Rayonier’s Annual Supply Chain Day - 2011“Staying Connected and Driving Value”

Reliability Model

3

Work ID Planning Scheduling

Work IDand Control

Planning Scheduling

MaterialsManagement

Down DayCoordination

EquipmentReliability

Work ID

and ControlPlanning Schedulin

g

Materials

ManagementDown Day

Coordination

Equipment

Reliability

MgmtCommitment

Fence Lines

ResolveBiggestBucks

NET RCFAScore-boards

Score-cards

Reliability Excellence Model

Foundation Established by Area Reliability Teams

4

Rayonier Reliability Model

Vision: Run our equipment from scheduled outage to scheduled outage

5

DSOP - Design, Service, Operate and Procure• Work processes required to deliver reliable performance

• D - Designed and built to meet our requirements

• S - How we take care of it so that it continues to perform

• O - How we use it to produce our products

• P - How our procurement system (specify, purchase, deliver, store)

delivers parts and services to support reliability

Leadership awareness of DSOP deficiencies is required in

order to achieve alignment on what to do and how to do it Leadership must understand its priorities and focus for

reliability within the organization - what is emphasized

DSOP concept

6

Organizational changes

More supervisor/employee time: Shift supervisors/

maintenance supervisors Improved maintenance/operations coordination: OMC role Focused planning: Professional planner role Improved contractor execution: Maintenance engineers Continuous failure elimination: Reliability engineer Improved operator/mechanic training: Training

department

7

Reliability practice changes

Work will be initiated by written work requests

Increased focus on mechanic feedback for continuous improvement

All emergency break-in work executed by shift maintenance, when

possible

Maintenance work orders will be planned and scheduled

Critical equipment information will be verified

Standardization of work flows and business processes

Implementation and training of “Best Practices” at both mills

Reliability

9

Supply Chain - overview

Committed to safety

Built on customer service

Driving efficiency

Focused on values

ValueValue

10

Supply Chain - overview

Focus on Safety

Current RIR To Become The Safest RIR < 1.0

•Develop Road Map•2010 Safety Plans•High Level Budget Items•Resources and Org-D

Q4 2009Enabling

2010Implementing

2012Sustaining

2011Improving

•Focused Safety Action Plans•Leadership Behavior•Employee Participation•Measures and Recognition•Drug and Alcohol Program•H&S Compliance Audits

•Wellness and Health•IH Strategy•PSM Compliance Audits•Develop Mgt. Systems

•Implement Mgt. Systems•Beyond Recordables•Contractor Safety Included

11

Supply Chain - overview

Customer service• Preferred suppliers• People engagement• Feedback

Efficiency• What are you doing to make it easier to do business with

Rayonier?• What can we do to make it easier to do business with you?

12

Supply Chain - efficiency

13

Supply Chain - overview

Rayonier Values

• Integrity first…- Do the right thing- Act fairly and honestly- Build relationships based on trust- Treat people with respect

• Accountability always…- Act like an owner- Recognize your authority and embrace responsibility- Deliver what you promise

14

Supply Chain - overview

Rayonier Values

• Quality in everything we do…- Understand your customer expectations and deliver value- Provide products and services that are right and on time- Continuously improve

• People are the foundation for success…- Safety is everyone’s responsibility- Recognize excellent performance with opportunity- Use teams, tools and training to achieve results- Communicate information and freely share ideas- Foster innovation and creativity- Respect the importance of a balanced and productive life

Preferred Suppliers and Recognition Program

16 Rayonier Confidential and Proprietary Information

Supply Chain

Vision• To be a world-class sourcing organization that delivers

the best overall value to Rayonier

Mission• Sourcing will drive value through partnering with our

customers and preferred suppliers, understanding our

markets, and flawless contract execution

17

Roadmap for success

Partnering with our customers and suppliers• First understand, then exceed our customers expectations

• Utilize a preferred group of suppliers

Leverage market knowledge• Become experts in our commodity markets

• Leverage supplier expertise

Flawlessly execute strategy• Efficiently drive contract implementation

• Drive value creation and business innovation

• Use metrics to drive continuous improvement

18

Preferred suppliers

Definition of a preferred supplier• Share similar values

• Focused on safety

• Compliant to Rayonier supplier requirements

• Strengths align with Rayonier’s needs– Product or service singularly fills need

• Excels at execution, customer service and value creation

19

Preferred supplier strategy

Benefits for Rayonier and supplier• Consolidates the supply base

– Longer term agreements

– Opportunity for more business (less suppliers)

– More competitive business offering

• Leverages expertise – Opportunity to drive business innovation

– Opportunity to drive value creation

• Improves execution– Challenges each other in all aspects of our business relationship

Creates “win - win” for both Rayonier and supplier

20

Rayonier Supplier Recognition Program

Guiding principles • Must be aligned with preferred supplier strategy

• Aligned with our engagement philosophy

• Designed to create value for suppliers

• Collaborative with our customer base

21

Performance requirements - safety

Rayonier’s vision is to be the safest company in

the forest products industry• Supplier must finish the year with NO recordables

It is expected that our suppliers share our focus

on safety to protect our most valuable assets, our

employees

22

Recognition Program Requirements• People - What level of service does your company provide?

• Quality - Does your product or service exceed expectations?

• Accountability - Does your company deliver what they

promise?

Do you exceed our internal customer’s expectations?

Performance requirements - customer survey

23

Performance Requirement - value creation

Value• Exceed Rayonier’s expectations and or contract requirements

• Other examples– Products

Substitutions; less cost or more efficient Longer product life Reduced maintenance (downtime) Repair cost less than new Standardization

– Services Reduced rates Improved methods Discount payment terms

24

Moving forward

Program will have three major categories:

• Chemicals and Energy

• MRO Supply

• Contract Services

While our desire would be to select a supplier from each

category, in the end, we will select the three best overall

performing suppliers regardless as to which category. Annual recognition dinner with senior leadership

Materials Reliability and Systems

26

Reliability Model

“Operating our equipment and processes efficiently, effectively, without interruptions from scheduled outage to scheduled outage”

27

Materials reliability approach

Definition• Right product when needed

Inventory Management Model• Mill - Focus on the need

• Supply Chain - Focus on filling the need– Sourcing

– Storeroom

– Supplier/Manufacturer

28

Materials reliability approach

Starts with SLA (Service Level Agreement)

• Maintenance

• Operations

• Engineering

Improved safety, quality, and environmental performance

Inventory management

• Location(s)

29

System

CMMS - Computerized Maintenance Management System

• Designed to track assets and form the basis of maintenance system

• ShawWare selected in 1980’s

EAM - Enterprise Asset Management

• Whole life optimal management of the physical assets of an organization to maximize value

• Improve return on the investment

• Advantis.Pro

30

System

Improved communications through B2B portal • RFQs

• Purchase orders and change request

• Order acknowledgements and ship notices

All items will be in the purchasing catalog (PCI)

Bar coding

Warranty tracking

Contract services managed through contractor module• Rates sheets

• Daily time and expense submittal

31

Keys to success

Management and supplier commitment

Joint ownership of reliability excellence in operations, maintenance, engineering, supply chain and supply base

Culture change from reactive to proactive

Measurement systems in place to sustain the practices over time

Logistics and Markets

33

Value proposition

Customer Expectations• Right product in the • Right quantity to the• Right destination in the • Right condition at the• Right time with the• Right documentation at the • Right cost

Logistics and Customer Service are core to our value proposition

34

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100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

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34

U.S. export market - containers only

TEU’sTop container exporters

1. American Chung Nam (wastepaper)

2. Koch Industries

3. IP

4. Weyerhaeuser

5. Newport CH International

26. Rayonier

3535

We are in a great location for access to shipping markets

Savannah77%

Jacksonville14%

Charleston2%Brunswick

7%

Savannah80%

Jacksonville5%

Brunswick9%

Charleston6%

2010 2011

36

Market drivers• Balance of trade/currency exchange rates

• GDP

• Security and Regulation

• Market capacity

• Labor, fuel, capital

Market conditions• Vessel overcapacity controlled to restrict supply

• Global shortage of containers

• Imports are down and exports are up

Issues and Regulation• Antitrust immunity

• Security

• Financial stability

• Jones Act

• Cargo liability

• Port infrastructure

36

Ocean container drivers and conditions

37

Market drivers• GDP growth, CPI/PPI

• Market consolidation

• Labor, fuel

Market conditions• Shrinking supplier base

• Declining availability of drivers and equipment

Issues and Regulation• Driver hours of service

• FMCSA

• Weight limits

• Infrastructure investment and funding

37

Truck market drivers and conditions

38

Market drivers• GDP growth, CPI/PPI

• Labor, fuel, capital

Market conditions• Limited competition

• Aging and declining equipment supply

Issues and Regulation• STB reauthorization

• Toxic Inhalation Hazardous (TIH)

• Positive train control

• Antitrust

• High speed passenger rail

38

Rail drivers and conditions

3939

Customer feedback• Corrective action systems

• Partnership meetings

• Survey

Monthly measurement and reporting

• On time delivery

• Package condition

• Customer feedback (Promise Pack)

Customer service