SUPPLY CHAIN OVERVIEW

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Scott GradySr. Vice President

Landstar Supply Chain Solutions

North American Supply Chain Trends

Early 2000’s Globalized Focus

– One Product fits all Auto Industry

Clothing

Agricultural

Consumer Electronics

– Inventory Floats could be as much as 60 days

– Industry carried “Back up inventory” Velocity was Slow

NAFTA– North American Focus

Limited Global Impact

Premature for Infrastructure 2

North American Supply Chain Trends

Today Globalization Comes Home

– Consumer trends are changing more dynamically Auto Industry Clothing Agricultural

– Supplier Trends Near Shoring Campus Environment Tier 1’s are more sub-assemblers than Manufacturing based

– Auto– Electronics– Industry carried “Back up inventory”

Velocity Extremely Fast and agile Supply base has “right Sized” no excess Capacity

NAFTA– Today NAFTA is bringing Manufacturing to the Consumer– Mexico Has Advantage

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MEXICO Today

Mexico Seaports

– Intermodal– Strong Infrastructure focus in past 10 years

Highway– Infrastructure Upgrades and Rapid improvement– Can Source Regionally Today

Growing Consumer Demand Supplier Capacity Workforce Downside

– Security Issues– Political Strife– Limited Logistics Expertise (Growing)

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Changes in Strategy

Manufactures Campus Environment (Near Sourcing)

– Tier 1’s (sub Assembly) on Campus Parts are sequenced Inventory owned by Tier More capacity at Manufacturing sites Forced Suppliers to Tier 1

– Consumer Electronics

Consumer Driven Velocity– Trends drive sourcing choices– Time to Market

Consumers tastes change and they want more for their $ Retail-no longer seasonal, but stores are updated every 45-60 days Automobiles, used to be 36 to 48 months concept to dealer floor

– Dodge Dart 18 Months

Green Environment Risk Mitigation Sustainability

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Changes in Strategy

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Collaborative Suppliers:

Increased LTL Frequency Decreased Lead Time Decreased Inventory Reduced Transportation Spend

Customer

SupplierSupplier

Supplier

Supplier

Supplier

NOWCustomer

Supplier

Supplier

Supplier

Supplier

Supplier

THEN

Current Supply Chain Issues Cross Border

Visibility Security

– High valued cargo– Merchandise easy to sell– Merchandise that is not traceable

Expedite – Mexico– US

Vendor set-up Very little exchange still of capacity

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Supply Chain

Brief DiscussionDesign

Why Outsource

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Total Enterprise Solution

Air

Ocean

Truck

Rail

Reducing Supply Chain Costs and Increasing Visibility

Level 2 Shipment

Planning & Optimization

Shipment ExecutionGlobal In-Transit

Inventory Visibility

Master Data,Customer

Order

Financial Settlement

PerformanceReporting

Supply Chain Event

Mgmt

Level 1 SKU Level Planning

Transportation Management

System

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The Supply Chain Network

The Design Complexity drives the solution

– Size and volume does not drive complexity Forecasting integrity

– A changing forecast drives Mode change Deviation and route fall off Expedite

Visibility is the key– Multiple touch points need to have event marks

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Operational StrategicTactical

Basic Network Dynamic

Simple Optimization Evaluation of Cost & Service Options

Full Network Optimization

Shipment Level Shipment Level Daily / On Going

Excel / Access Transportation Modeler Enterprise

Network Design Types of Optimization

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1. Loading 2. Warehouse receiving. Storage as required

3. Container stuffing

4. Customs - origin

7. Customs -destination

6. International transport (Land, Sea and/or Air)

8. Port services - destination

9. Container de-stuffing and warehouse receiving. Storage as required

10. Truck loading

5. Port services - origin

11. Final delivery

• Route• Mode

OptimizedDecisions

• Timing• Equipment

• Consolidation• Service Provider

Service Time Calculation 3-Dimensional Container

Optimization Itineraries & Profiles Carrier Capacity Throughput Rating

Multi-Leg Multi-Mode Consolidation

Common Leg Consolidation

Multi Stop Consolidation Multi-Tier Networks LTL Consolidation Continuous Moves

Support a wide range of optimization needs

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Shipment Planning and Optimization

Shipment View– All Ship Units– By Item– By Commodity– By Stop

Change View Perspective– Nose– Tail– Top– Side

Manipulate, at the ship unit level – Sequence of loading– Orientation

Increase effective cube utilization Provides detailed loading instructions Reduces failed loads – loads that can not be loaded as planned Inputs to drive utilization include SKU level detail

– Stack ability, dimensions (LWH), dunnage13

Load Configuration

TOP 10 REASONS TO OURSOURCE

Global Reach– Leverage critical functions– Global resources

People, Process and Systems

Operating Expenditures (OpEx) Rules– No capital expenditures– Fees are operating costs– No need to show return on equity

Innovation and Interoperability– Outsources spend billions a year integrating new technology– Companies can tap into these resources

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TOP 10 REASONS TO OURSOURCE

Service Transparency– As outsourcing has matured however, metrics have become a key indicator

of the success– Organizations can benefit from best practices

Savings in Labor Cost– The cost of labor in developed countries for high level activities is

extremely high– Shifting the location where this work takes place is definitely advantageous

depending on the skill set. Centralized Management of Resources and Functions

– The ability for outsourcers to consolidate these functions is a core competency that many companies look to leverage.

– Commonality across divisions and regions in process

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TOP 10 REASONS TO OURSOURCE

Improving Regulatory Controls– Achieving, measuring and maintaining compliance is a complex and capital-

intensive endeavor. Companies with limited compliance resources look to outsourcing for the design, execution and auditing of controls, while allowing companies to retain requisite internal oversight

Accelerating Process Maturity– Outsourcing can often become the catalyst to drive business maturity– Outsourcing can drive a set of best practices and recommendations that can be

applied across the organization– Process integration is a key enabler to the improved delivery of services, and

provides a comprehensive framework for aligning resources to deliver business value and repeatable processes across the Supply Chain

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TOP 10 REASONS TO OURSOURCE

Increased Resources– Companies that need access to new skill sets for project work, mergers and

acquisitions and/or to support expansion into a new region, outsourcing can offer a solution.

– Leading outsourcing companies can support Strategic direction and develop new capacity as well as having a global reach to a broad talent pool

Improving Company Strategic Focus– Letting an outsourcer focus on managing operational functions allows

companies to focus more strategically on their core business, saving time and improving efficiencies

– Outsourcers today are in the business of driving innovation, managing data centers and applying non-disruptive technologies to help businesses succeed in an ever changing market

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Operational StrategicTactical

Tools

Focus

Horizon

3 to 6 Weeks 3 to 6 Months

Solutions Environment

Shipment / Load Management

Evaluation of Cost & Service Options

Full Network Analysis & Design

Daily / Weekly 6 Months to 1 Year 1 to 3 Years

Transportation Mgmt. Systems

Transportation Modeler

Supply Chain Strategist

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Order Optimization

ModeOptimization

CarrierOptimization

OrderVisibility

Business Intelligence

Reduce Shipments Least-cost Mode Least-cost Carrier Inventory Reduction Savings Validation

5 -15%Savings

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Cost Reduction and Value Creation

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Ripple Effect…….

The issues cause a …….

Capacity shortage predicted by mid 2013– Capacity down 7% from 2008 (Source Credit Suisse) – ATA predicts a loss of capacity with CSA as cash strapped companies

cannot afford in cab technology TT Asset utilization poor Empty miles are still high Customer leverage deteriorates as rates increase with shortfall

– Platform already strained in 1st and 2nd quarter 2012 Natural Disasters

– 2011 The year was telling

North America Capacity Market Issues

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3.5

3.0

2.5

2.0

1.5

1.0

0.5

0

Shipments(Numbers)

Expenditures(Dollars)

Jan 2011 Jan 201222

Capacity

Cass Freight Index

Transportation Industry Today

How far down the Supply Chain does your provider manage Can you use the process to let you know

– Event Management Business Intelligence Manage the exceptions Utilization

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Planned for the Un-Planned

Value Proposition

Benefit Category Explanation

Improved Shipment Visibility Many companies report a reduction in high cost shipments due to better transportation planning and shipment visibility

Optimize Carrier & Mode Selection Reduced costs due to automating the selection of the lowest rate carrier

Identify Transportation Invoice Discrepancies

Discrepancies are found at the individual shipment level prior to invoicing

Improved Carrier PerformanceUsing carrier performance information will help in the negotiation of better rates and the reduction in service related failures which impacts shipper’s bottom line

Lower Administrative Costs By automating the tendering, shipment creation, and consolidation process, firms can redeploy staff to more value added functions

Contract Savings By standardizing carrier tariffs and leveraging the buying power of Landstar, companies have received significant reductions in carrier rates

Utilize Carrier Assets More Efficiently

By leveraging technology of the carrier marketplace, customers are able to take advantage of backhaul pricing on many lanes

North American Supply Chain Trends

Thank You

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