1 Overseas Sourcing Supply Chain Strategy Executive Overview China Japan Malaysia Taiwan S. Korea USA Pacific Ocean

2 Guiding Principles for Supply Chain Design  Value chain focus –Consider total supply chain cost –Understand cross-functional implications  Mitigate risks to consider factors such as –Distance –Variability in demand –Contingency  Develop flexible cost structure  Develop phased-in approach considering saving/risk tradeoff

3 Transcontinental Supply Chain Process TODAY Pacific Ocean You Have Nothing But Deep Blue Pacific Ocean Today! China USA Malaysia Taiwan

4 Transcontinental Supply Chain Process Options Various Options - Order Management - Quality Inspection - PIC/MRP/SOP Logistics Process Overseas Inland Transportation Ocean/air Freight US Inland Transportation Import Compliance OverseasUSA Warehousing Consolidation Cross-docking Overseas Supply Base Manufacturing Assembly Distribution Center(s) Overseas Consolidation Export Compliance Regional Delivery

5 Transcontinental Supply Chain Network Option 1 - Information flow - Physical goods flow - Documentation flow - Cash flow To Execute The Process. Manufacturing Assembly Ocean Freight (FCL) WHOWHO Us Your Warehouse Our Warehouses Clear Customs Inventory Warehouse Customer Demand Planning Cross- docking Overseas Supply Base Document Preparation Overseas Consolidat ion Clear Customs Booking Clear Custom s Bookin g FCLFCL YES NO Clear Custo ms Book ing

6 Transcontinental Supply Chain Network Option 2 Manufacturing Assembly 1 Overseas Consolidat ion Clear Customs Booking Overseas Supply Base FCLFCL YES NO Clear Customs Booking Ocean Freight (FCL) W h er e Site 1 Site 2 Our Warehouse 1 Clear Customs Warehouse Inventory Our Warehouse 2 Clear Customs Break Bulk if needed Demand Planning Manufacturing Assembly 2 Demand Planning Document Preparation

7 Benefits of Our Transcontinental Supply Chain Network Have true “visibility” into and “control” over supply chain network Meet variability in demand through a smoother pipeline of inventory Maximize Full Container Load shipments by consolidating LCLs - Without paying LCL price - Close to FCL replenishment cycle time - Reduced damage Better service across all your operations

8 Pilot 1: Widget - OM - QI - PIC/MRP Logistics Process Overseas Inland Transportation Ocean/air Freight US Inland Transportation Import Compliance Overseas Supply Base Manufacturing Assembly Overseas Consolidation Export Compliance Warehousing Cross-docking DC West Coast Import Compliance Warehousing Cross-docking DC IN GR Regional Delivery Replenishment Cycle time (Weeks) Total Supply Chain Cost ($/unit) Other RFP Factors (TBD) QualitativeQuantitative Partner 1 Partner 2 Partner 3 X XX XX X Partner 1 Partner 2 Partner 3 Today Partner 1 Partner 2 Partner 3 Today Note: - The graphs show the initial estimates of cycle times and total supply chain costs. - The detailed quoting and recommendation will be finalized upon the completion of RFP process. Example Lead-times from stock to plant are different

9 Transcontinental Supply Chain Initiative Decision-Making Time