1. consulting & technology financial services | payments | government | transportation | healthcare Managed Inbound Transportation 4 th Annual Government Transportation Forum April 24, 2014 – Presented by Richard Langer, Quetica, LLC

2. quèt  ica Agenda 2  Objectives  Inbound Management  Methodologies  Unmanaged Prepaid and Allow  Unmanaged Prepaid and Add  Managed Collect  Managed Optimized  Moving Toward an Optimized Inbound Management Model ©2014 Quetica, LLC

3. quèt  ica Objectives 3  Discuss differences in current inbound freight processes  Identify opportunity to reach an optimized inbound method  Realize cost savings through a managed inbound transportation strategy ©2014 Quetica, LLC

4. quèt  ica Opportunity For Managed Inbound  Government non-managed inbound cost is > 50% of fully landed cost as % of total transportation spend  Based on cross-agency sample, federal government pays 25% to 50% higher transportation costs vs. GSA transportation rates  Managing inbound transportation with outbound allows agency to create savings via network optimization  GSA estimates federal agencies spent about $4 billion on managed inbound in 2011 4 ©2014 Quetica, LLC Source: Office of Government-wide Policy, Office of Asset and Transportation Management

5. quèt  ica Methodologies 5  Unmanaged Prepaid and Allow  Unmanaged Prepaid and Add  Managed Collect  Managed Optimized ©2014 Quetica, LLC

6. quèt  ica Unmanaged Inbound Prepaid & Allow  Freight cost absorbed into cost of goods negotiated within Procurement  Prepaid and Allow  Fully Landed 6 ©2014 Quetica, LLC

7. quèt  ica Unmanaged Inbound Prepaid & Allow 7 Supplier Agency Supplier DC Contract ©2014 Quetica, LLC

8. quèt  ica Unmanaged Inbound Prepaid & Allow 8 Supplier Agency Supplier DC Contract ©2014 Quetica, LLC

9. quèt  ica Unmanaged Inbound Prepaid & Allow 9 Supplier Agency Supplier DC Contract Purchase order Contract ©2014 Quetica, LLC

10. quèt  ica Unmanaged Inbound Prepaid & Allow 10 Supplier Agency Supplier DC ASN Contract Purchase order Contract ©2014 Quetica, LLC

11. quèt  ica Unmanaged Inbound Prepaid & Allow 11 Supplier Agency Supplier DC ASN Contract Tender Purchase order Contract ©2014 Quetica, LLC

12. quèt  ica Unmanaged Inbound Prepaid & Allow 12 Supplier Agency Supplier DC ASN Contract Tender Purchase order 214 Contract ©2014 Quetica, LLC

13. quèt  ica Unmanaged Inbound Prepaid & Allow 13 Supplier Agency Supplier DC ASN Contract Tender Purchase order Invoice for Fully Landed Cost 214 Contract ©2014 Quetica, LLC

14. quèt  ica Unmanaged Inbound Prepaid & Allow 14 Supplier Agency Supplier DC ASN Contract Tender Purchase order 214 Contract Invoice for Fully Landed Cost ©2014 Quetica, LLC

15. quèt  ica Unmanaged Inbound Prepaid & Allow 15 Supplier Agency Supplier DC ASN Contract Tender 214 Purchase order 214 Contract Invoice for Fully Landed Cost ©2014 Quetica, LLC

16. quèt  ica Unmanaged Inbound Prepaid & Allow 16 Supplier Agency Supplier DC ASN Contract Tender 214 Payment Purchase order 214 Contract Invoice for Fully Landed Cost ©2014 Quetica, LLC

17. quèt  ica Unmanaged Inbound Prepaid & Allow  No management of  Trade documents  Invoices  Compatible with varied purchasing environment  Supplier ability to negotiate  Supplier markup to account for future years (20 to 50%)  Vendor traffic management dependency  No say in TSPs used  No cross vendor load optimization 17 ProsCons ©2014 Quetica, LLC

18. quèt  ica Unmanaged Inbound Prepaid & Add  Supplier is responsible for:  Contracting TSP  Managing delivery  Paying TSP  Actual freight cost is visible in agency’s invoice as a line item  Prepaid & Add 18 ©2014 Quetica, LLC

19. quèt  ica Unmanaged Inbound Prepaid & Add 19 Supplier Agency Supplier DC ASN Contract Tender 214 Payment Purchase order 214 Contract ©2014 Quetica, LLC

20. quèt  ica Unmanaged Inbound Prepaid & Add 20 Supplier Agency Supplier DC ASN Contract Tender 214 Payment Purchase order Invoice with Actual Freight Cost 214 Contract ©2014 Quetica, LLC

21. quèt  ica Unmanaged Inbound Prepaid & Add 21 Supplier Agency Supplier DC ASN Contract Tender 214 Payment Purchase order Invoice with Actual Freight Cost 214 Contract ©2014 Quetica, LLC

22. quèt  ica Unmanaged Inbound Prepaid & Add 22 Supplier Agency Supplier DC ASN Contract Tender 214 Payment Purchase order Invoice with Actual Freight Cost 214 Contract ©2014 Quetica, LLC

23. quèt  ica Unmanaged Inbound Prepaid & Add  Visibility to transportation vs. material charges  Can be managed in Procurement  No need to manage trade documents  Audit and reconciliation of supplemental invoices  Supplier ability to negotiate  Supplier markup  No say in carriers used  No cross vendor load optimization  Vendor traffic management  No visibility to audit 23 ProsCons ©2014 Quetica, LLC

24. quèt  ica Managed Inbound Collect  Costs for transportation are entirely born by agency with no activity supported by the supplier  Collect  Agency responsible for identifying, negotiating, and contracting a base of TSPs  Agency communicates approved TSP list to suppliers 24 ©2014 Quetica, LLC

25. quèt  ica Managed Inbound Collect 25 Supplier Agency Supplier DC ASN Tender 214 Payment Purchase order Invoice 214 Contract ©2014 Quetica, LLC

26. quèt  ica Managed Inbound Collect 26 Supplier Agency Supplier DC ASN Contract Tender 214 Payment Purchase order Invoice 214 Contract ©2014 Quetica, LLC

27. quèt  ica Managed Inbound Collect 27 Supplier Agency Supplier DC ASN Contract Tender 214 Payment Purchase order Invoice 214 Contract ©2014 Quetica, LLC

28. quèt  ica Managed Inbound Collect  Agency negotiates rates without markup  Agency determines TSPs  Managed via routing guide  Agency visibility to cost  Ability to audit invoice  Savings opportunity with agency or GSA contract rates  No visibility to cross vendor  Dependent on routing guide utilization  Spreadsheet  Load into supplier TMS  Leverage agency TMS  Supplier determines timing of shipments  Not 100% solution; Low ROI for varied procurement 28 ProsCons ©2014 Quetica, LLC

29. quèt  ica Optimized Managed Inbound Collect  All inbound freight centralized  Ability to optimize traffic decisions & supply chain network across all shipping activity  Supply Chain Network is established for all suppliers to participate  Agency performs traffic management or  Supplier performs traffic management on agency TMS 29 ©2014 Quetica, LLC

30. quèt  ica Optimized Managed Inbound Collect 30 Suppliers Agency Cross Dock Contract 214 Payment Purchase order data Routing instructions ASN Contracts Purchase orders ©2014 Quetica, LLC

31. quèt  ica Optimized Collect  Network Design Optimization  Traffic Management Optimization  Complete visibility  Audit of supply chain, as well as vendor  Significant savings  Not all inbound is 100% optimized 31 ProsCons ©2014 Quetica, LLC

32. quèt  ica Path Forward  Understanding inbound management potential starts with knowing where you are in your maturity  Setting goal for managed and optimized inbound freight management is a simple step forward 32 ©2014 Quetica, LLC

33. quèt  ica Discovery 33  Materials contracts analysis for transportation spend  Materials purchase order and invoice analysis to determine vendor shipment frequency, size, equipment and lane  Break data sample of shipping charges from fully landed cost  Identify existing TSP contract lanes gaps  Get industry benchmark data for all lanes in data sample  Benchmark shipping charges against contract rates and industry rate  Analyze existing infrastructure and processes to determine feasibility and required investment  Develop project ROI and business case ©2014 Quetica, LLC

34. quèt  ica Design 34  Identify target materials vendors:  For inbound network  For optimized inbound network  For unmanaged inbound networks  Run inbound network optimization simulation to determine quantitative network design  Establish quantitative and qualitative weighted factor decision model to finalize network design  Source transportation lanes for inbound  Establish operations and systems infrastructure  Create materials vendor & TSP communications & training ©2014 Quetica, LLC

35. quèt  ica Execution 35  Pilot managed inbound and optimized inbound networks with sample vendors and lanes  Analyze results and validate against business case  Establish supply chain, systems and business process infrastructure  Develop rollout strategy  Communicate and train vendors and TSPs  Migrate to optimized managed inbound network ©2014 Quetica, LLC

36. quèt  ica Summary 36  $1 Billion inbound materials spend  Average of $100 million in transportation cost imbedded in fully landed cost  Creates $35 million in managed inbound opportunity by eliminating risk premium and leveraging lower cost contract rates  In addition optimized inbound can yield another $10 to $15 million in cross materials vendor shipment optimization Total Savings Opportunity: $35 to $50 million for every billion in materials purchasing… ©2014 Quetica, LLC

37. consulting financial services | payments | government | transportation | healthcare 37 Questions & Answers Thank you for participating in today’s session. For more information, you can contact today’s speaker at: Richard Langer 651-964-4646 x800 richard.langer@quetica.com You can access a copy of the Inbound Management white paper at: http://www.quetica.com/download-request 37