Logistics: 21 st Century Competitive Advantage How good are you?

2. Harry Drajpuch Executive Vice President & General Manager USCO Logistics Logistics: 21st Century Competitive AdvantageHow good are you?

3. USCO CorporateHamden, CT Distribution CenterReno, NV KN CorporateSchindellegi, Switzerland KN Global ReachPacific Rim USCO Logistics Overview • Business unit of Kuehne & Nagel International AG • Leading provider of supply-chain solutions • 35 years’ experience • Manage 15M sf in 70+ facilities • Process 1.9M lines monthly • Integration with 75+ client enterprise systems • Partner to 36 of top 100 global companies* *BusinessWeek Global 1000, 7/9/01

4. KN Global Contract Logistics Reach Locations: 150 Logistics Space: 15 M sq ft Employees: 3,600 Locations: 70 Logistics Space: 15 M sq ft Employees: 3,000 Locations: 100 Logistics Space: 10 M sq ft Employees: 3,100 Locations: 320 Logistics Space: 40 M sq ft Employees: 9,700 Global reach & local know-how

5. 010010110011100 USCO Core Services Integrated Supply Chain Management Solutions Information Logistics WarehousingSolutions TransportationManagement OrderManagement GlobalLogistics • Dedicated & shared • Flexible & scalable • Largest NA network of distribution centers • Delivery solutions • Non-asset based • Optimized service& savings • Online order placement • Fulfillment & call-center services • Supply chain visibility • Kuehne & Nagel • 180 multi-client DCsin 90 countries • Lead logistics service provider • Information driven • Collaboration & visibility G 8

6. Shared Distribution Centers Dedicated Distribution Centers North American Network Edmonton Calgary, Alberta Winnipeg Dorval, Quebec Montreal, Quebec Portland OR Ottawa, Ontario Franklin MA Shakopee MN Toronto Jersey City NJ Port Clinton OH Allentown Sheffield OH Bridgeport NJ Chicago IL Joppa MD Gaithersburg MD Reno NV Baltimore MD Denver CO Independence, MO Hayward CA Louisville KY Lenexa KS Durham NC Zebulon NC Nashville TN Ventura CA Charlotte NC Ontario CA Memphis TN Cerritos CA Atlanta GA Dallas TX Lewisville TX Lakeland FL Miami FL Monterrey Guadalajara Mexico City

7. Industries & Customers Integrated Supply Chain Management Solutions High Tech Healthcare / Pharmaceuticals Retail Consumer /Industrial

8. Impact of Companies Like USCO • Link world’s businesses & people through globalization • Connect North America • Reduce economy-wide inventory • Lower business-cycle risks While information technology makes global & national linkages virtually possible -- companies like USCO make them physically possible.

9. Brush-Fire Management • Typical focus is on daily operating problems, sales & marketing promotions, & service issues, etc. • How often do you review logistics functions? • What’s overall impact & interaction with rest of business? • Does logistics function: • Respond directly to present & future needs? • Support primary business mission? • Drive most cost-effective & customer-service support? • How can you find out?

10. Recommendation • Conduct a self analysis of your logistics strategy • Focus on what your logistics activities should be doing to support your business • Consider the following 7 key areas

11. Logistics Strategy – Self-Analysis • Company Markets • Have you moved into new markets? • Has there been shift in customer shipments? (I.e., wholesalers, distributors, retailers, etc.) • Company Products • Have you added or deleted product lines? • Customer Service • Has representative customer survey indicated service problems? • Have there been any systems or order processing changes that have affected order cycles?

12. Logistics Strategy – Self-Analysis • Logistics Operations • Have labor or facility costs resulted in changes to location or operations? • Have type, quality or size of product packaging changed? • Have you reached capacity in existing distribution facilities? • Transportation Operations • Has the profile of product shipments changed? (i.e., UPS, full truckload, less-than-truckload) • Do you move inbound & outbound products across common shipping lanes?

13. Logistics Strategy – Self-Analysis • Product Operations • Have you changed or introduced new source points for products? • Has product capacity changed at existing production locations? • Other • Have distribution & transportation costs increased as percent of sales? • Have there been internal structural changes?

14. Assembling the Jigsaw Puzzle Customer relationship management Order Management EAI Internet Int’l trade & compliance e-Logistics Portals + TMS Global in-transit visibility 3PL ASP Warehouse management LLP Event management Transportation planning & management Supply chain collaboration e-Fulfillment Merge-in-transit, diversions All freight – All modes – All over the world ERP Private vs. public exchanges Single command &control center

15. Real-time logistics management capabilities Predictable, reliable & rapid transport Integrated logistics network Scaleable, Variable-cost infrastructure Common (global) processes Develop In-house? Outsource? Significant investment & development required to support evolving supply chain. Best source of your $?

16. Why Outsource? • Manufacturers are now embracing third-party logistics providers (3PLs) • Alternative to running their own distribution operations • 3PLs have been providing distribution operations to companies for years • Most have roots in transportation, warehousing or freight forwarding • Providing 3PL logistics services a $56B industry* • Increasingly seen as distribution option by companies in range of industries * Armstrong & Associates “Logistics Management & Distribution Report” 7/02

17. Cost Service Strategic • Lower cost warehousing (scale economies) • Lower cost transportation • Flexibility — pay for what you use • Network optimization — wring costs out of all supply-chain links • Specialized services at lower cost • Quicker delivery • Increased geographic reach — closer to customer or manufacturing site • Access to leading-edge information technology • Customization to specific needs • Allows management to focus on core business • Rapid ramp-up (and ramp-down) capability • Minimizes company assets tied up in non-core operations • “Best of Breed” applications can provide competitive advantages 3PL Benefits • Although not right answer for every company, where it’s “right” it can provide cost, service & strategic benefits

18. 3PL Usage Rates Growing Percent Using or Considering 3PLs “What’s ahead for 3PLs?” Modern Materials Handling, 4/01

19. Greater Functional Integration • Boarder Operational Autonomy Business Process Management Client Client LLP 3PL Provider Client LLP 1990s-2000s IT Service Provider Outsourcing 1980s-1990s Client 3PL Provider In-sourcing 1970s-1980s Client Evolutionary Cycles Continuing Internal Logistics Operations Source: Adapted from John Gattorna 1998

20. QUESTIONS?

21. Forward Buys 3PL 3PL Seasonal Overflow 3PL Seasonal Overflow 3PL Disaster Relief Sampling of Wal-Mart’s own distribution centers Example: “Designed In” Flexibility

22. Example: “Designed In” Flexibility • Rapid marketplace changes • “Time to money”