The document discusses potential techniques for re-engineering freight and logistics operations to reduce costs, including implementing a standardized fuel surcharge index, consolidating LTL shipments into truckload loads with intermediate stops, eliminating pallet weight from shipping rates, and utilizing regional parcel carriers for shorter hauls. It is estimated these approaches could reduce annual transportation costs by 9-37% depending on the company's operations and shipping profile.

1. POTENTIAL RE-ENGINEERING TECHNIQUES
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 1

2.  The cost ($) of freight is generally between 4% to 8% of a
companies Gross Sales
 Freight ($) is 5.5%* of Gross Domestic Product (GDP) in the
United States
 With the largest mode being truckload {2010 - $520Bn**}
▪ Either:
▪ Parcel (Ground)
▪ Less-than-Truckload (LTL)
▪ Truckload
▪ Commercial Carriers
▪ Private Fleets
▪ Dedicated-Contract Carrier Services
▪ Inter-modal
 TOFC –Trailer on Flatcar
 COFC –Container on Flatcar
*Source: APICS Module 3, Managing Customer & Supplier Relations ,pg 74
**Source: DC Velocity, March 2011, pg 51
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 2

3.  Removed $36MM from $270MM in freight costs
through:
 Reengineering
 Stronger Tariffs
 Better Contract Negotiations
 Focused Routing Guides
SALES TRAFFIC SPEND POTENTIAL SAVINGS
(4% to 8% of Sales) (13% of Traffic Spend)
$ 50MM $ 2MM to $ 4MM $260K to $520K
$ 75MM $ 3MM to $ 6MM $390K to $780K
$100MM $ 4MM to $ 8MM $520K to $1.1MM
$250MM $10MM to $20MM $1.3MM to $2.6MM
$500MM $20MM to $40MM $2.6MM to $5.2MM
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 3

4. PACKAGING SHIPPING MANAGEMENT
MATERIAL, 6% SALARIES, 7%
OUTBOUND
TRANSPORTATION, 40%
DC/WAREHOUSE
OPERATIONS, 25%
INTER-FACILITY
TRANSPORTATION, 22%
Source: Grocery Manufacturers Association (GMA) Survey 2005
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 4

5.  THROUGH COMPETITIVE
 Contracts
 Tiered Discounts
 Tariffs
 Rate sheets
 TARGETED ACCESSORIALS ($)
 RE-ENGNEERING of METHODS
 COLLABORATIVE TRANSPORTATION
MANAGEMENT (CTM)
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 5

6.  Added in to the line-haul (offset the fluctuation in fuel)
 Changes Weekly from DOE published Diesel Prices (cst/gal)
 Two Ways to Calculate
 Cst per miles – Advantage if shipments are less than (<) 500 miles
 Percentage (%) – Advantage if shipments are more than (>) 750 miles
 All Carriers are calculating this in their rates
 There is no advantage to an All-In Rate
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 6

7. PRICE of FUEL
$5.00
$4.643
$4.50
$4.00
$3.823
$3.50
Cost of Diesel per Gal ($)
$3.345 $3.303
$3.00
$2.904
$2.837
$2.764 $2.771
$2.50 $2.534
$2.412
$2.322
$2.198
$2.272
$2.00
$1.929
$1.50
$1.00
$0.50
$0.00
JAN '05 JUN '05 JAN '06 JUN '06 JAN '07 JUN '07 JAN '08 JUN '08 JAN '09 JUN '09 JAN '10 JUN '10 JAN '11 MAR '11
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 7

8.  Most carriers usually agree to follow a company structured
index
 In the next graph –
 An aggregate of carrier fuel indices
 Compared to a Structured one
▪ Percentage (%)
▪ Cst per mile ($)
 Rates based on a typical cst per mile and Line-haul for
▪ 250 miles
▪ 500 miles
▪ 750 miles
▪ 1,000 miles
▪ 1,500 miles
▪ 3,000 miles (cross-country)
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 8

9. $2,500
$2,000
COST ($) of FSC APPLIED to SHIPMENT
$1,500
$1,000
$500
$0
MARKET PLACE STRUCTURED FSC INDEX ($ per mi) STRUCTURED FSC INDEX (% of L/H)
PRICE of FUEL- DISTANCE TRAVELED
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 9

10.  Reduced transportation costs by 29.6% by
implementing a standardized Fuel Surcharge (FSC)
index amongst all LTL Transportation Providers along
with a single base rate
 Reduced transportation costs by 21.9% through the
implementation of a standardized Fuel Surcharge
(FSC) index amongst all Transportation Providers
along with a single base rate
 Created a 12.8% decrease in freight costs with the
implementation of a structured Fuel Surcharge (FSC)
Index
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 10

11.  DELIVERIES (ORDERS)
 NOTHING LESS THAN 250lbs (One-Ways) –
Minimum $65
 COMBINED ORDERS SHIPPED OVER A 2-DAY
PERIOD
▪ Average Weight per Shipment  826.8 lbs
▪ Average Pallets per Shipment  4 pallets
 REC HOURS  8am–2pm (Unless Specified)
 MAXIMUM 7 SHIPMENTS per TRAILER
 MAXIMUM 24 PALLETS per TRAILER
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 11

12.  UNLOAD RATE  35 PALLETS per HOUR
 MINIMUM TIME per STOP  25 MINUTES
 MAXIMUM WEIGHT 45,000 lbs per TRAILER
 FOLLOW ‘HOURS OF SERVICE’ DRIVING REGULATIONS
 USED ROUTING SOFTWARE TO DEVELOP POTENTIAL
LOAD CONFIGURATIONS
 COMPARED CURRENT LTL COST TO PROPOSED
TRUCKLOAD w/INTERMEDIARY STOP-OFFS
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 12

13. $6,000
$5,000
TOTAL CHARGE FOR SHIPMENT
$4,000
$3,000
$2,000
$1,000
$0
SHIPMENT IX
SHIPMENT I
SHIPMENT V
SHIPMENT II
SHIPMENT IV
SHIPMENT VI
SHIPMENT III
SHIPMENT VII
SHIPMENT VIII
TOTAL COMBINED LTL RATES TRUCKLOAD RATE with Intermediary Stop-Off
13
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012

14. L/H with Fuel VIII
LTL $1,541.17
T/L w/Stops  $1,421.98
TOTAL WEIGHT – 19,814 lbs
TOTAL PALLETS – 25
Six Intermediary Deliveries plus Final
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SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 14

15. L/H with Fuel
LTL $3,025.99
T/L w/Stops  $2,483.97
TOTAL WEIGHT – 23,605 lbs
TOTAL PALLETS – 20
Five Intermediary Stops plus Final
15 15
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 15

16. L/H with Fuel VI
LTL $780.14
T/L w/Stops  $404.66
TOTAL WEIGHT – 34,358 lbs
TOTAL PALLETS – 20
Two Intermediary Stops Plus Final
16 16
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 16

17.  Reduced freight costs $147,304 annually
(20.2%) with the implementation of a freight
consolidation program moving LTL
shipments to Truckload with intermediary
stops-off shipments
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 17

18. MILES SHIPPED {BILLED vs. OPTIMIZED}
BILLED MILES, 540.9
OPTIMIZED MILES , 489.4
480
530
550
470
520
540
460
490
500
510
Thousands
MILES
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 18

19.  Saved $313,474 annually by utilizing a routing
program along with the PC Miler software
where miles were determined for multi-stop
shipments and invoices paid from this
data, this produced a 37.6% of that portion of
the freight spend
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 19

20. ANNUAL WGHT of PRODUCT SHIPPED (lbs) ANNUAL WEIGHT of PALLETS SHIPPED (lbs)
2,183,800.0
643,141.3
19,847,200.0
859,452.0
11,256,757.4
7,601,088.0
STUDY I STUDY II STUDY III
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 20

21.  Reduced the Annual LTL Freight Spend by 9.2%
with removal of the pallet weight from the rate
calculation of the shipment
 Saved $242,000 (11.8%) in Annual Freight Costs
by negotiating a stronger tariff amongst the LTL
carriers with better discounts and waiver of
pallet weight with the product shipment
 Eliminated 5.2% of calculated rating with the
removal of the pallet weight from the shipment
calculation SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 21

22. REGIONAL PARCEL CARRIERS STATES COVERED
TransTek  CO, WY
OnTrac  WA, OR, CA, NV, UT, AZ
LoneStar Overnight  TX, NM, OK, LA, AR
SpeeDee Delivery Service  MN, IA, KS, MO, NE, WI, IL
US Cargo Packaging  WV, OH, KY, TN, IN, MI
Eastern Connection  VA, MA, NJ, NY, VT, MD, DE, ME, CT, VT, RI, PA, NH
Skyline Messenger  GA, AL
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 22

23.  If 30% of Shipments are within 600 miles
(zones 2 thru 4) of Specified Regions
 One can utilize a Regional Parcel Carrier in place
of UPS & FedEx
▪ Negotiate More Aggressive Discounts
▪ Waiver of Assessorial(s)
▪ Higher Tiered Savings Discounts
▪ Better Dim Qualifications
▪ Over-Night Service Guaranteed with no additional cost
($)
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 23

24. A holistic approach that brings
together supply chain partners and
service providers to drive
inefficiencies out of the transport
planning and execution process
*-Source: APICS Dictionary 12th Edition; Advanced Supply Chain Management –’Managing
Customer and Supplier Relationship’ Module 3, Section B
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 24

25.  Breakdown Pricing:
▪ Drive Time (Ideal Hours)
▪ Back-Hauls with Customer or Suppliers
▪ Continuous Moves
▪ Co-Loading
▪ Insurance
▪ Fuel
▪ Reduction of carriers' wait time for loading and unloading
▪ Optimization of weight and volume capacity of network resources
▪ Route Optimization
▪ Load Optimization
▪ Preferred Carrier Rating
▪ Off Hours Loading/Unloading
▪ Drop & Hook
▪ Etc…
 All which help to drive down costs in the system
SRM Logistics, Inc (Stephen R McCleary, Pres) ©2012 25