Presentation to MBA Group

December 17, 2001

Robert R. Auray, Jr.

President & CEO

Agenda

3PLIndustry

You

Actual Costs (in Billions)

299

39

481

78104 Inv Carrying Costs

Admin

Truck

WarehousingOther Carriers

U.S. Logistics Costs: $1,006 (billions)

Source: Cass Information Systems – 12th Annual “State of Logistics Report” – 6/4/01

Outsourced Logistics Market Size (billions)

0

10

20

30

40

50

60

1992 1997 2000

10b

34.2b

56.4b

Source: Armstrong & Associates

Penetration Rate of 3PL

0123456789

10

1992 1996 2000

2.7%

6%

8-10%

Key Benefits Sought From 3PL?

% of Fortune 500 Companies Using 3PLs

©Copyright 2001 Armstrong & Associates, Inc.

% of Fortune 500 Companies Using 3PLs

73%

53%47%

33%24%

0%10%20%30%40%50%60%70%80%

1-100 101-200 201-300 301-400 401-500

Fortune Ranking

% o

f R

an

k C

ate

go

ry

UPS/Fritz $27B

Fed Ex (Caliber/RPS/Viking/Roberts Express) $19B

CNF Group (Menlo//Emery/Conway) $5.6B

Kuehne & Nagel/USCO $5B

Ryder Integrated Logistics $5B

Ocean Group (Exel/MSAS/Mark VII) $5B

Danzas-AEI-DHL $5B

NOL - APL Group (BLS/ACS/Pacer/GATX) $4.6B

Expeditors International $1.7B

Major Third-Party Logistics (3PL) Service Providers

• Revenues of 3PL industry leaders are growing at approximately 18% per year; profits are growing at approximately 22%

• The three highest percentage users of 3PL services are the following:– Computer and peripherals (82.2%)– Consumer products (75.9%)– Retail (71.1%)

• Customer-3PL relationships are established for longer periods of time & are yielding lower overall total cost of customer operations

• Customers are outsourcing an increasingly larger portion of their Logistics Information Technology to 3PLs

3PLs: What’s Going On Out There?

Future Directions

• Full Service-Integrated Solutions to become the Norm-Upstream to Manufacturers’ Suppliers

-Downstream to Manufacturer’s Customers

-“Joint Venture Companies” …. Menlo – Vector

-Information Technology Capabilities will be equally important to Physical Assets & Service Network

-Visibility to Inventory At Rest & In Motion

-Exception Based Management (Sun example)• Proactive Issue Resolution

• Vendor consolidation-Gainsharing/Risk Sharing

• Further Consolidation of the Logistics Industry-Mergers, Acquisitions and Divestitures

• “4PL”

4PL

Plan Design Collaborate Operate Optimize

Manage

Transportation CMs/OEMs Warehousing Distribution Fulfillment

View

Manage an optimized supply chain on behalf of the customer, as the single point of contact.

Proposed Organization Model

General ManagerGlobal Logistics

DirectorSC Optimization

DirectorInformation Technology

DirectorFinance & Admin.

Day-to-DayOperations

SC Optimization

Flow Planning &Scheduling

System Operations

Network Operations

Integration Services

Application Development

Payment Services

Payroll Services

Legal Services

Admin. & HR Services

XYZ 4PL Organization

General ManagerGlobal Logistics

DirectorSC Optimization

DirectorInformation Technology

DirectorFinance & Admin.

Day-to-DayOperations

SC Optimization

Flow Planning &Scheduling

System Operations

Network Operations

Integration Services

Application Development

Payment Services

Payroll Services

Legal Services

Admin. & HR Services

Message Routing and Management

Secu

r it y

S

erv

ice

s

Valid

ati

on

Serv

ices

Inte

gra

tion A

PI

Application Connection Interface

Tr a

nsa

ct i

on

Serv

i ce

sD

i rec t

or

y

Serv

i ce

sV

ali d

ati

on

Serv

i ce

s

Manag

em

ent

Serv

i ces

Rep

ort

ing

S

erv

i ces

Int e

gra

t io

n

Serv

i ces

VisibilityServices

OrderManagement

ForecastingCollaboration

Services

SupplyMgmt

ERP

LegacyCRM

DataWhse

EAI Services

WarehousePartner

TransportationPartner

TradeCompliance

Partner

ManufacturingPartner

Customer

Client Private B2B Exchange• Directory Services• Security Services• Non-repudiation and Audit Services• Message Services• Reporting• Order Management• Forecasting• Collaboration Services• Visibility Services• Translation Services

Communications Protocols• XML• EDI• XML Variants• RosettaNet• Others?

Client Connection• XML• One “Hole” in Firewall• Maximum Private/Public Isolation

Proposed 4PL iHub (concept)

USCO Logistics Overview

• Leading provider of customized, integrated supply-chain solutions

• 35 years of third-party logistics experience

• Manage 15M sq. ft. of distribution space in 70 DCs across North America

• 3,000 staff

• Process more than 1.9 million lines & 500K orders monthly

• Focus on technology, pharmaceutical & retail business segments

• Business partner with some of the world’s most respected companies

North American Network

Shared Distribution Centers

Dedicated Distribution Centers

Ontario CACerritos CA

Reno NV

Hayward CA (2 D, 1 S)

Portland OR (1 D, 1 S)

Denver COLenexa KS

Tulsa OK

Dallas TX

Lewisville TX

Shakopee MN

Chicago IL

Shreveport LA

Memphis TN

Nashville TN

Lakeland FL

Miami FL

Dorval, Quebec

Port Clinton OH

Sheffield OH

Franklin MA

Guadalajara

Mexico City NorthMexico City South

Louisville KY

Charlotte NC

Durham NC (8)Zebulon NC

Jersey City NJNewark NJBridgeport NJ (3)

Joppa MD Savage MDGaithersburg MD

Pittsburgh PA (2)

Atlanta GA (1 S, 2 D)

Ventura CA

Calgary, Alberta

Monterrey

Baltimore MD

Allentown

Ottawa, Ontario

Integrated Supply Chain Management SolutionsIntegrated Supply Chain Management Solutions

Our Total Logistics Solution

Somewhat limited offering until KN acquisition.

InternationalLogistics

Optimized service & savings through non-asset based solutions and industry expertise

TransportationManagement

Highly customizedsolutions meetingcustomers’ unique needs in dedicated facilities

DedicatedLogistics

Flexible solutions via our nationwide network of distrib-ution centers using standard systems and processes

SharedLogistics

E-Services / Information Logistics / Supply Chain Visibility

Our Expertise: Customers

RetailConsumer /Industrial

Healthcare / Pharmaceuticals

High Tech

Integrated Supply Chain Management SolutionsIntegrated Supply Chain Management Solutions

Revenue by target industry

high-tech

healthcare

retail

other

High-tech

H-care/Pharma

Retail

Other

APL/GATX

UPS/Fritz

SchneiderPenske

FedEx

Competitive Positioning

RelationshipCommodity Vendor

Business Partner

Bre

adth

of

Ser

vice

sFull suite, integrated

Narrow, non-integrated

USCO Today

Menlo

Ryder ExelUSCO

“Warehouse of the Year”

On the go at USCO

“Proving that warehousing is becoming more about managing information than inventory, USCO Logistics' innovative business practices have earned the firm our annual Warehouse of the Year award…”

www.warehousemag.com

Vision

“To berecognized

by our customers as the leader in global

supply chain management”

KN-USCO Combined Service Suite

Int’l Trans Mngt.

Import Management

DistributionCenter

Services

Outbound Logistics

Origin Services

P.O. ManagementVMI/KittingConsolidation ProgramsFreight ForwardingOrigin TransportationCargo Booking

Export Management

Inspection Svcs (SGS)Export DocumentationExport Compliance

Int’l Trans. Mngt

NVOCCAir Freight ForwarderSea-AirIntercontinental Truck & Rail

Import Management

Customs House BrokerageDuty DrawbackDeconsolidationLocal Transportation

Destination Services

Inter-modal Transp.Trucking & RailDomestic Air FreightCross Docking & MITDC Bypass Programs

Export Mngt.

Origin Services

Destination Services

D.C. Services

Store/Pick/Pack/ShipLight AssemblyVMI/KittingIn-bond OperationsReturns ManagementValue Added Svcs

Outbound Logistics

Transp. MngtFrt. Audit & PayContract CarriersASNsTrack/Trace

Supply Chain Management Services Analysis, Design & Optimization Consulting LLP--Lead Logistics Provider Services

Global Track and Trace

Knowledge Management

Financial Services

What Are 3PLs like USCO Looking for In a New Hire Coming Out of University?

You

Useful Skills

• Database– Spreadsheet– Relational

• Analytical skills– Ability to examine cost/service trade-off between supply chain

functions (DCs, Transportation, service)

• Strategic context– Ability to look past symptom to see real illness

Characteristics of Recruits Who Do Well

• Comfort with technology/software– Quick study on variety of applications (WMS, TMS, Modeling Tools, etc)

• Mobility• Flexibility• Humility

– Know what they don’t know

• Good communicator. Good interpersonal skills.– Assertive without being aggressive

– Can persuade or influence

• Self-starter/High Achiever • High initiative/Independent

– Does not wait to be told what to do

Characteristics of Recruits Who Do Not Offer a “Good Fit”

• High grades, no communication skills• Not mobile• Arrogant• Don’t ask questions if they don’t understand• Need constant oversight

2001 Logistics Graduate of the University of Nevada, Reno

Special Projects, June, 2001 - Present

•Transportation Projects

-Cross-functional project which included IT, Finance and Transportation

-Developed database to track carrier issues.

-Initial evaluation of potential Transportation Management Systems

Operations Technology

-Implementation of MARC Warehouse Management System at pharmaceutical distribution center

-Exposure to Project Management

Sales

-Project lead on customer segmentation…developed database to evaluate customer profile

Profile: Jeremy Duddlesten

Comments From Jeremy

“Get as much experience as you can in logistics environment -- in the actual operations. “

“Don’t take well-rounded education for granted. Need those accounting and marketing skills”

“Don’t sit back and let things happen. Be aggressive and push for you want. Don’t wait for things to be handed to you…volunteer… Suggest ideas”

Profile: Brian Urban

•Penn State University, B.S. in Business

Logistics, May 2000

•Logistics Analyst - Operations Technology Group

-Bar Coding – Critical parts business

•Studied & documented current processes. Also developed new processes involving bar code scanner technology

•Developed test cases investigating weak spots or failures in scanner programming or new processes

-New Customer Transition

•Managed the transition of 6 Xerox parts centers (site evaluation, developed project plans, facility layouts, and managed physical move).

-Supply Chain Suite

•Developed functional specifications for variety of supply chain offerings with a team (Order Mngmt, Inventory Mngmt, WMS, Transp, Reverse Logistics).

Comments From Brian

“Since graduation, I have gotten real world training you don’t learn in school. For instance, one minute I will be interacting with a minimum wage warehouseman on a process change and the next minute I will get a call from a VP asking for a high level assessment of how a project is going….”

Advice• Always be proactive…think out of the box• In your first position upon graduation, find something that

will challenge you and allow you to learn….Don’t just look at pay scale and location.”

Profile: Jim Jones

• B.S. in Business Logistics, Penn State, 1999• May 99-Oct 99 – Supervisor at pharmaceutical DC• Oct 99-Jan 00 – Promoted to Operations Manager

– Side project transitioning DC from another 3PL to USCO in Montreal

• Jan 00-July 00 – Designed and implemented consistent operating system across USCO locations to maximize efficiency (IMPAC program)– 15% productivity improvement– $2 million in cost savings (profit improvement)– 200,000 miles flown, experience at 20 locations’

• July 00-present – Promoted to Head of Shared Operational Systems– Lead auditor for USCO Logistics Excellence Group

Jim Jones: Comments“I was given an opportunity right out of college to make a

difference. I was allowed to propose ideas and I was listened to.”

ADVICE

“Stay in school for as long as you can….”

“Be open to travel in order to give yourself the best opportunity to learn and make a difference. The best experiences aren’t necessarily within 10 miles of your home.”

THANK YOU!

3PLIndustry

You