Innovate or Die, Partner or Perish

1. Innovate or Die, Partner or Perish May 25, 2012 Istanbul, Turkey

2. Innovation Curve: innovation 1957 1969 “I call my invention “The Wheel”, but so far I’ve been unable to attract any venture capital.” 1903 “OK, you invented the wheel, but what have you done for me lately?” time 8,000 BC 3,500 BC C 2008

3. Innovation: What Made Long Distance Flying Possible? Jet Engines GPS Equipment Wide Body Aircraft The Toilet

4. STRATEGY COLLABORATION • “Partner or Perish” INNOVATION • “Innovate or Die” EXECUTION

5. AGENDA • Strategy • Strategy and Innovation • Strategy and Collaboration • Collaboration Execution • 5 Areas Where Innovation Will Occur

6. Strategy Positions Growth Client Intimacy Shareholder Value ROIC Op Margin Average Growth & Margin Rate Ops Excellence Low Cost Product Innovation Value Proposition Client Target Service Delivery Operations

7. R&D Eng PD Proc SCL Mfg QA Dist Sales Svc Admin R&D Eng PD Proc SCL Mfg QA Dist Sales Svc Admin R&D Eng PD Proc SCL Mfg QA Dist Sales Svc Admin Spend Varies by Market Position 10 IBM Focus 0 Client Intimacy 10 Apple Focus Product Innovation 0 10 Product Innovation Dell Focus 0 Source: Break Through Bill Davidson

8. AGENDA • Strategy • Strategy and Innovation • Strategy and Collaboration • Collaboration Execution • 5 Areas Where Innovation Will Occur

9. Multiple Options Seven Markets Seven Automobiles Business People 325i Sedan Vinyl Cloth Leather Racing Enthusiasts M3 Families with Kids 325i Sports Wagon Aluminum Wheels Chrome Wheels Hub caps Urban Cowboys Mini Cooper Outdoor Enthusiasts X3 Sunshine Lovers 325Ci Convertible Blue Red Green Dating Couples 325Ci Coupe Strategy Positions & Innovation: Low Cost—BMW Story Specialization All on 1 Platform Customization With “Plug & Play” This approach to Specialization & Customization delivers for BMW a 20% Operating Ratio

10. UTiInnovation Strategy: Innovation & Cost Management R&D & Innovation Client Requirements Drive Lower Operating Cost Expand Configuration 80-90% Configuration

11. Best of Breed Products Best of Breed Solutions Strategy Positions: Product Innovation Microsoft Integration Word Processing Leader WordPerfect Microsoft Office How many of these products are left ? Spreadsheet Leader Lotus 1-2-3 Graphics Leader Harvard Graphics Database Leader Ashton Tate dBase History shows the integrated solution wins (beats the competition), even if the individual products of the integrated suite are weaker than the “best of breed”

12. Product Innovation:APPLE Adjacent Industry Integration Movies Store Player Computing Browsing Apps

13. Client Intimacy Innovation: Innovation of a Commodity into a Solution Busy Exec Out House Designer Throne Cultural Toilet The First Toilet On-The-Go

14. Strategy Positions: Client Intimacy—Spaghetti Dinner Client Intimacy Other 3PLs Do It Yourself Operations Excellence Low Cost Product Innovation

15. AGENDA • Strategy • Strategy and Innovation • Strategy and Collaboration • Collaboration Execution • 5 Areas Where Innovation Will Occur

16. Partnership: Why Partner? • Why Partner? • Reduce risk • Fill a Gap • Speed to market • Gain expertise • Solve a problem • Operate at a lower cost • Do it better • Easier to get funding Control • Share it • Borrow It • Rent it • Lease it • Own It Supplier Buyer • Why Not? • Compete in collaborative • networksalready • Rival each other in an industry • Promote competing technologies • or infrastructures; • Create relationship exclusivity • that prevents partners from working • effectively with other partners.

17. Control and Flexibility are Often at Odds: Can You ReachPrime with Collaboration 100% Flexibility Control Amount Of Flexibility & Control 0%

18. AGENDA • Strategy • Strategy and Innovation • Strategy and Collaboration • Collaboration Execution • 5 Areas Where Innovation Will Occur

19. Strategy & Collaboration: (Cost / Quality (including risk) / Speed Tradeoff) Expertise Optimization Processes • Network Design • Network Optimization • TM • Inventory Optimization • Postponement • Order Management Systems • Shared Infrastructure • Shared Systems • Shared Expertise / Verticals Pooling • Economic Advantage • Visibility & Control Client Fixed Asset Operator Carrier Management Postponement & Distribution Network Other 3PLs Do It Yourself Expertise Systems • Service levels • Risk reduction • Experts • Continuity / Staffing Compliance Relationship Government & Regulatory

20. An Open Business Model (OBM) for Open Innovation (OI) Indispensable Dialogue Steps Establish Trust Build Goodwill Create Value • Ensure all internal • departments are on • board & not competing • with the partnership • Determine what can be • shared • Identify legal and • anti-trust issues • Assess whether the • relationship can work • Create & hold a similar • vision • Build & share IP together • Determine the process • for IP sharing in advance • Supplier owns ingredients • & technology (solution) • Partner owns the • application of the IP • (smart application) • Who gets what of the new • monetized solution • Communication, commitment, & • transparency • Explicit knowledge is easy to share • but the value comes from tacit • knowledge (real time Info sharing) • Use a methodology • View, Aim , • Execute • Idea Store • Who will do what • so each party • knows their role • By sharing and • brainstorming build • goodwill (win / win) • The enemy is each • partners competitors, • not each other • Has to create commercial • value for participants • Use project management to • implement • Need to develop a mindset of • “sharing is winning” • Need to focus on OI (Open • Innovation by • Leadership • Strategy • Partnership • Champions • Internal experts • Customers

21. Execution & Innovation: 5 Things To Focus on in the Future Expertise Optimization 1 Processes • Network Design • Network Optimization • TM • Inventory • Postponement • Order Management Systems Pooling • Economic Advantage • Visibility & Control Client Fixed Asset Operator Carrier Management Postponement & Distribution Network Expertise Systems • Service levels • Risk reduction • Experts • Continuity / Staffing Compliance Relationship Customs

22. 1) Network Design: 80-90% of Supply Chain Cost is Driven by Supply Chain Design

23. Execution & Innovation: 5 Things To Focus on in the Future Expertise 1 Processes • Network Design • Network Optimization • TM • Inventory • Postponement • Order Management Systems Pooling 2 Optimization Client Fixed Asset Operator Carrier Management Postponement & Distribution Network Expertise Systems • Service levels • Risk reduction • Experts • Continuity / Staffing Compliance Relationship Customs

24. 2) Static to Dynamic Execution—How We Do This? Key Metric: Cost/Kg Key Metric: Purchase Price Variance Real Time Data Forecasting Agility Total Cost • Static • Historical • RFQ • RFI Dynamic Execution VUCA How do you get consistency in the cost / kg so you avoid answering the PPV Question? Optimization

25. Execution & Innovation: 5 Things To Focus on in the Future Expertise Optimization 1 Processes • Network Design • Network Optimization • TM • Inventory • Postponement • Order Management Systems Pooling 2 • Economic Advantage • Visibility & Control Client Fixed Asset Operator Carrier Management Postponement & Distribution Network Expertise Systems • Service levels • Risk reduction • Experts • Continuity / Staffing 3 Compliance Relationship Customs

26. Compliance • Why Compliance • is Important • Foreign Corrupt Practice Act (FCPA) • Anti-Bribery Laws • Entry into new markets • Emerging Markets (1st world solutions) • Increased & Changing Regulatory Requirements • Increased compliance focus and penalties • What are the RISKS of • Non-Compliance? • Damage to company image • Fines and penalties • Sanctions • Interruptions or loss of privileges • Supply Chain Disruptions • What can a Supply Chain • Partner do? • Minimize Risk • Act as buffer • Knowledge and training • Communication • (Global) Processes • Controls

27. Execution & Innovation: 5 Things To Focus on in the Future Expertise Optimization 1 Processes • Network Design • Network Optimization • TM • Inventory • Postponement • Order Management Systems Pooling 2 • Economic Advantage • Visibility & Control 4 Client Fixed Asset Operator Carrier Management Postponement & Distribution Network Expertise Systems • Service levels • Risk reduction • Experts • Continuity / Staffing 3 Compliance Relationship Customs

28. Data to Knowledge • Control • Optimization • Real time execution • SC Design • Predictability = Reduce PPV • SC disruptions Convergence & Combination

29. Execution & Innovation: 5 Things To Focus on in the Future Expertise Optimization 1 Processes • Network Design • Network Optimization • TM • Inventory • Postponement • Order Management Systems Pooling 2 • Economic Advantage • Visibility & Control 4 Client Fixed Asset Operator Carrier Management Postponement & Distribution Network Expertise Systems • Service levels • Risk reduction • Experts • Continuity / Staffing 3 Compliance 5 Relationship Customs

30. Best Practice For ONE Industry Might Not be Innovative in Another Industry "If Ford had kept up with technology like the computer industry has, we would all be driving $25 cars that got 1,000 miles to the gallon." Bill Gates Comdex

31. If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics: #10: For no reason whatsoever, your car would crash......... Twice a day.

32. If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics: #9: Every time they repainted & updated the lines in the road, you would have to buy a new car.

33. If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics: #8: Occasionally your car would die on the freeway for no reason. You would have to pull to the side of the road, close all of the windows, shut off the car, restart it, and reopen the windows before you could continue. For some reason you would simply accept this.

34. If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics: #7: Occasionally, executing a maneuver such as a left turn would cause your car to shut down and refuse to restart, in which case you would have to reinstall the engine.!!!!

35. If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics: #6: Macintosh would make a car that was powered by the sun, was reliable, five times as fast and twice as easy to drive - but would run on only five percent of the roads.

36. If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics: #5: The oil, water temperature, and alternator warning lights would all be replaced by a single warning light . . . “This Car Has Performed An Illegal Operation”

37. If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics: #4: The airbag system would ask 'Are you sure?' before deploying.

38. If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics: #3: Occasionally, for no reason whatsoever, your car would lock you out and refuse to let you in until you simultaneously lifted the door handle, turned the key and grabbed hold of the radio antenna.

39. If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics: #2: Every time a new car was introduced car buyers would have to learn how to drive all over again because none of the controls would operate in the same manner as the old car.

40. If Ford had developed technology like Microsoft, we would all be driving cars with the following characteristics: #1: You'd have to press the 'Start' button to turn the engine off.

41. Ford’s Final Comment … when all else fails, you could call 'customer service' in some foreign country and be instructed in some foreign language how to fix your car yourself!!!!

42. STRATEGY COLLABORATION • “Partner or Perish” INNOVATION • “Innovate or Die” EXECUTION