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Outsource to In-house: Taking Back Control of

Transportation

Carl RossiDirector, Global TransportationAPC

Kerry WiggintonDirector, Logistics SolutionsOracle

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Agenda

• Topic Overview

• APC: Carl Rossi

•Q&A

Current State of the 3PL Market

Most Customers are Satisfied, But Improvement Opportunities Continue to Exist

5

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2002 2003 2004 2005 2006 2007 2008

IT Capabilities

Necessary

Element of 3PL

Expertise

Satisfied With

3PL IT

Capabilities

Source: 2008 13th Annual Third Party Logistics Study:Views from the Customers: Georgia Tech, CapGemini, Oracle, DHL

Transportation Management:Outsource or In House?

• Logistics Excellence

– Is it a commodity vs. competitive advantage?

• Control vs. “Easy button”

– Are you maintaining control of your network operations?

• Visibility vs. IT Investment

– Is it sufficient, or do you make do with what you get?

• Logistics Expertise

– Do you have experts in-house?

• Cost vs. Value

– Are you getting what you pay for?

Different Models Available

In HouseIn HouseAll In House

All Outsourced

Hybrid

Hybrid

OutsourceOutsource

In HouseOutsource

OutsourceIn House

People/

ProcessTechnologies

Note: Different regions and divisions can have different approaches

8

Logistics Order

Management

-Order capture

-Change order management

-Requirements forecasting

Carrier and Rate

Management

-Rate procurement

-Rate maintenance

-Carrier scorecarding

-Contract and insurance monitoring

Shipment Execution

-Carrier communication

-Shipment booking and tendering

-Re-Planning

-Appointment Scheduling

Visibility and Event

Management

-Proactive Exception Management

-Shipment, Order, SKU visibility

-Track and Trace

-Analytics and Reporting

TransportationPlanning and Optimization

-Shipment Planning

-Dock appointment scheduling

-Container Requirements Optimization

-Load Configuration

-Cooperative Routing

Financial Settlement

-Freight bill audits

-Cost allocation

-Accruals

-Customer billing

End-to-End Comprehensive Transportation Management Solution

How Does Oracle Help?A World Class TMS called Oracle Transportation Management

Functional InnovationOTM roadmap to additional value

• Fleet & Asset Management

– Manage transportation assets (drivers, trucks, trailers, containers, totes, etc)

• Global Trade Management

– Manage all aspects of cross-border transactions

– Visibility, regulatory compliance, chain of custody, documentation

• Environmental Sustainability

– Measurement and minimization of impacts

Reduced Freight Costs

• Inbound and outbound transaction costs

• Lower headcount

• Lower cost carrier selection

• Payment based on actual shipped weight

Increased Visibility

• Supplier communications

• Shipment data

• Rates, freight payment and damage claims

Increased Control

• Carrier KPIs: Service level, cost, quality

• Supplier compliance to core carriers

Results

• US was outsourced to 3PL, little control over inbound transportation

• Wanted to reduce freight costs and increase visibilityby streamlining and controlling logistics operations in-house

• Needed a TMS to support this strategy

Scenario

Proof Point: Global Heavy Equipment Manufacturer

Where You Should See Value

Shipment Planning

& Optimization

Shipment Execution:Booking/Tendering,

En Route Planning

Freight Payment/Billing

• 3 –20% Transportation Cost Savings

• 5 – 25% Expedited shipment reductions • 5 – 15% Capacity increase

• 5-30% Productivity Improvements

• Reduced errors, increased loads per hour

• 10 – 100% Reduction of transaction costs

• 2-5% Reduction of Freight Expense

TransportationSourcing

• 5 – 20% Rate Improvements from Carrier Bid Optimization• Increased payment, auditing and claims effectiveness

Supply ChainVisibility/Analytics

• 2-5% reduction in inventory• Lower transportation costs, better supplier and customer relationships

Status Updates,

• 1 – 3 % decrease in transportation costs

• 5 – 15% Reduction in overall freight cost

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Carl Rossi

Director, Global Transportation

APC

COMPANY OVERVIEW

• American Power Conversion (APC) is $3.5B provider of adaptable network-critical physical infrastructure to the information technology industry.

• Founded in 1981, the company's alternating and direct current power products include surge suppressors, uninterruptible power supplies, power conditioning equipment, power management software and direct current power systems, as well as precision cooling equipment and network consulting services.

• Headquartered in West Kingston, R.I., and maintains sales offices worldwide.

• The company has manufacturing facilities in Philippines, India and China

• Schneider Electric acquired APC on Feb. 14, 2007

CHALLENGES/OPPORTUNITIES• Moving from outsourced transportation and warehousing to in-house

• Integration to EBS

• Ability to manage both inbound vessel from Asia and outbound small package

• Visibility & Event Management

Who Are We and What Do We Do?

APC Operating Environment

• Being a global manufacturer with most plants in Asia means spanning a wide range of capabilities:

– Complete visibility from order entry through carrier payment

– Visibility to finished product shipping from Asia

– Container tracking en-route

– Optimized outbound transportation while considering constraints of the distribution centers

– All modes of transportation

– Many languages and currencies

Global Footprint

The Business Challenge – Why In-sourcing?

• The decision to outsource was made based on forecast savings;

• Savings never materialized, the opposite occurred – costs increased

• Service provider did not understand business = higher rates

• Freight under management fees exorbitant

• Efficiencies never delivered

• Service provider had poor carrier selection, evaluation process

• Delivery quality and customer satisfaction declined

• Challenges included selecting and implementing a new operating system within 3 months;

• Rebuilding processes and procedures that were lost when function was outsourced;

• Team concluded best solution was integration to Oracle E-Business Suite

How did we start?

• First Phase:

– Start in Western Distribution Region

– Bring up a new building

• Hire and train staff

• Transfer inventory

– Install new TMS and WMS

– Need to be done in 3 months

– Outbound was priority

• Parcel, LTL, TL, Specialized Delivery

• Ability to manage all transport modes including –– Ocean vessels

– Small package

– Less than truckload

– Full truckload

• Visibility & Event Management

• Transportation Management

• Transportation Planning

• Freight Settlement

• Business Intelligence

Why OTM?Tech Enabler for In-Sourcing Transportation Management

Transportation Scope - Interface Diagram –Outbound Process

Shipment

Execution

Accounts

Payable

Order

Management

Master

Data

Shipment

Planning

Visibility

Freight

Settlement

Order

Management

Shipment

Execution

Pick/Pack

OTMOTM EBSEBS WMSWMS

Track & Trace

Invoices

CarriersCarriers

Load

Tenders

Manifest /

Documentation

ManifestManifest

Items

Locations

Service Providers

Master

Data

Planned Shipment

Deliveries

Actuals

Shipment Actuals

Payment Voucher

Actual

ShipmentLoad Tenders

Tender Response

Shipment Status

Shipment Invoice

Pro #’s

Etc.

Deliveries (includes

Items and Locs)

EBS to WMS

interfaces do not

need to be built.

They are already

part of the pre-

built integration.

Project Teams

Project

Lead

(75%)

Project

Sponsor(s) /

Program Mgt

(10%)

APCAPC

Project

Lead

(100%)

OTM

Leadership /

Program Mgt

(10%)

OracleOracle

Program

Office

Application

Lead

(100%)

Technical

Lead

(60%)

OTM Install

Consultant

(15%)

1-2 Super

Users

(100%)

Sys Admin

(25%)DBA

(25%)

Note: These represent project roles. The same person may be responsible for multiple roles.

Application

Consultant

(80%)

Integration

Developer

(30%)

BPEL

Consultant

(20%)

IT/EBS

Analyst

(50%)

IT Various

(50%)

•Complete visibility from order entry through carrier payment

• ASN’s planned 2009

• Implement Business Reporting 2009

• FBAP project planned to begin late 2009

• During 2009 EDI from carriers for shipment status

•Planned implementations

• Philippines go-live January 15, 2009 with new Distribution Center

• International container management

• Europe project planned to kick off first week of March

•India implementation projected to begin late Q4

APC Implementation - Future Plans/Vision

Another busy year for the implementation team !

Results to date on target

• January statistics -

• In-sourcing produced significantly lower rates across all modes;

• OTM consolidated shipments and selected lowest cost carrier;

• Middletown start-up issues which were process and staffing related are now resolved

• Improved capacity weight utilization by 12 – 25% based on mode

• Gained additional control over logistics processes by bringing them in house

• Improved shipment & order visibility

LocationPicking Tasks

LTL Shipments Parcels Full TruckloadsWeight per Shipment

Cost per LB

Chino 13,054 1,058 8,942 18 21% -19%

Middletown 23,759 804 11,558 34 6% -29%

Questions And Comments

Thank you!