Pricing Methodology Provide details on how to charge both the warehousing and the transport services that you provide or receive. There are two ways of cost model. Open book and Close book. 1. Open book is at cost-plus management cost. We show every component of costs and agree management fee. An open book contract would typically have a very low sensitivity of income and hence a low risk rating. Open book contract during the early stages of the contact allow both parties to understand the true costs involved in the operation. Thereafter, both parties can move to a unit rate/closed book costing with confidence. With low volume & many customers, the cost model is Open Book 2. Close book, we charge our customer by activity base or based on handling boxes. Unit rate model Commercial Approach • Preferred approach “Open Book ” “Reward/Penalty” • Typically *LSP Charges a Management fee of 10% plus overhead recovery. • This is based on Costs incurred by LSP to run Logistics Center – Labour, Packaging, MHE, Utilities, etc – These costs are subject to agreed budget. • Cost Model Change from Open book to Transactional model. Based on mutual agreements starting service with Open Book Cost Model, that is suitable at the very first stage of outsourcing to an LSP • Business scope is unclear and volume fluctuation is hard to forecast • Logistics Service Receiver has no enough cost control power and data for the actual cost incurred in logistics • Invoicing on the basis of Cash Neutral *LSP: Logistics Service Provider Commercial Approach • • • • • • • • • • Evaluate level of KPI Apply Uplift Factor – This Become the Acceptable Level of Performance – Usually 10% Apply Additional Performance Factor This becomes Reward Level – Usually 5 % If Reward Level is reached then additional 2% is added to the Management fee If KPI is below current level, a 3% penalty is applied Usually this scheme is implemented 3/6 months after “go-live” Enables transparent and comparable Logistics Service Provider (LSP) service costs throughout the factory networks and drives for LSP internal service development and efficiency Fine tuning the Bonus & Penalty Scheme to derive the motivation to increase productivity and innovations from LSP Analysis to make transactional cost model precise and transparent. Score Card (Performance Check) to find any area that need process development continuously. W社 in Canada, B社 & N社 in Korea / LSP Case Study • Relationship – High trust relationship – Information shared freely – Communication strong at all levels of organization – Aligned Cultures – Respect for Wal*Mart knowledge – Respect for LSP knowledge – Focus on customer (Wal*Mart Stores) – Strive for excellence – Open Book Contract LSP Case Study è Supplier è NDC è Outbases Outlets Distribution Centre and Outbound Delivery Services: UK Key services - LSP manages and operates the Bridgestone UK national distribution centre in Coventry, UK and the outbound distribution to all UK outlets LSP provides value added services such as inventory control, route planning and optimisation, KPI development and cost to serve. 5 year open book contract started 2001 ISO 9001:2000 accreditation Key statistics An UK Tire Company Warehouse space Regional Outbases Average tyres stocked Tyre throughput/day Annual throughput Number of employees Value Added Services 18,500m² 5 220,000 20,000 (Peak 27,000) 4,800,000 units 38,000,000 kgs 87 Cost to serve