1 DOING BUSINESS LIKE A BIG OCEAN SHIPPER LTD SUPPLY CHAIN Presented by:

2 MY PERSPECTIVE  Real world logistics experience with major importers and exporters (and domestic)  LTD Shippers Association—for SMEs for Imports primarily  Spoke at NITL seminars on OSRA  LTD Supply Chain—4PL / LLP for Import Supply Chains (4PL is neutral party)  SCM consulting for 3PLs, Importers, Manufacturers, Wholesalers, Retailers

3 WHAT NEW RULE (NSAs) MEANS  Two beneficiaries— SMEs 3PLs  NVO as competitive alternative to carrier deals with large shippers  Change the relationship between SME and NVO

4 NVOCC SERVICE AGREEMENTS --Basic Terms--  Origin port(s)  Destination port(s) and Inlands point(s)  Commodity (ies)  Minimum volume  Service commits  Liquidated damages (if any)  Duration  Legal names and addresses  Shipment records to be maintained  All other provisions

5 DEAL WITH NVO VS OCEAN CARRIER  Given your volume and complexity: How many ocean carriers you need What service(s) you require Flexibility ( Plan B) Whether space or containers is tight Trend of rates Better as Beneficial Cargo Owner / Direct Account or not?

6 KNOW WHAT YOU ARE BUYING  What do you need for service?  What rates do you need—port to port, port to door, door to door?  What carrier(s) is NVO quoting?  Which service (note: each carrier has multiple sailings) is NVO quoting?  What transit time?  What service/delivery reliability?  Ability to get you containers and get on ship as needed? And if not?

7 WHAT YOU ARE BUYING  Ability of NVO to add surcharges and increase surcharges or create new surcharges?  Ability to get lower rates in off-peak / soft market?  Need for Plan B flexibility in a commit agreement?  Insurance coverage and rate?  Free time and demurrage cost?  Do you deal with one or multiple NVOs or deal with NVO and a carrier?

8 WHAT YOU ARE BUYING  Void contract if too many service failures?  Volume commit Are two commits By NVO to ocean carrier Importer / Exporter to NVO Protection to importer / exporter in event NVO fails to meet his commit to carrier(s) and there are penalties

9 CONVERSELY FROM NVO VIEW  What do you bring to the table besides volume?  How well can you define your import supply chain process and operation? What problems are there and why? (Dumping problems on to NVO does not solve anything)

10 SUPPLY CHAIN ISSUES --Go Beyond the Freight Rate--  Freight is a derivative of the purchase order  It’s about what’s in the container, not the container itself  25+% of import POs are not shipped or delivered on time  Supplier performance is key concern

11 SUPPLY CHAIN ISSUES  Supply chain visibility is more than just a freight portal  Need for multi-carrier/multi-service strategy to align with different inventories (A vs B vs C)  Need an NVO or a 3PL / 4PL?  Don’t forget about Sarbanes Oxley

12 DOWN THE ROAD  Service Agreements can-- go beyond just freight rates become a vehicle for supply chain optimization lessen the competitive gap between the large shipper and the SME  Think beyond just rates

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14 IN CONCLUSION