Risk Management for Global Sourcing NAW Large Company Financial Executives Networking Conference May 13, 2008 – Chicago, IL Don Munchrath, CFO

Global Sourcing Drivers for Carlson Reaction to market factors Reaction to market factors Emergence of generic alternatives to proprietary fasteners Emergence of generic alternatives to proprietary fasteners Need for supplier diversification Need for supplier diversification Cost advantages Cost advantages Paradigm changes in wholesale distribution – strategic supply vs. “peddler” Paradigm changes in wholesale distribution – strategic supply vs. “peddler”

Chronology of Foreign Supply 1980’s 1980’s Limited Limited A few direct relationships A few direct relationships Foreign JVs connected to US manufacturers Foreign JVs connected to US manufacturers Collective efforts through industry groups Collective efforts through industry groups

Chronology of Foreign Supply 1990’s 1990’s Emergence as a strategy Emergence as a strategy Need for consistency & predictability Need for consistency & predictability Broker partnerships Broker partnerships A few key direct relationships A few key direct relationships

Chronology of Foreign Supply 2000’s 2000’s Need for direct relationships Need for direct relationships Self-education & commitment to “row our own boat” Self-education & commitment to “row our own boat” False start in 2004 due to steel shortages False start in 2004 due to steel shortages price advantages of foreign supply create disruptive opportunities price advantages of foreign supply create disruptive opportunities All out efforts throughout 2007/2008 to locate and partner directly with foreign suppliers All out efforts throughout 2007/2008 to locate and partner directly with foreign suppliers Laufer relationship Laufer relationship

Current Portfolio 600-1,000 containers from outside the U.S ,000 containers from outside the U.S. $15 to $25 million (~20%) $15 to $25 million (~20%) Primarily collated fasteners but also Primarily collated fasteners but also Steel strap Steel strap Bulk nails Bulk nails

Resources to Manage Risk Background checks & other intel Background checks & other intel Face-to-face due diligence Face-to-face due diligence Domestic insurance coverage Domestic insurance coverage Hired logistical expertise Hired logistical expertise NOT: NOT: supplier agreements supplier agreements indemnity clauses indemnity clauses supplier insurance coverage supplier insurance coverage

Logistical Services & Benefits Load scheduling Load scheduling Visibility on inbound loads Visibility on inbound loads Information and expertise – tariffs, importation requirements Information and expertise – tariffs, importation requirements Flexibility Flexibility Potential cost advantages Potential cost advantages

Lessons Learned Packaging and presentation Packaging and presentation Duties Duties Product quality Product quality Necessity of foreign travel Necessity of foreign travel Know who you’re dealing with Know who you’re dealing with Credibility with suppliers Credibility with suppliers Uncovering globally unsophisticated suppliers Uncovering globally unsophisticated suppliers

Locating Suppliers If products are familiar and/or commodity, not much different than domestic effort If products are familiar and/or commodity, not much different than domestic effort Domestic and foreign trade shows Domestic and foreign trade shows Foreign travel Foreign travel More challenges if extensive communication/collaboration is required More challenges if extensive communication/collaboration is required