1. Best Practices In Transportation Procurement Long Island Import Export Association April 14, 2011

2. Photo placeholder Agenda – State of the Market: 2009-2011 – Supply & Demand Levels – Value-based Assessment – Centralization – Lessons from 2010 – Fuel Surcharges – The Role of NVOs – Bid & Contracting Practices 2

3. Unprecedented Volatility in 2009 and 2011 Discussions with shippers and carriers suggest freight rates in 2011 will be stable. 3

4. Priorities Changed in 2010 – So has Risk* Buyers were forced to reset their focus on service levels and capacity availability across modes. 4

5. Supply & Demand Dynamics Development of transpacific and transatlantic container volumes and slot capacity, 1995 – 2010, in ‘000 TEU – Moffatt & Nichol 5

6. Supply & Demand Dynamics Volume growth is expected but it will be modest compared to 2010. Source – IHS Global Insight 6

7. Buyers Sought Automation In 2009 60 percent of firms managed transportation procurement manually. In 2010 that number fell to less than 40 percent. 7

8. Automation Allows For Centralization Systems that manage the complexity of large, global networks allow for centralization of procurement activities. 8

9. Automation + Centralization = Best Practice Centralized buyers were far less likely to have rates increase by double digits. Why? 9

10. Equipment Shortages In 2010 Lapse in container production during downturn (2008-2009) came back to haunt the industry in 2010. Shippers who could get space often had trouble getting equipment – particularly exporters located “off the beaten path.” Best practice – Forecasting, communication and accountability. – Accurately forecast your need for equipment and space. – Communicate changes to your forecasted needs to your carriers. – Hold your carriers accountable for service failures, particularly if you’re providing them with good information. 10

11. Battleground 2011: Fuel Fuel prices (all kids – bunker, diesel, etc) will be extremely volatile in 2011: – Unrest in the Middle East – Global economic uncertainty remains – American “driving season” BCOs are looking to lock-in fuel costs to make transportation costs predictable. If you’re not paying your carrier a fuel surcharge you’re paying for it in the freight rate. Best practice – Let your fuel surcharge float with an agreed upon index. – IFO 380 Singapore/Rotterdam – Threshold based adjustments to fees. 11

12. The Role of NVOs – US Inbound BoLs 12 Tight capacity markets like we saw in 2010 drive volumes to NVOs.

13. The Role of NVOs More BCOs are using NVOs than ever before: –NVO’s share of US inbound TEU has increased to about one- quarter in 2010; up from less than 10 percent in 2003. –NVOs and Carriers are nearing parity in terms of shipments. There are pluses and minuses to using an NVO: – Leverage purchasing power of larger volumes (plus). – One more degree removed from carrier (minus). Best practice –BCOs with dense volumes should negotiate with carriers AND include an NVO in your carrier mix. Small BCOs should leverage NVO scale; align with shipper’s associations where applicable. Warning – Know your NVO. 13

14. Bid Solicitation & Contracting Practices Plan for the unexpected: – Consider scenarios where your network will be impacted (example – Japan quake/tsunami, Iceland volcano). – Ensure you have access to the spot market. Keep companies you don’t contract with in the loop. KISS – “Keep It Simple Stupid” – Use commonly accepted terms and conditions; don’t make up anything crazy. – Clearly define terms and especially acronyms. Long term contracting – Is it right for you? – Large, steady, predictable volumes. – Base commodities. 14

15. Thank you! Please feel free to contact me at any time: Jim Blaeser Publisher American Shipper (212) 464-8394 BlaeserJ@Shippers.com 15