volumes will have grown over 300%. Is this reasonable, or even possible? Regardless, at over 6 billion ordinary parcels

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1 MetraTech Monetization of Courier, Express & Parcel Services The Universal Postal Union well known for being conservative is forecasting a 15% per annum growth in parcel deliveries. At this sort of rate, within 10 years volumes will have grown over 300%. Is this reasonable, or even possible? Regardless, at over 6 billion ordinary parcels being delivered every year the absolute growth will be phenomenal. THE CONSUMER DEMAND SIDE Clearly, on the demand side the driver for growth is being able to shop without going to the shop being able to browse online, buy and herein lies the real source of the explosion have the goods delivered at home. With the increasingly high cost of energy, this phenomena is more than just a convenience it is the economics of saving fuel by no longer driving the shops. An even larger; in fact, the largest driver, is time jumping in the car and going shopping is time-consuming. Unless a consumer can find everything he or she wants in one place (ergo the rise of superstores like Wal-Mart and Tesco) car journeys make less and less sense. ecommerce, in contrast, is logical it makes the most sense for goods that don t fit into the shelving strategies of the largest hypermarkets. But even the shelf power of the supermarkets is waning online clothing and pharmaceuticals are two great cases in point. It is interesting to note that in less affluent economies where consumers have less access to personal transport, many goods (like cases of Coca Cola) are still sold door-to-door. In some ways this could be described as half of the ecommerce model the delivery without the computer. THE CONSUMER SUPPLY SIDE From the outside, ecommerce and the Hypermarket models are converging as Tesco Online takes on Amazon. This convergence will drive competition on two fronts: Who can stock the best selection of goods? a. and sell at the best price. Who can deliver those goods most rapidly and conveniently? a. and do so the most cost effectively. CONSUMER VERSUS BUSINESS / PICK UP VERSUS DELIVER The Order and get delivered model has always been the default in business. Best practice has always been if you want me to use your wares, I expect them to be delivered to my docks. Only in the consumer market has the practice been, if you want to buy my wares, you must come and get them. Why don t businesses just pick up what they need? It comes down to margins it is easier to squeeze a supplier to deliver a good more cheaply than squeezing an internal cost center to pick up at the lowest possible cost.

2 Of course, two key but opposing characteristics of business goods make a delivery model a shoe-in for future success: 1. Many deliveries are bulk huge quantities of low margin supplies. So many are delivered that the cost can be amortized down to almost nothing 2. Many deliveries are for high value goods large and/or requiring special handling that are by nature high margin making the additional delivery cost meaningless. Consumers are in the dead zone they buy low margin goods in low volumes. But they would take delivery if it were only offered. Consumers can squeeze suppliers en masse but each individual consumer has no power on his own. Only by switching loyalty to online vendors have they been able to push supermarkets into delivery based models. But as we are seeing in phenomena such as GroupOn, consumers are beginning to act like businesses by pushing more and more into the you sell you deliver mode BUT WHO DELIVERS? The consumer and business sides are also converging on another dimension. On the consumer side, the model had evolved from the supplier delivers almost entirely to the use of parcel services and couriers. Only recently have suppliers begun doing all their own deliveries, as in the case of the large supermarkets. On the business side, many businesses have continued to deliver their own goods to other businesses but with their increased integration capabilities, logistics providers have begun to make inroads into delivering items that suppliers once preferred to deliver themselves (critical production inputs). PALLETS AND POST CARDS AND PLANS The business and consumer parcel delivery business is built on the One Order One Delivery model. This is in contrast to the One Order many Delivery and Many Order One Delivery models that respectively characterize the pallet and private mail services. To take it one step further, the parcel business has been based on the One Order One Delivery Once approach none of the orders are placed once but supply continues every week. CONVERGENCE DRIVES CONVERGENCE Suppliers have never seen the difference and as their businesses begin to roll in new services for instance Amazon taking on Office Depot taking on Tesco taking on Dell they will force the delivery providers to converge as well: making each support the full matrix of delivery models. It is also clear that businesses are less and less willing to contract different carriers for each combination and when a carrier is unable to address a delivery models (i.e. public post not handling Pallets) they are likely to lose business. Businesses must wonder why a company that comes by their docks every morning to deliver and again every afternoon to pick up can t do all their deliveries and all their pickups regardless of the model. WHAT IT TAKES Managing these divergent models requires more than just willingness. It demands well managed and integrated logistics and an operational flexibility that specialized players have not needed until now. And

3 make no mistake, though businesses want converged logistics they still want to keep the commercial advantages that the specialized vendors have provided in specialized channels. Moreover, they will want to negotiate terms and conditions that do not respect the old boundaries asking for bulk rates for one off deliveries that are so predictable that they can be construed as bulk. WHY NOW? Regardless of the explosion of opportunities, providers are struggling for profits. Carriers are not immune to the downturn in the global economy and are especially susceptible to increasing costs with the rise in global commodity prices in particular oil. As margins are squeezed managing costs will provide some relief but the key will be increasing revenues by using existing assets to provide new delivery models that customers value more highly. The onus of new delivery models would appear to be purely down to logistics. But this only takes the providers point of view. The real difficulty that impacts both customers and providers is putting a business agreement in place that cleanly and explicitly defines the mutual expectations of how items will be picked up, transported and delivered. And as with any business agreement the terms are enforced through money. In other words they are enforced through the calculation of the invoice. The need to expand beyond mono-line billing systems that only manage the terms related to existing delivery models is key to expanding service portfolios which is in turn key to maintaining margins and capturing the real value of an exploding delivery market. MULTI-SIDED BUSINESS AGREEMENTS It has been common to expand the delivery network with 3rd parties especially through couriers and post offices that have monopolies in delivering letters. These 3rd parties have agreements with the providers much like providers have agreements with customers. Whereas the latter is based on invoicing, the former is based conceptually on being invoiced or settled. But in both cases the monetization of the relationship comes down to billing. From a management point of view providers are invoicing and being invoiced based on one transaction: taking an item

4 from point A to point B. Though sometimes only implicit, the terms of the agreement between the courier and the providers is back to back, with the agreement between the provider and the customer. If the courier fails to keep a parcel dry, the penalty will be enforced by the customers against the provider and if both sides of the business agreement are managed holistically then enforced on the courier. In other words, all the agreements that are put in place for each party as it plays its role in the delivery chain must be managed consistently. Monetization of each agreement should be unified in one system regardless of how payables and receivables are managed. Agreements between the provider and his large customers must easily flow down into agreements with sub-contractors. For instance, if a large retailer demands that delivery of high value clothing must allow for 3 additional delivery attempts beyond the standard contract, the couriers must understand this and be compensated accordingly. Couriers are just one example of a 3rd party. Many more are entering the delivery chain. But for each, the need to be managed within a unified monetization framework is critical. Some examples of back-to-back agreements are below. The most interesting viewpoint, considering that the delivery network is governed by interrelated agreements, is that of the parties taking delivery: the customers of the providers customer (typically the retailer). In fact it is often the receiver that forms the basis of the monetization chain by paying for shipping and handling. Ultimately, it is their terms and conditions and what they are willing to pay for that is the cornerstone to all other agreements. As consumers begin to exert power via cooperatives such as GroupOn their monetization terms will also come into play in all other agreements down the line. The real challenge that impacts customers, providers, consumers and all other 3rd parties is putting a business agreement in place that cleanly and explicitly defines the mutual expectations of how items will be picked up, transported and delivered. And as with any business agreement, the terms are enforced through money. In other words they are enforced through the calculation of all the invoices and settlements. BILLING IS THE MONETIZATION OF AGREEMENTS Evolving business models are driving the need to look at billing as an integral part of managing the chain of business agreements. Billing governs how these models are monetized. Managing each link in the chain as a separate arrangement will: Impede incorporation of new and hybrid delivery models (that customers are insisting on and competition from other segments are developing towards) from fear they cannot be successfully monetized. Make it difficult to take existing models and adjust its constituent 3rd party agreements into good margins not just on the aggregate but down to contract by contract. METRATECH AGREEMENT BASED BILLING FOR NEXT GENERATION POST AND PARCEL MetraTech s Agreement-based billing solution, MetraNet, recognizes explicitly both every transaction and the multiple parties involved in the delivery chain. The solution is designed to manage all aspects of any agreement under same umbrella.

5 MetraNet recognises that today s post and parcel-based services are agreementbased in that all terms can be negotiable or non negotiable. And as companies evolve, MetraTech s agreement-based Billing Solutions serve as a roadmap to which organisations can add features and functions. In this way, a unified billing strategy that enables flexibly priced products and services, as well as the ability to bill for them across an entire corporate client relationship by means of a single system, can be achieved. 1. Monetization comes from first recognizing key financial/business model components: CRM (customer profile) Service profile (marketing and offer management) Distribution chain (distribution partner profile) Supply chain development & management 2. Then executing on complex billing and, also, compensation: Sometimes the prime service provider relies on tie-ups with partners or 3rd parties to deliver service. The contracts and term & conditions differ for every 3rd party, and the entire process has in the past generally been done manually, as no generic role-based system has been available. But manual systems are cumbersome, slow, and susceptible to human error. Consolidating all billing operations, product catalog, and CRM systems is a major undertaking for any organisation. Choosing MetraNet allows companies to leverage expertise in all of the above-mentioned BSS functions, which helps achieve: 1. Increased market share through implementing Relationship Pricing 2. Cost reductions due to product rationalization and consolidated billing operations 3. Revenue growth through the ability to realize innovative business models 4. Revenue capture via better control of revenue leakage 5. Increased customer satisfaction through a platform for relationship driven pricing and better statement/ bill visibility 6. Reduction in Opex due to lower product management and IT-related costs. THE PROOF Every organisation needs to work with a trusted vendor with proven approaches. The evidence of MetraTech s impact can be seen globally. Microsoft deploys MetraTech s Agreement-based Billing and Compensation solution, MetraNet, for the company s Cloud Computing Services, Microsoft Online services, which remove the burden of managing and maintaining business systems and frees IT departments to focus on initiatives that can help deliver true competitive advantage. With A-B-C, Microsoft is able to reliably bill subscribers and automatically compensate partners for their customers subscriptions. The Depository Trust & Clearing Corporation (DTCC), which through its subsidiaries settled nearly US$1.48 quadrillion in securities transactions in 2009, and provides a range of clearance, settlement and information services in the equities, fixed-income, over-the-counter derivatives, wealth-management and insurance markets in the U.S. and overseas turned to Agreements-based Billing and Compensation from MetraTech some 20 months ago. OnStream, a National Grid Company in the UK which provides gas and electricity metering solutions to energy suppliers, deployed MetraNet to provide

6 the billing element of its extensive business transformation program in Communications Service Provider Meeting Zone s award-winning new collaboration portal, which set industry standards for ease-of-use and self-service functionality is founded on the relationship-building principles of agreements-based billing. As progressive service providers in multiple industries are now clearly starting to demonstrate through A-B-C, BSS need no longer be a barrier to innovation and, thus, to future success. About MetraNet MetraNet allows users to better and more profitably serve their customers, and to differentiate from competitors. Its benefits include: The flexibility to manage change Sophisticated agreements-based rating engine enables complex tiered rates, hierarchical relationship management and insight into all billing-related activities by product, by transaction, and by counter-party for auditing purposes and for profitability analysis. Business modelling tool which enables fast adaptation to changes in monetary terms and conditions on how products are priced and sold. Quickly, simply and faithfully update model contract term changes in the back-end billing system to meet front end negotiations - avoiding the number one cause of revenue leakage. Reduced time-to-revenue for pricing changes, products, and services Rapid calculation of margin and profitability at an individual relationship or portfolio-wide level. Supports improved customer service and assists in developing profitable customer relationships. Expansion of the product portfolio into new markets and geographies. One system to manage revenues while embracing new business relationships Improves efficiency while opening up new revenue streams. Commissioning and pricing for different types of customers or partners. Hierarchical fee management. Automated solution to the pricing and invoicing steps of straight through processing. Reduces workarounds and manual processes thus reducing costly errors and revenue loss. Copyright 2013 MetraTech Corp. All Rights Reserved.