The Panalpina magazine 2_2005

connect

September 22, 2005:

Going public of Panalpina

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An investment which has always proved to be very profitableWilfried Rutz (right), Chairman of the Ernst Goehner Foundation(hitherto Panalpina's main shareholder), Gerhard Fischer, Chairman of Panalpina, and Roger Schmid, Managing Directorand board member of the Foundation as well as board member of Panalpina, talk about the flotation of the company.

Reliability: the be-all and end-allHow Panalpina provides logistics support to Cambridge America, a smallcompany which operates in the electronics sector.

Page 4 IPO

Dedicated – heart and soulHow Kornelija Capek, Regional Key Account Manager, actively supportsher customers IBM and Lenovo.

Page 26 Human Resources

The all-round partnerThe wide range of services Panalpina offers the oil and gas industry.

Page 12 Oil and Gas

Page 20 SME

SCM for hi-tech customer in Eastern EuropeElectronics manufacturer Celestica turns to Panalpina again for its newproduction facility in Romania.

Page 22 SCM

Page 31 Publishing details

Page 28 Worldwide

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22 September 2005 represents a milestone in the history of Panalpina. It isthe day on which Panalpina shares were publicly traded for the first timeon SWX Swiss Exchange under the symbol PWTN. The Ernst Göhner Foundation, formerly our sole shareholder, enabled Pan-alpina to open up to investors and the stock market by selling a majority ofthe stock. Nevertheless, the Foundation intends to retain a sizable stockholding over the long term. For us, this decision is a sign of confidence inwhat we have been building up over the past decades. In the interviewwith representatives of the Board of Directors on page 4, you can find outwhy we are more than happy with the Foundation’s decision. This well considered and carefully planned IPO will bring our company anumber of clear and invaluable benefits. The name Panalpina will becomeeven better known, and we will have access to a widespread group of shareholders and thus to the capital markets, which will give us greaterfinancial flexibility in future. But what impact will the IPO have on our plans for the future and on ourday-to-day business? With this additional strengthening of our alreadyvery solid financial basis, we can confidently pursue our proven strategies:clear focus on international freight forwarding by air and ocean and onsupply chain management solutions. On the other hand, the public listingenables us to expand our worldwide network and reinforce our leadingposition as a globally active company. However, our size will never standin the way of our taking the various individual requirements and specialwishes of our customers into consideration. Panalpina will always makethe extra effort necessary to offer the precisely tailored and flexible for-warding and logistics solutions that customers expect. This is exactlywhat our motto “A Passion for Solutions” means.We can be proud of what we have already achieved, and now that we arepresent on the stock market we can be confident that we will continuealong our successful path.

Bruno SidlerPresident and CEO

Dear readers

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An investment whichhas always proved to be very profitableOn 22 September 2005, the shares of Panalpina World Transport (Hold-ing) Ltd. were for the first time publicly traded on the SWX SwissExchange. On the eve of its going public, “connect” talked with (from r.to l.) Wilfried Rutz (Chairman of Panalpina’s main shareholder, the ErnstGoehner Foundation, and Vice Chairman of Panalpina), Gerhard Fischer(Chairman of Panalpina and Vice Chairman of the Foundation), andRoger Schmid (Managing Director and board member of the Foundationas well as board member of Panalpina) about the motives and conse-quences of the decision to open the long-established company to thepublic, about Panalpina’s strategy and about what makes it differentfrom its competitors.

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“Panalpina remains a precious jewel in our portfolio.”

IPO

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global markets. Thus, the sector as such is already very interesting and will continue tobe attractive in the future. On the otherhand, most of our competitors of similar sizehave already gone public. Now Panalpinaoffers one of the last investment opportuni-ties in the area of global logistics providers.And there are a number of good reasons forinvestors to consider our company.

What are these reasons? What differentiates Panalpina from itscompetitors?Gerhard Fischer: We have a very solidfinancial basis, and we follow a tried andtested strategy with a clear focus on interna-tional air and ocean transport and supplychain management solutions. This marks usout from our main competitors, who offerintegrated contract logistics and generallyuse their own infrastructure to store goodsand transport them by road. Our asset-lightbusiness model increases our flexibility,reduces risks and improves our liquidity. Onthe other hand, we have established a global

network which is big enough to make us aglobal player and at the same time still smallenough to care for individual customerrequests – a fact which makes us attractiveto both major multinational companies andsmall and medium enterprises.

What is the “asset-light businessmodel”, and why do you call it acompetitive strength?Gerhard Fischer: As a principle, Panalpinadoes not own transportation assets, butrelies on third-party carriers for trans-

Why has the Ernst Goehner Foundation decided to open Pan-alpina to the public, and why at this precise moment in time?Wilfried Rutz: In line with the strategy tofurther diversify its assets, the Ernst Goeh-ner Foundation has been pursuing this ideafor quite a while. In the portfolio of the Foun-dation the forwarding and logistics groupPanalpina has for decades represented a sig-nificant asset – a “precious jewel”, I mightsay. The IPO is a move which makes mostsense to both institutions because it safe-

guards Panalpina’s possibilities to expandwithin a rapidly changing environmentwhile at the same time it ensures a continu-ation of our shareholding. As you know, afirst attempt at going public was made in2002, but due to the unfavourable situationon the stock markets back then, we had topostpone the project. Today, the stock climate is much more friendly, even ideal for such a move.

Gerhard Fischer: From the point of view ofPanalpina, going public brings someobvious advantages, too. Apart from anincreased brand awareness and an enhan-ced company profile, we will be able toenlarge and diversify our shareholder struc-ture and simultaneously increase our finan-cing flexibility by gaining access to the capi-tal markets. Last but not least, linkingmanagement focus with shareholder valuecreation will serve as an additional incentiveto performance and growth.

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Why is the Foundation selling a majority of the shares?Roger Schmid: We wanted to be crystal clear with the signals we are giving. By placing up to 56% of the shares in public

hands, we underline our firm commitment toopening up the company to interested inves-tors and the stock market. The substantialcapital which we will keep under our controlshows that we are absolutely convinced aboutthe huge potential of this successful companyand its management and staff, but it can alsobe seen as a sign of loyalty towards an invest-ment which has proved very profitable to usover many decades and which, we are con-vinced, will keep doing so in the future.

Why is the Foundation offering theshares at this point in time?Roger Schmid: We are convinced that thetiming for the IPO is ideal. Market condi-tions are very good, and the potential in Panalpina’s industry is huge. Moreover thecompany is in our view well positioned forprofitable growth.

What makes Panalpina attractive inthe eyes of the investor community?Wilfried Rutz: First of all, not only theexpert, but also the average investor isbeginning to understand more and more the enormous impact and complexity of gro-wing globalization and the important, if notto say crucial role which freight forwardingand logistics have assumed over recentyears. Today, logistics is high on the agendasof company managements as the decidingfactor between success and failure in the

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portation services. The same applies to offi-ce and warehouse facilities. This gives ussignificant operational and financial flexibili-ty and allows us to provide various transpor-tation options to our customers and to deve-lop optimal solutions for their transportationneeds. You need flexibility, especially intoday’s supply chain management. Just lookat the number of OEMs that are shiftingtheir production platforms further east, bothwithin Europe and to Asia. Being asset-lightand cooperating with best-in-class sup-pliers, we are able to adapt very quickly tospecific customer demands.

Apart from the general situation onthe stock markets, what has changed since 2002? What have youachieved to make Panalpina evenmore fit for going public?Wilfried Rutz: To start with one of the mostrecent changes, we have, at our extraordina-ry general assembly of 23 August, revised ourArticles of Association and approved anextension of the Board of Directors from fiveto seven members. The four newly electedmembers (see page 8) will further enhancethe industrial competency of the board andwill help to ensure that the Group’s leader-ship stays in experienced hands, both inregard to the listing and in view of our growthstrategy. We have every confidence in thisnew team, and I am sure our investors willhonour this decision. At the executivemanagement level, we have reduced the Exe-cutive Board to four members in June of thisyear. By making it leaner and introducing thetwo new functions of Chief Operating Officerand Chief Administrative Officer (see page10), the Executive Board’s decision-makingprocess has been facilitated considerably andflexibility has clearly been raised.

What were the reasons for therecent changes at regional manage-ment level?Gerhard Fischer: By implementing regionalmanagement structures three years ago,Panalpina has reached its essential goals, inparticular strengthened local sales capaci-ties and standardized global operation pro-cesses. Also in June 2005, in a second steptowards the further development of thesestructures, we partially redistributed theresponsibilities between the regional cen-tres and corporate head office in Basel. Thisadjustment was particularly geared to sup-port the Group’s productivity objectivesthrough more efficient functional guidanceat managerial level as well as to re-focus ourglobal project portfolio. The former Emearegion was divided into two separateregions, with Europe on the one hand andAfrica/Middle East/Central Asia on the otherhand. Furthermore, China (formerly part ofthe Asia-Pacific region) was split from Asia-Pacific into a separate region. Thus, the exi-sting four were replaced by six regions,managed by lean organizations operating asregional competence centres.

What was the reason for choosing ageographic rather than a productsegmentation like some of your com-petitors do?Gerhard Fischer: We have a global busi-ness which is executed from area to area oreven from country to country and accord-ingly influenced by local customer require-ments. We manage our company geographi-cally in order to enhance cross sellingopportunities and exploit the full potential ofour sales force. We are convinced that ourapproach is successful, as most of our custo-mers are organized by geography as well.

Which of your regions has the highest growth potential? One wouldguess it’s probably China, isn’t it?Gerhard Fischer: The Asia-Europe/Europe-Asia trade lane represents Panalpina’s mostimportant market, and our share of the vol-umes transported on this lane is significantlyhigher in both air and ocean freight than our

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respective overall global market shares. Pan-alpina intends to increase its turnover bycapitalizing on its strong presence in Asia,where demand for transportation is expec-ted to grow faster than in other regions ofthe world. Asian cargo markets continue tolead air cargo industry growth while oceanfreight volumes are anticipated to grow at asimilar rate to air freight. The liberalizationof trade services in China paved the way forPanalpina to obtain the licence for a whollyowned enterprise in Shanghai in 2004. Nineadditional operating branch licences havebeen applied for, and we expect to obtainthe respective licences this year.

So far, Panalpina has been growingorganically. Will this strategy changein the future? Is providing the finan-cial means for bigger take-overs one of the reasons behind the IPO?Gerhard Fischer: Our growth strategy willnot change. We don’t believe in huge acqui-sitions just for the sake of growing “by anymeans”. Our focus will remain on organicgrowth, supported by very specific andselected so-called “bolt-on” acquisitions, asfor instance we have done this year byacquiring Janco Oil Field Services (see arti-cle on page 18). Talking about expansion ofscales, we intend to strengthen our positionin the fast growing trade lanes and toimprove our market position in areas wherethe Group is relatively underrepresented.As regards network expansion, we will keepacquiring partner companies in strategiccountries to secure our direct control of thecustomer base. And when it comes toexpansion of skills, we intend to further addto and strengthen our capabilities in selected industry verticals and in specificgeographic areas.

IPO

“Loyalty towards an investment

which has always proved very profitable.”

“The Foundation will retain a

substantial stake in Panalpina over

the long term.”

At the same time, the asset-light busi-ness model also reduces Panalpina’s exposureto the business cycles of the transportationindustry and the industry sectors it serves.Capital expenditure is limited and largelyfocused on IT systems that reinforce our com-petitive strengths. As a result, Panalpinaenjoys strong cash-flow generation and highreturns on capital employed.

Without possessing its own fleets,how does Panalpina cope with steadily increasing demands andwith imbalances in air and oceanfreight capacity?Gerhard Fischer: We believe and have infact proved that our Central Procurementand Capacity Management (CPC) generatesbenefits in terms of improved efficiency,reduction in duplication, and better co-ordi-nated and standardized processes. Our pro-curement is managed by a small global teamof professionals who, together with speciali-zed information technology platforms suchas our Airwarder and Seawarder IT plat-forms, ensure full transparency and opencommunication amongst the specialistsinvolved. This, in turn, provides maximumbenefits to both the carriers and Panalpinaby meeting agreed targets and supportingthe carriers in their efforts to reduce unusedcapacities caused mainly by trade imbalan-ces. We have also found that central procu-rement results in an optimization of groundnetwork services and rationalization ofcosts, which plays an increasingly importantrole as the port/airport-to-port/airport pro-ducts become more and more commoditized.

What are the main key industries you are focusing on, and what roledo they play in your business?Gerhard Fischer: Over the past few years,Panalpina has installed industry competen-ce centres for the automotive, health care,high tech, retail and fashion as well as the oiland gas industries. Each competence centeris staffed with dedicated experts and isexclusively geared to developing new and innovative industry solutions and tosupporting Panalpina’s sales force in gene-

rating business from existing and targetcustomers. The expertise accumulated bythese staff has not only proved to be a valuable internal resource, but has also ledto Panalpina being recognized as a leadinginnovator in these markets. We believe thatour specialist sector capabilities are essen-tial to building customer relationships and to maintaining a consistently high level ofservice quality across our business.

We have long been concentrating on theoil and gas industry, for instance, and we areproud to consider ourselves the world’s mar-ket leader in supply chain solutions for thissector. The transportation needs of the oiland gas industry require highly complexsolutions and specialist skills and, therefore,provide better differentiation potential forfreight forwarders. Based on our leadingmarket share and customer relationships,our reputation in the sector and our special-ist experience and capabilities (e. g. special-ist engineers), we believe that Panalpina is in a uniquely strong position globally to provide freight forwarding services for thisindustry, which is truly key to the world economy.

What about Panalpina’s customerbase? What do you mean by having a “healthy balance between majorglobal customers and SMEs”?Gerhard Fischer: Panalpina serves a largeand diverse customer base of over 100,000customers globally. We estimate that approxi-mately 20% and 80% of our net forwardingrevenues are derived from our globalaccounts and SME customers respectively.

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Retaining a well balanced customer mix isboth a high priority and essential for us. Onthe one hand, global accounts have a signifi-cant volume on certain trade lanes, whichenables the Group to optimize the procure-ment of transportation capacity and fosterthe expansion of its operations. We operate ahighly experienced global account division,clearly underlining the importance of ourthree dozen top accounts. On the otherhand, maintaining a diversified portfolio ofSME customers helps us to limit the risks ofour exposure to any individual globalaccount. This customer mix strategy helpsbalance the Group’s growth and createsbenefits for its customers.

You have been quoted as saying “it’sthe ideas which move the freight”.What do you mean by this?Gerhard Fischer: Well, at the end of the dayit’s always the people that make the differen-ce. The most sophisticated strategies andsystems will only help if your staff are com-mitted to going the extra mile for their custo-mers. We are very fortunate to have this kindof people. Panalpina considers itself to be anemployer-of-choice in the industry. In orderto achieve our corporate objectives, we arestrongly committed to attracting some of thebest talents in the market and to retainingour internal high performers. Panalpina focuses on people who embrace the Group’score values and who reflect in their beha-viour what we call “A Passion for Solutions”,which means finding the best possible solu-tion and turning challenges into promisingopportunities. >

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IPO

Rudolf W. Hug Member Swiss, born 1944elected 2005 (till 2008)

Rudolf W. Hug holds a doctorate in law from the University of Zurichand an MBA from INSEAD,Fontainebleau (France). In 1985 heparticipated in the senior executiveprogramme of the Graduate School of Business at Stanford University.From 1977 to 1997 he worked inseveral positions for Schweizeri-sche Kreditanstalt (today CreditSuisse). From 1987 to 1997 he ranthe International Division and was amember of the executive board of Credit Suisse and Credit SuisseFirst Boston. Since 1998 he hasbeen active as an independentmanagement consultant.

Board of Directors

Wilfried Rutz Vice ChairmanSwiss, born 1939 elected 2003 (till 2007)

Wilfried Rutz holds a universitydegree in economics as well as aPhD from the University of St. Gal-len. Since 2003 he has been amember of the Board of Directors;in 2005 he was elected Vice Chair-man.

Glen R. Pringle Member American, born 1947elected 2005 (till 2008)

Glen R. Pringle holds a degreefrom the University of Alabama aswell as from the Georgia Institute ofTechnology and Indiana Univer-sity/Perdue University. From 1967to 1969 he worked as state direc-tor of sales for CENCO InstrumentCompany. After working atWVNI/WBIL Radio Station as salesmanager, he joined the AlabamaDevelopment Office in 1986 as adevelopment director until he be-came development director of Retirement Systems of Alabama in1995.

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Gerhard Fischer ChairmanSwiss, born 1933elected 1991 (till 2007)

Gerhard Fischer joined the Groupin 1964, when he started workingfor Hans Im Obersteg Ltd., Zurich,at that time a Panalpina subsidiary.He was later nominated as del-egate for the Group’s Airfreight FarEast division. From 1973 to 1978he headed Air Sea Broker (todayPanalpina Airfreight). In 1978 hemoved to the head office, where heled the airfreight business of theentire Group. In 1980 he becamemanaging director of PanalpinaNigeria. From 1986 to 1987 he wasthe Group’s COO. In spring 1987he was appointed CEO, and in1991 he was elected as a memberof the Board of Directors. In 1995,Gerhard Fischer was also electedChairman of the Board of Directorsin addition to his CEO function. In1998 he handed over the CEOfunction to his successor.

Gunther Casjens Member German, born 1950 elected 2005 (till 2008)

From 1976 until 2004 Gunther Casjens held several positions atHapag-Lloyd, in 1983 as deputydirector of Europe / Far East Servi-ces, in 1987 as managing directorNorth America Services and in1988 as managing director Northand South America Services. In1990 he became a deputy memberof the executive board of Hapag-Lloyd, and from 1991 until 2004 he was a member of the executiveboard of Hapag-Lloyd. In 2004 he became managing partner andchief executive officer of Nord-capital Holding GmbH & Cie KG.

Roger Schmid Member Swiss, born 1959elected 2003 (till 2007)

Roger Schmid holds a PhD in lawfrom the University of Zurich. From1991 until 1995 he was legal counsel and director at Bank Leu,a subsidiary of Credit Suisse. Since2003 he has been a member of theBoard of Directors.

Yuichi Ishimaru Member Japanese, born 1939 elected 2005 (till 2008)

Yuichi Ishimaru holds a bachelordegree in economics from KeioUniversity. He has worked for the Marubeni Corporation since1963. From 1995 until 1998 hewas a member of the board ofdirectors of Marubeni Corpora-tion and served as COO forMarubeni America Corporation,New York. From 1998 until 2000he served as chief executive officer for Europe and Africa forMarubeni Europe PLC, London.Since 2001 he has also held aposition as executive vice presi-dent of Marubeni Corporationand since 2003 he has acted asspecial advisor to Marubeni Cor-poration.

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IPO

Bruno Sidler President&CEOChief Executive Officer since 1998Born 1957

Additional responsibilities: Corporate Development, Corporate Communications and Legal Services.

Bruno Sidler joined Panalpina in 1980. Until 1984 he worked forPanalpina Johannesburg as sales manager and subsequently asregional manager for South Africa. During 1985 he worked at Pan-alpina Nigeria. From 1987 to 1994 he became managing director ofPanalpina Singapore. In 1987 he also worked as managing directorof Panalpina Indonesia. In 1994 he became managing director of Air Sea Broker (today Panalpina Airfreight) until 1998, when he was appointed President and CEO of the Group. Bruno Sidler was trained as a forwarding officer. He has participated in variousmanagement courses at the International Management Institute(IMI), Geneva, and at the International Institute for ManagementDevelopment (IMD), Lausanne.

Roland Wider Chief Administrative Officer, CAOMember of the Executive Board since 2002Born 1959

Responsible for Human Resources, Corporate Information Tech-nology, Project Management and Management Information System.

Roland Wider joined Panalpina in 2002 as CFO of the Group andmember of the Executive Board. In 2005 he was appointed as CAO(Chief Administrative Officer) of the Group. Prior to Panalpina, he heldseveral management positions at different companies in Switzerlandand in Asia. From 1996 until 1999 he worked for Kuehne&Nagel inHong Kong as regional CFO for the Asia Pacific Region. RolandWider holds a certificate in economics from the Hohere Wirtschafts-und Verwaltungsschule Zurich as well as a degree as a certified public accountant from the Schweizerische Treuhand- and Revisions-kammer.

Monika Ribar Chief Financial Officer, CFOMember of the Executive Board since 2000Born 1959

Responsible for Financial Reporting, Tax Management, Corporate Treasury, Controlling and Credit Control.

Monika Ribar joined the Group’s head office in 1991. She held seve-ral positions within the Group’s controlling, IT and global projectmanagement departments. From 2000 until 2005 she held the position of CIO (Chief Information Officer) of the Group and was a member of the Executive Board. In 2005 Monika Ribar was appoin-ted CFO of the Group. She holds a university degree in finance andcontrolling from the University of St. Gallen. She participated in anexecutive programme at Stanford University, Palo Alto, California, in1999.

Jörg Eggenberger Chief Operating Officer, COOMember of the Executive Board since 2000Born 1961

Responsible for Air & Ocean Capacity Procurement, Operations,Marketing and Sales, Business Processes & Quality.

Jörg Eggenberger joined Panalpina in 1977, holding several posi-tions. From 1981 until 1982 he held a management position at Pan-alpina London, after which he returned to the marketing and salesdepartment at the Swiss company. From 1985 until 1988 he heldanother management position with Panalpina in Melbourne. In 1989he was assigned to a management position in Taipeh, and in 1990he held the position of a branch manager at Panalpina Melbourne.From 1990 until 1991 he worked as manager for the Far East withAir Sea Broker (today Panalpina Airfreight). In 1991 he becamedirector of the seafreight division at the corporate head office. In1998 Jörg Eggenberger became managing director of the West Africa division of Air Sea Broker. In 2000, he became a member ofthe Executive Board as COO for the eastern hemisphere. In 2002 he was appointed regional CEO of the Africa/Middle East/CentralAsia/CIS division. In 2005 he was appointed COO of the Group. In 2004 he participated in a senior management course at ColombiaUniversity, New York.

New responsibilities within the Executive Board

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A brief summary of Panalpina’s history

1895Forwarding company Hans Im Obersteg & Cie. AG in Basel, Switzerland established, which was acquired in 1935 by the Group’s former parent company Schweizerische Reederei AG. The Group was focused on Rhine river shipping.

1930–1940Expansion of activities into maritime shipping and international forwarding operations.

1950–1960Expansion of the global network, establishing numerous new branches in North America and later in Latin America, Africa, Asia and Australia.

1954All freight forwarding activities of the former parent company grouped under a holding company named Alpina Internationale Transporte AG.

1960Company changed its name to “Panalpina World Transport”.

196940% of the share capital of the company acquired by the Ernst Goehner Foundation.

1973Established the Air Sea Broker unit in 1973 to act as an air charter broker and ship’s agency coordinator.

1980’sAcquisition of the Houston-based J. P. Harle Group, which focuses on the oil and gas business segment. By 1983, Ernst Goehner Founda-tion holds 100% of the company shares.

1990–2001

2002–2005Granted “A” licence in China – enabling it to develop its own operational organization. Consolidated market leadership in the oil and gas industry by taking over the Scottish firm Grampian International. Strengthened position in Asia by acquiring book of business of the South Korea-based IAF. Acquired Singapore-based Janco Oil Field Services. Launched successful IPO at the SWX Swiss Exchange on 22 September 2005.

In a nutshell, Panalpina’s “unique selling propositions” are

• global network combined with a strong presence on the local markets;

• high brand recognition and excellent reputation;

• healthy balance between major global customers and SMEs;

• strong customer base in all major key industries;

• global market leadership in the oil and gas industry’s supply chain;

• central procurement and air and ocean freight capacity management;

• non-asset-based business model;

• process-integrated IT platforms;

• management team with long-term experience in the industry;

• passionate staff.

100 years of innovation

Panalpina’s USPs

Network extension in Far East and Europe, Africa, Oceania and India. Acquired ChartAir, Netherlands, as well as the Jacky Maeder Group.

Oil and Gas

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Crude oil is one of the most important rawmaterials in today's industrial society, if notthe most important. Without petroleum andits by-products, very little would function inthe modern world. Where would we bewithout electricity or fuel? Oil is a basicingredient in the production of both. Inaddition, crude oil is used by the chemicalindustry to manufacture plastics and otherchemical products, the majority of whichcan be constructed from several hundredbasic chemicals – molecular bonds pre-dominantly derived from crude oil or naturalgas. Thus numerous paints, varnishes,medicines, detergents and cleaning fluidshave emerged as by-products of crude oilchemistry. “Crude” is the basic raw materialfor almost all automobile fuels, for the dieselused in car and ship engines, for heatingoil, lubricants and engine oils, as well as solvents. The list is practically endless, anindication of the fact that the almost unre-stricted mobility enjoyed by modern man isonly possible thanks to the exploitation ofcrude oil. The same is true of the global economy, whose structure allows us to buymerchandise from all around the world,anytime, anywhere – and which relies onforwarders, shipping companies and air-lines to get those products to their finaldestination on time.

It’s a similar story with natural gas,found in regions with oil reserves, wheresubterranean pressure often forces it to the

surface. Natural gas, a compound consist-ing primarily of methane with smallamounts of ethane, propane and butane, isgrowing in importance as a source of ener-gy. It has a very high calorific value and canbe delivered to the consumer quickly andcheaply. Today, natural gas covers almostone-quarter of global energy consumption.

Times pastCrude oil was formed from marine plankton,presumably around 2 billion years ago. Ithas served as a raw material for several mil-lennia and is even believed to have beenused by the Babylonians. The term “petro-leum” comes from the Latin “oleum petrae”roughly meaning “rock oil”. However, pro-per exploitation did not begin until the 19thcentury. In 1852, Canadian physician andgeologist Abraham Gessner obtained apatent to produce lamp oil from petroleum,which burned clearer and was less expen-sive than the tallow candles then common-ly in use. In 1854 the chemist Benjamin Silliman proposed using refined oil as a fuel.The actual boom kicked off in 1859 whenEdwin L. Drake tapped the first major crudeoil reserves at Oil Creek in Pennsylvania,unleashing an unstoppable demand for"black gold". In 2004, 3,820 million tonnesof crude oil were extracted globally, compa-red with 2,275 million tonnes in 1970!Around 84 million barrels are consumeddaily, with the United States accounting for

one-quarter of that usage, followed byChina, Japan and Germany. Global con-sumption is currently rising by about 2%per year. Saudi Arabia, Russia, the USA,Iran, Mexico, China and Venezuela headthe rankings of leading crude oil and natu-ral gas producers, with the West Africanstates and, increasingly, the Central Asianstates making their way up the list.

Panalpina is right in the thick of the actionWherever oil and gas reserves are beingdiscovered and exploited, Panalpina is sureto be part of the action – and has been fordecades. How did a company with roots ininland shipping and traditional forwardingservices end up in the oil and gas industry,with its very different requirements andextremely capital-intensive – and thustime-critical – business models? Forward-ing, in its narrow definition, is not alwaysthe primary task performed by Panalpina.The company supplies drilling sites withgroceries, medicines and replacementparts, acts as an agent for drilling and trans-port equipment, organizes crew changes,takes care of storage for pipeline construc-tion, runs husbandry services along theWest African coast using a specially con-structed fleet of ships, and transports mas-sive components to the remotest areas ofAfrica, Asia, Russia and Latin America.And much more besides!

The all-round partner In the oil and gas industry, things tend to work differently from mostother branches of the economy. Panalpina has been an expert in this sec-tor for decades and knows exactly what kind of service oil and gas custo-mers require in order to operate competitively. Classic forwarding thusforms just one part of its broad portfolio of services, which spans a widerange of solutions.

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It all began in NigeriaWe spoke to Erik Hutter, Head of Global Oiland Gas at Panalpina, who knows this lineof business inside out. “We first becameinvolved in this sector in the early 1960s,with Nigeria playing a key role. At thattime, Panalpina had already established apresence in the largest African nation,having run its own operations there since1954. One day we were approached bycompanies with whom we were not familiarand asked whether we could offer our servi-ces in Port Harcourt and Warri. They explai-ned that it was to do with the extraction ofoil. Panalpina very quickly realised that herelay an assignment that was not only unusu-ally challenging, but also held enormouspotential,” Hutter elucidates.

While the impetus may have come fromoutside the company, the decision to enter acompletely new business segment never-theless required a great deal of courage.However, it is a decision that has never oncebeen a matter for regret. Quite the opposite– the oil and gas business is now one of themain cornerstones of Panalpina’s portfolio ofproducts and solutions. An entrepreneurialspirit, a willingness to take risks and thecourage to tread new paths are values thatare still much prized at Panalpina today.

Merlin and African StarOne example was without doubt the ship-ping service along the West African coast,

which got underway in 1986 with the sup-ply vessel “MS Merlin” and which can bedescribed, without exaggeration, as a pio-neering feat. In 1990 a second ship, the“Merlin II”, was brought into service. These

vessels, specially constructed for shallowwaters, can also handle roll-on roll-off con-signments and are able to dock even wherethere is no port infrastructure. They supportour dedicated coastal service between the

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Oil and Gas

The oil crisis of 1974 shook the global economy and sent demand spiralling upwards.Nigeria tapped its reserves as fast as it could and the oil companies found they neededthe support of a logistics company that knew the territory, had international connectionsand could do more than “just forward”. “We very quickly realized that Houston, Texas waswhere the important decisions concerning the global oil and gas business were beingmade,” Erik Hutter recalls. As a result, the first major acquisition in Houston was made,in the form of J. P. Harle, at that time leading logistics provider for the local oil and gasupstream industry. A few years earlier, Panalpina had set up Air Sea Broker Ltd. in Basel,managed by individuals who had been involved in the Nigerian operations right from theoutset.

“Air Sea Broker was given the task of developing and marketing the catalogue of ser-vices for oil companies active in West Africa, and especially for their subcontractors,”Hutter explains. Over the years, the company subsequently expanded its presence intoGabon (1980), the Congo (1982) and Angola (1985). It was not a matter of growth at anyprice, more a case of being where the customers were and where out-of-the-ordinaryservices were called for.

West African countries and offshore instal-lations, transporting replacement parts,generators, drinking water, groceries andfuel. The service is just as popular today asback in 1986, so the state-of-the-art “MVMerlin III” was taken on time-charter in2004.

No less innovative is the “African Star”,a combined air/sea cargo service operatingsince 1993 and linking West Africa’s coastalregions to Panalpina’s global airfreight net-work. The “African Star” is another pur-pose-built vessel, not just an ordinary ship.It runs according to timetable, regularly calling at a number of ports.

Mr Hutter, is it fair to say that theprimary focus of Panalpina’s Oil andGas activities is on West Africa? “No, that was only true in the early years. Inthe meantime we have become active inevery region where oil exploration andexploitation is taking place. We have great-ly expanded our position in Central Asiaand Russia, for example. There was a con-siderable upsurge in activity in this regionduring the 1990s, partly as a result of theupheavals in the former Soviet Union. Itgoes without saying that we went whereverour customers went, often entering com-pletely new territory. One example thatcomes to mind is Sakhalin, where we reallydid some ground-breaking work.”

Panalpina doesn’t transport oil anddoesn’t operate tankers or pipelines.To what extent is the company actu-ally active in the oil business?“Well, this is something I’m often asked

about, just as I’m asked whether we deliverheating oil to private households. We don’t,of course – any more than we physicallytransport raw materials. There are special-ized forwarders who do that. We offer

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Oil and Gas has been a real success story at Panalpina, and one that is by no meansover. From 2000 to 2004 the division, which currently employs a staff of around 1,000,boosted its net profit by 53%. It should be noted that this growth was almost entirelyorganic. And recent targeted acquisitions should help speed up this trend in future.

Our operations in Nigeria, Gabon, the Congo and Angola were followed by branchesin Ghana, Sakhalin, Brazil, Venezuela, Kazakhstan, Azerbaijan, Asia (Singapore andChina), Guinea and Cameroon. The next major phase of expansion is planned for NorthAfrica. Grampian International Freight Ltd (GIF), headquartered in the Scottish oil capitalof Aberdeen, was acquired in 2004, followed this year by Janco Oilfield Services Pte Ltd.,registered in Singapore. Panalpina thus has an extremely strong market position in the oiland gas "triangle" of Houston/Aberdeen/Singapore, the three decision-making centres ofthe industry. Panalpina Oil and Gas operates strategic centres at these locations. Opera-tions in the western hemisphere, including Latin America, are coordinated in Houston,while Singapore is responsible for the eastern hemisphere, taking in the entire southeastAsian region, and Aberdeen is the main location in Europe, also covering Russia and Cen-tral Asia. West Africa is looked after from both Aberdeen and Houston, depending onwhere the client is based. This structure was not merely dreamed up by Panalpina: itreflects common practice within the industry.

It is no coincidence that Grampian, a company that has been active in the oil indus-try almost exclusively for over 20 years, and that has built up outstanding customer rela-tions, became a part of our Group, but it is certainly a stroke of luck. There were alreadyclose links between the two companies prior to the takeover, with both sharing the samebusiness philosophy. All activities and processes are strictly aligned with customer requirements, which, in this line of business especially, tend to be demanding ones. Newideas, innovative products and a continually improved service are automatically expected,as are mutual trust and honesty.

integrated logistics services to all compa-nies in the upstream segment.”

What does “upstream” actuallymean?“Upstream” refers to the exploration, production and exploitation of natural oiland gas reserves. It includes seismic andgeophysical evaluations, oil field logging,the actual drilling for oil or gas and thetransportation and storage of the raw mate-rial. “Downstream”, on the other hand,refers to refineries, including further proces-sing, distribution and suppliers.”

Who are Panalpina’s customers inthe upstream business?“They are active in oil and gas exploitation orgeophysics, or they provide maintenanceand supply services to rigs and explorationsites. We are also called upon by the ownersof heavy transport vessels, as well as theoperators of offshore facilities, drilling com-panies and, of course, the major service pro-viders such as Halliburton, Schlumberger orBaker Hughes. Interestingly enough, thenumber of companies in this industry is notthat large, meaning we tend to work withthem at several locations around the globe.We know one another and are forever mee-ting up. This shows how important it is tooffer the customer perfect service, to satisfytheir requirements (which tend to changerapidly) and to create a foundation of trust.”

Monique Gubler, Managing Director at Pan-alpina Angola, agrees. “Of course expertisein the field is extremely important, as isindustry know-how, but these are actuallytaken as given. That’s why a client relation-

ship based on trust is so crucial. This invol-ves admitting your mistakes and not tryingto cover things up. There is a lot of money atstake in the oil industry and every minute of lost production gobbles up money.

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Oil and Gas

Monique Gubler, Area Managing Director Panalpina Angola, Congo,Gabon.

The overall package must be right: Jeffrey A. Miller of Halliburton.

“Confidence is of utmost importance,” states Jeffrey A. Miller. Until recently, Miller wasVice-President at Halliburton in Angola and now works for the same company in Asia. “Asa service provider, we are only satisfied with the best quality. Our goal is always to keepthe customer completely satisfied with every aspect of our service. To do this we needpartners like Panalpina who are required to meet exactly the same standards. The suc-cess of our customers – primarily exploitation and production companies – depends onthe performance of our partners, which is why we will not accept any compromises in thisarea.” This particularly applies to what are known as “small” tasks. “If a customer isunable to work owing to an error on our part or by one of our partners, we call this a “non-productive time catastrophe”, which might perhaps be instigated by incorrectly draftedimport documents. If, for that reason, a certain chemical is not delivered on time, this canlead to an entire rig coming to a halt, which in turn will have far-reaching consequences.”

Flexibility, innovation, creativity, optimized solutions and reliability are the basicrequirements for receiving a Halliburton mandate. Miller believes he should be able toexpect his partners to think for themselves and not just follow instructions. After all, it isin the interests of everyone involved that procedures are constantly reviewed and im-proved. Since supply chain management and logistics are key success factors, theresponsibility placed on the provider is correspondingly high. Maintaining a dialogue andcomplete openness are thus also important. Errors shouldn’t happen, but can occur fromtime to time, in which case it is important to own up immediately and join together in looking at ways to contain the damage.

“This is why we don’t just choose our partners on the grounds of price alone,” Jeffrey A. Miller stresses. “Naturally, costs are a factor – that is the case wherever youlook in business. But our approach involves a kind of ‘balanced scorecard’, whichweighs up various competencies against one another. Knowledge of the market, busi-ness philosophy and security measures feature alongside service quality, flexibilityetc. The overall package must be right!”

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Customers must have confidence in theirlogistics provider, and the latter must go onearning this trust over and over again.”

Mr Hutter, we have heard a lot aboutproducts. But what exactly are youoffering your customers?“In view of the process cycles in the upstre-am sector, the varying requirements of thecompanies involved and their geographicalspread, it is self-explanatory that we are talking about complex requirements that byfar exceed what is traditionally on offer fromforwarders. These can range from devisingsolutions for the transportation of thousands of tonnes of drilling cement, tothe moving of 10,000 m3 onshore landrigs,through to the forwarding of bulky andunwieldy equipment and materials to loca-tions in the desert or on the coast wherethere is no port infrastructure. Servicessuch as order management, hub or distri-bution management, industrial packaging,forwarding costly underwater systems thatrequire careful handling, or the emergencyor hot-shot delivery of urgently neededreplacement parts are also part of the port-folio. So much for the area of “forwarding” –our products and services go much further:we take on agency mandates and represent

offshore rigs, organize the temporaryimport of all manner of drilling equipment,construction or supply vessels, ensuresmooth handling by the competent authori-ties, organize deliveries of medicines, gro-ceries or replacement parts to drilling rigsand coordinate the changeover of crews onthe platforms. Quite a wide field really.”

So it can’t be that easy to find goodpeople...“Our staff are the key to our success. As Imentioned, we employ around 1,000 peoplein the Oil and Gas division, many of whomwork in remote areas where the actual busi-ness is taking place. Our professionals havemany years of experience and are enthusia-stic about their work. They are always onthe lookout for new ways of optimizing theservice and – most importantly – they cantalk to customers in the language of theindustry.”

A final word on organizational struc-ture. Panalpina differentiates be-tween Global Oil and Gas, PanalpinaOil and Gas und Panprojects. Wheredo the differences lie?“Global Oil and Gas is a management unit,steering and coordinating business at

global level. I am head of this area and workclosely with the Regional Heads of Oil andGas, our key account structure and a post inR&D. We are tasked with strategic develop-ment, defining and monitoring targets andpromoting sustainable customer relations.In addition, we remain in close contact withthe people on-site and in the key regionssuch as Aberdeen, Singapore, Houston,Central Asia, Russia and West Africa.

Panalpina Oil and Gas is the new brandname of ASB Air Sea Broker, a subsidiaryacting as a liaison and coordination officefor all our branches in Africa.

Panprojects, on the other hand, func-tions as an independent business unit within the Panalpina Group. For the mainpart, it specializes in project-related for-warding for construction companies. Incontrast to the Oil and Gas unit, Panprojectis extremely active on behalf of oil and gascustomers in the downstream segment,wherever large industrial plant or powerstations are being built. The borders bet-ween upstream and downstream tend to befluid, giving rise to many interfaces between the various Panalpina units, with the corresponding degree of close co-operation.”

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Representatives of Panalpina Oil and Gas at a conference in Basel. Erik Hutter is in the middle of the front row (above the ‘N’).

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Panalpina has been in the oil and gas busi-ness since the 1960s. As a globally activecompany that has undergone dynamicdevelopment in the 50 years or more since itwas founded, Panalpina has continued toexpand in the oil and gas sector thanks toorganic growth and targeted acquisitions.The acquisition of Janco Oilfield ServicesPte Ltd. in July 2005 was the final piece ofthe jigsaw: “The integration of Janco is adecisive move in the expansion of our globalnetwork. The last gaps have now been closed, enabling us to offer comprehensivelogistics solutions at all three major oil andgas hubs in the world – Houston, Aberdeenand Singapore,” says Erik Hutter, Head ofGlobal Oil and Gas at Panalpina.

Sustained growthHowever, Panalpina did not see this asmerely a matter of filling in gaps in its net-work. Janco Oilfield Services Pte is not justany logistics provider. The Singapore-basedcompany, which was founded in 1984, is infact an acknowledged specialist in logisticsservices to the oil and gas industry. It offerslogistics management solutions to cus-tomers in the upstream segment (oil extrac-

tion) and has acquired a reputation for pro-viding high-quality service round the clock.The takeover has therefore strengthenedPanalpina’s position as market leader forlogistics services to the oil and gas industry.“Acquiring an established and highly effi-cient company like Janco Oilfield Services isexactly in keeping with our strategy ofsustained growth,” Panalpina CEO BrunoSidler explains. “We are strengthening ourposition across the various geographicalmarkets and enhancing our competencies inkey industries through targeted acquisi-tions,” he added.

Serving the customerUltimately, corporate mergers have to makesense from the customer’s point of view. AsSidler points out: “Bringing together thecompetencies of Panalpina and Janco Oil-field Services has numerous advantages forthe customer and creates new opportuni-ties.” Bernard Lee, General Manager and former co-owner of Janco Oilfield Services,believes that the merger enables the twofirms to derive great benefit from their com-plementary knowledge and experience.“Janco’s experience in the industry and our

good relations with decision-makers in Sou-theast Asia, combined with Panalpina’sinternational business contacts and therange of logistics services it offers, meaneven better solutions for the customer,” saysLee with conviction. And this isn’t just talk:Lee intends to prove it, along with his formermanagement team and staff, in their workfor the company’s new owner, Panalpina.Continuity is thus being preserved so that customers can benefit from the team’sspecialist knowledge in future too.

Janco Oilfield ServicesJanco Oilfield Services Pte Ltd. was foun-ded in 1984 and is based in Singapore at theLoyang Offshore Supply Base, which is ofstrategic importance for the oil and gasindustry. In 2004 Janco generated turnoverof SGD 25.1 million (CHF 17.4 million) andemployed 28 people. Its key customersinclude all the leading oil and gas explorersand producers. As Janco is an ISO90001:2000 accredited company whichenjoys a very high reputation, the Jancobrand name will be retained.

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Out in frontHouston, Aberdeen and Singapore – those are the world's three strategically most important oil and gashubs. Panalpina is present in all three locations. Indeed, the acquisition of Janco Oilfield Services in Singa-pore has enabled the Group to strengthen its position as the leading global supplier of logistics solutions tothe oil and gas industry.

Oil and Gas

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“This assignment actually has very little todo with forwarding,” Soeren Zincke tells usright at the start of the interview. Zincke isHead of Tender Management EasternHemisphere with Panalpina Oil and Gas,headquartered in Basel. “However,” he con-tinues, “the qualities and attributes that youpick up when working in the forwardingsector do come in useful!” This statementsums up the business: logistics providersmust be there for their customers 24/7 toensure a fast and flexible reaction. For it isoften the case that an unexpected turn ofevents requires an immediate solution,making both flexibility and reliability essen-tial. The customer must be able to rely 100%on the service from Panalpina, becauseeven the slightest error can easily end upcosting a fair amount if production comes toa halt or if the extremely expensive vesselsare unable to operate. Fairness and open-ness vis-à-vis the customer, who must bekept informed at every stage of our activi-ties, also play a role.

Panalpina has acted as an agent forHMC in West Africa for more than a deca-de now. The company is specialized in com-plex offshore constructions and installationsfor the deep-water exploitation of oil andgas. Its clients include almost all the leading

oil companies and construction firms, and itis primarily active in the North Sea, the Gulfof Mexico, West Africa and Brazil. HMC canlook back on 50 years of experience in theindustry. It transports, installs and movesvarious types of offshore construction,including both moored and floating installa-tions for use in shallow or deep water. Another subsidiary of the Heerema Group,Dockwise, boasts a fleet of 16 semi-submer-sible heavy transport vessels. The freightdeck of this type of craft can be loweredbeneath the surface of the water to facilitatethe loading or unloading of heavy or bulkycargo. Dockwise additionally deploys a fleetof tugs for towing drilling rigs and platforms.

A wide variety of tasks“We provide HMC with a variety of differentservices,” Soeren Zincke explains. Theseinclude agency activities related to the con-struction ships, heavy transport vessels,tugboats and supply ships in use. At themoment this applies primarily to the “SSCVThialf”, a 200m-long crane vessel with over136,709 GRT, which was recently deployedfor installation work off the West Africancoast.

What exactly does the assumption of an agency mandate involve? According to

Soeren Zincke it covers the entire area ofport handling, i. e. organizing a mooringberth or anchorage prior to the ship’s arri-val, hiring a pilot (if necessary), bookingtugboats, registering the ship with the portand customs authorities and drawing upthe required documents. “In addition, weorganize the temporary import of units, actas customs agent and provide the facilitieswith fuel, water, groceries, medicines andsuch like. As shipping and customs agentswe are responsible for all these differenttasks.”

Husbandry...The term “husbandry” covers all manner ofservices you would not necessarily expect aforwarding company to provide. For exam-ple, Panalpina organizes the changeover ofcrews, which in the case of the “Thialf”means around 400 people embarking anddisembarking all at once. “We also meet theclient’s representatives at the airport andorganize transport to and from their hotels.In addition, we help individuals completethe formalities for entering the country, pro-vide medical assistance, make hotel andairline reservations on their behalf and offerthem the use of a workspace at our localbranch,” says Zincke, to round off the list.

... and freight transportAnd what about forwarding services – don’twe have any responsibility for those?

“Of course we do,” he assures us. This pri-marily involves the forwarding of replace-ment parts or handling equipment that hasto be ordered abroad. “And we also chartervessels for customers if they so require.Wherever possible we then take on theagency mandate for these vessels!”

Going the extra mileAgency mandates from customers involved in both oil and gas exploration and exploitation of the coast ofWest Africa are one of Panalpina's strengths in the oil and gas industry. Panalpina is currently acting onbehalf of its long-standing client, the Netherlands-based Heerema Marine Contractors (HMC). HMC is one ofthe four subsidiaries of the Heerema Group.

Cambridge America LLC, located in Bran-ford, Connecticut (USA), is a distributor andservice provider of Printed Circuit Boards(PCBs) to customers throughout the UnitedStates and Canada. It focuses on an impor-tant niche in the PCB industry, accommo-dating orders involving large numbers ofparts which require specialized service that many of its larger competitors do not

provide. Cambridge America has built itsbusiness around this niche and its attentionto this market segment has paid off.

“Our focus is to serve customers whoutilize PCBs that comprise a large numberof parts and which therefore require a higher level of parts service,” says Bill Bansavage, President of Cambridge Ameri-ca. “Many PCB suppliers are more inter-

ested in moving high volumes with custo-mers. We serve the needs of lower and midsized volume customers, with a focus onexcellent service.”

Part of the supply chainCambridge America provides prototype,pre-production and low volume require-ments to US manufacturers and medium to

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SME

Reliability: the be-all and end-allSmall to medium-sized enterprises are often niche-players that knowtheir market like the back of their hand. That is certainly true of Cam-bridge America, a small, agile, service-focused and successful firm that operates in the electronics sector. Even though Panalpina is a large corporation, smaller companies are keen to use its logistics services because its global network makes it an ideal partner for SMEs.

A small but highly efficient team: Cambridge America.

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large volume requirements to Asian manu-facturers. It takes full ownership of themanufacturing process on behalf of custo-mers, selecting the manufacturing plants inAsia and coordinating customized partsorders.

Freight forwarding is an importantextension of the company’s offering tocustomers, and Panalpina plays a criticalrole in its supply chain. Having workedtogether since April of 2004, CambridgeAmerica feels Panalpina is a great fit for itsbusiness requirements in terms of volumes,weight and pricing. Likewise, Panalpinafinds Cambridge America to be a great fit asan SME customer.

“The relationship between CambridgeAmerica and Panalpina is that of a true part-nership based on open communication andtrust. They are a loyal customer with grow-ing business needs. As they grow, we willgrow with them,” says Matthew Brockway,Account Manager for Panalpina in Bradley,Connecticut.

Tailor-made logistics solutionPanalpina provides air freight, consolidationand warehousing, as well as customs clear-ance services to Cambridge America. Prod-ucts are consolidated in Asia, then shippedout of Taiwan and Hong Kong to CambridgeAmerica in Connecticut. About 1 metric tonof this freight is shipped each week in twoconsignments.

Panalpina provides a trustworthy andreliable service with consistent transit times,including the very busy peak season out ofAsia. “Cambridge utilizes key trade lanesfrom Asia Pacific to North America. We areable to offer especially competitive rates onthese lanes, and provide consistently excel-lent service through close collaboration be-tween our Panalpina offices,” adds Brockway.

In the unlikely event that a shipment isdelayed, Panalpina is quick to notify Cam-bridge America with status updates. Pro-active event notification has been key to the success of Panalpina’s relationship withCambridge America.

Partner of choice“Situations can occur, and when an issue ari-ses, Panalpina doesn’t run off in differentdirections,” says Bansavage. “They quicklynotify us of the issue and provide us withsuggested solutions. They are the type ofpartner you are truly able to trust.”

Cambridge America points out thatthere are plenty of shipping companies allover the world and that many other freightforwarders often seek its business. But Panalpina is its partner of choice, with theservice and reliability needed for time-critical operations. Flexibility is important tothe growing company, and Panalpina hasdeveloped a transportation programme thatmeets both the needs of Cambridge Americaand the expectations of its customers.

To Cambridge America, Panalpina provides various services, among them airfreight, consolidation, warehousing and customs clearance.

SCM

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Celestica and Panalpina are old acquaint-ances: their successful cooperation datesback to 2003. Celestica has twice alreadyrecognised Panalpina’s performance in inte-grated air and sea freight solutions with a“Global Supplier Award”. Last year, Pan-alpina handled some 40,000 air cargo ship-ments weighing 12,500 tons and around 600sea freight consignments for Celestica.

Careful choice of locationNow the two companies are cooperatingwithin a new project. Panalpina is takingcare of the logistics of a new Celestica pro-duction facility in Oradea (Romania). Thisprovides a good opportunity to glimpsebehind the scenes of Celestica, an electron-ics manufacturing services provider (EMS).The obvious question is:

What prompted Celestica to chooseOradea in the first place?Richard S. Williamson, Director GlobalLogistics & Trade Compliance at Celest-ica was glad to explain: “We are followingcustomer demand for low-cost solutions. Asone of the leading companies providingelectronics manufacturing services forOEM customers, we are looking for loca-tions where we can produce at low cost.”

When Celestica decides to move intoan emerging country it is usually based ona customer need and has the end goal ofimproving the scope of service offerings tocustomers. That said, Celestica prides itself

in providing a competitive offering and astrategic global footprint to its customersby anticipating customers' needs. Overall,Celestica's goal is to provide the optimumsolution for its customers.

In making the decision to move to anemerging country, Celestica considers thefollowing:• Infrastructure (power, roadways, airports,

shipping, communications network, etc.)• Working environment• Political environment• Proximity to customers and/or their end

markets• Logistics – Is the location close to the

border – is there a strong logistics scenario

• Workforce – access to labour pool and technical skills

• Cost of building labour rates

Oradea, for example, is quite close toBudapest with its well-developed transportconnections. Additional important factorsare dues and taxes and the administrationeffort necessary for importing or exportinggoods to or from a certain country.

Equally important for us is the composi-tion, on different levels, of the local work-force. Oradea has a good university. We co-operate with them, bringing in engineersfrom Western Europe to train students.These students can later work in our manu-facturing plant. After a time of transition, ourOradea location will therefore become a partof our company which is self-sufficient evenon the personnel side.

Williamson speaks from his own expe-rience when he explicitly recognizes that theinfrastructure in Eastern Europe is welldeveloped.

Supply chain management for hi-tech client in Eastern EuropeThe electronics manufacturing services provider, Celestica, and Panalpina extend their worldwide cooperation into an additional country,Romania. What makes a leading company in electronics manufacturingservices like Celestica choose Romania as a location?

The logistics centre in Oradea/Romania. Panalpina CEO Bruno Sidler receives the Supplier Award from Celestica.

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Lower-cost labour is not the only decisivefactor, and Celestica even provides develop-ment assistance to Romania’s national eco-nomy.

What exactly is Celestica producingin Oradea? “I cannot disclose the specifics, but I can tellyou that we manufacture goods whose finaldestination is Western Europe. Their distri-bution is mainly via the road network”.

But we have never seen the Celest-ica name on any electronic device ...“This is part of our policy”, Williamson said.“It is important that we keep the work we dofor our customers confidential.”

Where do you get the raw materialand perhaps the semi-finished products Celestica is processing inRomania?“Most of it is procured in Asia, in part alsoin the Americas and in Europe. We useseveral methods of transportation, one ofwhich is airfreight.”

And how do you find the right logistics provider, which fits into thewhole picture?“When choosing a logistics provider we areprimarily looking at tangible factors likewhat the company can do, what its abilitiesare. In Romania, we are working with Pan-alpina. We have concluded a "master trans-port agreement" with a number of addendaregarding imports and exports. This is inaccordance with our primary partner modelwhich proved its worth in western coun-tries.”

Will Celestica – like other big inter-national companies – reduce thenumber of its logistics providers?“By means of a global request for quotation(RFQ) process, we have reduced the num-ber of our logistics providers from about 20to just three global partners. Panalpina isone of them. Panalpina is a depended sup-plier in airfreight. Besides that, we are co-operating in contract logistics and haveout-sourced some activities to Panalpina.”

“We have other suppliers that movesmall parcels. Besides that, we have sup-pliers in ocean transportation and, byregion, in ground transportation. So we areworking with several forwarding partners.Of course we keep trying to optimisewherever this is possible.”

What do you most like about Panalpina?“I particularly appreciate our good andlasting relationship, and our cooperation.We communicate with the senior manage-ment in a direct and straightforward way.We also have the same business values.”

And what is your biggest worrytoday?“Right now it is the flood and its aftermathin New Orleans, even if it has not directlyhit our company. Then it is the price of fuel.This has a huge impact on us, especially onour logistics. It is comparatively easy topass on the additional cost as it hits every-one. But I do wonder about the Global na-ture of our business and the implications onlogistics?”

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SCM

Full transparencyPanalpina maintains three further VMI (Vendor Managed Inventory) hubs on behalf ofCelestica. Two of them are located in the Czech Republic (Prague and Brno). In accord-ance with Panalpina’s “asset-free” strategy, they are, just as in Oradea, run by an exter-nal logistics and warehouse manager. A rule book drafted by logistics specialists fromPanalpina lays down the precisely defined tasks, responsibilities and competencies of themanagement firm.

The third VMI hub is situated onsite at the Celestica plant in Vimercate near Milan.Panalpina staff ensure its smooth functioning with the support of Panalpina’s own Ware-house Inventory System (WIS), an innovative IT system that was launched at the begin-ning of 2005.

Thanks to the specially developed SCV (Supply Chain Visibility) module, Celestica hasall the information it needs at its fingertips. Regardless of whether Panalpina outsourcesits warehouse activities to subcontractors or operates the site itself with its own WISapplication, the customer can call up information on stocks and inventories at any time.Suppliers are also connected to the system, naturally with access to information relatedto their own goods only.

With its three innovative tools, SCV (for transparency), the rule book (defining pro-cedures at warehouse partner companies) and WIS (for own warehouse activities), Pan-alpina has genuine added value to offer to its customers.

Interview Rolf D. Sulser

CelesticaCelestica is a world leader in thedelivery of innovative electronicsmanufacturing services (EMS). Cel-estica operates a highly sophisticat-ed global manufacturing networkwith operations in Asia, Europe andthe Americas, providing a broadrange of integrated services andsolutions to leading OEMs (originalequipment manufacturers). Celest-ica's expertise in quality, technologyand supply chain management, andleadership in the global deploymentof Lean principles, enables the com-pany to provide competitive advan-tage to its customers by improvingtime-to-market, scalability and manu-facturing efficiency.

The company has over 40 locationsaround the globe and is listed at the Toronto and New York stock ex-changes.

The company is led by CEO SteveDelaney, its chairman of the board ofdirectors is Robert L. Crandall (for-merly of American Airlines). Celestica was incorporated in 1994as a wholly-owned subsidiary of IBM.In 1996 it was acquired by the Cana-dian investment company OnexCorp. which is still its majority share-holder. When Celestica went publicin 1998 it had annual revenues ofUSD 3.2 billion. It grew to its presentsize primarily by acquisitions, takingover production facilities of OEMssuch as IBM, Motorola, Avaya, Omni

NEC Corp.

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Industries, Lucent Technologies and

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Human Resources

Dedicated –heart and soul!In day-to-day business, things seldom go exactly as planned, a fact towhich Kornelija Capek has long since grown accustomed. As RegionalKey Account Manager, she must be available 24/7 to provide a fast andflexible response when clients IBM and Lenovo come to her with arequest or a problem.

This interview was actually supposed totake place the week previously, but, at thelast minute, Kornelija Capek was forced tomake other arrangements and travel to animportant meeting with a client in Canadaalong with other members of her team. Thisis nothing out of the ordinary for Ms Capek.After all, IBM and Lenovo are clients whosehigh-tech products are manufactured andsold all over the world. She doesn’t alwaysneed to hop on a plane though, for urgenttalks are often held by teleconference lateat night or early in the morning. “There isalways someone awake and at worksomewhere on the planet. That means wehave to be available round-the-clock. Afterall, it’s part of what customer service is allabout.” She is convinced that “commit-ment” of this kind is one of Panalpina’s

major strengths and thus one of the secretsof its success. “Clients know that we areprepared to do everything in our power tosupport them in their business. The namePanalpina acts as a guarantee in thatrespect.” Leaving these expectations aside,she is in no way fazed by the nature of herassignments. Quite the contrary: “I amtotally dedicated to what I do, heart andsoul. I enjoy working for Panalpina. And ifyour heart’s in your work, that means youdo a good job. I feel sorry for people whodrag themselves to work each morning. You should be doing something you enjoy –that’s the main thing!”

You can tell from Ms Capek’s bodylanguage and eye contact that she is notjust paying lip service here. She is livelyand enthusiastic when discussing her

career and clients or when expounding onthe joys of working in a responsive teamwhere there is plenty of room for initiative.She is already familiar with the combina-tion of team spirit and resourcefulness fromher hobby, basketball, although she has notbeen able to devote quite as much time toit recently. Her activities as Regional KeyAccount Manager don’t leave a great manywindows of opportunity these days.

A running dialogue with clients ...But work makes up for a lot of things. Cer-tain aspects of her job – such as travel –complement her hobbies. She finds it ashame that she sometimes hardly gets tosee anything of the places she visits, otherthan hotels and conference rooms. “How-ever, it’s a chance to get to know interest-

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ing people and to negotiate with clients. Inot only find personal contact enriching, Ialso consider it of key importance when itcomes to doing business. Some things canbe dealt with more easily and more effi-ciently when you know the people in-volved,” she explains. “A running dialoguewith the client is absolutely essential to anygood partnership, and is something thecustomer automatically expects. We keepin regular touch with our contacts, whetherit be by means of personal visits, by e-mailor a telephone call. And it naturally worksboth ways.” Clients have to be kept perma-nently up-to-date, making a glitch-free flowof information an absolute must. “And if aproblem or bottleneck crops up somewherealong the forwarding chain, we need toreact immediately and present the clientwith potential solutions. You need opencommunication channels for that!”

… and dedicated teamworkCustomer care is required not just at inter-national level, but also regionally and local-ly, and so the Key Account ManagementTeam is made up of individuals from allaround the globe. “Teamwork is very impor-tant to me, because together we are ca-pable of really achieving something and ofproviding clients with the level of servicethey require. I can confidently state that wehave grown hand-in-hand with our clientsand established high-quality partnerships.”The point is not merely to satisfy require-ments or follow instructions – just the oppo-site, in fact. “Everyone on the Key AccountManagement Team is constantly on thelookout for even better solutions so that

clients really do feel they are being well looked after and know that we are there forthem.”

Operational excellence at every level“It is essential to employ outstanding peo-ple at every level in every branch. This isthe case at Panalpina. We need to get everything right, which of course boilsdown to perfect handling from start tofinish. What good are all the concepts andvisions in the world if a consignment isn’tcleared through customs, is delivered lateor arrives at the wrong destination?” In MsCapek’s words, that is why cooperationthroughout the entire organisation is soimportant. This obviously applies in nosmall measure to the Panalpina Airfreightsubsidiary, too. “We often require airfreightcapacity at short notice. We then discussall the existing problems with our col-leagues at Panalpina Airfreight, identifypotential bottlenecks and come up with thebest possible solutions. A local event suchas a strike, for instance, could threaten thewhole process. When that happens weneed to provide alternative solutions.”

Kornelija Capek’s main duties alsoinclude regular monitoring of the core para-meters agreed with the client and takingaction, in collaboration with the KeyAccount Management Team and the localbranches, should she spot something amiss.This involves maintaining regular contactwith those on the front line to ensure theyare thoroughly informed about the exactnature of the agreement and know whatrequirements the customer expects to besatisfied. “That is why every last person

counts, no matter what their position in theforwarding chain. Understandably, I get toknow almost all of the Panalpina Group,even IT, since I am responsible for the inter-face between our systems and those of ‘my’clients. My job really does offer me a greatdeal of variety.” Asked whether tact, diplo-macy and negotiating skills come in at allhandy at meetings, she agrees with asmile. “After all, there is a lot at stake. Weprocess around 11,000 to 12,000 consign-ments per month, with a volume of around5,000 tonnes, for these two customers.“

Long-standing staff memberKornelija Capek has been involved in theforwarding business right from the word go.A Swiss citizen born in 1976, she completedher commercial apprenticeship with amedium-sized forwarding company. In 1998she joined Panalpina in Zurich. She beganas a supervisor in the Airfreight depart-ment, then went on to become a traffic controller. In 2003 she took up her positionas Regional Key Account Manager. Along-side her private studies, she also attendedcourses at Panalpina as part of its Pan-academy programme: The Winning Piece,The Winning Strategy and – at CranfieldUniversity – Leveraging Supply ChainManagement. “These training courseswere really worthwhile because they weregeared so much towards actual practice.We drew up business plans, for example,acted out meeting the customer and had toprove ourselves in a crisis managementsituation. It’s important to be able to keep a cool head, even when you’re under greatpressure.”

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Giant of the oceansGermany On 17 June 2005 an inaugural ceremony was held forthe new container vessel “P&O Nedlloyd Manet”, named after theFrench painter Edouard Manet. Some 350 people participated inthe festivities at the port. The ceremony was performed by KathrinEisenblätter, wife of Thomas Eisenblätter, Managing Director ofPanalpina Ocean Freight, which has collaborated closely with theP&O Nedlloyd shipping line for a number of years. The ship wasfinanced by German issuing house MPC Capital via the MS Manet

Star closed-end fund and built at the Japanese shipyard IHI Mari-ne United. It has been chartered out to P&O Nedlloyd for the next15 years. The vessel is one of the giants of ocean-going shipping,at 335 metres long, 42.8 metres wide, 60.84 metres high and witha loading capacity of 8,450 standard containers. This huge con-tainer vessel will ply the oceans between Europe and Asia carry-ing consumer goods such as shoes, toys, electronic products andtextiles.

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Worldwide

Expansion in Central AsiaKazakhstan In response to the growing demand for logisticsservices in Kazakhstan, in 2005 Panalpina opened two ultra-modern offices in Atyrau and Aktau. The Kazakhstan branches,both of which are on the Caspian Sea, offer the full range of Pan-alpina logistics services. Their focus, however, is on providingservices to the oil and gas industry. Both of them therefore com-

ply with the Health Safety & Environment (HSE) standards whichPanalpina has implemented throughout the world. About 20 peo-ple work in the 365 m2 office in Atyrau, in collaboration withstaff employed by a customer, Agip. The 370 m2 office in Aktauhas 22 staff. Panalpina is therefore well equipped to furtherexpand its business in Kazakhstan.

Race fever

Luxembourg/Italy/Russia/Netherlands/USA/UK/SouthAfrica The Event Logistics department is part of Panalpina Air-freight. This department was founded in March 2004 with theprincipal aim of supporting clients who are active in the racingbusiness, such as the UIM F1 Federation in Lausanne (Switzer-land), which organizes F1 powerboat championships. Anotherexample is Monaco-based SPES (Sports Promotion & Spectacle),which is responsible for the World Aquabike Class Pro champions-hip. Then there's FIA F3 in Bitburg (Germany), which stages theFormula 3 European Cup. The Panalpina team, which is based inLuxembourg in the heart of Europe, knows how to tackle the ship-ment of every kind of unusual and high-value freight, from boats toaquabikes and motorbikes.For instance, Panalpina Airfreight shipped 14 aquabikes plus spareparts from Vicenza (Italy) to Moscow (Russia) for the AquabikeClass Pro championships held there on 25/26 June 2005. Specialtrucks and trailers were used for this shipment. Panalpina Vicenzaand Panfairs of Hamburg (Germany) also participated in this parti-cular project, assisting Panalpina Airfreight with document hand-ling and road forwarding. Furthermore, Panalpina Airfreight trans-ported the aquabikes back to Vicenza at the end of the champion-ships.

The MotoGP World Championship in Laguna Seca, California(USA) on 9/10 July 2005 was another big event, for which Panalpi-na Airfreight shipped 180 tonnes by air from Luxembourg to SanFrancisco, including 41 motorbikes, spare parts, two cars and pro-motional material. First, the freight was consolidated in 14 specialtransporters at the site of the previous Grand Prix – the TT inAssen (Netherlands) – and taken to Luxembourg, where it was loaded onto a chartered B747 and two regular flights of Cargolux Airlines. In San Francisco an agent took charge of the goods and saw that they were transported to the motor racing circuit. After the race, Cargolux and Singapore Airlines flew the special cargo from San Francisco to Nottingham (UK), where it was handed overto the British motorcycle racing organization at East Midlands Airport.Another impressive feat was the transport of motocross bikes forthe MX Motocross championships held in Sun City (South Africa)on 16/17 July 2005. Panalpina Airfreight flew 16 MX1-class racingbikes plus parts from Luxembourg to Johannesburg for this event.First, the bikes had to be collected from the various teams in Euro-pe by truck and transported to Luxembourg, where the valuablemachines were packed by specialists and loaded onto the aircraft.In Johannesburg, the appointed agent took delivery of the racingbikes and forwarded them to Sun City. Eventually, the bikes weresent back to the individual teams in Europe by the same route.

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Panalpina wins againGermany The Bosch Group is a leading international manufactur-er of technology products for the automotive, industrial and con-struction sectors, as well as producing consumer goods. The grouprecently presented its Supplier Award for the tenth time. The con-tenders for the award are judged on the basis of quality, cost, reli-ability of delivery, technological potential and readiness to pursuea continuous process of development. At the beginning of July,Panalpina accepted the Supplier Award 2005 at the Bosch Group’sdevelopment centre in Abstatt, near Heilbronn (Germany). “Qualityis the most important success factor as far as Bosch is concerned.In the long term, the only suppliers who have a good chance ofgrowing alongside Bosch are those offering the highest standardsof quality. There can be no concessions here,” explained FranzFehrenbach, Chairman of the Board of Management of RobertBosch GmbH, at the award ceremony.

Singapore Panalpina was also awarded the 2004 Global SupplierPerformance Award by the technology company Flextronics at theend of July. Flextronics, which is based in Singapore, is a leadingglobal provider of electronic products and services. Its customersincludes companies in the automotive, medical and technologysectors. With branches in over 30 different countries on every con-tinent, Flextronic provides its customers with design, production,distribution and maintenance services for electronic products. The reliability of the company's suppliers is therefore of paramountimportance. Mark Randall, Senior Vice President and Chief Pro- curement Officer of Flextronics, therefore finds it fitting to single out the five best suppliers each year and honour them forexceptional service.

An unforgettable marathon

Switzerland On 28 August 2005 – a beautiful summer’s day – the first Basel City Marathon was held. Some 2,500 runners set outfrom the Basel Trade Fair Tower, the highest building in Switzer-land. The 42.195-km course then crossed three bridges over theRhine as it passed through the historic Old Town, followed the pic-turesque riverbank in Kleinbasel and traversed four districts ofBasel. The finishing line was in the St. Jakob Park stadium, homeof the football club FC Basel. The attractive course through thecity of Basel with its splendid setting on the Rhine, along with thevarious accompanying events, attracted a large number of specta-tors and helped to make the day an unforgettable experience for

everyone. Panalpina, which sponsored the event, set up a barbe-cue stand in the Rhine port area, constructing an imposing “fort-ress” of containers close to the Marathon route. Moreover, a num-ber of the company’s employees participated in the challengingrace: Caroline Hug, Jakob Bader, Patrik Schaub, Rolf Krattiger,Robert Frei and Pia Rohner. Panalpina, its customers and employ-ees all cheered on the keen athletes during the race. Eticha Tes-faye of Ethiopia won the men’s race in a time of 2:13:45, and therewas another victory for the same country in the women’s race:Tsige Worku was first home in a time of 2:35:04.

Publishing details: Editor, owner and publisher: Panalpina World Transport (Holding) Ltd, Viaduktstrasse 42, P.O.Box, CH-4002 Basel, Switzerland. Internet: www.panalpina.com. Tel. ++41 61 226 11 11.Responsible for contents: Martin Spohn, Corporate Communications. Editor: Martin Spohn, e-mail: martin.spohn@panalpina.com, büro:z GmbH, Bern/Basel. Distribution: Monika Dups, e-mail: monika.dups@panalpina.com. Publication intervals/languages: “connect” is published several times a year in German, English, French, Spanish and Chinese in over 100 countries. Total circulation:60 000 copies. Photos: Cover: Panalpina; p. 2 (top), p. 3–10: Julian Salinas, Basel; p. 2, 12: Digital Vision; p. 14 (top and bottom left); p. 15, 16, 21, 22, 25–27, 32: Peter Maurer, Weisslingen; p. 18: visipix.com; p. 20: Cambridge America; p. 28 – 29: P&O Nedlloyd: Design and production: büro:z GmbH, Bern/Basel. Printed by: bdv, Basel. Printed on 100% chlorine-free bleached paper

Kornelija Capek Regional Key Account Manager

Profile on pages 26/27>