2013 TLC Conference: Import/Export Best practices April 22, 2013 San Diego CA

1. by Jerrod Slaughter, Corporate Transportation Manager 2013 TLC Conference:Import/Export Best practices April 22, 2013San Diego CA

2. International: What’s the big deal? • What does a shipper really want? • Simple … • Reliability • Flexibility • Market competitive rate

3. Shipper Perspective - Plan a strategy!!

4. Understanding Ocean … What are the basics?

5. Ocean: important for a shipper • Container Rates • Type of delivery is needed • Container Size • Container Routing • Essential Accessorial Terms • Surcharges • Bunker (Fuel) • Peak Season Surcharge (PSS) • General Rate Increase (GRI) • Essential Service Terms • Space Guarantees • Minimum Quantity Commitment (MQC) • Detention & Demurrage • Delay In Transit (DIT) • Performance levels / KPI • Bookings • Transit times

6. What type of delivery is needed? • Container Yard (CY) • Inland Port Intact (IPI) • Store Door Delivery (SDD) • Container Size • 20 FT (TEU), 40 FT (FEU), 40 FT High Cube and 45 FT • Routing • All Water Service (AWS) • Landbridge (Not through Panama Canal) Rates: define services needed Rates

7. Surcharges • Advance Manifest Fee (AMS) • Chassis Usage Surcharge (CUS) • Document Fee (DOC) • Terminal Handling Fee (THC) • War Risk Surcharge (WRS) • Etc. (See 40+ other terms) • Bunker (Fuel) • Floating schedule • Peak Season (PSS) • Typically June 1st through October 31st • General Rate Increase (GRI) / Rate Restoration (RRI) • Any time based on Carrier / Alliance Essential Accessorial Terms

8. Space Guarantees • Hong Kong to Los Angeles – X FEU? • Minimum Quantity Commitment (MQC) • How many FEU’s a year? • What is the right number? • Detention (out gate)& Demurrage (in gate at Port) • Agreed days known as “Free Time” • Days (calendar or working) • Delay In Transit (DIT) • Key Performance Indicator (KPI) • Booking acceptance • Service Strings / Port to Port On-Time Essential Service Terms

9. If you don’t have contracts today or do find undesirable terms then evolve … One step at a time! Partner with internal Legal Counsel Seek help on “boilerplate” by mode Include terms with Request For Quotations (RFQ) How will incumbents react? Don’t surprise your vendors. Discuss with internal stakeholders. Understand that terms can cause lengthy negotiations and potentially impact rates. Careful not to overbuy! “Best Practice”: get a Boilerplate

10. Understand Ocean Line vs. NVOCC What are the options?

11. Ocean Line (Direct BCO) NVOCC Non Vessel operating common carrier The Positive • Direct relationship with Line • Leverage MQC FEU volumes directly to secure terms/rate/service • Assigned allocation can lead to consistent service string transit time • Strong long term partnerships can assist during industry challenges The Challenge • More complex i.e. FMC requirements • Provide forecast of trade lane volumes • Manage MQC volumes • Resources and bench strength to manage multiple Ocean carriers • Challenging to make changes The Positive • Flexibility with little to no commitment • Less complex to manage • No FMC required for shipper • No MQC requirement • No long term commitment • Ability to chase rate • Much closer to the market rates The Challenge • Subject to volatility of market • Susceptible to surcharge • GRI / RRI • PSS • No direct relationship with Ocean carrier • Possible less predictable transit times Ocean: Line vs. NVOCC

12. Selecting an International Partner … Vendor management

13. Define Supply Chain Strategy & Needs • Request for Quote (RFQ) • Know the Market • Document shipper characteristics • Identify and include Stakeholders • Define service expectations • Boilerplate • Stakeholders provide suggested carrier RFQ pool • Container Rate and Surcharge template • Understand service string and transit offering • Cost Analysis on 80%-95% volume lanes • Selection • On Boarding • Performance Evaluation “Best Practice” to Manage International

14. Operational readiness • Define “Who’s who” • Detailed Standard Operating Procedure (SOP) • Escalation path • Limited volume at startup • Slowly turn on the Valve! • Deming Wheel approach • Plan, Do, Check, Act “Best practice” on boarding

15. Shipper provided FEU forecast by lane • Best practice: 3 month rolling forecast • Keep it simple! • Communicate Origin Performance • Is cargo getting booked and COB as expected? • Any rolls, delays, etc.? • Be engaged and ask for feedback Shipper needs to be a partner

16. KPI agreement • Reporting requirements • Quarterly or Bi-annual business review • Measure transit expect vs. actual • Cargo Claims • Billing Issues • Service Review • Booking performance • Space guarantees • Transit time metrics “Best practice” business review

17. Relevant field definitions: • Target Transit Time: transit time expectation per lane from contract negotiations. • Transit Time for 95% Of Shipments: Denotes the transit time by lane (or carrier) for which 95% of shipments were equal to or less than. • On-Time %: Percentage of shipments per lane (or carrier) that were equal to or less than the target transit time. • % Within +/- 1 Day of Target: Percentage of shipments per lane (or carrier) that were within one day of targeted transit time.  The higher the percentage, the more consistent the transit times are. • Transit Time Range (Days): This the range in days between shortest transit time and longest transit time per lane or carrier. • Avg Variance (Actual vs Target): Per lane or carrier, this is the average variance in days between actual transit time and target transit time.  The lower the number, the more consistent the transit times are. Ocean KPI’s

18. Ocean KPI’s – Quick example

19. International Air Freight Forwarding Important terms and strategy

20. Rates by route • Port-Door, Port-Port, etc. • Recommend add gateway to door as option • Add Service levels that fit your need – Exp, Std, Def • Add tier level weight break • Know your sweet spots!! • Include transit days by service by lane • Define service commitments • Define Fuel surcharge • Peak Season ?? • Liability and cargo claims Contracting for Air Freight: What is important?

21. Full service forwarder vs. niche regional forwarder • Carrier service area • Forwarders usually handle all major lanes • A full service forwarder may compliment a Shippers needs as supply chain becomes more complex • Don’t underestimate the value of regional niche forwarders • Experts in specific geographies • Forwarders seek different freight mixes to support trade lane • Rates and very drastically between competing forwarders • Shop around for best rate Forwarder differentials

22. International – Its an adventure