Nylex

Distribution changes

West Coast

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Content• Overview of changes: West Coast

• Changes to service overview

• How will it work now?

• Questions & answers

• Service delivery measurement and management

• Conclusion

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Overview of West Coast distribution strategy

A strategic analysis was undertaken to examine the most cost effective methods of servicing the WA market..

Various scenarios were examined in detail including full 3PL (full outsourcing of local warehousing and delivery) through to direct delivery ex Melbourne.

The option chosen is a combination of these based on delivering• The required “Next Day” service level for fasteners and some fabric products• Cost effective distribution of plastic and other products directly from Melbourne

Features include:• A small footprint of product (568 sku’s) still held in WA in an outsourced “3PL”

environment. • Direct shipping of other orders weekly from Melbourne

The service will be split into two distinct categories we shall call the “locally held stock lines (3PL)” & “break bulk” ex Melbourne.

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How will WA now work?

Local WA held product overview.

• 586 Lines held locally in 3PL provider.

• These lines are primarily Ajax & Senco, with some film and fabric products.

• Service will be via next day delivery after placement of orders. Cut-off will be at 2.00pm WA local time.

• Provider will have limited access to our SAP platform & be able to print out orders on a local printer.

• Provider will have access to check stocks, print orders & other necessary transactions. Provider will have no access to any other plant & or data.

• Orders that are placed for items that are locally held & have lines held in Melbourne will be split into two distinct orders either manually or via a SAP driven trigger.

• All EDI based customers such as Bunning will be fulfilled ex Melbourne.

• All customers that have specific delivery requirement will be catered for by provider as per current arrangements.

• Date for this change will be effective Monday 13th October 2009

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How will WA now work?

Melbourne held product service overview

• EDI based customers will be serviced Ex Melbourne for all orders

• All current customers will have access to all lines in the Melbourne DC.

• Primary Shipping day will be Thursday ex week for delivery in full the next Monday. Cut-off times for this service will be COB each Wednesday.

• Product will be shipped during the week depending on volumes & transport schedules.

• Service will be by rail via the option named “break bulk”

• Orders will be picked & packed in Melbourne & consolidated into a large single delivery then distributed to the customers at the WA end.

• All orders will have the full compliment of paperwork currently provided.

• Senco spares & other small items currently service by air bags will continue.

• Melbourne warehouse operation will be responsible for the same level of communication currently provided by the staff in WA. This includes to local 3PL operation as well as the Melbourne portion.

• Current distribution management will have full control & responsibility over the WA 3PL operation

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How will WA now work?

Service offer detail

WA based 3PL stocked lines.

586 Lines of fastener based products help in WA.

All WA customers have the ability to order these lines.

Current - system set customer MOQ’s still apply.

Orders placed before 1.pm (LT) delivered next day.

Somerton distribution team to manage WA operation

Provider to submit activity & delivery (DIFOT) KPI’s.

Somerton team to view order queue daily to ensure compliance

Melbourne based stocked lines.

All remaining Consumer products available to WA Base customers.

Orders will be picked & shipped weekly.

Cut-off times for orders will be Wednesday buy COB Melbourne time

Orders will be shipped each Thursday morning for delivery by the following Tuesday.

Shipments will consist of direct to customer deliveries & STO’s into 3PL operation

Somerton distribution team to manage all activity KPI’s relating to this activity

Provider to submit delivery (DIFOT) KPI’s at the Delivery level.

** Changes can be made subject to review & capability**

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How will WA now work?

Fulfilment offer detail

WA based 3PL stocked lines.

3PL based lines to be replenished by STO process

Only “A” & “B” class lines from fasteners to be held at local 3PL operation

Safety stock levels to be set at 4 weeks for “A” class 6 weeks for “B” class items

STO’s to be shipped weekly along with customer orders.

All STO’s to be shipped with a week of creation ** Order creation cycle to be timed with shipping**

Supply to use sales generated forecast along with historical sales data to determine stock levels.

Supply team to manage KPI’s that relate to stock outs & forecasting accuracy.

Somerton team to manage KPI’s relating to STO delivery performance.

Melbourne based stocked lines.

All remaining stock lines to be held at Somerton All “C” class fasteners & all GH&L ABC’s

Somerton safety stock levels will be adjusted to incorporate WA demand

WA based sales forecasts will be built into the stock holding & Somerton stock purchasing requirements.

DC based sales & large volume sales of any products can be shipped direct to WA for substantial orders that meet the efficiency “criteria”**

Supply team to manage KPI’s to ensure WA order fulfilment failures due to stock outs & forecasting accuracy. ** Efficiency criteria is for large orders of stock from suppliers that

can be efficiently configured into a delivery.

**Example full containers of Esky that equal 1 or 2 customer orders

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WA distribution flowchart “How will it work”

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Why is Nylex undertaking this change?

This has been brought about by the need to change the way we operate, so that we can continue to be a viable provider of high-quality warehousing and distribution services.

The cost of carrying inventory in multiple sites ties up valuable financial resources and prevents the business from undertaking other activities with that cash. This change will allow us to better plan our inventory and ensure it can be sourced to meet customer demand.

Transport from the East is unreliable?

We have developed a transport model which will allow us to deliver in a predictable and cost-efficient window each week.

We have also built a plan for delays and derailments which will ensure our customer orders are delivered by road as a fall back position with the same weekly timeline for all plastic products.

Is everything going to be delivered from Somerton?

Fasteners will continue to be warehoused and delivered from a third party provider in Perth.All plastic products will be delivered from a central warehouse in Melbourne.

Is this the result of poor performance in Western Australia?

No absolutely not. This is the result of a strategic review of the Nylex business and identification of more efficient ways to spend shareholder funds.

Why is this happening now?

Nylex is undergoing financial stress due to a number of factors. It is imperative that changes are made to continue to do business with our customers and find ways to create savings at every opportunity.

QUESTIONS & ANSWERS

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QUESTIONS & ANSWERS

What will be the impact on our customers?

Our customers should not experience any differences in the fulfillment of fasteners, with a small change occurring in the plastics business

to weekly ordering and weekly delivery.

The key change for customers will be the timing of placing orders each week for plastic products to ensure they meet the timeline for rail

deliveries.

What do we say if customers ask what is going on?

We can tell customers that Nylex has reviewed its supply chain and fulfillment structure and found opportunities to do business more

efficiently.

With our primary obligation to create shareholder value, we are working to deliver or improve upon customer delivery expectations andensure we do so profitability.

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All current SAP based transactions will show order status in SAP for both the local 3PL option & Melbourne fulfilment models.

• Transaction “ZVLO6N” will show current order status in sap for all WA orders. Plant 09 for Melb based orders & Plant 45 for WA based orders out of 3PL provider that are currently at pick slip & not invoiced.

• Please note list below has all required delivery dates & customer information

KPI & Data measurement Nylex performance data

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Excel based delivery reports will be available weekly with all deliveries measured inclusive of TRUE DIFOT.

Pickup, transit times & actual delivery date/time information will be included for each WA delivery.

**please note this is sample data from historical STO deliveries & for sample purposes only**

KPI & Data measurement Carrier & 3PL delivery performance

Conclusion

The Nylex distribution team is committed to customer service in all aspects

• Communication

• Information

• Co-operation

• Cost effectiveness

• Performance

• Customer satisfaction

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