© Copyright 2008 United Parcel Service of America, Inc. All rights reserved.

Synchronizing Global Freight

May 29, 2008

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Enabling Global CommerceUPS:

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 9th 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

SupplierManagement

InternationalAir Freight

OceanFreight

TradeFinancing

LTL RoadFreight

InternationalTrade

ServicesLogistics and Distribution

North AmericanAir Freight

InformationManagement

TruckloadRoad Freight

SmallPackage

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Supply Chain Element Spend

Freight and Transportation - All Modes 4.36% of sales

Warehousing 1.8% of sales

Order Entry / Customer Service .55% of sales

Administration .36% of sales

Inventory Carrying Costs 2.07% of sales

Total Average Supply Chain Cost 9.14% of sales

Sources: CASS, Stephens, Herbert W. Davis

The Cost of the Global Supply ChainFreight 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.

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Average Shipper Freight Spend by ModeTwice a decade 100,000 businesses across all freight shipping segments are asked to quantify their transportation spend across modes.

TL / LTL19%

Air Freight35%

Ocean Freight28%

Rail Freight4%

Other14%

Sources: Shipper Surveys, U.S. DoT / U.S. DoC

Average Freight Spend, International and Domestic

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Freight Routing: Different Modes for Different NeedsThese modes each deliver a different balance of Effectiveness (speed and precision) and Efficiency (shipment expense and per-carton cost)

Effe

ctiv

enes

s

Efficiency

10xCost

10xTime

6

T

ime

in T

ran

sit

3

5

6

7

16

26

28

40

Customer Ready Store Ready Pooler Ready DC Ready

Shelf Life

M

arg

in

S

easo

nal

G

eog

rap

hy

D

eman

d

High Margin Merchandise

Seasonal Merchandise

High Velocity Merchandise

Replenishment Merchandise

Freight Routing: One Size Does Not Fit All

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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

CLEARCUSTOMS

DECONSOLIDATESHIPMENTS

FINALDELIVERY

FULL VISIBILITY: End-to-end tracking provided throughout the supply chain.

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Single Mode FocusPotential 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-ShiftCapabilities

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

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Global Freight is Not a Level Playing FieldEffective 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-Outs 2%-8% improvement

Lower Inventory Levels 10%-40% improvement

Increased Sales 5%-20% improvement

Manufacturing Business Improvement Through End-to-End Supply Mgmt

Lower Inventory Levels 10%-40% improvement

Faster Replenishment Cycles 12%-30% improvement

Higher Sales 2%-10% improvement

Better Customer Service 5%-10% improvement

Sources: Benchmark analysis, AMR survey

Thank you

www.ups.com

© Copyright 2008 United Parcel Service of America, Inc. UPS, the UPS brandmark and the color brown are trademarks of Untied Parcel Service of America, Inc. All rights reserved.