1 The Benefits of Technology to Large Scale Wholesale Distribution ERP Benefits at Graybar Electric Company Updated from K filing

2 “It is managerial ingenuity that creates stockholder wealth through the invention and exploitation of new products, the development and more efficient provision of services, and sound financial management.” Leo E. Strine, Jr.,Vice Chancellor of the Delaware Court of Chancery

3 Agenda I.Graybar – Profile II.Project Background and Objectives III.Project Risks – The Challenge of Transformation IV.Graybar Business Case V.Outcomes and Benefits VI.Link to the Distribution Value Map VII.Conclusion

4 I. Graybar Company Profile Founded in Spun off from Western Electric and sold to employees in locations in North America. 8,000 employees. 6,000 shareholders. Based in St. Louis.

5 Graybar as an Industry Leader One of the largest electrical wholesaling companies in the U.S. One of the largest private companies in the U.S. A Fortune 500 ranked company. Recognized technology leader by InformationWeek, InfoWorld, and BusinessWeek. I. Graybar Company Profile Primary Markets Served Contractor Industrial Utility Government Graybar Business Volumes $5 billion in revenue $1.5 billion in assets 250,000 customers 4,500 suppliers

6 II. Graybar Project Background The Tipping Point: Our current system was running out of capacity – Home built/Mainframe based. Our business and industry were becoming more complex – Regulations/Rebates. Our customers needed us to be more responsive – One off requests/electronic interaction.

7 To use Technology as a catalyst for business process change. To Standardize, Simplify, and Automate our business process using ERP as a global best practice source. To create value by improving our asset management and generating positive cash flows using the most up-to-date tools available. To improve profitability by increasing employee productivity by focusing on activities the customer is willing to pay for. II. Project Objective

8 III. The Challenges of Transformation Design BuildTestDeploy Project Risk Phase Stabilization A/R Inventory Employee Self Service Gross Margin Improvement Business Disruption Risk Phase Investment Risk Phase

9 III. The Challenges of Transformation Project Risk Phase Business Disruption Risk Phase Investment Risk Phase 12 to 24 months duration Focus – Expenditure control – Design issues – Scope issues – Technical issues 12 to 18 months duration Focus – Customer & Employee retention – Training issues – Productivity issues – Morale issues 60 to 120 months duration Focus – ROI – Priority issues – Impact issues – Speed issues

10 IV. The Graybar Business Case To improve cash flow by better Accounts Receivable management. (10% reduction in days sales outstanding) To improve cash flow by better Inventory management and deployment. (10% reduction in days inventory) To improve profitability by increasing employee productivity. (10% increase in sales per employee)

11 V. Outcomes & Benefits Productivity Inventory A/R 10%

12 V. Outcomes & Benefits $698 Million $765 Million Days 50 Days Accounts Receivables 5% Improvement in days $67 million in positive cash flow 10% Days Updated from K filing

13 V. Outcomes & Benefits 10% $385 M $748 Million Days 28 Days Inventory 46% Improvement in days $363 million in positive cash flow Days 40 Updated from K filing

14 V. Outcomes & Benefits $596 K $469 K $450 $550 $650 Sales Per Employee 20% Improvement $100 thousand per employee improvement in productivity Thousands % Updated from K filing

15 V. Outcomes & Benefits 10% A/R Inventory Productivity 100% 5% reduction in DSO $67 million Positive cash flow 46% reduction in Inventory days $363 million Positive cash flow 20% increase Sales per employee $100 thousand more per employee 100% Near Miss Hit Updated from K filing

16 V. Outcomes & Benefits Unanticipated ERP/SAP Benefits Significantly increased the tempo of our business. Provides much richer data about our business. Provides greater control of our business. Taught us to be better project managers. Taught us the value of change management.

17 V. Outcomes & Benefits $505 M $386 M $326 M $373 M $312 M $198 M $641 M Net Debt (adjusted) 69% Improvement $443 million reduction $ Millions Updated from K filing

18 V. Outcomes & Benefits Balanced Scorecard YTD - 12 Months 2005 vs % 17% 5% 10% 15% 20% 25% 30% 19% 14% -5% 4% Revenue Gross Margin SG&A Operating Margin Net Profit Net Working Cap. Headcount (U.S.) 8% 88% 242% Updated from K filing

19 VI. Links to Deloitte’s Distribution Value Map

20 Enterprise Value Driven by ERP Accounts Receivable DSO is down 5.5% at Graybar

21 Enterprise Value Driven by ERP Inventory Inventory is down 46% at Graybar

22 Enterprise Value Driven by ERP Productivity Sales per employee up 33%

23 Enterprise Value Driven by ERP Increase the “Tempo” of the business Decision making at the speed of light at Graybar

24 Enterprise Value Driven by ERP Provide much richer data about the business Real time data about business performance Daily KPI’s on every Managers desktop

25 Enterprise Value Driven by ERP Provide greater control of the business Meet regulatory and governance requirements

26 VII. Conclusion Using technology to transform a large distribution company has risks and rewards. Process re-design and technology helped to generate significant value at Graybar through asset management improvements and gains in productivity. ERP/SAP is part of the secret sauce to our success.

27 Questions?