Boise Cascade Office Products

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Electronic commerce is booming. Customers are more frequently ordering products, checking on shipments, and making payments without ever picking up the phone or touching a piece of paper. We made switching to electronic commerce easier with the introduction of our Internet system, I-97, and more than 1,500 customers have signed up. It's not just convenience that has our customers flocking to I-97. Companies using I-97 can realize a substantial reduction in administrative costs associated with ordering office products by letting end-users do their own purchasing. And when our customers order electronically, we save money, too.

Customer ordering isn't the only place we're using technology to lower costs and improve service. Many companies require custom catalogs with special products and pricing. With our new catalog database system, we'll generate custom catalogs in printed or electronic format quicker and more cost-effectively.

To understand our customers better, we must identify trends quickly. We're using a data warehouse together with the latest analytical software tools to analyze customer needs and to determine how best to respond. Customer, product, and distribution center sales and profitability data are never more than a few mouse clicks away.

We're always planning better ways to conduct business, and our major source of new ideas is our global associates. We're bringing together people from all over the world to share best practices. In 1997, we grew our international presence to 20% of sales, in part through our acquisitions of JPG, a leading French direct marketer, and of contract stationers in France and the United Kingdom. We're learning successful marketing and operating techniques from our foreign operations. JPG, for example, excels at marketing furniture to small offices. That's one of several proven skills we plan to extend to our other operations.

With our larger global presence, we are well positioned to benefit our multinational customers. We are a single supplier for several of our North American customers, and this model will work for customers located in Europe, too. Look for us to broaden our international coverage in 1998.

We also understand that each local market has its own requirements. For example, copy paper is a different size in Europe than in the United States. Product-preference differences can make negotiating international agreements with our vendors and customers a little more challenging. However, we anticipate strong gains in purchasing efficiencies in the years ahead, and we'll bring even more vendors on board with our global purchasing program.

Today, almost every company faces competitive pressures, and we are no different. We're responding through an endless quest to do more for less. It's working; our operating costs fell to 20.6% of sales in 1997 vs. 21.0% in 1996. We're constantly fine-tuning our logistics system to achieve even greater cost savings. For example, we monitor how every inch of each distribution center is used, stock slow-moving products in only our hub distribution centers, and expertly place products in each warehouse where they can be picked most efficiently to fill orders. These actions minimize the inventory we need, reduce operating costs, and allow us to handle more merchandise in the same space.

Last year, we reconfigured many of our distribution centers to process orders for both contract stationer and direct mail customers. As a result, we have lower overall costs and can provide better service to our direct mail customers. It's just another way we're becoming more competitive and increasing market penetration.

This year, we will begin installing a new state-of-the-art warehouse management computer system. The new system will make order fulfillment even more accurate, enable more customer-specific services, and further reduce manual processes.

Consolidating suppliers makes sense for customers; it means fewer headaches and lower costs. Many of our customers rely on us to provide coordinated service for all their offices. We are an industry leader in this area. Our centralized systems link every distribution center and are the key to simplified ordering, accurate shipments and billing, and customized usage reports-all at competitive prices.

The trend toward one-stop shopping continues. In response, we're expanding our offerings in computer products and services, furniture, paper, and promotional products. In promotional products, we combined two acquisitions to form Boise Marketing Services, Inc. BMSI provides a wide range of promotional product marketing services-including custom design, decorating, and distribution-to a growing market. As businesses try to spend their advertising budgets more effectively, we're there, ready to build and implement targeted marketing programs.

Not only are we making it easier for our customers to do business with us, we're making it easier for them to do business with other suppliers, too. A big boost to one-stop shopping is Boise-Wallace Single Sourcesm, an integrated supply program that allows customers to place one order through one source for both office products and pre-printed forms. Our marketing partner, Wallace Computer Services, is a recognized leader in print management. Customers will see our alliance as a single supplier; they will receive one usage report and one invoice. We expect to add additional top-of-class suppliers to the program in 1998.

Leading edge information technology is essential in the distribution business, and we will continue to invest to increase our efficiency and improve customer service. Our new warehouse management system and new financial system will automate many routine tasks and provide more tools for analyzing information and operating results. They're also part of our preparation for the year 2000. By focusing on the millennium issue early, we expect to be ready with time to spare.

We've been moving more and more data closer to our front-line troops, our sales force. Most of our large business customers know us through sales representatives assigned to their accounts. With laptop computers and the latest software, our sales people can download customized media presentations and access on-line customer information and contracts from our centralized computer system. This lets them sell and service customers more effectively. In 1997, we again won the H.R. Chally Award for sales excellence, one of only two companies to win the award twice.

Our customers will have different needs tomorrow than today. We're responding. With focused growth and new technology, we will be different too.



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