Microsoft PowerPoint - SIG Ecolab The Work we do matters Final v1[1].pptxGEORGE J. KATTNER
18 May 2017
ECOLAB – CONFIDENTIAL
$35 billion Market Capitalization
Every Year, Ecolab Helps:
42% Ensure the safety of
of the global processed
Produce
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On-site Expertise & ServiceTechnology Information Training
Best results, best value creation, lowest total costs=
ECOLAB – CONFIDENTIAL
ECOLAB – CONFIDENTIAL
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4 2 O F T H E F O R T U N E 5 0 A R E C U S T O M E R S
STRONG COMPETITIVE POSITION
13%($ mlns.)
Market share data are current estimates of the relevant immediately addressable market
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$ MILLIONS $0 $5,000 $10,000 $15,000 $20,000
Other
Ecolab Remaining Market
Market share data are current estimates of the relevant immediately addressable market
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TECHNOLOGY
50% MORE PEOPLE by 2050, with most growth in emerging markets
in Europe, Japan, and China will shift CONSUMER BEHAVIOR; Drive HEALTHCARE
More DISPOSABLE INCOME, DIET SHIFTS to protein and away from home dining
Increased RISKS, and CAPABILITIES & OPPORTUNITIES
$ $$$
$$
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10,000 CHEMICAL TANK LEVELS AUTOMATICALLY MONITORED
68,000 SYSTEM UPDATE
5,000 ON-SITE EXPERTS
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
STRONG, CONSISTENT GROWTH
2012 Sales and EPS include the Nalco merger 2013 Sales and EPS include the Champion acquisition
EPS (adjusted)
EPS CAGR
Adjusted Earnings
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$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
ACTUAL > ECOLAB FORECAST 95 OF 96 QUARTERS
(EXCEPTION = 3Q 2001)
Global mindset Regional alignment Local execution
100% of spend at lowest total cost
of our team engaged of the time
100%
Purpose To create competitive advantage by delivering the lowest total cost to our businesses through strategic sourcing and risk management, while serving stakeholder needs.
What we do
Communicate and consult on market views and trends
Engage supplier innovation to create a competitive advantage
Leverage global size and scale to support global businesses
Deploy global strategies regionally and execute locally
Ensure business and supply continuity through proactive risk management
Consistently exceed 5% net structural savings
Use Total Delivered Cost sourcing process for all spend
Partner with suppliers to create sustainable value
Embody the Ecolab Code of Conduct by doing business with unquestionable ethics and integrity
Promote a culture of safety at work and home
Attract, develop and retain talented people, empowering broad career path options
We are engaged, challenged and fulfilled in our work and invested in the success of Ecolab
Partner Execute Add Value Engage
Indirect Procurement - Enabling 2020+
One Team - One Global Procurement Strategy Global Procurement Operating Model Focused on Key Imperatives
Strong Stakeholder Partnerships - business strategies & future opportunities Quicker Enterprise Level Decisions, Local/ Market Execution Regional Indirect Leaders, Global Category Leaders
Category Management Work Plans with Stakeholder Buy In TDC Sourcing / Global Strategies Subject Matter Expertise & Insights
Supplier Management Supplier Innovation & Performance De-Risking of Supply Base (Simplify) Baseline & Benchmarking
Indirect Governance Model Executive Sponsorship with Enterprise Excellence Support: COO, CFO, CSCO
Enablers: Buy into work plan and enable Bid Idea success (eliminate barriers: change management, project management, reporting, stakeholder resource allocation, data and demand management…); while Tracking and Trapping of Savings
Magnifying Our Size and Scale
BIG Ideas –Consulting Governance, Heavy Fleet Program, Tanks/Totes Program, Temp Labor MSP, Smart Travel. Global Leverage: (TMC, Fleet, Recruiting…)
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Spend Analysis
Market Analysis
Strategy Creation
Strategy Execution
Implement -ation
The Total Delivered Cost (TDC) Sourcing Process identifies and eradicates loss in order to obtain
structural savings, strengthen security of supply,
gain efficiencies in portfolio management support growth targets, and achieve a
competitive advantage for our business.
U.S. FLEET – TDC PROCESS Hallmark Win - 2016
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The Real Fleet!
management
Fleet Program Background: Ecolab provides approximately 12,000 sales and light service vehicles to eligible employees in the United States in order to perform work related duties.
• Fleet Management Company: 1 Primary incumbent in providing U.S. Fleet Leasing and Management Services for the last 10+ years with a small amount of volume going to other FMCs.
• OEM: Recently selected 1 OEM as exclusive provider as the result of an extensive sourcing event conducted in 2015. Prior to exclusive award Ecolab utilized GM, Ford, Chrysler, and Toyota.
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state
U.S. Fleet: Spend by Sub-category
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53.6%
29.9%
3.2%
3.1%
2.8%
2.3%
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Regulation
Autonomous Braking) by 2018 • Regulation surrounding recalls
Fuel Costs • 2016 - $2.18/gallon • 2017 - $2.37/gallon
Economy
• Secondary market for vehicle sales depressed for sedans/minivans • Secondary market for vehicle sales flat for trucks/SUVs • Interest Rates – minimal uptick in LIBOR forecast for 2017 • U.S. Vehicle Sales – 17.8M 2015/17.3M Est 2016
Vehicle Costs • New vehicle costs typically increase yearly • 2% YoY Price Protection built into the OEM Contract
U.S. Fleet: Mgmt. / Leasing 5 Forces Bargaining Power of Buyer - High
• Consistent demand • Sizeable spend: $108M • Low cost of change, but complex &
time consuming requiring education of new fleet management company
Entry Barriers - High
• Significant cost of entry especially for leasing with substantial financial investment
• Consolidation of market (Element acquiring: GE and PHH in North America)
Bargaining Power of Supplier - Medium
• Top providers are: ARI, Donlen, Element, LeasePlan, Wheels
• Changing providers is complex (Fleet Management) and time consuming (Leasing)
Substitution of Products - Low
providers • Minimal time to qualify equivalents,
but long leasing transition period
Competitive Rivalry - High
• Competition continues to rise as suppliers continually looking for growth opportunity both in the U.S. and globally
• Cost has increased for the providers on the technology/system offering, mobile apps, websites, and call center services to attain and/or sustain competitive advantage
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U.S. Fleet: OEM 5 Forces Bargaining Power of Buyer - Medium
• Consistent demand: Two order cycles per year totaling ~3000 vehicle orders
• Sizeable Spend: $84M • Low Cost of Change
Entry Barriers - High
• Significant cost of entry • Auto manufacturing industry is
considered to be highly capital and labor intensive: Labor, Advertising, New vehicle auto parts, Replacement parts production
• Increased government regulation
• Top 5: Toyota, VW, GM, Hyundai/Kia, Ford
• Demand has exceeded supply recently • Regulatory environment
Substitution of Products - High
between manufacturers • Minimal time to qualify equivalents
Competitive Rivalry - High
• The auto industry is considered to be an oligopoly, which helps to minimize the effects of price-based competition
• OEMs understand price-based competition doesn’t necessarily lead to increases in the size of the marketplace, historically they’ve tried to avoid price-based competition, but recently competition has intensified – rebates & preferred financing helped lure in customers, but also put pressure on the profit margins for vehicle sales
• OEMs update cars yearly as part of normal operations, but if substantial new design changes are made could lead to delays & glitches resulting in increased costs & slower revenue growth
• New design may pay off in long run
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Definitions Fleet Mgmt. / Leasing:
suppliers and that Ecolab believes are
high importance to the business units and/or
company
Partner
approved supplier and that Ecolab believes
are high importance to the business units and/or company
Shop
considered low importance to the
business units and/or company
approved supplier and that are considered
low importance to the business units and/or
company
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Ford, GM, Subaru, Toyota, VW • High spend that supports high
revenue generation • No transition barriers for
Ecolab to move business • Can leverage supplier to drive
best total cost agreement
FMC: • Multiple suppliers: ARI,
Donlen, Element, LeasePlan, Wheels
• High spend that supports high revenue generation
• Tied to supplier for life of lease • Possible to transition, but
complex and time consuming • Can leverage supplier to drive
best total cost agreement
Multiple Sources Sole Source
Key / Strategic Product / Service
U.S. Fleet: Supplier’s Perspective Matrix
Relative Value of Business to Ecolab
A cc
• Incumbent for last 12 years
• Complex and time consuming to move the business
• Potential to expand Ecolab business into Latin America
OEM:
• Ecolab is one of OEM’s top 5 Fleet Customer
• Ecolab is on their Fleet Advisory Board
• Recently became exclusive provider
• Potential to expand Ecolab business outside of North America
• No barriers for Ecolab to move business once current contract up
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Issue to solve:
Complexity = Increased Cost
• Associates’ fleet vehicles will be either comparable or superior to prior fleet vehicle options
• Leveraged buying power to secure single supplier • All business divisions will offer standardized vehicles, based on job
title groupings • Only four different driver classes • New Simplified Fleet Policy
Solution:
Simplify the Fleet Program
• 10% savings over the next five years • Reduces program costs due to overall complexity and an excess of
idle, or unused, vehicles • All 2016 model year and newer vehicles will have no-charge Sirius XM
radio for thirty-six months
Billing, Policy, Project Management, Negotiation
67% of Support Offered 89% of Support Offered: Adding direct communication to field
Strategic Consulting 100% of Support Offered No Change
ePlan 85% of Support Offered 100% of Support Offered: Adding direct communication to field
Asset Management 83% of Support Offered 100% of Support Offered: Adding LP Ownership of Process
Vehicle Acquisition 87% of Support Offered No Change
Remarketing 50% of Support Offered 100% of Support Offered: Adding exception reporting
Violations Process 50% of Support Offered 100% of Support Offered: Adding ViolationsPlan
Maintenance Management 93% of Support Offered No Change
Fuel Management 46% of Support Offered 100% of Support Offered: Adding exception reporting and driver communication
License and Title 94% of Support Offered 100% of Support Offered: Adding direct driver communication
Accident Management 95% of Support Offered No Change
Personal Mileage Reporting 80% of Support Offered 100% of Support Offered: Adding direct driver communication
Service Level Agreements • $xxxK ($xxK per quarter) Total • Penalty paid if SLA missed for 2 consecutive quarters
• $xxxK ($xxK per quarter) Total • Penalty paid if SLA missed for the quarter
Idle Vehicle Management What is the Problem/Opportunity?
Over the past two years, an average of 4.7% of Ecolab’s North American light sales and service vehicles sit idle* in any given month
This means, with a fleet of 10,000-11,000 vehicles, 470 - 517 vehicles sit in parking lots, driveways, etc. not being used
Ecolab pays monthly lease fees regardless of whether the vehicle is being used or not
Best practice idle vehicle % rate is 0.5% Ecolab’s goal is to reduce the average idle vehicle % from 4.7% to < 2.7%
35 *Idle vehicles are defined as vehicles with a Status=Current and Usage=Available/Pending per the Fleet Management database
U.S. Fleet: Mgmt. / Leasing Go to Market
Option Risk Reward
Leasing RFP
• Time to complete 6 - 12 months • Systematic resources (Excel to be utilized) • Unable to implement savings quickly • Potential deterioration of overall relationship
with incumbent global
market conditions • Opportunity to ‘blueprint’ future Fleet
Leasing & Management Services events
• No competitive bidding • Full savings potential ??? • Reduced understanding of total market
condition • May be leaving money on the table
• Agility to implement savings opportunities quickly
• Relative ease of implementation • Continue to further develop the
relationship
Option Risk Reward
No RFP – Incumbent
• Reduced understanding of total market condition
• Full savings potential ???
• Agility to implement savings opportunities quickly
• Relative ease of implementation
Sourcing Option
Spend Analysis
Market Analysis
Strategy Creation
Strategy Execution
Implement- ation
Forecast
Execute Vehicle Selector New vehicle selector models and process, resulting in additional upfitting opportunities
Idle Vehicle Management Process Optimize the use of current, active and pending sales and service vehicles
Fleet Mgmt. Vendor Review & Selection
Implement sourcing activities to maintain current Fleet Management Company (FMC) or select / transition to new FMC
OEM Single Source Contract based savings for single source and rebate
TOTAL POJECTED IMPACT 10%
Spend Analysis
Market Analysis
Strategy Creation
Implement- ation
Strategy Execution
• Lessons Learned
Prior to this effort relationships were contentious and strained
We reached out to share our view and seek to understand, and ask how Ecolab could be a better partner
The partnerships established at the executive level aided in Ecolab securing multi millions in credit notes to impact 2016
Enterprise Excellence Partnership:
- Steering Committee, data analysis, documentation
- Process, Communication, and policy changes
Recognition:
- Sustainability – reducing emissions / increasing MPG
- CEO Lunch
- OEM Fleet advisory board positions ( US & Global)
- OEM chose Ecolab for a 2 year test of experimental vehicle
- 2017 Indirect Procurement involvement in key cost savings initiatives
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