PG1 | 19/04/20211

Freight RecoveryInformation Pack

April 2021

PG2 | 19/04/2021

Freight Recovery is the mechanism by which transport costs incurred by Coles in moving supplier products from NDCs to RDCs are recovered from those suppliers. Optimal availability of products in stores results in optimal sales.

This Information Pack contains:

1. Coles’ Fast/Slow Ambient DC Network

2. Freight Recovery payable

3. Calculating rates

4. Freight Recovery Agreement

What is

Freight

Recovery?

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1. Fast/Slow Ambient DC Network

Ranging fast items in Regional

Distribution Centres (RDCs) and

slower items in National Distribution

Centres (NDCs)

Ranging of goods:

RDC

• High carton velocity

• High frequency of promotions

• High volume uplift during

promotions

• Temperature control

requirements

• State or Territory where the

goods originate from

NDC

• Low carton velocity

• Low frequency of promotions

• Minimal volume fluctuation

during promotions

• Specific storage requirements

Heathwood RDC

Forest Lake RDC

Eastern Creek NDC

Somerton NDC

Edinburgh Parks RDC

Tasmanian Stores

Fast moving items

Slow moving items

Highly promoted items

Kewdale RDC

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Heathwood RDC

Forest Lake RDC

Eastern Creek NDC

Somerton NDC

Kewdale RDC

Edinburgh Parks RDC

Tasmanian Stores

Lanes incurring FRT Recovery

2. Freight Recovery payable on goods ranged in NDCs

NDC delivery:

- Suppliers make fewer deliveries,

to fewer locations, with larger

payloads

- Coles consolidates freight for

movement from NDC to RDC

resulting in lower freight costs for

these movements.

The Freight Recovery Agreement

and Policy provide transparency of

rates by lane and ranging criteria.

Note:

- Freight recovery is only

applicable for ambient products

delivered into NDCs by suppliers.

- Freight recovery is not

applicable for overseas

products delivered FOB or ex

works, or products delivered

Direct to Store or Cross-Dock. Benefits of the Fast/Slow Network

Optimal availability of products in stores results in optimal sales. Coles can provide

stores with products on shorter lead time and at higher frequency.

Fast moving items

Slow moving items

Highly promoted items

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Cubic Utilisation Cost Per Cube

• Our actual cost for

moving products

interstate is incurred

based on a cost per

pallet space rate.

• We determine how

much of the

available pallet

space is utilised by

actual product being

moved.

3

• A cost per cubic

metre is calculated

by dividing our cost

per pallet space by

the number of cubic

metres utilised.

Administration

4

• An industry

benchmarked

Administration charge

is applied to our cost

per cubic metre.

Rate Per Cube

5

• The rate per cubic

metre is the sum of

our cost per cubic

metre and

Administration

charge.

Coles Transport Cost

1

We translate our transport cost per pallet space to a

cost per cubic metre in order to charge suppliers for

their product moves

$100

per pallet space

2

cubic metres per pallet space

$50

per cubic metre

$5

per cubic metre

$55

per cubic metre

* All rates are exclusive of

GST and fuel surcharge, as

detailed in the Freight

Recovery Policy and

Procedure

2

APRIL 21

3. Calculating Freight Recovery rates

Coles has had the methodology and rates validated by an external freight consultancy.

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4.Freight Recovery Agreement

The Agreement and Policy explain the operation of Freight Recovery

6

The Freight Recovery

Agreement is the legally

binding agreement

between your company

and Coles.

The Policy and Procedure,

which can be found on the

Coles Supplier Portal, sets out

the principles and methodology

that Coles follows in relation to

freight recovery.