© Copyright 2008 United Parcel Service of America, Inc. All rights reserved. Synchronizing Global Freight May 29, 2008

2 Enabling Global Commerce UPS: World’s largest package delivery company and a global leader in supply chain services Revenue of $49.7 billion in 2007 Moves 6% of U.S. gross domestic product Serves more than 200 countries and territories around the world 7.9 million customers daily 93,637 ground vehicles 268 aircraft - World’s 9 th largest airline 101 years of experience UPS Supply Chain Solutions: A global provider of integrated logistics and supply chain solutions Revenue of $8.4 billion Operations in 120 countries with over 1,033 facilities and 38 million square feet of warehouse space Customs brokerage services in all major international trade locations Global air and ocean freight forwarder and a leading Non-Vessel Operating Common Carrier

3 Supply Chain ElementSpend Freight and Transportation - All Modes4.36% of sales Warehousing1.8% of sales Order Entry / Customer Service.55% of sales Administration.36% of sales Inventory Carrying Costs2.07% of sales Total Average Supply Chain Cost9.14% of sales Sources: CASS, Stephens, Herbert W. Davis The Cost of the Global Supply Chain Freight and transportation accounts for an average 4.36% of Cost of Goods Sold (COGS). This is the largest and most actionable area for near-term supply chain improvement.

4 Average Shipper Freight Spend by Mode Twice a decade 100,000 businesses across all freight shipping segments are asked to quantify their transportation spend across modes. Sources: Shipper Surveys, U.S. DoT / U.S. DoC Average Freight Spend, International and Domestic

5 Freight Routing: Different Modes for Different Needs These modes each deliver a different balance of Effectiveness (speed and precision) and Efficiency (shipment expense and per-carton cost) Effectiveness Efficiency 10x Cost 10x Time

6 Time in Transit Customer Ready Store Ready Pooler Ready DC Ready Shelf Life Margin Seasonal Geography Demand High Margin Merchandise Seasonal Merchandise High Velocity Merchandise Replenishment Merchandise Freight Routing: One Size Does Not Fit All

7 Example: An Integrated, Mode-Shifting Solution Freight and individual packages are picked up and consolidated Consolidated shipment crosses the border in a single customs clearance Freight moves via LTL Packages enter UPS package delivery network Package and LTL shipments are delivered direct to multiple retail stores and/or end customers PICKUP / CONSOLIDATE SHIPMENTS CLEAR CUSTOMS DECONSOLIDATE SHIPMENTS FINAL DELIVERY FULL VISIBILITY: End-to-end tracking provided throughout the supply chain.

8 Single Mode Focus Potential economy of scale at cost of agility and responsiveness Progression of Global Freight Management Strategy Multi-Modal Management SKU level routing optimization, maximum utility with lowest opportunity cost, heightened agility, decreased disruption Mode-Shift Capabilities Sea-Air, Trade Direct, DC bypass, transload, in-transit VAS application, shortened transit, heightened value Full Supply Chain Management End-to-end global supply chain cohesion, total distribution cost management, active management of suppliers, integrated customer and regulatory compliance

9 Global Freight is Not a Level Playing Field Effective management of end-to-end freight and ancillary functions can reduce total distribution cost by up to 5%, with the same impact on profit as a 30% increase in sales. Retail Business Improvement Through End-to-End Supply Management Reduced Stock-Outs2%-8% improvement Lower Inventory Levels10%-40% improvement Increased Sales5%-20% improvement Manufacturing Business Improvement Through End-to-End Supply Mgmt Lower Inventory Levels10%-40% improvement Faster Replenishment Cycles12%-30% improvement Higher Sales2%-10% improvement Better Customer Service5%-10% improvement Sources: Benchmark analysis, AMR survey

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