Mr. Bruce Jacquemard Executive Vice President Savi Technology

1. Mitigating security threats and facilitating trade through the deployment of a global security network Mr. Bruce JacquemardExecutive Vice President Savi Technology

2. Smart and Secure Tradelanes • More then 40 SST Partners (ISO participation announcement 14 May, 03 – ISO/TC8 Chair) • Current – 12 of the largest/busiest global tradelanes • Global Information Network and Physical Infrastructure • SST provides real-time visibility of location and security status tracking infrastructure from point of origin to destination • SST compliments US (CSI, CTPAT, OSC) and other global initiatives

3. Key Drivers in Supply Chain Security • Transparency and Visibility of Supply Chain • Improve visibility across entire supply chain for security and efficiency • Build capability to track and locate containers • Physical Security • In addition to data layers of defense, we need physical layers of defense for cargo, containers, ports, supply chain facilities, and people. • Complete System Intelligence • Point/silo requirements, decisions, and/or solutions can sub-optimize the entire network; address global supply chain security as network problem • Regulatory Compliance • Implement US Customs Programs of CTPAT, CSI and 24 AMR in an integrated approach • Forensics and Restart • Isolate  Recover  Learn • Systems and networks need to be judged not only by how well they perform but also “how well they fail” and restart.

4. Requires a “Smart Network” • Transparency and Visibility of Supply Chain Make people smarter –locate containers with information from inside the system (automatic reporting of location, status, routing, contents, etc.) • Physical Security Make the conveyance smarter – integrate deterrence and automated detection capabilities (location, security status, secure history and event log, automate manifest, sensing, etc.) • Complete System Intelligence Make processes smarter –Manage what you measure - real-time information drives optimization of processes leveraging all available information from within or from outside the logistics system • Regulatory Compliance Make enforcement smarter - Automated checks or information collection for CSI, CTPAT, AMR. ( authorized access recorded/ linked to manifest, AMR stored with container at origin, Automated Seal verifications, etc.) • Forensics and Restart Allow us to continue to learnand adapt -Analyze/diagnose event and respond appropriately, ability to segment issues and restart

5. Goal: Secure the Supply Chain • Secure at Point of Container Packing • Manufacture • Consolidation Mfg Distribution Center Retail Distribution Center Transit Port Road/Rail Transport Retail Store Vessel Vessel Factory Road Transport • Limit Terrorism Threats • Dirty Bomb • Contamination Road Transport Consolidator / Distribution Center Port of Loading Port of Discharge Monitor at Key Choke & Transit Points • Reduce Shrinkage • Identify Pilferage Points

6. SST Deployment Memphis/ Menlo DC Long Beach • Status Updates Availability: • 100% Coverage • Partial Coverage • Not Available • Not Applicable Container Stuffing International Security Status Update Domestic Security Status Update Container Unloading Venture Mfg Road Transport Consolidator / Distribution Center Road Transport Port of Loading Vessel Transit Port Singapore Maersk, Hanjin, or APL Road/Rail Transport Retail Store Retail Distribution Center

7. Systems Framework For a Security Solution • Rather than securing a specific person, place, or thing as we have in the past – we now have to look at security of the process as a whole. • No single process change or technology device offers a complete solution by itself • Increased focus on containers vs. Vessels (container as message packet) • Integrating new processes or applying new technologies to facilitate efficient distribution of information • Automated methods of collecting and distributing data further up the supply chain • More real-time capabilities to link information flow to the physical flow • Software systems for identifying, analyzing and responding to real-time information

8. SST Network – End 2003 NJ – PNCT Seattle APL Eagle Marine Seattle TTI Hanjin Savannah Longbeach TTI Hanjin NJ-Global Terminals ECT Rotterdam Hutcheson/Line HNN - Antwerp PSA - Singapore Indonesia Shekou Felixstowe UK China Merch HIT Hong Kong Chi wan Kaohsiung (Twn) Yantian SAFMarine (SA) Guilan Island Federation Alaska Savi Hosted LA Long Beach Tokyo Baltimore Seattle Guatemala New Orleans Tacoma Laem Chabang Shippers Houston NY / NJ Genoa Jacksonville Turkey Puerto Rico

9. Current SST Participants  75% of the world’s container trade

10. Container Stuffing • Import containers from Malaysia are stuffed at contract manufacturer • Container sealing performed by an authorized individual using an active RFID seal. • Container data – manifest route, schedule, other required information – keyed into TSS application and made available to downstream trading partners and Customs systems. Future EDI integration to eliminate keying data. • Future - Video associated to record container loading and biometric worker verification • Automatic verification of seal status as container departs consolidation point • Software application to manage change in control for container sealing Manufacturing Facility - Malaysia

11. Transshipment Port – Singapore Truck Entry at Gates/Arrival by Feeder • Automatic recording of arrival and status information through RFID • Tie-in of RFID and application to truck profile, pre-advisal, and reservation system to provide updates to terminal operator • OCR/pressure sensor to check untagged containers • Monitoring personnel will have the appropriate qualifications (e.g. TWIC) Yard Coverage • Seal status continuously monitored through network of readers in yard • Terminal areas distinguished as “safe” vs. “uncontrolled” zones • Container inspection (either personnel or technology) for containers that give off alerts • Software access control protocol for container seals/unseals in the yard • Workaround solution of polling reader plugged into car battery used to scan containers in PSA yard while awaiting loading on mother vessels of Hanjin & APL services Non-Intrusive Inspection • Unsecured containers passed through nuclear/gamma-ray portal • Data passed to software application and appropriate systems and compared to previously captured container images and videos Quay-Side Automatic recording of container departure and status information; software application receives information

12. Port of Discharge – Long Beach Data made available to Customs, Coast Guard, and INS & referenced with other incoming intelligence data Non-Intrusive Inspection • Unsecured containers are passed through nuclear or gamma-ray portal; • Data passed to software application and appropriate systems and compared to previously captured container images and videos Vessel arrival at Long Beach Yard Coverage • Seal status continuously monitored through network of readers in yard • Intrusion detection enabled Quay-Side Automatic recording of container arrival and status information; software application receives information Truck Exit at Gates (For truck-modal transport) • Automatic recording of arrival and status information • OCR/pressure sensor as failsafe device

13. Drayage- Rail/Long Haul to Distribution Center Satellite Link Drayage • Automatic recording of departure status and information at Rail Ramp Drayage • Automatic recording of arrival status and information at Railhead Load to Train in LB • Automatic recording of arrival and status information Long haul • Automatic recording of departure status and information Container Arrives at Final Destination • Automatic recording of arrival status and information • Container unsealed by authorized party, tagged items deconsolidated and cross-docked (if appropriate) • Software application monitoring • In Transit • Instant Security Status Change Notification

14. Software Application: Transportation Security System (TSS) Global Views • Global visibility for containers in-transit • Status and location listing for selected criteria • Serves as localized application of software Facility Views • Current facility inventory • Facility clearance verification • Yard location • Inquiry by container or by type of assets • Inspection facilitation Handheld Terminal • Container Views • Current container location • Container status • Routing information • Movement history • Associated manifest data • Inspection history • User & historical security info • The TSS software application: • Maintain audit trails of container security and route histories • Manage deviation alerts (including route and schedule) and tamper alerts • Provide sealing and unsealing functionality in a handheld terminal • Allow workflow configuration to enable management of business processes • Provide visibility of current container movements for further supply chain operational benefits • Provide a register of authority enabling selected personnel to perform seal/unseal activities • Sample “view” and drill-down functionality includes …

15. “Drill Down” on Major Impacts of Security Infrastructure on Efficiency Economic Benefits Substitution Cost Savings:direct and indirect cost avoidance attributed to the substitution of existing 24 Hour AMR compliance processes with automated compliance & security processes. • Reduction in Bill of Lading Surcharges , expedited freight • Reduction of Safety Stock due to improved certainty Scale Cost Savings:‘across the board’ direct and indirect cost savings attributed to improved trade compliance, reduced U.S. Customs inspections, and cargo theft incidences. • Reductions in Direct Costs of Inspections • Theft Cost Savings • Safety Stock savings from reduced inspections Structural Improvements:fundamental or ‘structural’ savings and margin increases attributed to the flexibility provided by improved container security transparency and visibility. • Reductions in Safety Stock from reductions in transit-time variations or inventory optimization or….. • Margin increases from improved transparency and customer service • Reductions in Risk man costs, Reductions Insurance, reduction in manual security processes KEY DRIVERS Inventory Carrying Costs • High tech goods have high depreciation and obsolescence rates. • The greater the depreciation, the greater the safety stock needed to cover variations in transit times. • The greater the commodity value of the container, the greater the inventory carrying cost. % Reduction in Transit-time Variation • A 10% reduction in transit-time variation has a 65% increase cost savings and profit increase. Margin Multiplier • High Tech goods have sales multiplier effects. • The opportunity cost of missed sales is a multiple of the actual retail value of goods, due to customer attrition and missed sales of ‘add-on’ or complimentary products. • The indifference point of this multiple in the inventory-service tradeoff is .4. Service Target Rates v. Actuals • Direct relationship between difference between the target and the actual in-stock service rate.

16. Two Representative Customer Benefit Scenarios Are Created Scenario 1: Holding Customer Service Levels Constant while Reducing Safety Stock Scenario 2: Holding Safety Stock Constant while Increasing Customer Service Levels Customer “As-Is” SST “To-Be” Customer “As-Is” SST “To-Be” 1.3% $2.9M 1.3% 15% Direct Cost of Theft & Pilferage $8.3M Inventory Cost Due to 24 Hour AMR 15.5% $1.8M .9% Inventory Cost Due to Inspection 9% Increase in Sales Margin from Improved Customer Service 75% % = Percentage of Total Total Inventory Cost of Safety Stock 73% Substitution Scale Structural Total: $20M Total: $0

17. Automated Compliance of Customs Programs Empowers Shippers with Benefit Choices: Reduce Inventory or Increase Customer Service Levels $Millions • SST gives Shippers flexibility to optimize their inventories and service levels based on data collected by security infrastructure • Analysis concludes that this customer should leverage security solution to increase service levels : $8.3M margin increase versus $2.9M cost savings • However, depending on firm’s market position they can align and optimize their benefits anywhere on the SST curve Margin Increase $8.3M Cost Reduction $2.9M Customer Service Level

18. Learning Points from Real World Experience 24 Hour Advance Manifest: • Initial results indicate that 24 Hour Advance Manifest is possible through a combination of automated processes, technologies, and integrated messaging and enables better supply chain planning and execution. Data: • Initial qualitative results demonstrate improved data accuracy, completeness, and timing through enabling processes/technologies, upstream supply chain data, automated tracking, and leveraging the port or 3PL as the consolidator of information. Automated Tracking and Physical Status-Location vs. EDI: • Automated tracking is inherently accurate vs. EDI (batch). • Example: an automated SST event showed a container had physically arrived at a US port whereas the EDI transmission said it would arrive 2 days later. Pattern Analysis: • Initial results indicate that routing mistakes and deviations happen and in SST are automatically detected through an automated tracking network vs. legacy systems or EDI. This has security and efficiency implications. • Example: 2 containers from Thailand arrived in Singapore; prescribed routing did not include transshipment at Singapore. Network-based Problem Requires Network-based Solution: • The complexity and dynamic nature of global supply chains requires a common open architecture where multiple processes and technologies can be tested and innovated upon rather than having to create and integrate point solutions.