ap-plications – Manufacturer, Construction, Steel

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Case Study - Heat Solutions Management CompanySeptember 17, 2012

After hearing and reviewing, we reviewed the PowerPoint we customized for them and we shared the potential of being able to reduce their costs. We pre-sented the two page confidentiality agreement so that both of them felt comfort-able providing us their 12-month calendar spend / P&L in MS Excel. We outlined the steps that we would assess their 12-month spend history, prioritize areas of potential cost reduction for each of the goods and services they were buying, and we would present a potential solution of projects that we could help them reduce costs with.

We assured them that this would not take much of their time, with the excep-tion of the MS Excel data and that quality and vendor performance would not be jeopardized. In fact, with many projects over the years, improved quality and improved specifications happens more than not. We also let both gentlemen know that we would present the potential projects to them and they could decide on what they wanted to start with. We let them know that some clients start with a few things and several start with many.

We then showed them our client statements about what some of the people have to say about us and asked them what they wanted to do next.

From this entire approach, they both felt comfortable, we gathered the data in MS Excel, conducted an analysis, reviewed their suppliers, and assessed how many suppliers we would have to source within a three month period to mitigate the supply risk from the existing vendors. From this, we provided a planned solution, they gladly agreed, and we went to work.

Initial Need(s)/Project(s)Source New Suppliers

Additional Project(s) ConductedFrom the initial assessment and supplier analysis, Above the Standard Procurement Group® (ATS) found the company was having cash flow difficulties. Many of their critical suppliers would either not do business with them or would not extend any credit terms.

From the initial assessment and

supplier analysis, Above the Standard Procurement Group® (ATS) found the company was having cash flow difficulties. Many of their critical suppliers would either not do business with them or would not extend any credit terms.

Many projects over the years,

improved quality and improved specifications happens more than not.

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Case Study - Heat Solutions Management CompanySeptember 17, 2012

We provided a solution to source new supplier. We placed these suppliers with Net 45 terms instead of Net 30 terms or cash only, and they were able to continue operations. The company was going out of business, because they could not man-age the peaks and valleys in their cash flow. Within this industry of high tempera-ture applications, very specific materials for products were required and used in building these facilities and solutions for their clients. In other words, there were not a lot of suppliers around the globe that the company could use to source the products that were needed.

We went onto conduct many other projects. Some of them were cost reduction projects, such as:

# Area Annual Spend % Reduce Dollar Reduction

1 Ceramic Fiber Modules $573,000 21% $123,000

2 High Temperature Fabrics $1,420,000 13% $188,000

3 Office Supplies $174,000 41% $72,000

4 Refractory Bricks $287,000 19% $55,000

5 Insulation $1,923,000 15% $289,000

� Centralized purchasing from eight offices to one where we conducted the fol-lowing:

o Created and implemented Standard Operating Procedures;o Changed their warehousing and logistics processes to minimize too

much inventory (they had several products warehoused that were not being used for months);We mirrored customer demand, jobs, project management,

inventory, and forecasted sales for a Just-In-Time system for them (this resulted in almost $1 Million of products not in inventory each month);

o Instituted best practice of products, product categorization, labeling, inventory systems, etc.;

� Re-engineered three warehouses for:o Increased productivity;o Real time inventory;o Just in time inventory;o Human capital output effectiveness, which involved when deliveries

were coming, stocking methods, how each warehouse was organized, how many steps warehouse engaged to do their different job functions; and

The company was going

out of business, because they could not manage the peaks and valleys in their cash flow.

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Case Study - Heat Solutions Management CompanySeptember 17, 2012

o Reduced hazard (sustainable safety). � Supplier Management Systems compliance, organization, and systemization;

o Their suppliers were not being utilized for sourcing, product and services identification, and volume;

o We centralized all supplier data in one location for the corporate office to view as well as all locations;

o We cleaned the list of all non-applicable suppliers, ensured proper documentation for each supplier on file, and utilized each supplier for the benefit of our client reducing supply chain disruption of goods and services by more than 20%; and

� Other projects as directed by management.

Outcome(s)ATS was able to reduce costs by $10.5M over two years and keep Heat Management Solutions Company in business. The company did not have to let any workers go! Management was grateful for the actions we implemented for them so they did not impact the local economy. We increased effectiveness by improving communications by implementing best practices. We centralized procurement and provided a platform for proper supplier management and evaluation. We instituted many new techniques and methodologies into the organization for greater accountability with company resources. We empowered the staff to be more active with holding people accountable for action items, which led to an increase in results.

ATS was able to reduce costs

by $10.5M over two years and keep Heat Management Solutions Company in business. The company did not have to let any workers go!