CONFIDENTIAL Policy Overall 2009 09 1 The

CONFIDENTIAL Policy Overall 2009. 09 1

The Role of CPO (Chief Procurement Officer) CPO Performs various roles from setting up the procurement strategy of company to executing & supporting with comprehensive perspective. Also, CPO ensures the enormous leadership is not limited in procurement organization, but company-wide. CPO Agenda CPO Role Strategist Planner Controller § Emerging Trends Ensure a global view on new principles & Trends § Multi-year planning Define Procurement Strategy Corresponding Financial / Non. Financial Target of the Company § Total cost focus Consider Total Cost Ownership (incl. Risk, Innovation, Service Cost) § Supply base rationalization Innovator Harmonize & Rationalize Suppliers Based on Procurements Expense & Strategic Plan § Integrated systems and processes Decide over common IT platform for Efficient Process Integration and Extension § Supplier & Staff development Supporter Coordinate Purchasing teams in monitoring and reviewing company relationships with the Supply Base Source by: Accenture CPO Community 2008 Autumn Session 2 Must go with “Leadership” … … Inside the procurement group AND outside the group

Introducing Status of CPO Introduction of CPO allows all global & local market leader to rationalize process leveraging and optimize procurement cost Local Company Global Company • LG Electronics Automotive / Automotive Parts Logistics • Sam Sung Electronics • Toyota • Volvo • VW Audi • Fedex • LG Display • LG Household & Healthcare • The Office of Supply • Han Kook Tires • Hyundai-Kia Motors • Sam Sung Petrochemical • LS Cable • KT • Good Year Airlines High-Tech & Consumer Goods • Tyco • Sara Lee • IBM • Lucent • Nortel Finance • ABN Amro • Deutche Bank • HFC Bank / Dow 3 • United Airline Chemicals/ Energy /Pharmaceuticals & Medical Products • Aventis • Astra Zeneca • Arcelor • BP Castrol

HMM CPO (Chief Procurement Officer) Vision & Mission HMM CPO performs its Vision & Mission to attain cost optimization & visibility enhancement Vision Mission “ Strategic 1) Partner 2) for Achieving Global Level 3) Cost Leadership 4)” Cost Optimization Visibility Enhancement CPO Role Enhancement CPO Strategic Direction for Executing CPO Mission Cost Optimization Sourcing Capability Enhancement 1)Strategic : Transform its Role from Simple Procurement & Settlement of Account to High Value Strategic Sourcing 2)Partner : Conducting HMM Cost Optimization as a Partner/Collaborator & Coordinating Cross BU as a Coordinator 3)Global Level : Global TCO Managing Level Competing with Other Global Shipping Company 4)Cost Leadership : As Org. under immediate control of CEO, CPO Performs a TCO (Total Cost Ownership) Cost Optimizing Role Cross Over BU 4

CPO Transformation Project CPO Project established strategic sourcing & service procurement management structure in 1 st wave and conducts global rollout in 2 nd wave based on implications from executing pilot project in 2 nd half of 2008 2009 1~2 Q CPO Mission CPO Transformation Wave III “Foundation & Conceptualization” “Stabilization & Rollout” “Enhancement & Integration” SVC Procurement Management Structure 2 Strategic Sourcing Execution 3 (19 Categories) CPO Cost Optimizati on 5 Visibility Enhancement - Rollout Procurement Policy - Define Monitoring Operational Rule Strategic Sourcing Enhancement - Complete Rollout of Strategic Sourcing Structure 8 SRM* System - Implement Strategic Sourcing System 9 CPO EIS** - Implement EIS System Procurement Staff Capability Enhancement 1 Billion (USD) (38. 1%, 8 SVCs) Target : 5 SVCs (Acc. 80 Million) Expected Saving : Accumulated 11 Million(13. 96%) 7 - Rollout Strategic Sourcing Structure - Set Up Strategic Sourcing System Base - Define Strategic Sourcing Framework/Approach(5 SVCs) 6 Managing Portion Strategic Sourcing Structure Strategic Sourcing Stabilization 4 - Establish Procurement Policy - Design & Define Procurement Process & R&R (8 SVCs) - Execute Strategic Sourcing (Long Term Lease / Dry Dock Repair) CPO Role Enhancem ent 2010 ~ CPO Transformation Wave I 1 Cost Optimizati on 2009 3~4 Q 2. 7 Billion (USD) (100. 0%, 19 SVCs) To Be Estimated (After CPO 2 nd Wave) * $1 = 1, 250 KRW 5 *SRM : Supplier Relationship Management **EIS : Executive Information System Cost Management Enhancement & Completion To Be Estimated (After CPO 3 rd Wave)

Value Creation of CPO Activities Applying procurement policy to HMM will have an effect on supplier selection and contract all over the company. For those implication and improvement opportunity by applying procurement policy, CPO will contribute to saving procurement cost & maximizing profitability by providing strategic sourcing approach & supporting to set up procurement strategy Improvement Opportunity Value Added What is the Improvement Opportunity for Cost Saving or Procurement Visibility? As a Procurement Policy Owner (incl. Strategic Procurement Knowledge), What Kind of Guideline does CPO Provide? Cost Visibility What kind of Procedure does HMM follow to make a payment? Which Supplier Does HMM Pay for? Truck Feeder Depot M&R … Fuel Parts Policy Gate § Supplier Evaluation Method § Supplier Management & Differentiation/ Segmentation § Volume Allocation Rule § Others CPO Transmits Strategic Sourcing Value for Improvement Opportunity to related Operating Team Cost Competitiveness What is the detailed Execution Plan for Cost Optimization? Cost Optimization Ensuring Visibility & Fairness of Supplier Evaluation/Selection/Contract 6 Contribute High Profitability for HMM by achieving CPO Vision & Mission “High Profitability of HMM” CPO Vision & Mission Conducting In-house Consultant Role High Profitability Revitalize Supplier Competition Circle by Procurement Visibility & Fairness Achievement

What is Policy? Definition of Procurement ü Procurement is the acquisition of goods and/or services at the best possible total cost of ownership, in the right quality and quantity, at the right time, in the right place and from the right source, generally via a negotiation, contract and purchase order. ü Maximize the impact of procurement by securing the visibility in procurement activity, managing risks in advance and acknowledging improvement opportunity Objective ü HMM Value Maximization introducing Supplier Competition Structure ü Enhancing Procurement Capability by Managing Strategic Suppliers ü Minimizing External/Internal Risk of the privities of Contract Section Details 1 Procurement Ownership & R&R Procurement Ownership/ Changing Procurement Ownership / CPO R&R 2 Procurement Process Supplier Qualification / Bidding & negotiation / Supplier Selection / Contract Management / PO (Purchase Order) Management 3 Supplier Management Potential Supplier Management / Supplier Evaluation / Supplier Differentiation & Segmentation / Special Management 4 Risk Management SOD (Separation of Duties) 5 Information Management Procurement IT System 7

Transformed Operation by Applying Procurement Policy Applying procurement policy will lead to improve compliance by self-check for supplier evaluation & selection Transformed Operation Role & Responsibility Do (Operate) 1 Competitive Bidding § Supplier Evaluation/Selection as Defined Procedures (incl. Competitive Bidding) Self-Check § Supplier Selection/ Contract / Management [Case 1 : Operation by RHQ] Zoom In next Page 2 Supplier Selection § Periodical Supplier Capability & Performance Evaluation for ensuring Supplier Competitiveness Verification § Monitoring Compliance Procurement Policy (Supplier Selection / Contract / Management) Inform RHQ [Case 2 : Operation by RHQ & Approval by HQ] RHQ Approval/Confirm § Confirm / Verify Result of Self-Check Inform [Case 3 : Operation by HQ] § Minimum Qualification Standard for Potential Suppliers to Minimize Risk Regional or HQ CPO Inform HQ Potential Supplier Qualification Regional or HQ CPO [Case 4 : Operation by CPO] 3 HQ RHQ / HQ CPO 8 Inform HQ CPO

[Example] Practical Use of Supplier Evaluation Operating team has an ownership for supplier evaluation part, one of policy gate keeper’s roles, and the result will be used for core supplier selection, volume allocation, leading factbased negotiation and supplier risk management 2 [ Zoom In – Practical Using of Evaluation Result] [ Supplier Assessment – Operating Team] Result Supplier Score Grade Segmenta Result Utilization ‘A’ ‘B’ [Evaluation Template] Asset & Liability, Sound Finance, Profitability, Liquidity ‘B’ 90 86 ‘D’ 79 ‘Y’ Performa nce Price History, Service Quality History, OTD, etc Excellent Gr Good Excellent Gr Normal Emerging Gr. … … Capabilit y Information Management, Facilities/Providing Service, Quality Assurance, CRM, System, etc ‘Y’ ‘Z’ 93 ‘C’ Finance ‘C’ ‘D’ ‘A’ ‘Z’ Proper Supplier Selection Core Strategic Supplier Selection 63 Bad 9 Improvement Gr. Supplier Differentiation Volume Integration Core Supplier-oriented Operation Volume Allocation Rule Service Level Improvement Supplier Improve Opportunity Survey Fact-Based Negotiation 69 Value Add Sharing Evaluation Result / Competition Advanced Warning Supplier Bankrupt Supplier Collaboration Supplier Competition Fact Based Negotiation Contract Management (Singing/Expiration/Renewal) Advanced Procurement Activity

Efficient Operational Plan for Procurement Policy For managing procurement value driver in actual fact, procurement policy will be operated considering the characteristic of service and operation HMM Procurement Policy Operational Direction [Reflection of Operational Reality] [Improvement of Supplier Evaluation Effectiveness] “In Principle, Procurement Policy Applies 100% of Total Spend for each Service” but, “In Order to attain the most effective Result of Supplier Evaluation for Actual Selection & Management. . ” 1. Considering The affiliates/partners/spot/small Sum Supplier 1. Integration of former evaluation system & best practice from market leaders” 80% (minimum target) of total spend will be managed considering operational efficiency. Define & apply differentiated supplier evaluation (capability/performance) for each service [Differentiated Applying Level for Policy Provision] [Indicator Selection & Management] “In Principle, Competitive Bidding & Supplier Evaluation Applies all Supplier in Scope. . ” but, “To Find Out Improvement Opportunity for Value Enhancement from Result of Applying Procurement Policy” 1. Considering sole & single supplier due to special condition 1. Spend ratio (supplier evaluation), competitive bidding, supplier evaluation There are only exceptional cases for competitive bidding, not for supplier evaluation Define right Direction for those opportunities & enhance the level of supporting strategic sourcing activities 10