>>Supply Chain Solutions that Deliver

UTi Worldwide

Contract LogisticsIntroduction for Inzalo

UTi Worldwide

Contract LogisticsIntroduction for Inzalo

Agenda

• Introductions - Definition

• Value of Warehousing to UTi

• Value of UTi Warehousing to Customer

• Types of Warehousing and Risks/Benefits

• Customer Selection Guidelines

• Finance, Accounting and Legal Issues

Value of Warehousing to UTi

• Outsourcing of warehousing growing faster than other UTi businesses. (20+%)

• Larger customers looking for global, one stop solution.

• Longer term commitment for business• Typical returns 15-20% versus 3-5% for freight• Cost of change for customer is difficult• Only service where UTi is not dependent upon

another entity to deliver service. We can control the quality.

• Provides keystone for other transactional activity.• Information available in the warehouse is not

available from other systems and sources. “Atomic level information”

Value of UTi Warehousing to Customer

• Provides opportunity to remove warehouse expense from company assets.

• As a non asset based provider, solutions are not focused on asset utilization, but rather optimized solution.

• Warehouse personnel issues are transferred to UTi.

• Dollars spent on warehouse infrastructure can be utilized to develop new products/markets/customers.

• Once an initial operation is established it can be globalized at a dramatically reduced cost.

Value of UTi Warehousing to Customer

• UTi can provide a global solution with same processes/systems.• UTi can implement best in class WMS in a consistent and global

basis.– Rapid Implementation– Less Costly– Better ability to integrate all supply chain information into one

pipeline.

• UTi can provide a “glass pipeline” of inventory information, in motion and at rest, globally.

• Existing relationship with UTi has proven partnership approach.

• UTi has committed to grow this market segment with large scale investment in technology.

• As “foundation customers” in warehouse offering, customer will enjoy high level of executive commitment.

Warehouse Business Models With Risks and Benefits

Dedicated

Shared

Public Warehouse

One Customer Facility

A Few Key Customers

Multiple customers withmultiple terms

Dedicated Business Model

Dedicated One Customer Facility

•Typically long term contract•Risk of capital is shared•Ability to have system connectivity is easier•Personnel are focused on one customer’s needs•Pricing typically open book, cost plus, or fixed variable.•Margins typically 10-15%•Best situation for UTi

Dedicated Business ModeBenefits and Risks

Dedicated One Customer Facility

Benefits Risks

1. Both parties share risk2. Typically focused on productivity and partnership3. More flexible to handle change4. Allows for long term focus5. Keeps focus on one set of business issues6. Lower cost possible for customer due to

fixed/variable pricing approach7. Easier to gain synergies from integrated systems.

1. Must have detailed contract2. Requires open relationship..3. Risk to customer if business falls dramatically3. Risk to UTi if customer fails

Shared Business Model

A Few Key Customers

•Long term contract with keystone customer•Additional 1-2 customers that compliment keystone customer•Often market niche facility•Expanded enterprise supply chain•Systems connectivity more involved•Need to minimize capital risk - customer commitment•Priced fixed, variable with minimum commitments•Avoid per unit pricing due to fluctuation in volume•OK for UTi with proper pricing controls

Shared

Shared Business ModelBenefits and Risks

A Few Key CustomersShared

Benefits Risks

1. Ability to develop market niche2. If structured properly, keystone customer will share

risk.3. Can continue to get fixed/variable pricing4. Customer enjoys market niche expertise

1. Must have detailed contract2. Requires open relationship..3. Risk to customer if business falls dramatically3. Risk to UTi if customer fails

Public Warehouse Business Models

Multiple Customers with Multiple Terms

•Typically month to month pricing. UTi takes major capital risk.•Customer requirements may vary dramatically•Customers typically commodity price buyers. Service priced per unit. Accuracy of unit activity critical and often not accurate from customer.•Empty space is an ongoing problem•Easier to sell•Pricing needs to factor in cost of planned empty space•Hard to integrate systems or additional services.commitment•UTi should avoid unless existing space. Then do so cautiously.

Public Warehouse

Public Warehouse Business Model Benefits and Risks

Multiple Customers with Multiple Terms

Public Warehouse

Benefits Risks

1. Spread risk across multiple clients2. If done correctly, can generate high margins

1. Typically transaction priced2. Accurate information for pricing is

critical3. Volume swings create havoc4. Systems integration difficult5. Fixed costs at risk6. Difficult to differentiate7. Competition is often local

Legal and Finance Issues

• Contract Terms – especially relating to inventory liability.– Ownership of Inventory– Consignment of Inventory– Loss or damage– Co-Employment– Hazardous Materials– Start up and end costs– Pricing reviews

• Pricing Issues– Elements– Pricing tools

• Accounting and cost reporting– Tracking P & L – Tracking space and labor productivity

Sales and Marketing Strategy

• UTi should focus on developing contract warehouse operations

• Shared warehouse operations should be considered when there is a keystone customer who will share the risk/rewards of the extra space. Also could be considered for vendor hub or niche market warehouse.

• Public warehouse should only be considered when excess space is available. Business should be converted to contract as soon as practical and, as public, should carry higher margins for higher risk.

Sales and Marketing Plan Customer Selection

1 42 3 5

1 42 3 5

1 42 3 5

1 42 3 5

1 42 3 5

1 42 3 5

1 42 3 5

1 42 3 5

Customer Locations

Product Mix

Seasonality

Value Added

UTi Relationship

Capital Risk Sharing

Warehouse Strategy

Value Systems and Integrated Solution

Single Location and Local Multi location and Global

Hazardous or Specialized Minimal Special Requirements

Highly Seasonal Even Flow Of Goods

Bulk Commodities High Value Added

New Relationship Existing with Other Services

No Interest Understands Risk Sharing

Public Warehouse Dedicated Operations

Systems not Important Values Global System

1 42 3 5

Time FocusShort Term Contract Long Term Strategy

Sales and Marketing PlanPerspective Customer Profile

• Large, multi national customer• Requirements include multiple sites in various

geographies.• Requires value added services difficult to obtain in

public warehouse environment• Values quality and information in comparison to

price.• Willing to share risk and rewards.• UTi already has an extensive and positive

business relationship.• Customer sees value in having dedicated space,

people and systems.• Focus on longer term gains as opposed to short

term solutions.

Systems Plans

• Each region will maintain u-Warehouse system project coordinator and IT coordinator to assist and direct in new implementations and addition of new customers.

• For all facilities on UTi u-Warehouse system, system and operating process maps will be completed. (Example in attachment 2).

• Operations will appoint systems “super user” to manage day to day activities on system.

• UTi standard processes for naming conventions, locations, product master files will be maintained.

Systems Plans

• Standard UTi WMS implementation methodology will be utilized.

• Customer interfaces, where required, will be identified, jointly discussed, and, if appropriate, paid for by customer.

• Implementation teams will be created with budget and timelines closely monitored.

• UTi will utilize EXE consultants, where necessary, to support implementation.

• Total cost of system implementation will be budgeted in developing customer pricing.

Agenda

• Value of Warehousing to UTi

• Value of UTi Warehousing to Customer

• Sales and Marketing Plan

• Operations Plan

• Systems Plan

• Finance, Accounting and Legal Issues

• Next Steps

• Attachments

Financial, Accounting and Legal Issues

• Accounting processes must be established to adequately track warehouse P & L separately.– Include stating costs in storage and handling

components.– Develop and understand how we will charge for

capital equipment, leases, and interest.– A method of tracking labor costs needs to be

implemented.

• Strategy regarding leases of facilities for customers requires development.

Financial, Accounting and Legal Issues

• All warehouse customers will have a fully executed contract in place.

• Standard North America contract will be utilized as standard. (To be developed)– Identify term– Identify cost elements and payment terms– Identify legal liability limitations of UTi– Identify and include performance metrics.– Prepare and complete performance clauses.