Kenco Logistic Services - Year in Review

Dear Valued Partner:

At this juncture of a new year, as we pause and reflect on the accomplishments of the past and look forward to the prospects of the future, we’d like to take this opportunity to thank you for being such an integral part of our business.  Because of your partnership and loyal support, Kenco Logistic Services continues to reach new heights as one of the nation’s leading providers of warehousing, transportation, material handling and logistics management solutions.

Year In Review
To recap some of the highlights of 2007, following are some of the key milestones we were able to achieve through your partnership and support:

• Expanded business by 10% and secured 100% of contract renewals due in 2007
  
  
• Continued focus on Kenco’s Operational Excellence initiatives, with an annual commitment of $4 million and investment of $9 million through 2008, to constantly raise the bar in terms of standards of operation and maintain our position as leaders within our industry.
  
  
• Finalized the Kenco Financial Management System through:
  • Development of networked database to track and report work performance standards and improve operational efficiencies to reduce costs
  • Improved operational profile management and the impact it has to costs through the development of activity-based costing
  • Customized dashboard reporting to track and report Key Performance Indicators
    
    
• Continuous Improvement efforts in the Kenco Safety Management System enabled us to reduce our OSHA Recordable Rates (Incidence Rate and Days Away from Work Rate) to unprecedented levels, as follows: 
  • 2007 OSHA Incidence Rate (Total Recordable Cases) was more than 50% below the national average for “General Warehousing and Storage” (NAICS #49311);
  • 2007 OSHA Lost-Time Rate (Cases with Days Away from Work) was more than 70% below the national average for “General Warehousing and Storage” (NAICS #49311).
    
    
• Invested in a major health plan designed to:
  • Promote awareness and improve the health of our employees
  • Reduce health insurance costs
  • Reduce work loss time due to illness
    
    
• Acquired and implemented the latest technology solutions to benefit our customers, based on their specific needs, including:
  • Implementation of Kenco’s WES system as Keurig Coffee’s WMS
  • Launch of Manhattan Associates Tier 1 WMS and Order Management Systems
  • Purchase of Red Prairie Tier 1 WMS for GlaxoSmithKline Consumer Health Division’s 4 U.S. facilities
    
    
• Through our sister company, Kenco Transportation Services, we’ve been able to accomplish the following:
  • Achieved 41% top line sales growth over the previous year
  • Reached record profitability despite surging fuel prices and challenging economic conditions
  • Purchased and implemented new software by TMW, recognized as the world’s leading provider of enterprise management software for trucking companies
  • Secured 50 brand new trailers to replace older trailers in the fleet, which will lower maintenance costs and project a consistent, professional image for Kenco Transportation
  • Improved our driver turnover percentage to 15% - a standard unheard of in the trucking industry.  Trucking companies of similar type of operations, which are often plagued with turnover percentages approaching 100%
    
    
• Implemented new Customer Advocacy program, Voice of the Customer, designed to gather, interpret and integrate constructive feedback in a continual effort to improve service and communications.
  
  
• Conducted industry workshops and established strategic alliances to benefit our customers and promote continued education, including:
  • Four workshops on labor management and work standards
  • Continued partnership with the University of Tennessee’s Logistics Department and participation in their semi-annual forums
  • Execution of the first annual Kenco Sustainability Summit
    

Looking Ahead

As we forge ahead in this New Year, we anticipate:

• Continued strategic, steady growth
  
  
• Geographic expansion and the opening of distribution channels, both in the United States and abroad, to benefit our customers
  
  
• Development of innovative solutions designed to meet customers’ changing needs

Our overriding goal has always been and continues to be doing a better job at what we do in order to help our customers focus on their core competency.  By offering the best products, service and value, we aim to become a true asset and valuable extension of their business.  Toward that end, we thank you again for allowing us the opportunity to earn your business, your partnership and your faithful support.

With Best Regards,

Gary Mayfield                                                               Andy Smith
Chief Executive Officer                                              Chief Operating Officer