7 - russ johnson_23 tocpa_usa_21-22 march 2016

Upload: jelena-fedurko

Post on 06-Jul-2018

214 views

Category:

Documents


0 download

TRANSCRIPT

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    1/91

    23rd International Conference of the

    TOC Practitioners Alliance - TOCPAwww.tocpractice.com 21-22 March, 201, Tennessee, !"A

    Transforming the CompetitiveBid Game:

    A Sub-Contractors Mafia Offerto a General Contractor 

    Dr. Russ Johnson, Associate ProfessorEngineering and Technology ManagementWashington State UniversityUnites States

    March, 2016

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    2/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Dr !ussell "ohnson

    Russ Johnson has been teaching and implementing

    Theory of Constraints, Lean and Six-Sigma/Quality

    Management tools and concepts in business and at

    the university level since the mid-1980’s. His roles

    as a business owner, university professor and

    consultant have allowed him to blend common

    sense approaches that bridge the gap between

    theory and application. He became a CertifiedAssociate of the Avraham Y. Goldratt Institute in

    1991. He served as an instructor with the Goldratt

    Schools and as a TOC Application Expert and

    Project Leader on some of the first Viable Vision

    Projects in the US from 2004-2008. He holds

    numerous TOCICO certifications and currently

    serves on their board of Directors. He is the proud

    Grandpa of 5, under 5, grandchildren.

    Email:[email protected]

    Phone: 970-581-0075

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    3/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Original Scenario

    for the Mafia Offer:Well established and respected millwork (high

    end woodworking) company• Annual sales of $15mm-$17mm• uffered $!"5mm loss

    • #ank line of credit maed out $1"%mm• $1"&mm 1!'days past due accounts payable• $1mm owed to bonding company

    • etention being held $1mm• *nder contractor with broker to sell

    controlling interest (obtain outside in+estor)

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    4/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Challenges

    • ,o cash

    • ost suppliers who would supply were cash ./# or 0/

    • ost work a+ailable to bid re2uired bonding

    • 3ack of materials killed gains from #4 00 and full kit

    • #$en if client won the %id with a &C, the &C still had to win

    the o$erall %id for client to 'et (o%ositi+es

    • 6ad one4 local contract that was big enough to co+er / for

    at least & months ($&mm)• ome suppliers on another mafia offer tied to large

    contract

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    5/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    #ormat of toda$%s

    presentation• resent the offer as it was presented to the

    prospecti+e 8eneral 0ontractor

    • lide animation has been remo+ed by replacingwith multiple slides

    • upporting slides that had been linked from otherslides ha+e been placed into presentation body

    • .ollowed by9

    • iscussion of 80 reactions during and after thepresentation

    • : and A including suggestions or changes neededto use in other en+ironments

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    6/91

    &

    To build a thriving future

    8eneral

    0ontractor

    )*+ &or'ing Together:

    (everaging past success

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    7/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Our shared frustration

    • /ur hit rate on competiti+e bids is much lessthan wanted

    • ;ncrease bid staff  decrease bid staff 

    • ;t

    • #id more =obs witch to negotiated

    contracts• on

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    8/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    )uantif$ing the

    value of a solution

    ecalling battles lost

    What was the approimate +alue of those lost

     =obs?

    What was the profit opportunity represented by

    those lost =obs?

    What would this ha+e represented to youpersonally?

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    9/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    The problem

    o we ha+e agreement on the problem we wantto sol+e?

    e want to win more wor

    O%stacle /roppin' or price % an additional1-2 wold win more %ids %t,

    e ha$e fond no consistent wa to do this

    other than frther trimmin' or mar'ins and,That is not accepta%le or we wold alread%een doin' it

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    10/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Brea'ing the barrier 

    What if we pro+ide the money?

    AC Millwors offers a discont on or %ase%id sfficient to allow o to drop or total

    %id, on selected pro(ects, % 1-2.

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    11/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    *+pected impact

    #enefits to @B9

    • #ring $!''mm or more new business to yourcompany per year

    • o this without endangering your margins onthose additional =obs

    • inimal effort and little if any additional cost

    6ow?

    • Creat the symptoms by treating the disease

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    12/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Moving from s$mptoms

    to a common cause

    Diew A

    Diew #

    Cwo +iews of reality9E Diew FA<

    E Diew F#

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    13/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Diew A

    Diew #Cwo +iews of reality9

    E Diew FA<

    E Diew F#

    EWhat if +iew FA< actually resides within +iew F#

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    14/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    The bidding dilemma

    ignificantly impro+e our bottom line through the competiti+e bid process

    /ur current competiti+e bid GhitH rate is

    much less than desired9

    We are winning !-% =obs for e+ery 1' bid

    We ha+e no desirable and reliable

    strategy to significantly increase our

    GhitH rate

    /ur eistingbidding staff is

    pushed hard to

    submit more bids

    We need to double

    the number of =obs

    we win

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    15/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    ignificantly impro+e our bottom line through the competiti+e bid process

    /ur current competiti+e bid GhitH rate is

    much less than desired9

    We are winning !-% =obs for e+ery 1' bid

    We ha+e no desirable and reliable

    strategy to significantly increase our

    GhitH rate

    /ur eisting biddingstaff is pushed

    hard(er) to submit

    more bids

    /ur bidding capacity would

    be 2uickly ehausted

    Che number of =obs won

    would go down significantly/ur bid hit rate would

    actually go downI we

    would be working

    proportionately

    harder for the work

    we won

    /ur bid 2uality goes down

    The bidding dilemma

    We need to double

    the number of =obs

    we win

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    16/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    ignificantly impro+e our bottom line through the competiti+e bid process

    /ur current competiti+e bid GhitH rate is

    much less than desired9

    We are winning !-% =obs for e+ery 1' bid

    We ha+e no desirable and reliable

    strategy to significantly increase our

    GhitH rate

    We need toimpro+e the /; on

    our bidding staff 

    Chere is pressure to

    reduce our bidding staff 

    /ur eistingbidding staff is

    pushed hard(er) to

    submit more bids

    /ur bidding capacity would

    be 2uickly ehausted

    Che number of =obs won

    would go down significantly/ur bid hit rate would

    actually go downI we

    would be working

    proportionately

    harder for the work

    we won

    /ur bid 2uality goes down

    The bidding dilemma

    We need to double

    the number of =obs

    we win

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    17/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    ignificantly impro+e our bottom line through the competiti+e bid process

    /ur current competiti+e bid GhitH rate is

    much less than desired9

    We are winning !-% =obs for e+ery 1' bid

    We ha+e no desirable and reliable

    strategy to significantly increase our

    GhitH rate

    /ur bidding capacity would

    be 2uickly ehausted

    Che number of =obs won

    would go down significantlyAny cost

    sa+ings from

     =ob cuts

    would beeclipsed by

    reductions in

    sales

    /ur bid hit rate would

    actually go downI we

    would be working

    proportionately

    harder for the work

    we won

    /ur bid 2uality goes down

    The bidding dilemma

    We need toimpro+e the /; on

    our bidding staff 

    We need to double

    the number of =obs

    we win

    /ur eistingbidding staff is

    pushed hard(er) to

    submit more bids

    Chere is (more and

    more) pressure to

    reduce our bidding staff 

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    18/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    ignificantly impro+e our bottom line through the competiti+e bid process

    /ur current competiti+e bid GhitH rate is

    much less than desired9

    We are winning !-% =obs for e+ery 1' bid

    We ha+e no desirable and reliable

    strategy to significantly increase our

    GhitH rate

    /ur bidding capacity would

    be 2uickly ehausted

    Che number of =obs won

    would go down significantlyAny cost

    sa+ings from

     =ob cuts

    would beeclipsed by

    reductions in

    sales

    /ur bid hit rate would

    actually go downI we

    would be working

    proportionately

    harder for the work

    we won

    /ur bid 2uality goes down

    The bidding dilemma

    We need toimpro+e the /; on

    our bidding staff 

    We need to double

    the number of =obs

    we win

    /ur eistingbidding staff is

    pushed hard(er) to

    submit more bids

    Chere is (more and

    more) pressure to

    reduce our bidding staff 

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    19/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    An in,ection into the

    GC%s current realit$

    We ha+e a desirable and reliable

    strategy that doubles our GhitHrate without cutting our margin

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    20/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    ignificantly impro+e our bottom line through the competiti+e bid process

    /ur current competiti+e bid GhitH rate is

    much less than desired9

    We are winning !-% =obs for e+ery 1' bid

    e ha$e a desira%le and relia%le

    strate' that do%les or 4hit5

    rate withot cttin' or mar'in

    Solving the bidding

    dilemma

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    21/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    ignificantly impro+e our bottom line through the competiti+e bid process

    /ur current competiti+e bid GhitH rate is

    much less than desired9

    We are winning !-% =obs for e+ery 1' bid

    We would double

    the number of =obs

    we win

    e ha$e a desira%le and relia%le

    strate' that do%les or 4hit5

    rate withot cttin' or mar'in

    /ur current biddingstaff would win !@

    more =obs

    /ur bid 2uality goes up

    /ur bidding capacity would

    be 2uickly epanded

    Che number of =obs won

    would go up significantlyWe would be

    working

    proportionately

    easier for thework we won

    Solving the bidding

    dilemma

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    22/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    ignificantly impro+e our bottom line through the competiti+e bid process

    /ur current competiti+e bid GhitH rate is

    much less than desired9

    We are winning !-% =obs for e+ery 1' bid

    Chere is less (and less)pressure to reduce

    our operations costs

    e ha$e a desira%le and relia%le

    strate' that do%les or 4hit5

    rate withot cttin' or mar'in

    /ur current biddingstaff would win

    !@() more =obs

    /ur /; for ourbidding staff (more

    than) doubles

    /ur bid 2uality goes up

    /ur bidding capacity would

    be 2uickly epanded

    Che number of =obs won

    would go up significantlyAny cost sa+ings

    from =ob cuts would

    be eclipsed byincreases in sales

    We would be

    working

    proportionately

    easier for thework we won

    Solving the bidding

    dilemma

    We would (more than)

    double the number of

     =obs we win

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    23/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Agenda(for the offer meeting with the GC)

    • 0ome to a common understanding of the

    problem• Co determine the +alue of such a solution to

    your organiJation

    • Co present the details of the proposedsolution

    • Co determine how we can Gwork togetherHto make the proposal a reality"

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    24/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Ma'ing the

    missing lin'. a realit$

    We ha+e a desirable and reliable strategy that

    doubles our GhitH rate without cutting ourmargin

    What does G/esira%leH ean?

    What does G6elia%leH ean?6ow can we claim to Gdo%le or hit rate5?

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    25/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    &hat does desirable.

    mean/

    Co make use of the strategy the 80 doesn

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    26/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    &hat does reliable.

    mean/

    ;n making use of the strategy4 the results are

    redictable K we ha+e taken actions so weha+e a high le+el of confidence that the

    results we want will be the results we get

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    27/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    The outcomes of

    several bids

    Lob 1 @ @ @ * @ @ @

    3ow ' 6igh

    * M our companyNs bids @ M 0ompetitor

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    28/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Lob 1 @ @ @ * @ @ @Lob ! @ @ * @ @ @

    3ow ' 6igh* M our companyNs bids @ M 0ompetitor

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    29/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Lob 1 @ @ @ * @ @ @Lob ! @ @ * @ @ @

    Lob O @ * @ @ @ @

    3ow ' 6igh

    * M our companyNs bids @ M 0ompetitor

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    30/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Lob 1 @ @ @ * @ @ @Lob ! @ @ * @ @ @

    Lob O @ * @ @ @ @

    Lob % @ @ * @ @ @ @

    3ow ' 6igh

    * M our companyNs bids @ M 0ompetitor

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    31/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Lob 1 @ @ @ * @ @ @Lob ! @ @ * @ @ @

    Lob O @ * @ @ @ @

    Lob % @ @ * @ @ @ @Lob 5 @ @ @ @ * @ @

    3ow ' 6igh

    * M our companyNs bids @ M 0ompetitor

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    32/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Lob 1 @ @ @ * @ @ @

    Lob ! @ @ * @ @ @

    Lob O @ * @ @ @ @

    Lob % @ @ * @ @ @ @Lob 5 @ @ @ @ * @ @

    3ow ' 6igh

    * M our companyNs bids @ M 0ompetitor

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    33/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Lob 1 @ @ @ * @ @ @

    Lob ! @ @ * @ @ @

    Lob O @ * @ @ @ @

    Lob % @ @ * @ @ @ @Lob 5 @ @ @ @ * @ @

    3ow ' 6igh

    * M our companyNs bids @ M 0ompetitor

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    34/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    The !ealit$ of the

    bidding 0orld

    "%mitted

    id 6an'e

    id too hi'h for consideration

    id too low7 Owner is neas

    idder wants to recall or

    modif as the are concerned

    somethin' was missed

    )

    ))

    )

    )

    )

    )

    The !ealit$ of the

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    35/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    ids within ran'e of

    consideration. 8 spread is

    sall no more than2-9 at the &C le$el

    )

    ))

    )

    )

    )

    )

    The !ealit$ of the

    bidding 0orld

    "%mitted

    id 6an'e

    id too hi'h for consideration

    id too low7 Owner is neas

    idder wants to recall or

    modif as the are concerned

    somethin' was missed

    The !ealit$ of the

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    36/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    )

    ))

    )

    )

    )

    )

    ids within ran'e of

    consideration. 8 spreadis sall no more than

    2-9 at the &C le$el

    ids still too hi'h with little

    chance of winnin' wor %ased on

    %etter :alit, relationship, etc.

    "%mitted

    id 6an'e

    The !ealit$ of the

    bidding 0orld

    The !ealit$ of the

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    37/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    ids in serios contention for (o%."econd place has chance of winnin'

    wor %ased on %etter :alit,

    relationship, etc., %t will liel %e

    pressred to match low %id price

    )

    ))

    )

    )

    )

    )

    ids within ran'e of

    consideration. 8 spreadis sall no more than

    2-9 at the &C le$el

    ids still too hi'h with little

    chance of winnin' wor %ased on

    %etter :alit, relationship, etc.

    "%mitted

    id 6an'e

    The !ealit$ of the

    bidding 0orld

    The impact a small

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    38/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    The impact a small

    change can ma'e

    If %ids are within 2 of

    each other, the a%ilit to

    redce or total %id % (st 1 wold mo$e o

    from

    A to or C to /

    ids in serios contention for (o%. "econd

    place has chance of winnin' wor %ased on

    %etter :alit, relationship, etc., %t will

    liel %e pressred to match low %id price

    ids still too hi'h with little chance of

    winnin' wor %ased on %etter :alit,

    relationship, etc.

    )

    ))

    )

    )

    )

    )

    A

    C

    /

    "%mitted

    id 6an'e

    The impact a small

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    39/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    "%mitted

    id 6an'e

    ids in serios contention for (o%. "econd place has

    chance of winnin' wor %ased on %etter :alit,

    relationship, etc., %t will liel %e pressred to

    match low %id price

    ids still too hi'h with little chance of winnin' wor

    %ased on %etter :alit, relationship, etc.

    )

    ))

    )

    )

    )

    )

    ids within

    ran'e of

    consideration.

    A

    C

    /

    #

    ;

    &

    If %ids are within 2 of each other

    the a%ilit to redce or total %id

    % (st 1 wold mo$e o from

    A to or C to /

    The impact a small

    change can ma'e

    If %ids are within 9 of eachother the a%ilit to redce or

    %id % (st 1 wold mo$e o

    from # to ; or ; to &

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    40/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Doubling $our hit rate

    ;mpact of your resultsif you could ha+e lowered your bid by =ust 1>?

    Lob 1 @ @ * * @ @ @Lob ! * @ * @ @ @

    Lob O @ * * @ @ @ @Lob % @ * * @ @ @ @Lob 5 @ @ * @ * @ @

    3ow ' 6igh* M our companyNs original bids @ M 0ompetitor

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    41/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    ;mpact of your resultsif you could ha+e lowered your bid by =ust 1>?

    Lob 1 @ @ * * @ @ @Lob ! * @ * @ @ @Lob O @ * * @ @ @ @Lob % @ * * @ @ @ @Lob 5 @ @ * @ * @ @

    3ow ' 6igh

    * M our companyNs original bids @ M 0ompetitor

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    42/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    ;mpact of your results if you could ha+e lowered your bid by1>?

    Lob 1 @ @ * * @ @ @Lob ! * @ * @ @ @Lob O @ * * @ @ @ @

    Lob % @ * * @ @ @ @Lob 5 @ @ * @ * @ @

    3ow ' 6igh

    * M our companyNs original bids @ M 0ompetitor

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    43/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Criteria for a good solution

    "ol$es a ma(or partner pro%lem while9

     – aking them their cstomer?s preferred spplier

     – aking it +ery difficlt for their competition tocop

    ;mpacts a lar'e eno'h maret

    e can 4sell5 it in the target market

    st not create 4real ris5

    st not e@hast the or'aniation?s resorces

    Ma'ing the missing lin'

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    44/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Ma'ing the missing lin'

    a realit$

    AC pro$ides the dollars needed to lower the total

    %id % 1-2

    Bow

    A si'nificant price redction, p to 20, on the part

    of our bid that is self performed#@cldes materials4 buyouts4 subcontracts4 shipping

    and like elements that are pass through dollarsI

    $ we collect for others

    uts the 80

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    45/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    An e+ample of the

    impact of the offer 

    :ualifying portion iscount applied

    of A#0 bid 1'> 15> !'>

    $%4'''4''' $%''4''' $&''4''' $P''4'''#ase 80 bid ;mpact of discount on total 80 =ob bid

    $!54'''4''' -1"&'> -!"%'> -O"!'>

    $5'4'''4''' -'"P'> -1"!'> -1"&'>$754'''4''' -'"5O> -'"P'> -1"'7>

    $1''4'''4''' -'"%'> -'"&'> -'"P'>

    $15'4'''4''' -'"!7> -'"%'> -'"5O>Che larger our portion of the =ob4 the larger the ability

    of our discount to reduce the total =ob price

    Are 0e meeting our

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    46/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    g

    criteria.

    • akes the 80 their cstomer?s preferredspplier

    • 8ets your bid into the 4'reen one5

    ;s +ery difficlt for or competition to copQ

    • 6ow much luck do you think your competitorswould ha+e con+incing a sub to drop their bid

    by enough to lower the 80-!>?

    QGifficult to copyH assumes an eclusi+e

    arrangement with a partner 80

    A bi h M ' t/

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    47/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    A big enough Mar'et/

    /ffer is best le+eraged on =obs with high millwork tototal =ob content ratios9 the higher the better

    iscount Winning =ob bid A#0>Aaaa 6D 81E0,000 8 39mm -.9

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    48/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    ABC program target

    Add $1'-!'mm in e@tended hors self-performed wor

    ;f each =ob contains $!-%mm of self-performed millwork

    then reaching our goal9• Would re2uire winning 5-1' =obs through the program

    • ;f the program hit rate is &'-P'> then this would

    re2uire bidding P-15 =obs (+ersus up to %5 =obs)

    • ;f a+erage discountable millwork content was 1'> oftotal 80 =ob price this would e2uate to an additional

    8100mm - 8200mmF to the &C?s annal %oo of%siness

    0lick here for an eample of the financial opportunityS+alue of the offer

    for the partner 80

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    49/91

    "elf-performed millwor as of total (o% 8Galifin' portion 2 9 10 19

    of AC %id 2ui+alent 80 total =ob price (A#0 $ S > millwork of total =ob $)

    8900,000 $!54'''4''' $1'4'''4''' $54'''4''' $O4OOO4OOO

    80 net profit T !> $5''4''' $!''4''' $1''4''' $&&4&&7

    80 net profit T 5> $14!5'4''' $5''4''' $!5'4''' $1&&4&&7

    81,000,000 $5'4'''4''' $!'4'''4''' $1'4'''4''' $&4&&&4&&7

    80 net profit T !> $14'''4''' $%''4''' $!''4''' $1OO4OOO

    80 net profit T 5> $!45''4''' $14'''4''' $5''4''' $OOO4OOO

    $1,900,000 $754'''4''' $O'4'''4''' $154'''4''' $1'4'''4'''

    80 net profit T !> $145''4''' $&''4''' $O''4''' $!''4'''80 net profit T 5> $O475'4''' $145''4''' $75'4''' $5''4'''

    $2,000,000 $1''4'''4''' $%'4'''4''' $!'4'''4''' $1O4OOO4OOO

    80 net profit T !> $!4'''4''' $P''4''' $%''4''' $!&&4&&7

    80 net profit T 5> $54'''4''' $!4'''4''' $14'''4''' $&&&4&&7

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    50/91

    "elf-performed millwor as of total (o% 8Galifin' portion 2 9 10 19

    of AC %id 2ui+alent 80 total =ob price (A#0 $ S > millwork of total =ob $)

    82,900,000 $1!54'''4''' $5'4'''4''' $!54'''4''' $1&4&&&4&&7

    80 net profit T !> $!45''4''' $14'''4''' $5''4''' $OOO4OOO

    80 net profit T 5> $&4!5'4''' $!45''4''' $14!5'4''' $POO4OOO

    83,000,000 $15'4'''4''' $&'4'''4''' $O'4'''4''' $!'4'''4'''

    80 net profit T !> $O4'''4''' $14!''4''' $&''4''' $%''4'''

    80 net profit T 5> $745''4''' $O4'''4''' $145''4''' $14'''4'''

    8 $%4'''4''' $14&''4''' $P''4''' $5OO4OOO80 net profit T 5> $1'4'''4''' $%4'''4''' $!4'''4''' $14OOO4OOO

    89,000,000 $!5'4'''4''' $1''4'''4''' $5'4'''4''' $OO4OOO4OOO

    80 net profit T !> $54'''4''' $!4'''4''' $14'''4''' $&&&4&&7

    80 net profit T 5> $1!45''4''' $54'''4''' $!45''4''' $14&&&4&&7

    Can 0e sell. it/

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    51/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Can 0e sell it/

    Carget markets

    • 6igh millwork $ to total =ob $ (6otelSresort remodels)

    • ,egotiated contract prospects

    *se the offer9

    artner 80 in+ited to bid

    • Che partner 80 prepares their best bid as normal• A#0 prepares our best bid as normal

    • A#0 prepares a separate sheet identifying the discount

    a+ailable to be taken and any limitationsSconditions• Che partner 80 deducts the desired amount of the

    offered discount from their total bid price and submitstheir bid (What if A#0

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    52/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Thoughts so far 

    0ould work

    8ood deal for the 80

    till ha+e some 2uestions """

    A#0 holds risk so9

    Bow does it wor or mae sense for sH

    What do we epect in return from the 80 making

    use of the offer?

    oes e+ery 80 ha+e access or is it eclusi+e to @B?

    1o0 are 0e able to

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    53/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    offer this discount/

    /ur offer assumes that9

    Chis work will be performed during etended

    hours9Weekends andSor !ndSOrd shifts

    Chis work does not ha+e to support the fied

    components of our monthly operating epenses9rent4 insurance4 loan payments4 etc"

    Chere

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    54/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    discount

    Con$ertin' fi@ed o$erhead to mar'inprofit ?s are conceptalD

    1' 1' 1'

    O' O' O'

    O' O' O'

    1' 1' 1'

    15

    5!'

    1'

    '

    !'

    %'

    &'

    P'

    1''

    1!' !'> discount on self 

    performed work

    argin and profit

    .ied o+erhead

    roportional o+erhead

    irect labor

    aterials

    ubsSbuyouts

    #inancial source of the

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    55/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    discount

    Con$ertin' fi@ed o$erhead to mar'inprofit ?s are conceptalD

    1' 1' 1'

    O' O' O'

    O' O' O'

    1' 1' 1'

    15

    5!'

    1'

    '

    !'

    %'

    &'

    P'

    1''

    1!' !'> discount on self 

    performed work

    argin and profit

    .ied o+erhead

    roportional o+erhead

    irect labor

    aterials

    ubsSbuyouts

    A#0

    &C

    #inancial source of the

    di t

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    56/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    1' 1' 1'

    O' O' O'

    O' O' O'

    1' 1' 1'

    15

    5!'

    1'

    '

    !'

    %'

    &'

    P'

    1''

    1!' !'> discount on self 

    performed work

    argin and profit

    .ied o+erhead

    roportional o+erhead

    irect labor

    aterials

    ubsSbuyouts

    discount

    Con$ertin' fi@ed o$erhead to mar'inprofit ?s are conceptalD

    A#0

    &C

    Minimi2ing real. ris'

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    57/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Minimi2ing real ris'

    6ow much discount does A#0 offer?

    6ow much discount does 80 use?

    aimum discount must still be profitable

    0ash flow risk still eists9

    etention

    O'-R' days or more in+oice-payment gap

    e are willin' to e@chan'e mar'in for cash flow

    Thoughts so far

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    58/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Thoughts so far 

    ;t

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    59/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    g

    If the &C ses the discont to 'et the (o%, AC also'ets the (o%

    AC will not %e ased to frther lower their pricenless it is tied to a chan'e in scope or similar isses

    AC will not %e s%(ect to retention

    All paments for AC related materials, s%contracts,and %ots will %e $ia 4Joint Chec5 or 4/irectPament5 % partner &C and will %e in fll, noretention

    Pament for AC?s portion of in$oices will %e madewithin 19 das of s%mittal, all others within 30 das

    Details needing

    l ti

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    60/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    resolution

    laying games with pricing

    Why partner 80 wants other millworkers to

    pro+ide them with bids

    Why partner 80 wants A#0 to submit bids to

    other 80s bidding on the same =ob

    3la$ing games 0ith the

    pricing

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    61/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    pricing

    Why wouldn

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    62/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    mill0or'ers to bid ,ob

    ome other millwork company may submit a bid thatwould beat e+en A#0

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    63/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    to other GCs on the same ,ob

    A#0

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    64/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    roposed solution9 A#0 submits its standard bid to all80s re2uesting a bid for a specific =ob and will submit thesame standard bid to our partner 80 if they are biddingthe same =ob" Che partner 80 will be the only 80 whohas the additional discount a+ailable" We do4 howe+er4recogniJe that our best odds of GwinningH the =ob will be

    +ia our partner 80"Chis allows A#0 to stay in the running for the o+erall =ob

    regardless of which general contractor wins the bid

    educes the potential financial risk to A#0 which allowsus the ability to offer the deep discount on theetended hours work while maintaining someprofitability

    to other GCs on the same ,ob

    The bidding dilemma

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    65/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.comignificantly impro+e our bottom line through the competiti+e bid process

    /ur current competiti+e bid GhitH rate is

    much less than desired9

    We are winning !-% =obs for e+ery 1' bid

    We ha+e no desirable and reliable

    strategy to significantly increase our

    GhitH rate

    /ur bidding capacity would

    be 2uickly ehausted

    Che number of =obs won

    would go down significantlyAny cost

    sa+ings from

     =ob cuts

    would be

    eclipsed byreductions in

    sales

    /ur bid hit rate would

    actually go downI we

    would be working

    proportionately

    harder for the workwe won

    /ur bid 2uality goes down

    We need toimpro+e the /; on

    our bidding staff 

    We need to doublethe number of =obs

    we win

    /ur eisting

    bidding staff is

    pushed hard(er) to

    submit more bids

    Chere is (more andmore) pressure to

    reduce our bidding staff 

    Solving the bidding

    dilemma

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    66/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.comignificantly impro+e our bottom line through the competiti+e bid process

    /ur current competiti+e bid GhitH rate is

    much less than desired9

    We are winning !-% =obs for e+ery 1' bid

    Chere is less (and less)pressure to reduce

    our operations costs

    e ha$e a desira%le and relia%le

    strate' that do%les or 4hit5

    rate withot cttin' or mar'in

    /ur current bidding

    staff would win

    !@() more =obs

    /ur /; for ourbidding staff (more

    than) doubles

    /ur bid 2uality goes up

    /ur bidding capacity would

    be 2uickly epanded

    Che number of =obs wonwould go up significantly

    Any cost sa+ings

    from =ob cuts would

    be eclipsed by

    increases in sales

    We would be

    working

    proportionately

    easier for the

    work we won

    dilemma

    We would (more than)double the number of

     =obs we win

    Offer summar$ so far 

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    67/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    ol+e ma=or problem

    Che solution

    6ow solution works

    6ow A#0 can offer it

    What is epected of the 80

    :uestions you ha+e to this point

    o+ing on to clusi+ity

    *+clusivit$ issues

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    68/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    easons why the 80 would want the offer to beeclusi+e to them

    easons why A#0 wouldn

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    69/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    e+clusivit$

    /ffer has no +alue to any one 80 if any other 80has same deal

    Cwo or more 80s with the same offer bidding

    the same =ob =ust lowers the price bar for

    e+eryone

    &h$ ABC doesn%t 0ant

    e+clusivit$

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    70/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    e+clusivit$

    Che more 80

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    71/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    All 80s bidding a specific =ob get the offer

    tend the offer to a Gelect .ewH 80sake the GofferH eclusi+e to one4 and only one4

    partner 809

    • 8i+es 80 what they want

    What +alue can the 80 offer in echange?

    • itigate some of A#0

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    72/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    0ommon solution might be a commission4

    '"!5 to '"5> of 80 total =ob bid price

    for =obs won using the offer"

    What would that look like?

    *+ample commission

    structure

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    73/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    elf-performed millwork as > of total =ob $

    A#0 !'> :ualifying portion !> 5> 1'> 15>

    discount of A#0 bid Cotal =ob price (A#0 $ S > millwork of total =ob $)

    $1''4''' $5''4''' $!54'''4''' $1'4'''4''' $54'''4''' $O4OOO4OOOA#0 0omm T'"5> $1!54''' $5'4''' $!54''' $1&4&&7

    A#0 0omm T'"!5> $&!45'' $!54''' $1!45'' $P4OOO

    $!''4''' $14'''4''' $5'4'''4''' $!'4'''4''' $1'4'''4''' $&4&&&4&&7

    A#0 bonus T'"5> $!5'4''' $1''4''' $5'4''' $OO4OOOA#0 bonus T'"!5> $1!54''' $5'4''' $!54''' $1&4&&7

    $O''4''' $145''4''' $754'''4''' $O'4'''4''' $154'''4''' $1'4'''4'''

    A#0 bonus T'"5> $O754''' $15'4''' $754''' $5'4'''

    A#0 bonus T'"!5> $1P745'' $754''' $O745'' $!54'''$%''4''' $!4'''4''' $1''4'''4''' $%'4'''4''' $!'4'''4''' $1O4OOO4OOO

    A#0 bonus T'"5> $5''4''' $!''4''' $1''4''' $&&4&&7

    A#0 bonus T'"!5> $!5'4''' $1''4''' $5'4''' $OO4OOO

    *+ample commission

    structure

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    74/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    elf-performed millwork as > of total =ob $

    A#0 !'> :ualifying portion !> 5> 1'> 15>

    discount of A#0 bid Cotal =ob price (A#0 $ S > millwork of total =ob $)

    $5''4''' $!45''4''' $1!54'''4''' $5'4'''4''' $!54'''4''' $1&4&&&4&&7A#0 bonus T'"5> $&!54''' $!5'4''' $1!54''' $PO4OOO

    A#0 bonus T'"!5> $O1!45'' $1!54''' $&!45'' $%14&&7

    $&''4''' $O4'''4''' $15'4'''4''' $&'4'''4''' $O'4'''4''' $!'4'''4'''

    A#0 bonus T'"5> $75'4''' $O''4''' $15'4''' $1''4'''A#0 bonus T'"!5> $O754''' $15'4''' $754''' $5'4'''

    $P''4''' $%4'''4''' $!''4'''4''' $P'4'''4''' $%'4'''4''' $!&4&&&4&&7

    A#0 bonus T'"5> $14'''4''' $%''4''' $!''4''' $1OO4OOO

    A#0 bonus T'"!5> $5''4''' $!''4''' $1''4''' $&&4&&7$14'''4''' $54'''4''' $!5'4'''4''' $1''4'''4''' $5'4'''4''' $OO4OOO4OOO

    A#0 bonus T'"5> $14!5'4''' $5''4''' $!5'4''' $1&&4&&7

    A#0 bonus T'"!5> $&!54''' $!5'4''' $1!54''' $PO4OOO

    A problem and an

    opportunit$

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    75/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    pp $

    A#0 has a significant obstacle that blocks us from

    committing to the offer and no commission structure

    alone would o+ercome this obstacle"

    O"TACK# AC is profita%le L. 1st D %t de to

    crrent de%t strctre, we are not %onda%le.

    ust consolidate debt to be HbondableH"

    e are willin' to trade or 4e@clsi$itcommission5 for remo$in' the o%stacle.

    Balance sheet details

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    76/91

    /e%t load

    "enior %an de%tN 8 1,3L0,000

    #:ipment financin'N 8 330,000

    ondin' sret ad$anceN 8 L90,000Acconts paa%le past deN 8 1,00,000

    "hareholder related de%t 8

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    77/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    ecuring funding through a traditional bank loan

    is unlikely in our current financial condition

    without outside financial support"

    Without other financial support4 we will sell a

    controlling interest in A#0 to an e2uitypartner"

    • The pro%a%ilit is a new e:it partner will

    prefer AC sees hi'h mar'in (o%s, and madiscora'e, and more liel i'nore, this offer.

    3artner GC removes the

    obstacle

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    78/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    /ur partner 80 can Gshare the riskH and

    gain eclusi+ity of the offer by either

    pro+iding the needed financing directly or

    supporting a bank loan in echange for a

    significant commission reduction"

    Che more fa+orable the loan terms4 thelower the commission"

    (oan directl$ or support

    a loan/

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    79/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    We belie+e it is in the best interest of our partner

    80 to pro+ide this loan directly as9

    •Offer can?t %e %loced % third part

    •#arns interest for their spport.

    •Tie the e@clsi$it of the offer to the drationof the loan"

    !educing ris' of loan

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    80/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    •Che partner 80 would be in a senior position forcollateral assets offered by A#0"

    •Che partner 80 can re:ire dal checs andSorthird party payment control on all AC (o%s4 not

     =ust those with the partner 80

    •Creates an incenti$e for %oth parties

    •The &C?s re$ene from these (o%s woldeclipse the loan amont

    89-10mm new profit per earD

    Ma+imum financing

    needed

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    81/91

    "enior %an de%tN 8 1,3L0,000

    #:ipment financin'N 8 330,000

    ondin' sret ad$anceN

    8 L90,000Acconts paa%le past deN 8 1,00,000

    Operatin' fndsNN 8 1,000,000

    Other nonshareholder de%tNNN 8 290,000Total otstandin' de%ts 8 9,300,000

    N ;rom /e%t side of %alance sheetNN 6eplaces line of credit for da-to-da operations

    NNN l is contractal o%li'ation to finance %roer

    Ma %e lowered thro'h ne'otiated paoffs

    Solving the bidding

    dilemma

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    82/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.comignificantly impro+e our bottom line through the competiti+e bid process

    /ur current competiti+e bid GhitH rate is

    much less than desired9

    We are winning !-% =obs for e+ery 1' bid

    Chere is less (and less)

    pressure to reduce

    our operations costs

    e ha$e a desira%le and relia%le

    strate' that do%les or 4hit5

    rate withot cttin' or mar'in

    /ur current bidding

    staff would win!@() more =obs

    /ur /; for our

    bidding staff (more

    than) doubles

    /ur bid 2uality goes up

    /ur bidding capacity would

    be 2uickly epanded

    Che number of =obs wonwould go up significantly

    Any cost sa+ings

    from =ob cuts would

    be eclipsed by

    increases in sales

    We would be

    working

    proportionately

    easier for the

    work we won

    We would (more than)double the number of

     =obs we win

    &or'ing Together:

    (everaging past success

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    83/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    PO

    To build a thriving future

    )uestions(3ast slide of the offer presentation)

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    84/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Chank you for your time and attention"

    Are there any 2uestions?

    0omments?

    Where do we go from here?

    *vents during

    presentation

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    85/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Che @B reps easily followed the concepts and agreed to

    ha+ing a shared problem in terms of poor /; on bidding

    process efforts4 confirmed they often lost =obs by small

    percentage (1> or less)4 and that they were unwilling to

    drop bid price any more resulting in hit rates of 1'>-!'>"

    @B was intrigued by our super in=ection9 We would reduceour price enough (1'>-!'> ) to e2uate to 1>-!> of the

    80

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    86/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Che @B reps were gi+en time to digest slide O1 G80 using

    the offer must U and

    aised the predicted reser+ations (,#

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    87/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Che @B reps9

    Agreed they would want eclusi+e access to the offer andagreed that ha+ing that eclusi+ity re2uired some form of

    +alue in echange for it"Agreed they were +ery interested4 understood and belie+ed thedetails of the offer"

    Wanted to know if the offer could be applied to some =obs

    currently being bid without resolution of the loan issue";dentified that they were not in an appro+alScommitment

    capacity so needed and wanted to take concept up the ladderto the corporate management le+el that could appro+e and

    would do so before week

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    88/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Che re2uested documentation was pro+ided the net day(Cuesday) with an offer to assist with presenting the concept upthe ladder if neededSwanted" @B felt confident in taking the

    message on"Che @B reps called that .riday with an update" *ppermanagement was +ery interested but had four ma=or concerns9

    1" Chey were unsure what the ramifications would be on theirability to pursue specific =obs4 especially go+ernment work4 ifthe loan created the reality4 or e+en perception4 of themha+ing an e2uity interest in A#0

    !" Chey are employee owned and needed to be sure the loanwas good for the company and that they could con+ey thisto the employees"

    *vents follo0ing

    presentation 5continued6

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    89/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Che @B reps called that .riday with an update" *pper

    management was +ery interested but had four ma=or

    concerns9O" Chey didn

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    90/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    While the remaining obstacles were being o+ercome with

    @B4 A#0 recei+ed an offer to purchase through its broker

    that was accepted"Che buyer was able to negotiate a combined pay down with

    the bank and bonding company to $5''4'''"

    A#0 officially ceased to eist lea+ing the other creditors4 meincluded4 with no options but to eat the outstanding debt"

    Che new owners were deeply imbedded in traditional cost

    accounting thinking and had their own plans for thecapacity they had purchased so they werenNt e+en made

    aware of the offer"

    )uestions from this

    TOC3A group/

  • 8/18/2019 7 - Russ Johnson_23 TOCPA_USA_21-22 March 2016

    91/91

    23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

    Chank you for your time and attention"

    Are there any 2uestions?

    0omments?

    Choughts on how to change the offer for

    other similar en+ironments