22001122 TTLLCC CCOONNFFEERREENNCCEE:: IIMMPPOORRTTIINNGG && EEXXPPOORRTTIINNGG APRIL 23RD, 2012 ORLANDO, FL

by Jerrod Slaughter, Corporate Transportation Manager

IMPORT & EXPORT: SHIPPER PERSPECTIVE

Know the Mode Ocean service contracts and service agreements What is important?

Have a Strategy Line vs. NVOCC Request for Quotation

On Boarding KPI / Evaluation

WHAT ARE THE BASICS?

OCEAN: IMPORTANT FOR A SHIPPER

Rates

CY, IPI, Door?

Surcharges

Bunker (Fuel)

Peak Season (PSS)

General Rate

Increase (GRI)

MQC Volume

Detention Demurrage

KPI

Container Rates Type of delivery is needed Container Size Container Routing

Essential Accessorial Terms Surcharges Bunker Peak Season (PSS) General Rate Increase (GRI)

Essential Service Terms Space Guarantees Minimum Quantity Commitment (MQC) Detention & Demurrage Delay In Transit (DIT)

Performance levels / KPI

RATES: DEFINE SERVICES NEEDED

Type of delivery is needed? Container Yard (CY) Inland Port Intact (IPI) Store Door Delivery (SDD)

Container Size 20 FT, 40 FT, 40 FT High Cube, 45 FT, 53 FT (APL)

Routing All Water Service (AWS) Landbridge

Rates

ESSENTIAL ACCESSORIAL TERMS

Surcharges Advance Manifest Fee (AMS) Chassis Usage Surcharge (CUS) Document Fee (DOC) Terminal Handling Fee (THC) War Risk Surcharge (WRS) Etc. (See 40+ other terms)

Bunker (Fuel) Floating schedule

Peak Season (PSS) Typically June 1st through October 31st

General Rate Increase (GRI) / Rate Restoration (RRI)

Any time based on Carrier / Alliance

ESSENTIAL SERVICE TERMS

Space Guarantees HPH to Portland X FEU?

Minimum Quantity Commitment (MQC) 200 FEU for a year? What is the right number?

Detention (out gate)& Demurrage (in gate)

Days (calendar / working) Delay In Transit (DIT) Performance levels / KPI

Booking acceptance Service Strings / Port to Port On-Time

undesirable terms then evolve

One step at a time!

Partner with internal Legal Counsel

Include terms with new Request for Quotations

Discuss with internal stakeholders. Understand that terms can cause lengthy negotiations and potentially impact rates.

Careful not to overbuy!

Best Practice!

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Understand Ocean Line vs. NVOCC

WHAT ARE THE OPTIONS?

OCEAN: LINE VS. NVOCC

OCEAN LINE NVOCC NON VESSEL OPERATING COMMON CARRIER

TThhee PPoossiittiivvee Direct relationship with Line Leverage MQC FEU volumes directly to secure terms/rate/service Assigned allocation can lead to consistent service string transit time Strong long term partnerships can assist during industry challenges

TThhee CChhaalllleennggee More complex i.e. FMC requirements Provide forecast of trade lane volumes Manage MQC volumes Resources and bench strength to manage multiple Ocean carriers Challenging to make changes

TThhee PPoossiittiivvee Flexibility with little to no commitment Less complex to manage

No FMC required for shipper No MQC requirement No long term commitment

Ability to chase rate Much closer to the market rates

TThhee CChhaalllleennggee

Subject to volatility of market Susceptible to surcharge

GRI / RRI PSS

No direct relationship with Ocean carrier Possible less predictable transit times

OCEAN: LINE VS. NVOCC

General Recommendation Depends on product shipped, Logistics Model and Needs

Over 3,000 FEU consider going direct with Line Between 3,000 1,000 mix Ocean Line with NVOCC Less than 1,000 FEU consider using NVOCC

NVOCC (Non-Vessel Operating Common Carrier - Forwarder) Volatility of Market? PSS, Market rate increases, GRI, etc. Transits vary by selected Line Little to zero relationship with Line

Ocean Line Subject to FMC Minimum Quantity Commitment (MQC)

QQ.. WWHHAATT IISS BBEETTTTEERR?? LLIINNEE OR NVOCC? Answer: Depends. It is really determined by what the shipper is seeking and alignment with their Supply Chain strategy.

VENDOR MANAGEMENT

Define Supply Chain Strategy & Needs Request for Quote (RFQ)

Know the Market Document shipper characteristics Identify and include Stakeholders Define service expectations Boilerplate Stakeholders provide suggested carrier RFQ pool Container Rate and Surcharge template Understand service string and transit offering Cost Analysis on 80%-90% volume lanes Selection

On Boarding Performance Evaluation

Operational readiness

Detailed Standard Operating Procedure (SOP) Escalation path

Limited volume at startup Slowly turn on the Valve!

Deming Wheel approach Plan, Do, Check, Act

KPI agreement Reporting requirements Quarterly or Bi-annual business review Measure transit expect vs. actual Cargo Claims Billing Issues Service Review

Booking performance Space guarantees Transit time metrics

SHIPPER NEEDS TO BE A PARTNER

Shipper provided FEU forecast by lane Best practice: 3 month rolling forecast Keep it simple!

Communicate Origin Performance Is cargo getting booked and COB as expected? Any rolls, delays, etc.? Be engaged and ask for feedback

International Air Freight Forwarding

IMPORTANT TERMS AND STRATEGY

CONTRACTING FOR AIR FREIGHT: WHAT IS IMPORTANT?

Rates by route Port-Door, Port-Port, etc.

Recommend add gateway to door as option Add Service levels that fit your need Exp, Std, Def Add tier level weight break

Know your sweet spots!! Include transit days by service by lane Define service commitments Fuel surcharge Reference by incorporation Peak Season Liability and cargo claims

FORWARDER DIFFERENTIALS

Full service forwarder vs. niche regional forwarder Carrier service area Forwarders usually handle all major lanes

A full service forwarder may compliment a Shippers needs as supply chain becomes more complex

forwarders Experts in specific geographies

Forwarders seek different freight mixes to support trade lane

Rates and very drastically between competing forwarders Shop around for best rate

INTERNATIONAL ITS AN ADVENTURE