Reducing Product Damage in a Global Supply Chain

Agenda Introductions/Background Damage Risk for Product Distribution Managing Damage in the Supply Chain How a Monitoring Program Works

About ShockWatch, Inc. ─ Founded: 1974 ─ Headquarters: Dallas, Texas ─ Distribution: Global ─ Solutions: Indicators & recorders covering major environmental conditions: impact, tilt, temperature, vibration & pressure ─ Customers: 2/3 of the Fortune 100 & 1/2 of the Fortune 1000 ─ Markets:  White Goods  Furniture  Industrial  Defense/Aerospace  Pharmaceutical  Food  Energy  Communication Systems  Electronics  Medical Equipment

Damage Risk for Product Distribution

The longer the supply chain, the greater the risk of damage. Distribution Center Retailer

The average number of times a product is handled before it reaches its destination

Mechanical damage to goods accounts for approximately 43% of insurance claims made by shippers. - International Logistics: The Management of International Trade Operations Damage Risk in the Supply Chain

In recent years, the annual cost of goods damaged in transit has been more than US $4 billion. - International Logistics: The Management of International Trade Operations Damage Risk in the Supply Chain

Managing Damage in the Supply Chain

How Can ShockWatch Help? ShockWatch offers a variety of devices which can help: ■ Reduce damage caused by product movement during shipping or the manufacturing process (totes, conveyors, material handling equipment) ■ Monitor components that must be calibrated and remain calibrated during product shipment (gyroscopes, weaponry, medical devices) ■ Provide indisputable evidence of mishandling ■ Act as a visual deterrent to improper handling ■ Promote chain of accountability for all product handling ■ Reduce warranty claims resulting from mishandling ■ Confirm effectiveness of packaging

ShockLog Multi-use recorder Complete event analysis and journey profiling G-View Threshold alarms for 3 axes Performance Full Analysis Data Recorders Indicators Supply Chain Product Portfolio ShockWatch Label, MAG, DropSpot, Clips, Tilt Single use Low cost Go – No/Go Price Simple Data Recorders Increasing Value to Customer ShockWatch Product Line  Solutions range from simple indicators through full data recorders  Customers are able to scale their monitoring needs over time – start with a recorder and scale to an indicator when supply chain becomes stable

ShockWatch Clips, Mini-Clips, & Multi-G Mount directly to product or product packaging Indicator turns red when an impact exceeds the threshold of the device Available in 7 sensitivities Omni-directional impact sensing capability Used in drop testing to determine packaging or ShockWatch label requirements (Multi-G)

ShockWatch Flex The Flex is a reliable, tamperproof impact indicator that reveals if your product has been subjected to unacceptable handling Ability to monitor tools that may become misaligned, equipment that may lose calibration, or products that may be damaged with mishandling Optimal when mounting an impact indicator is complicated by product shape

MAG 2000 The MAG 2000 is a cost-effective device designed to monitor the handling of fragile goods and freight containers greater than 500 lbs Highly visible device deters mishandling Can be reused/reset with specially designed key Tamperproof Red disk indicates excessive impact and direction of the impact

How a Monitoring Program Works

Monitoring Program When used in conjunction with companion labels, alert stickers, caution tape, posters, and communication tools, ShockWatch indicators become a highly effective damage reduction and prevention program. To aid in communication with program participants, ShockWatch provides customized letters for your carriers and customers. These letters describe the ShockWatch program and detail the steps to follow in the event a shipment is received with an activated label. Posters are available for the sending and receiving docks. These posters are another reminder of the ShockWatch program details. Alert tape and ShockWatch companion labels are additional tools that increase the visibility of the handling requirements of your package.

Why Implement a Program? Create an atmosphere of accountability that increases customer satisfaction Inform & educate ■ employees on how to properly mount the product ■ carriers on accountability and liability to damages while in their possession Receive results through receipt records from your distributors & customers Mitigate risk by providing data that helps managers make decisions Decrease costs through effective packaging & handling of products Most successful with collaboration from the carriers & your shipping, warehousing, and packaging departments.

Included Instructions Identify a champion Train Apply Impact Indicator Typical Implementation Process Instructions for placement included for each order Identify a champion to drive development, documentation, training, implementation, enforcement, & tracking Acquire companion tools Train necessary employees Apply impact indicators to outbound shipments Educate shippers and handlers Communicate with carriers & customers

Estimated Return on Investment Typical ShockWatch users see damage rate reductions of 30-70% within 6 months Company’s est. total shipments per year XCompany est. damage rate=Company damaged units 250,0002%5,000/year Company’s damaged units XAvg. replacement / repair costs per unit =Current yearly costs for replacement / repair 5000$300$ 1,500,000 Company’s units shipped per year XShockWatch unit cost=Total ShockWatch investment 250,000 $ 1.00 $ 250,000 Current yearly costs for replacement / repair xConservative damage reduction rate using a ShockWatch* 40% decrease in damage equates to savings of $1,500,00040%$900,000 Reducing your damage rate by 17% pays for total investment. A conservative 40% reduction more than doubles your return. Not captured in current costs (that may be reduced with monitoring program): Administration fees Freight (if furniture cannot be repaired in the field) Unhappy customers (customer service manpower)

Who Benefits from a Monitoring Program? Manufacturers – know where trouble spots are in the supply chain and can take steps to help address the issues Carriers – have evidence that products were handled with appropriate care during the transportation process Retailers – increase the amount of saleable product and reduce the amount of time and energy expended to deal with damaged product that must be repaired, replaced, or scrapped Customers – get the goods they want without the aggravation of product showing up with damage

Reducing Damage Helps You... Cut expenditures Improve efficiency Increase customer satisfaction

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