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.
Who We Are
IndustryResearch
Cost and Price Analysis
Supply Chain ConsultingResearch Analysis Consulting
®
Page 2© 2008 Boston Strategies International, Inc.
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
Page 3© 2008 Boston Strategies International, Inc.
Relative job securityEXCERPT
AccountantsB k
SkydiversSt k
Safe Not Safe
BankersLawyersPurchasing
Stock car racersStunt menFiremenPurchasing
AgentsOperations
FiremenIntelligence officers
managersForecasters
Roofers
Page 4© 2008 Boston Strategies International, Inc.
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%
Page 5© 2008 Boston Strategies International, Inc.
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
Page 6© 2008 Boston Strategies International, Inc.
Budget Variance
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%
Page 7© 2008 Boston Strategies International, Inc.
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
Page 8© 2008 Boston Strategies International, Inc.
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
Page 9© 2008 Boston Strategies International, Inc.
Identify risk-prone categories of spendEXCERPT
Page 10© 2008 Boston Strategies International, Inc.
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: djacoby@bostonstrategies.com
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