Choosing the Right Transportation Partners Managing Costs, Risks and Capacity

1. Choosing the Right Transportation Partners Managing Costs, Risks and Capacity March 19, 2007 Troy Stevenson Global Leader Truckload Carrier Relations Owens Corning Brett Cayot Principal Supply Chain Innovation Practice PRTM Where Innovation Operates

2. Today’s Agenda • Overview of Owens Corning • Owens Corning Transportation Challenges • Approach and Goals • Project results • Key Principles to Selecting the Right Providers

3. Owens Corning Overview • $6.5B global building products manufacturer with 61 plants in the United States and over 100 locations worldwide • Wide range of products requiring different transportation modes, handling and service-levels • Insulation • Roofing • Cultured Stone • Composites • Vinyl Siding • Asphalt • Significant spend on largest three modes of domestic transportation • Dry Van, Flatbed and Tanker

4. Owens Corning Transportation Challenges • Costs • 1 to 5% annual rate increases over the past 5 years • Lane rates varied by up to 40% • Internal Capabilities • Limited experience with leading transportation procurement practices • Transportation historically sourced at individual plant locations • No technology tools to analyze and select carriers • Capacity and Carrier Management • Difficulties securing carriers to cover volume surges such as after Hurricane Katrina • Growing reliance on brokers especially in Flatbed • Highly variable lane structures and rate types with over 90,000 old rates • No ability to take advantage of different flatbed trailer capacities

5. Owens Corning and PRTM teamed to identify and implement transportation improvements Phase I – Transportation Strategy and Roadmap Development • Strategic Transportation Procurement • Inbound Freight Management • Dedicated Fleet Services • Transportation Management System Phase II – Implement Strategic Transportation Procurement program • Reduce annual transportation costs • Maintain or improve service-levels • Develop in-house sourcing expertise • Implement sourcing optimization tools 4 Key Opportunity Areas Identified PRTM Strategic Transportation Sourcing Methodology

6. The team exceeded all project goals • Reduced transportation costs by over 10% • In addition, many intangible benefits were delivered

7. Selection of the Right Providers Three Key Principles • Develop detailed sourcing strategies and identify alternative savings levers • Go to market with a fact-based, economics-driven, comprehensive approach • Clearly state requirements and carefully define lane structures • Match shipper lanes to carrier “sweet-spots” to maximize savings • Always balance service and cost

8. Principle 1: Develop detailed sourcing strategies and identify alternative sourcing levers Lane Complexity and Service Requirements Key Activities High Low Detailed lane analysis performed to identify service requirements and market status Alternative sourcing levers developed to reduce lane complexity and shift market status Individual strategies created to maximize results Shipper’s Market Market Status Carrier’s Market Sourcing strategies ensure service is maintained while maximizing savings

9. Principle 2.1: Clearly state requirements and carefully define lane structures Clear requirements and carefully defined lane structures minimize shipper and carrier risks to maximize opportunity

10. Principle 2.2: Match shipper lanes to carrier “sweet-spots” to maximize savings • Reducing carrier empty miles provides significant savings opportunities Example Carrier Costs • Finding carrier “sweet-spots” requires a involvement from a large number of carriers and the ability for carriers to see the entire network • OC Carrier Portal database, PRTM DOT-linked Carrier Identification Tool and existing providers used to create pool of potential carriers • Recommend invitation of at least: • One carrier per $500k sourced - OC Actual: 1.3 carriers per $500k • 1/3 new carriers - OC Actual: 55% new carriers Average lane rate variance reduced from ~40% to less than 4%

11. Principle 2.2: Match shipper lanes to carrier “sweet-spots” to maximize savings (cont’d) The approach enhanced savings levels by 70% from traditional sourcing 70% of savings associated with carrier lane optimization • Keys to Success: • Rich analysis of lane structures and building attractive lanes for carriers • Understanding of service requirements / business environment • Close collaboration with “A” carriers • Computerized scenario analyses 100% 10% 20% 75% % of Total Savings) 31% 50% 25% 39% Rate Introduction of new carriers(Carriers withfavorableeconomicsfor specificlanes) Mode and New lanes for Reductions (TraditionalNegotiations Approach) Equipment Incumbents (Existing laneswon by incumbents not previously known to have coverage) Optimization

12. Principle 3: Always balance service and cost Clearly Defined Requirements coupled with Advanced Optimization Tools help identify the Best Total Cost Solution Clear Definition of Shipper Needs • Model of constraints – e.g. Max carriers per location, turnover limitations, balance of national, regional, niche providers • Lane-level service requirements – e.g. required high service lanes/carriers, drop trailers, value-added services • Provides basis for award decisions and cost/service trade-offs Scenario Analysis Reports Optimal Award Allocation Shipper’s Demand Optimization Engine Defined Lane Requirements • Lanes, volumes and service requirements • Expected fluctuations, e.g. seasonality, weekly and daily demands • Reduces carrier’s risk and rates Scenario Comparison Reports Solution Summaries, e.g. total savings, # of carriers, risk analysis Solution Details, e.g. network, lane and carrier awards Operational Impact Reports, e.g. carrier impact, turnover ratios, carriers per location) Carrier Proposals Complete proposals • Includes all expressive bidding structures (disparate bundles, discounts, alternate bids, etc.) • Rates at different service / capacity levels

13. Principle 3: Always balance service and cost (cont’d) • Utilize scenario-based optimization tools to identify the true “cost of service” and pay for it when it’s required • “Beating-up” on carriers may result in short-term rate reductions. However, true collaboration will deliver long-term results • Understand carrier economics and challenge newly available capacity at low rates • Validate carrier capabilities with existing customers • Carefully manage carrier turn-over based upon service requirements and internal capabilities Proper selection of the right providers will deliver cost and service improvements

14. Thank You! Troy Stevenson Owens Corning Brett Cayot PRTM Mobile: 312.371.5559 bcayot@prtm.com