Types of Third Party Providers Asset‑Based Services Offered Through Use of Supplier's Assets Often Dedicated Services

1. Types of Third Party Providers Asset‑Based Services Offered Through Use of Supplier's Assets Often Dedicated Services (Contract Carriage, Warehousing) Management‑Based Non‑Asset‑Based Act as Coordinators/Consultants Strength is Information Integrated Asset‑Based Service Beyond Capacity of Assets Administrative Non‑Asset‑Based, Focus on Administrative Services Freight Bill Auditing/Payment Claims Management/Adjustment

2. Asset‑Based Third Party Providers Own Their Own Equipment Advantages Provide Name Recognition Financial Strength Equipment Availability Have In‑House Expertise Ability to Handle Emergencies Disadvantages Internal Politics Lack of Management Commitment from Parent Difficult to Ensure Customer of Neutrality

3. Management‑Based Third Party Providers Do Not Invest in Equipment Contract with Other Companies Advantages Flexibility in Dealing with Carriers Frequently Have Excellent Information Systems Neutral Provider Ensures Serving Customer's Best Interest Disadvantages Lack of Name Recognition Unknown Financial Stability Lack of Expertise Difficult to Handle Emergencies

4. Functions Outsourced to Third Party Providers Percentage of Firms Citing Usage Category 2000 2001 2002 2003 Freight Bill Payment 43 53 63 72 Shipment Consolidation 43 49 49 66 Direct Transportation Service 49 61 56 62 Custom Brokerage 40 41 67 62 Warehouse Management 56 59 42 60 Freight Forwarding 44 45 59 53 Carrier Selection 29 43 51 51 Tracking/Tracing 33 44 51 Measure Carrier Performance 47 Rate Negotiation 29 37 47 38 Re-labeling /Re-packaging 21 25 23 38 Order Fulfillment 24 33 33 34 Product Returns 21 25 23 30 Reverse Logistics 26 IT System Operation 20 16 21

5. Buyers of 3PL Services # of 3PLs Used General Motors 37 Wal-Mart Stores 33 Ford Motor, Hewlett-Packard 27 Procter & Gamble 20 General Electric 17 Georgia-Pacific, IBM 16 Du Pont, Home Depot 14 Altria Group, PepsiCo, Sears Roebuck 13 Coca-Cola, Sara Lee, Target, Xerox 12 General Mills 11 Delphi, Safeway 10 Colgate-Palmolive, Deere, Kroger, Lucent Tech 9 Dow, Exxon, Honeywell, IP, Kmart, Weyerhaeuser 8 Major Users of Third Party Logistics

6. Impact of 3PL Use on Firms Category Negative No Impact Positive Employee Morale 22 45 33 Logistics Costs 10 14 77 Customer Satisfaction 6 29 65 Systems Development 10 47 43 Logistic Service Levels 1 14 85 Supply Chain Integration 2 35 63

7. 3PL Cost Benefits to Firms Percent of Respondents 3PL Service Reporting Benefits Warehouse Management 30 Rate Negotiation 16 Shipment Consolidation 14 Freight Bill Payment 30 Direct Transportation Service 14 Fleet Management/Operations 8 Carrier Selection 6 Freight Forwarding

8. 3PL Service Benefits to Firms Percent of Respondents 3PL Service Reporting Benefits Warehouse Management 22 Order Fulfillment 11 Freight Bill Payment 9 Direct Transportation Service 9 Fleet Management/Operations 9 Tracking/Tracing 7

9. Reasons for Using Third Party Providers Category Importance Rank Labor Cost Savings 2.08 1 Specialization 2.29 2 Reduce Asset Use 2.36 3 Inadequate Resources 2.43 4 Transportation Cost Savings 2.54 5 Expanding Workload 2.54 5 Lack of Flexibility 4.07 7 . 1= Most important; 5 = Least Important

10. Reasons for Not Using Third Party Providers Category Importance Rank Loss of Management Control 1.62 1 Company Policy Dictate 3.44 2 Waiting for Industry Trends 3.59 3 Lack of Specialized Vendors 3.67 4 Organizational Resistance 3.74 5 Human Resource Problems 4.04 6 1 = Most important; 5 = Least Important

11. Problems with Using Third Party Providers Category Importance Rank Service Level Consistency 3.33 1 Management Control 3.42 2 Customer/Vendor Relations 3.82 3 Company Policy Restraints 3.95 4 Company Employee Relations 4.10 5 Departmental Resistance 4.13 6 1 = Major Problem; 5 = Not a Problem

12. Suggestions for First Time 3PL Users • Develop key performance indicators and targets and incorporate them into the 3PL contract • Carefully develop internal logistics costs before meeting with potential providers • Seek broad company inputs at the RFP Stage • Solicit multiple RFPs and closely check references • Be sure the cultures of the two organizations are similar • Don’t give up complete control of your supply chain to the provider

13. Suggestions for First Time 3PL Users • Select only the services you really need • Make sure you understand the technology issues before proceeding to the contract stage • Prepare to change you assumptions after the startup • Move slowly before signing the contract • Retain your own links with carriers • Manage your provider very closely

14. Carrier Selection Criteria Importance Selection Criteria Score Rank Transit Time Reliability/Consistency 1.301 1 Door to Door Transport Rates/Cost 1.405 2 Total Door to Door Transit Time 1.551 3 Willingness to Negotiate Rates 1.611 4 Financial Stability of Carrier 1.807 5 Equipment Availability 1.878 6 Frequency of Service 1.892 7 Pickup and Delivery Service 1.899 8 Freight Loss and Damage 2.037 9 Shipment Expediting 2.054 10 Quality of Operating Personnel 2.108 11 Shipment Tracing 2.118 12 Willingness to Negotiate Services 2.162 13 Scheduling Flexibility 2.267 14 Line Haul Service 2.389 15 Claims Processing 2.338 16 Quality of Carrier Salesmanship 2.635 17 Specialized Equipment 3.476 18 .