Supply Chain Organization and Customer Collaboration

CSCMP Chicago Round TableApril 12, 2012

Howard Lortz and Andrew Weiler

•Third-largest North American manufacturer of uncoated freesheetpaper•Office & commercial printing papers•Envelopes, forms and newsprint•Flexible papers for food wrap and other applications•Containerboard and corrugated products •Boise Paper2011 sales: $1.5 billion

Boise Packaging2011 sales: $950 million

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Leading manufacturer of paper and packaging products

04/12/12

Manufacturing and Distribution Locations

5,400 employees17 states, Canada, Mexico, France, Netherlands, Spain• Acquired Hexacomb and Tharco for $325 million in 2011

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Boise owns TharcoPackaging, Inc. - Leading manufacturer and distributor of packaging solutions - 1,600 SKUs of standard size boxes - Traditional and plastic corrugated- Foam packaging and anti-static products

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• Recently, Boise Inc. acquired Hexacomb protective packaging business.

• Hexacomb is a leader in kraft-paper-based honeycomb protective packaging and operates twelve manufacturing facilities across six countries.

• Hexacomb converted approximately 60,000 tons of containerboard.

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SafetyBoise's Safety Strategy Consists of:

•Leadership committed to achieving the vision. •Effective communications to relay safety and health expectations. •A process to identify strengths and weaknesses and the means to address them. •Employing those committed to the safety and health process. •Effective training and development to include extensive safety orientation. •Continuous and consistent focus on housekeeping and measurements. •Holding all accountable for the safety and health process and extensive employee involvement.

INCIDENT-FREE!6

Individual Choices Help Create Corporate Sustainability

Our people make choices every day that enhance our performance. Employees developed our Stewardship Principle: We manage our businesses to sustain environmental resources for future generations.We seek new opportunities to grow profitably while balancing the goal of sustainability with customer requirements, environmental perspectives, and returns to our investors. We do this by working safely, enhancing the communities where we operate, using natural resources intelligently, and taking a stand to improve the global environment.

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Boise Inc. Helped Design Better Practices, Better Planet 2020

An initiative of the American Forest & Paper Association that sets the most extensive, quantifiable sustainability goal

setting put forth by a U.S. manufacturing industry.

Boise CEO Alexander Toeldte is chairman, AF&PA board of directors in 2012

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Supply Chain Organization

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Logistics Planning Organization

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Supply Chain ResponsibilitiesCustomer Service

Average 6,000 plus orders per month 62% of orders are electronic

Business systems supportVMI/EDIBoise.comCSR systems

Logistics Sales ForecastingProduction PlanningInventory managementDistribution systemsFreight Management

Sales, Inventory, Operations Planning (SIOP)System OptimizationMachine LoadingFive Quarter Financial Forecast and Budget

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Tasks, responsibilities

Accountability Roles:P - PrimaryC - Contributory

Logistics Sales Marketing Manufacturing Transportation

DISTRIBUTION AND FREIGHT MANAGEMENTDevelop RFPs and select carriers C PSelect Transportation Management Systems C C PManage freight costs per ton C C PSelect 3pls for service and cost P C C CNegotiate warehousing and converting costs P C C CSelect and Install systems to support distribution PDevelop International Distribution Strategy P C C CTOTAL LOGISTICS COSTSFreight Cost Targets P C C CInventory Targets P C CDistribution Management P C C CNetwork Optimization Model P CSERVICE METRICSService Targets C C P CExecute fill rates P C C CExecute on time delivery P C C CINVENTORY PROGRAMSCustomer eligibility decision, prioritization C C PManage Stocking Lists C C P CAnalyze excess and slobs inventory P C CReplenish inventory programs PMill Inventory programs P P CJob Lot Management P C C C

Supply Chain Roles

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Customer Experience Vision“Why do I buy from Boise? Simply put, Boise just gets it. They understand my business and the problems I face. They understand my supply chain and offer services and solutions that I can depend on. They are my trusted partners in marketing, sales and logistics.”

“They’re easy to work with, too. They provide me options in how I send and receive information. Whether it be via phone, email, mail or the web, I always get what I need. When I call someone at Boise, they are always knowledgeable, informed and efficient. They know what’s going on and handle my requests with one call. They make me feel like I’m their most important customer.”

“Most importantly, I trust Boise. They meet their commitments. My paper arrives when they say it will. If there could potentially be a problem someone always calls me with options and information. They care about my business, and my customers. I’ve built my operations around their service reliability. They always make it right.”

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Monthly – Sales, Inventory & Operations Planning (SIOP)

Update data & generate preliminary

forecast

Sales adjusts forecast

Preliminary Operating

Plan

Pre-SIOP Meeting

SIOP Meeting

Month End Week 1 Week 2 Week 3

Actual sales

Production

Inventory

System generated forecast

Promotions

New Customers

New products

Market change

End of Week 3

Demand changes

Inventory requirements

Capacity constraints

Supplier constraints

Resolve problems and develop recommendations

Identify alternatives to problems not resolved

Set agenda

Make decisions

Authorize change

“Break ties”

Final Operating Plan

Revise forecast based on:Update files:

Review adjusted forecast

Prepare for S&OP Meeting by:

Hold S&OP Meeting:

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Sales & Operations PlanningThe Sales & Operations Planning process translates business plans into a tactical operations planning and execution system.

BusinessPlanning

Monthly Financial Forecast

SIOP Plan

Block Schedules, Production Schedules,

Inventory Replenishment Tactical Execution

1 Month

1-3 Months

36 Months Model optimal loading, identify Gaps, develop execution plans, & monitor execution performance.

Updated 36 month price and volume assumptions. Load plans and gap identification

Production planners build master plan. Actual orders entered in plan blocks

Mill trims PM –production schedules

X Y Z

Production variability, Demand Variability, Transit delays

Friday operations meeting

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Organizational Challenges

• Replacing an aging work force

• Finding people who want to work in non urban areas

• Advancement opportunities

• Working in a smoke stack industry

• Understanding the millennial generation

• Third party relationships and company culture

• The use and selection of systems without a background in

operations

• Customer collaboration

Customer Collaboration

OfficeMax

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Transportation SynergiesOfficeMax partners with Werner Enterprises for PowerMax DC deliveries to approximately 900 stores.Boise utilizes some of their backhaul capacity in key lanes

Reduces empty milesProvides efficiency gains at PowerMax’s

On-going dialog between transportation organizations to identify additional opportunities.

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Pallet Recycling ProgramReverse logistics program from OfficeMax DCs to Boise Pallet manufacturer

Partner pallet manufacturer reworks and ships down to Boise’s Jackson, AL mill.

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LEAN WarehousingBoise’s Chicago Regional ServiCenter began partnering with OfficeMax’s local facility in January to mentor in the area of LEAN warehousing.

OfficeMax has a strong LEAN culture and we are working to harness that knowledge in our own operations.

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Safety: Carton Handling TeamObjective:Develop leading-edge indicators and solutions that reduce Recordable injuries and Lost Time Incidents (RLTI) occurring in supply chain and retail while handling office paper products in carton quantities.

Accomplishments:Perforated CartonsAdded “Paper” Flag to the STARS reportingMore space for pallets of paper at store layoutsDirections for safe handling included in SOPs (standard operating procedures)Safety included as topic in 2012 Store AuditSafety included as topic in DM MeetingsCarton Packaging and Handling Risk Assessment

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