Bakery Initiative in Romania

BAKERY INITIATIVES, THE NETHERLANDS

Bakery Initiatives’ Service Portfolio Explanation of the role of BI

2011

BAKERY INITIATIVES, P.O. BOX 70, 5324 ZH AMMERZODEN, NETHERLANDS

BAKERY INITIATIVES’ SERVICE PORTFOLIO To better serve our client, we cover all five areas of expertise Plan, Product, Plant, Process & People, the 5 P’s. We offer these services in a logical and chronological order. Step by step, divided in 2 broad phases:

A.

-

PHASE A – PLANNING PHASE

-

PHASE B – IMPLEMENTATION PHASE PLANNING PHASE: PHASE A, can consist of four steps. We execute these services on the basis of a CONSULTANCY contract.

B.

1.

Strategy development and pre-feasibility – this is offered in PROPOSAL 1

2.

Full feasibility study

3.

Bankable proposal (if applicable)

4.

Partner search / matchmaking (if applicable)

IMPLEMENTATION PHASE: During PHASE B we work according to the BOT-principle to ensure timely, professional, efficient, and money saving execution of your bakery project. We can either work as CONSULTANT or as SYSTEM INTEGRATOR. 5.

6.

7.

Main Office P.O. Box 70 5324 ZH Ammerzoden The Netherlands Tel +31 73 534 0850

Building your bakery: 5.1

Engineering (production, technical utilities and building)

5.2

Procurement of technical equipment

5.3

Construction of building and installation of equipment

5.4

Commissioning, start-up and initial training (1-2 months)

Operating your bakery: 6.1

Interim operational management

6.2

Interim marketing management (if applicable / needed)

6.3

Define workflows, processes and KPI’s

6.4

Monitor and improve KPI’s

Transfer bakery know-how: 7.1

Improve products

7.2

Improve processes

7.3

Improve people

7.4

Improve production facility (plant)

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Regional offices Dubai – UAE Bucharest – Romania Tehran – Iran

PHASE A - PLANNING BAKERY INITIATIVES’ ROLE DURING PLANNING During the planning phase we work as consultants usually on a lump sum basis, which provides clarity of the maximum cost for the client and transfers the risk of extra work to BI. 1.

Pre-feasibility

During pre-feasibility we assist the client to choose a bakery system that meets current and future market demands. On the basis of an analysis of preliminary production, distribution, and market requirements, the main parameters affecting the choice of the optimal bakery system is identified. PROS and CONS are listed. An initial estimate will be made of the investments needed, the expected profitability, return on investment and the project time planning.

Because of the multi-disciplinary character of the study, and depending on the capabilities of the client, the prefeasibility requires at least one visit of the BI team. The BI team comprises 3 persons: technologist, marketing/finance specialist, and a technical engineer/equipment specialist. The field visit usually takes 3-5 days.

The report is presented two weeks thereafter.

Optional: Quick scan When the client is already ‘in business’ we can conduct a Quick Scan to identify ‘quick winners’ and identify intermediate steps that might be taken to increase the production capacity to allow for growth until the moment that the new bakery will be ready to use. BI’s Quick Scan (max. one extra day) covers the three areas of the “Golden Triangle”, namely the Physical Assets, Technology and Organization of the existing production facility.

The three aspects of the triangle always mutually influence one another: a change in one aspect, requires changes in the other two.

Main Office P.O. Box 70 5324 ZH Ammerzoden The Netherlands Tel +31 73 534 0850

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Regional offices Dubai – UAE Bucharest – Romania Tehran – Iran

The Quick Scan in more detail:

1 - Physical Assets include:

2 - Technology focused on Product and Production: x Product:

x

Building

x

Primary production equipment (technical audit on capacity)

x x

o x

Recipes/ ingredients

Production line(s):

Secondary technical utilities (e.g. room conditioning,

o

Line capacity (Pieces/hour)

etc.)

o

Line balance (capacity per process step)

General lay-out of and routing in the production area

x

Production process data: o

Storage and dosing of ingredients

o

Dough preparation

o

Make-up line(s)

o

Proofing (bowl, intermediate and final)

3 – Organization includes:

o

Baking

x

Human resources

o

Cooling / Freezing

x

Staff-know how/training

o

Packaging

x

Business practice

o

Dispatching and shipment of goods

x

Flow of information

x

Product shelf life

x

Production forms

x

Temperature

x

Process control forms

x

Process Controls

x

Waste

2.

Feasibility

During feasibility BI ensures the following deliverables: I.

Marketing and Product Innovation Plan A.

Market Positioning: ‘Making The Quality Jump’

B.

Product identification (for earlier identified products only)

C.

Packaging

D.

Market Size and Estimated Shares in Volumes

E.

Prices, cost prices and margins

Main Office P.O. Box 70 5324 ZH Ammerzoden The Netherlands Tel +31 73 534 0850

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shared responsibility Client and BI

Regional offices Dubai – UAE Bucharest – Romania Tehran – Iran

II.

III.

IV.

A.

Stock levels in the chain

B.

Storage conditions

C.

Transportation

full responsibility of BI

Technology Plan A.

Product recipes

B.

Processing times

C.

Shelf life and point-of-sale considerations

full responsibility of BI

Manufacturing Facility Layout A.

B.

C. V.

full responsibility of BI

Physical distribution Plan

Plant layout 1.

Principal logistic layout (scalable)

2.

Square meter cost estimates

Equipment layout 1.

Technical description of the production line(s)

2.

Technical description of the supporting equipment

3.

Detailed cost estimates of all equipment needed

Plan for the facility supporting areas shared responsibility Client and BI

Financial Plan A.

Investment

B.

Sales volumes

C.

Cost prices and Margins

D.

Projected Income Statement

E.

IRR calculation

F.

Logistics

Assuming the same BI team is employed, the feasibility study requires at least one additional visit of the technologist and the marketing/finance specialist. The technical engineer/equipment specialist can work from the office. The field visit again takes 3-5 days. The final report and all designs are presented six weeks thereafter.

Main Office P.O. Box 70 5324 ZH Ammerzoden The Netherlands Tel +31 73 534 0850

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Regional offices Dubai – UAE Bucharest – Romania Tehran – Iran

3.

Bankable proposal

To make the bankable proposal the results of the feasibility study are re-written in a way to attract bank finance.

This is an optional service which can be offered either on an hourly basis, as a lump sum, or on no-cure-no-pay basis, where BI receives a percentage of the bank loan obtained.

4.

Partner search / Matchmaking

If the feasibility study points out that the client lacks sufficient equity, or management capacity to successfully implement the project, BI can offer to scout for suitable partners. In rare cases, BI co-invests itself in the share capital of the new bakery. The extend of work of our matchmaking services are hard to quantify in advance and are therefore offered on a case-by-case basis.

PHASE B BAKERY INITIATIVES’ ROLE DURING PROJECT IMPLEMENTATION Let’s assume that PHASE A – PLANNING has been successfully completed, that strategy and project planning have been approved, and that financing is available. During BUILDING there are two ways to get BI involved:

1.

1.

as Consultant

2.

as System Integrator

BI as Consultant

When contracted as CONSULTANT, BI will help to prepare a detailed work description of tasks 5.1 to 5.4.

5.1

Executional responsibility:

Engineering a. production equipment

full responsibility of BI

b. technical utilities, and

supervision by BI

c. building

supervision by BI

5.2

Procurement of technical equipment

supervision by BI

5.3

Construction of building and installation of equipment

supervision by BI

5.4

Commissioning, start-up and initial training (1-2 months)

supervision by BI

Main Office P.O. Box 70 5324 ZH Ammerzoden The Netherlands Tel +31 73 534 0850

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Regional offices Dubai – UAE Bucharest – Romania Tehran – Iran

BI usually works on a lump sum basis, which provides clarity of the maximum cost of the work and transfers the risk of extra work to BI. However, the Client keeps full end-responsibility for all steps during BUILDING. That means if something goes wrong during execution of the other steps, the Client ‘pays the bill’. The cost of BI’s consulting services from engineering (5.1) until completion of initial operational staff training (5.4) typically ranges from 10% to 15% of the investment in equipment.

2.

BI as System Integrator

Where a consultant only supervises the work executed by others, the SYSTEM INTEGRATOR actually buys and builds the equipment himself and takes over the full responsibility from the client. This drastically reduces the number of project executors; less executors means less communication and coordination, less man hours and, most importantly, less costly mistakes. BI integrates the work of all (equipment) suppliers.

5.1

Executional responsibility:

Engineering a. production equipment

full responsibility of BI

b. technical utilities, and

supervision by BI

c. building

supervision by BI shared responsibility Client and BI

5.2

Procurement of technical equipment

5.3

Construction of building and installation of equipment

full responsibility of BI

5.4

Commissioning, start-up and initial training (1-2 months)

full responsibility of BI

After the engineering has been completed, BI and the Client start ‘shopping for equipment’. BI works with a number of preferred suppliers. These suppliers have been selected based on their willingness to cooperate with BI. These are medium-sized specialist companies, which are too small to act as system integrator themselves1. They like to cooperate with BI, as this greatly reduces their selling and marketing costs. This allows BI to negotiate for reseller discounts up to 20-30% from these Original Equipment Manufacturers (OEM suppliers).

1

The large main stream suppliers in the bakery industry like Kaak, Mecatherm, Werner & Pfleiderer act as a System Integrator themselves and will not accept to sell equipment to BI with reseller discount. These companies have their own agencies and prefer BI to stay away from ‘their’ clients. Their ‘supply’ is limited largely to hardware.

As everybody knows, even these suppliers do not produce all equipment and either procure equipment elsewhere or leave this up to the client.

Main Office P.O. Box 70 5324 ZH Ammerzoden The Netherlands Tel +31 73 534 0850

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Regional offices Dubai – UAE Bucharest – Romania Tehran – Iran

For BI itself it is crucial to work with trustworthy vendors. BI cannot afford to take over the building risk from just any supplier. BI has identified Preferred Suppliers for each process step in the whole bakery process: from A (silos) to Z (packing). When the Client selects equipment from these suppliers, BI will be able to share the OEM reseller discount on a 50/50 basis. Should the Client want to work with other suppliers, BI will first make an assessment of this company. If this company qualifies BI selection criteria and wants to enter the list of BI’s preferred suppliers, the same 50/50 rule will apply. However, should the company not qualify than BI will share the reseller discount on a 67 (BI) / 33 (Client) basis.

Calculation example: if an investment in equipment of €2 million is envisaged, the consultancy bill for supervisory work will be 10-15%, say €250,000. Working with BI as System Integrator and its preferred suppliers, will allow for a discount of 20-30%, say €500,000. Sharing this with the Client means that €250,000 is given back, which in most cases will cover the consulting bill. That means that all works from engineering up initial training of the staff will be free of charge.

Main Office P.O. Box 70 5324 ZH Ammerzoden The Netherlands Tel +31 73 534 0850

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Regional offices Dubai – UAE Bucharest – Romania Tehran – Iran