A Review of the DistributionNOW Business Opportunity

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2 SECTION HEADING B distributionnow.com MACHINE TOOLS SUPPLY AND MANUFACTURING SERVICES Image courtesy of Walter

3 Markets Served...2 DistributionNOW Overview On-site Supply Stores...3 On-site Supply Stores Material and Asset Management Manufacturing Services...4 Tool and Cutter Grinding Fluid Care and Maintenance Tooling Identification and Cataloging Cycle Time Optimization Inspection and Repair Services...5 Repair Programs Additional Services Product Delivery Assembly Kitting Inventory Management...6 On-site Consigned Inventory Fixed Quantity Consignments Variable Quantity Consignments Dedicated Support Inventory Client Owned Inventory Management Tool Crib Management Analytics and Reporting Technology...8 Automated Tool Crib Management Increased Control and Visibility Increased Fill Rates Increased Accountability Software Key Software Capabilities Vending Technology...10 Vending Technology and Hardware Carousel Vending Personal Protective Equipment (PPE) Dispensing Locker Dispensing RFID Technology Machine Tools Supply and Manufacturing Services 1

4 Markets Served UPSTREAM Drilling MIDSTREAM Processing DOWNSTREAM AND INDUSTRIAL Exploration and Production Transmission DistributionNOW Overview DistributionNOW is an industry-leading provider of pipe, valves and valve automation, fittings, mill and industrial supplies, tools, safety products, and artificial lift systems to the upstream, midstream, and downstream and industrial markets. We are also recognized as a leading supply chain solutions company providing valueadded services, including supply chain management, project management, and e-commerce solutions. Our associates are the best in the business, with extensive knowledge, broad experience, and a thorough understanding of our customers process and business drivers. DistributionNOW has over 300 locations in more than 20 countries, serving the upstream, midstream, and downstream/ industrial markets. We will continue to expand our global footprint wherever there is an opportunity to better serve our customers. For more than 150 years, our customers have looked to us to provide them with the products and services that make their businesses run. We stock more than 300,000 diverse products, and we have the technical expertise to back them up. Refining, Petrochemical, Chemical and Utilities Manufacturing and Machine Tool 2 distributionnow.com MACHINE TOOLS SUPPLY AND MANUFACTURING SERVICES

5 On-site Supply Stores On-site Supply Stores DistributionNOW is the leader in on-site supply stores due to depth of inventory, extensive knowledge, hands-on industry experience, and global presence in procurement services and electronic transactions. We are committed to meeting customer expectations, while delivering value through reduction in capital employed, decreased total cost of products and operations, and a supply chain that maximizes efficiencies through process improvements. Furthermore, we can become your single point of contact, automating recurring orders and managing all ordering, receiving, distribution, and payment for your maintenance, repair, and operations (MRO) materials. DNOW can help you reduce your supplier base and eliminate the associated costs, while maintaining the technical product support and expertise that your supplier base provides. Our supply chain services capabilities also allow you to reduce internal costs such as inventory holding, transaction costs, manpower, procurement, and payables. Material and Asset Management DNOW is able to conduct field audits on inventories as a means of identifying materials that are potentially available for redeployment or disposal. The audit teams fill gaps in our customers employee base required to identify, count, classify, and value materials. We also provide the resources to put data in a format acceptable for entry into surplus inventory systems. In addition, efficiently managing on-site stores is a DistributionNOW core competency. We provide the expertise and the technical systems to assist in the management of your material requirements. DNOW s Project Management team helps you focus on your core competencies, while we provide engineering, operations, and construction departments, with aid in authorization for expenditures (AFE) preparation and costing, sourcing, procurement services, expediting, staging and shipping, and receiving. We have a history of helping our customers reduce costs and improve operational efficiencies. Machine Tools Supply and Manufacturing Services 3

6 Manufacturing Services Total Solution Partner DistributionNOW specializes in optimizing metal cutting machine shops and offers comprehensive solutions for all industrial market segments. Wether its cutting tools, abrasives, cutting fluids, work holding, tool holding, precision measuring or safety supplies, DNOW has experts on staff to assist you in optimizing your production needs. You can be assured that you will get the best total solution from one source. Highest Performance Tooling Solutions To machine a component at the lowest possible cost, you need the best possible combination of machinery, work holding, tool holding, cutting tools, cutting fluids and machining parameters. Therefore at DistributionNOW we believe in analyzing all aspects of the production process and systematically optimizing them together considerably reducing tooling costs and machining time. Becoming Lean and Competitive DNOW s primary objective is to improve the competitiveness of our customers by increasing their efficiency and driving down costs. Process optimization, tooling solutions, new technologies and best practice training and education are an important part of DistributionNOW s focus. Cycle Time Optimization DNOW offers cycle time optimization services that can help improve your productivity, profitability, and throughput. Our programs are comprehensive to ensure that your existing or new processes are evaluated considering equipment, CNC programming, and tool selection. Tooling Identification and Cataloging DNOW will work with your manufacturing and engineering teams to identify and catalog all tooling assets. Custom Tools Many of today s machining projects require non-standard tooling. Having access to a vast resource of custom tool manufacturers, we can procure tooling based on your tool print, or assist in engineering application specific tools. All tools are developed and manufactured using the latest technology and geometries. Radius grinds, altered standards, custom tools in HSS, Cobalt, Carbide and PCD as well as full special indexable tooling can be provided. 4 distributionnow.com MACHINE TOOLS SUPPLY AND MANUFACTURING SERVICES

7 Inspection and Repair Services Tool and Cutter Grinding DNOW understands that the right tool at the right price can make a significant impact to reducing tooling costs. Using local grind facilities and the original factory reconditioning programs we can offer quality sharpening and repair service for all tooling. In fact we have the capability of sharpening or reconditioning all your HSS, Cobalt, Carbide and PCD cutting tools. Fluid Care and Maintenance DNOW provides on-site industrial fluid maintenance programs, which include fluid identification and cataloging, disposal, monitoring and analysis, optimization, machine cleaning, lab reporting, and employee training. Our fluid care services can make your facility safer, healthier, and more productive. Tool Repair Programs Malfunctioning tools are entered back into the system with a repair indicator, which lets our technicians know to remove the tool, replace it, and send it out for repair. When it comes back, the repaired tool is entered into the system with a repaired indicator. For cutting tools with a set life cycle, the system counts how many times a tool has been reground, and gives an alert when it must be discarded at end of life. DNOW helps you understand exactly where your assets are: who the asset has been assigned to, what repairs are costing you, what types of repairs were performed, where the assets are assigned, when the assets were checked out, when they are due back, when inspections were completed and repairs made, and why repair costs may be higher on certain assets. Additional Services At DistributionNOW, we are dedicated to offering all services necessary for the manufacturing facility s continued operations, including the following: Product Delivery - Delivery is often available daily from one of DistributionNOW s 300+ global locations. Assembly Kitting - Kitting is an integral part of the planning and scheduling processes. Your planning department determines which items will be kitted, scheduling determines when the kit should be ready and where it will be used, and DNOW has the responsibility for physically creating the kit. Machine Tools Supply and Manufacturing Services 5

8 Inventory Management On-site Consigned Inventory Dependent on a facility s unique needs, DistributionNOW can offer two types of consignment programs: fixed and variable. Fixed Quantity Consignments Initial consigned quantities and values are static, or will not change, until the item is removed from the program. This type of program eliminates the need for periodic cycle counting by suppliers, as the shelf quantities do not reflect the value of the consignment. Variable Quantity Consignments Consigned quantities and values fluctuate based on the shelf count. Materials can be issued, received, returned, or transferred, thus affecting the on-hand quantities and values. This type of program is more frequently utilized in a warehouse location as opposed to a satellite or zone store program. Dedicated Support Inventory In addition to maintaining inventory on site, DistributionNOW will stock additional inventory at a dedicated regional warehouse to ensure your facility has timely access to all critical material. Client Owned Inventory Management In a world of increasingly complex demands, industry leaders cannot afford to simply manage their inventory: they have to maximize it. DistributionNOW s focus is on inventory maximization, allowing our customers to see inventory across their entire network, no matter how many sites, warehouses, zone stores, or outlets they may have. We will help you set appropriate min/max and reorder points and design an effective inventory maximization program. We identify what you have, what you need, and how much of it you need to drive optimal use of inventory budget and increased operational efficiency. VLM180 Benefits and Specifications Increase picking productivity by 20-40% Increase security and employee accountability Recover 30-80% of your floor space Reduce labor costs Security and employee accountability Worker safety reduction of injuries Order picking accuracy Flexibility Modular height AutoCrib integration Easy to learn and use No repackaging required Enclosed inventory stays cleaner Dimensions: Machine footprint in. (1,752.6 x 2,514.6 mm) Machine height 12 ft 6 in. to 40 ft (3.8 m to m), in 6 in. (152.4 mm) increments Standard models 18 ft (5.5 m), 24 ft (7.3 m), and 31 ft (9.4 m) tall AutoCrib VLM180 SPSS - Reclaim floor space for value-added activities. The VLM180 is designed to optimize your facility s layout by taking advantage of unused overhead space. 6 distributionnow.com MACHINE TOOLS SUPPLY AND MANUFACTURING SERVICES

9 Inventory Management Tool Crib Management Workflow analysis CAD layout of warehouses Store rooms redesign Bin-locating customer inventory Labeled bar coded inventory 5S compliance Surplus recovery Onsite inventory specialists Vending technologies Shipping function Receiving function Tool repair Tool regrind Tool/gauge calibration Tool presetting Tool qualification Tool preventative maintenance Customer training Employee training Continuous improvement programs Key performance indicators (KPI) reporting and compliance Analytics and Reporting DistributionNOW provides accurate, timely, and powerful analytics, allowing you to monitor the performance of your suppliers, carriers, customers, and employees from one intuitive dashboard. Our customers are able to see a single, consistent, real-time view of their entire materials handling program. We also offer the ability to receive notification of all material handling events as they occur, enabling you to respond immediately. Some of our standard reports include the following: Spot buy analysis Inventory turns analysis Product improvement analysis Consolidated invoicing Commodity analysis Vendor/manufacturer score carding Savings documentation Usage and accountability reports Inspection and repair tracking Example chart showing inventory history of a product over a six month period. Machine Tools Supply and Manufacturing Services 7

10 Technology Increased Control and Visibility Check-out records Check-out alerts Location of tools Reports and analysis Increased Fill Rates Real-time product data Historical data Min/max reordering levels Point-of-use vending Increased Accountability Employee authentication Usage limits Waste elimination Reduced consumption The EleVend is a dispensing machine that pushes the product up from the bottom until it reaches the top. One of the primary benefits is eliminating the need for repackaging. Automated Tool Crib Management DistributionNOW offers an all-inclusive inventory control system that improves your ability to distribute and track tools and other supplies with accuracy and confidence. The software, developed specifically for the manufacturing industry, uses bar coding to tie fast and reliable tool crib transactions to a powerful system of inventory control. Our software flexibility means it fits the needs of manufacturers of any size, whether using an attended tool crib, automated storage and retrieval, or a combination of both. The system monitors tool inventory and usage, racks consumption and budget, issues purchase orders either automatically or manually, and includes more than 200 standard reports. It also has an embedded work order system that automates scheduling and tracking of maintenance and repairs to assets. Increased Control and Visibility By implementing an automated tool crib management solution, our customers enjoy a reliable employee authentication process with detailed check-out alerts and records, up-to-date location of tooling assets, and access to a full suite of standard and customizable reports. Increased Fill Rates The system s capability of producing real-time data of product availability in conjunction with its historical data intelligence ensures proper min/max reordering levels are established. In addition, through the use of vending technology, product is offered at the point-of-use, effectively minimizing production downtime. Increased Accountability Employee authentication for each transaction creates a feeling of accountability for product usage, which can be tracked by department or individual worker. Employees who have a high rate of consumption may be refused a tool request at the point of issue. Setting usage limits eliminates waste and identifies a potential problem before it leads to stockout. Studies show up to a 30% reduction in product consumed within the first 6 months of implementing a tool crib management system. AutoLocker stations provide 24-hour access to high value, oversized, calibrated and durable products. 8 distributionnow.com MACHINE TOOLS SUPPLY AND MANUFACTURING SERVICES

11 Technology Software DistributionNOW s software has been designed to make it incredibly easy to manage industrial vending machines and traditional tool crib or store areas. The simple Issue/Return screens allow the tool crib attendant or vending customer to quickly identify any item requested and process the transaction with a minimum of clicks. Furthermore, inventory can be transferred from tool cribs to satellite cribs or vending machines, ensuring optimal usage of inventory. In addition, our intelligent dashboards compile many reports into a simple, easy-to-use, color-coded screen that presents actionable data. We offer a suite of standard reports, including the following: Reorder reports Projected stock outs Inventory value Consumption reports by department, job, employee Key Software Capabilities 200+ reports and automatic scheduling Multiple users Barcode capabilities Scalable/configurable Radio frequency/batch bar code scanners Multiple cribs Expendable, durable, reworkable Serialized items with complete traceability Document management Instant item lookup User definable fields and cost centers Preventive maintenance suite Calibrations schedules and tracking Automatic replenishment Multiple cost breaks Ordering calculations based on history Fax, electronic data interchange (EDI) and purchase orders Configurable security levels Dial-in supplier access Secure point-of-use distribution Consigned inventory - integrated supply Machine Tools Supply and Manufacturing Services 9

12 Vending Technology Vending Technology and Hardware DistributionNOW offers technically advanced complete solutions for your supply chain needs including hardware, software, setup, and support for your tool crib to point-ofuse vending solutions. We offer a variety of configurable machines that remove the limitations placed by our competitors. In addition, you will be supported by highly trained DistributionNOW project managers from the initial inquiry, through installation, training, and far beyond. Carousel Vending LX2000, VX1000, and VX500 provide secure access to varied types and numbers of items, and the carousel design allows for managing both small and large items in one location. The machines give access to products by item, employee, or job. Further, the system has the capability to track serialized items. Calibration control ensures that no serialized item will be issued if it has fallen out of the authorized calibration cycle: Carbide inserts Drill bits Tape Safety and PPE Air tools Welding tips Solder Hand tools AutoCrib Tambour TX750 - The system in its most dense bin size configuration provides for up to 900 bins. Personal Protective Equipment (PPE) Dispensing Our PPE vending machines push the supply of product from the bottom until it reaches the top of the bin. The system then measures the distance the elevator traveled and decrements the appropriate amount of product from the inventory. The machine provides 24-hour access to fast moving gloves, PPE, and other items in a secure format with a simple-to-use keypad: Gloves Coveralls Tyvex suits Shirts Arm protection Aprons AutoCrib RoboCrib LX This unit has been designed to provide secure access to over 2,000 different items. 10 distributionnow.com MACHINE TOOLS SUPPLY AND MANUFACTURING SERVICES

13 Vending Technology AutoCrib AutoLocker - Provides 24-hour access to high value items using a simple to use keypad interface. Locker Dispensing Our locker stations provide 24-hour access to high value, oversized, calibrated, and durable items using solenoid activated lockers and a simple-to-use keypad interface. This system is ideal for the following types of products: Gauges Hand tools Laptops Rechargeable tools Power tools Pneumatic tools Individual lockers are available in eight different sizes that can be mixed and matched to fit your specific needs. Windows in the locker doors let you visually locate the items. The lockers can be programmed to deny access to any gauge that has exceeded its calibration threshold. Calibration recall can be based upon the first occurrence of a calibration date, number of days on floor, or the number of cycles it has run. RFID Technology Our RFID portal system is a turnkey network of radio frequency identification (RFID) readers located strategically at choke points to track movement of RFID tags in and out of a controlled area. Our system can be used to secure a tool crib or an entire warehouse. It is the perfect solution for applications where a high number of items needs to be issued, or where there are many large or bulky items. The RFID portal system delivers the lowest cost per vended item in high-volume environments. It can vend and track an unlimited number of item types, sizes, and shapes. AutoCrib Intelliport - This is a turnkey system of RFID readers placed at a choke point, to track movement in and out. Machine Tools Supply and Manufacturing Services 11

14 Machine Tools Supply, a DistributionNOW Company, is a supplier of cutting tools and accessories, standard and custom tooling, fluids, and machinery to industrial manufacturers in the energy, aerospace, automotive, shipbuilding, fluid control, and other industrial markets. They offer comprehensive inventory management solutions, enabled through the use of a state of the art ERP system. The company also helped to develop the technology that became the AutoCrib industrial vending system. 12 distributionnow.com MANUFACTURING AND MACHINE TOOL PRODUCTS

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