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Risk Management for Global Sourcing NAW Large Company Financial Executives Networking Conference

Risk Management for Global Sourcing NAW Large Company Financial Executives Networking Conference May 13, 2008 – Chicago, IL Don Munchrath, CFO. Global Sourcing Drivers for Carlson. Reaction to market factors Emergence of generic alternatives to proprietary fasteners

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Risk Management for Global Sourcing NAW Large Company Financial Executives Networking Conference

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  1. Risk Management for Global Sourcing NAW Large Company Financial Executives Networking Conference May 13, 2008 – Chicago, IL Don Munchrath, CFO

  2. Global Sourcing Drivers for Carlson • Reaction to market factors • Emergence of generic alternatives to proprietary fasteners • Need for supplier diversification • Cost advantages • Paradigm changes in wholesale distribution – strategic supply vs. “peddler”

  3. Chronology of Foreign Supply • 1980’s • Limited • A few direct relationships • Foreign JVs connected to US manufacturers • Collective efforts through industry groups

  4. Chronology of Foreign Supply • 1990’s • Emergence as a strategy • Need for consistency & predictability • Broker partnerships • A few key direct relationships

  5. Chronology of Foreign Supply • 2000’s • Need for direct relationships • Self-education & commitment to “row our own boat” • False start in 2004 due to steel shortages • 2005-2007 price advantages of foreign supply create disruptive opportunities • All out efforts throughout 2007/2008 to locate and partner directly with foreign suppliers • Laufer relationship

  6. Current Portfolio • 600-1,000 containers from outside the U.S. • $15 to $25 million (~20%) • Primarily collated fasteners but also • Steel strap • Bulk nails

  7. Resources to Manage Risk • Background checks & other intel • Face-to-face due diligence • Domestic insurance coverage • Hired logistical expertise • NOT: • supplier agreements • indemnity clauses • supplier insurance coverage

  8. Logistical Services & Benefits • Load scheduling • Visibility on inbound loads • Information and expertise – tariffs, importation requirements • Flexibility • Potential cost advantages

  9. Lessons Learned • Packaging and presentation • Duties • Product quality • Necessity of foreign travel • Know who you’re dealing with • Credibility with suppliers • Uncovering globally unsophisticated suppliers

  10. Locating Suppliers • If products are familiar and/or commodity, not much different than domestic effort • Domestic and foreign trade shows • Foreign travel • More challenges if extensive communication/collaboration is required

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