$ave

Proposal Suggestions and Evaluation Process

Suppliers participating in $AVE are expected to submit annual suggestions totaling 5% of their prior year spend with PPG. At least 60% of the $AVE dollar suggestions are expected to be associated with HARD SAVINGS as outlined in the $AVE Measurement Grid.

Measurement Grid

HARD SAVINGS:
Commercial	Measure	Determination/Confirmation
Non-Market Price	Non-market price reduction from prior year end price	Supplier tally confirmed by buyer and SBU accounting and credited to supplier for next 12 months
Payment Terms	Incremental improvement in pay terms	Differential calculated between old terms vs. new terms One time annual cash flow savings based on PPG's cost of funds
Rebates / Prebates	Improved rebate/prebate over prior year lowers actual net price	Supplier rebate/prebate or incremental rebate/prebate confirmed by buyer and SBU accounting and credited to supplier for applicable period
Supplier financing	Actual $ paid by Supplier to SBU for project cost	SBU accounting receives/credits $
Operational Process Improvements	Measure	Determination/Confirmation
Outsource	Innovative service or joint effort to replace PPG internal effort	Internal vs. external cost comparison evaluated by purchasing/SBU accounting/applicable functional area
Lower energy consumed (Energy Efficiency)	Less energy consumed due to Supplier’s proposed change	Plant operations, SBU accounting verifies lower energy bills paid. (cost savings for the 1st full year only)
Yield Improvement	Improved throughput, waste minimized in production process	Plant operations, SBU accounting verifies improvement in output or sub-standard product loss. (cost savings for the 1st full year only)
Inventory	Measure	Determination/Confirmation
Material consolidation	Actual working capital removed from ledger	Buyer, plant operations, SBU accounting verifies. 12% annual cost multiply by on hand inventory eliminated. (cost savings for the 1st full year only).
Vendor Owned Inventory	Actual working capital removed from ledger	Buyer, plant operations, SBU accounting verifies. 12% annual cost multiply by on hand inventory eliminated. (cost savings for the 1st full year only)
Vendor Inventory Mgmnt	Elimination of planning for material, order placement, etc.	Plant operations, SBU accounting verifies employee's work time allocated elsewhere. (cost savings for the1st full year only)
Quality/Innovation	Measure	Determination/Confirmation
Supplier technical project	Unique project for PPG where supplier lab and technical personnel used	Actual $ expense avoided determined by technical/buyer/SBU accounting
Variability reduction (Specification Optimization)	Improvement in consistency leading to better end product performance	SPC data, Plant operations, Technical, SBU Accounting verify actual savings. (cost savings for the 1st full year only)
Reformulation (Material Substitution)	Actual formula cost reduction multiplied by the gallons per year produced	Technical/Buyer/SBU accounting requote formula to determine savings
Alternative green or eco-friendly products and processes	Environmental benefits clearlyidentified with supporting data	Supplier/Buyer/Plant personnel confirm $ saved on annual basis back to SBU. (cost savings for the 1st full year only)
Supply Chain Logistics	Measure	Determination/Confirmation
Packaging Optimization and Recycling	Actual reduction in waste, production, or conversion costs	Supplier/Buyer/Plant personnel confirm $ saved on annual basis back to SBU. (cost savings for the 1st full year only)
Duty reduction, drawback	Actual dollars refunded to SBU	Supplier/Buyer/Distribution personnel confirm and credit $ on annual basis back to SBU
Packaging Optimization and Recycling	Reduction in virgin material used in packaging	Confirm $ saved on annual basis
Regulatory compliance	$ paid by supplier to help PPG obtain regulatory compliance in given country	Technical/Product safety verify


SOFT SAVINGS:
Commercial	Measure	Determination/Confirmation
Minority, Women, Veteran and Hub Zone Vendors	Direct minority spending credit of 2% of prior year spend with PPG	Minority Supplier must provide proof of certification by NMSDC, SBA, WBENC or NWBOC
Incremental year over year increase in purchase of PPG products	Credit calculated as 25% of validated increase in purchase of PPG products.	Supplier must establish current spend with PPG & confirm / validate incremental buy
Business Process Improvement	Measure	Determination/Confirmation
Certificate of Compliance (elimination of Certificate of Analysis)	Credit $5,000 for each location where COA's are eliminated	QA/purchasing verification
Submit Champ Code req. on time	Credit $5,000	Subjective judgment of purchasing/Material Tech
Submit Cert. of Origin on time (NAFTA certificate)	Credit $5,000	Subjective judgment of purchasing/Material Tech
PCARD	Elimination of current procure to pay process steps	$50 for each Purchase Order eliminated. $10 for each Invoice eliminated. 1% of the total dollars transferred to PCARD. (cost savings for the 1st full year only)
E-Buy	$10 per electronic invoice processed including PCard payments. $5000 for full enablement on ASN with PPG e-Buy	Supplier/buyer confirms how many electronic invoices or Pcard payments processed through e-Buy. (cost savings for the 1st full year only)
Pay on Receipt	$10 per invoice cost eliminated	Supplier/Buyer/Accounting confirm how many invoices eliminated on annual basis. (cost savings for the 1st full year only)
EFT	$0.375 per check cost eliminated (one payment per month)	Buyer/Treasury calculates number of checks eliminated on annual basis. (cost savings for the 1st full year only)
EDI, Internet	Elimination of planning for material, order placement, COA entry etc.	Plant operations, SBU accounting verifies employee's work time allocated elsewhere. (cost savings for the 1st full year only)
Operational Process Improvement	Measure	Determination/Confirmation
Safety/Environmental	Credit $10,000 for each potential safety hazard eliminated	Plant operations/Safety management judgment
Cycle time reduction (Soft)	Lead-time from customer order placement to delivery improved by supplier proposal	Actual conversion cost to improve manufacture finished product. (Accounting manual quote required )
Bar coding	Credit $10,000 for each location	Plant operations/Purchasing verify
Alternative “Green or Eco-friendly products and processes	$25,000 credit	Green or environmental label or certification
Carbon emissions and climate change mitigation strategies	Credit $25,000	Completed Carbon Disclosure Project (type) form.
Global Initiatives	Measure	Determination/Confirmation
Global Specs	Mutually agreed upon global specs. - $1000/material	Technical/QA/Material Tech. verify

New Markets/New Products	Global specs./Global availability/Global pricing - $50,000/material	Global Purchasing verify.
Quality/Innovation	Measure	Determination/Confirmation
Defect Free Delivery	Credit $25,000 per supplier mfg. facility on an annual basis for zero defects	QA/Purchasing/Supplier verify
ISO Registration (quality assurance and environmental) & Responsible Care (RC) & Sustainability Policy	Achieve ISO9000:2000, ISO/TS16949, ISO14000 and/or RC registration. Sustainability policy established. Credit $10,000 per location - 1st yr only	Proof by policy statement and/or certificate(s) submitted to Purchasing
Exclusively designed products	Helping PPG develop products	Credit based on judgment by R&D
Joint engineering/research	Helping PPG develop products	Credit based on judgment by R&D
BMAP notification (Build of Material Approval Process)	Credit $5,000 per location	Timely notification of mfg. site change or other changes where PPG can be proactive in customer notification
Training	Supplier pays for training for PPG end customer or PPG personnel	PPG Sales/Purchasing verify, cost of doing business does not qualify