globalise the outsourced supply chain, jeremy davidson, deputy md, nyk logistics
DESCRIPTION
Presentations from eyefortransport’s 8th 3PL Summit & Chief Supply Chain Officer Forum in Brussels, November 2010. Visit www.3PLsummit.com/eu for further resources.TRANSCRIPT
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Opportunities in Eastern Europe & Beyond Slide No. 1
Globalise the Outsourced Supply Chain
Opportunities in Eastern Europe & Beyond
Jeremy Davidson
25th November 2010
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Opportunities in Eastern Europe & Beyond Slide No. 2
Key Themes
Black Sea region is recovering from recession
o Consumer-led growth in demand critical
Black Sea has considerable potential as a key Gateway for C & E Europe as
well as Central Asia
o Shipping FE Imports via N Europe no longer makes sense; direct
shipment a viable and better alternative
W Europe retailers already dominant and changing logistics practices
Controlling logistics cost as important as in W Europe
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Opportunities in Eastern Europe & Beyond Slide No. 3
GDP per capita
Pop (m) Per Capital GDP
2009 in 2009
Russia 142 $15,176
Turkey 75 $13,952
Ukraine 46 $6,873
Romania 22 $12,214
Bulgaria 8 $12,296
Average EU-27 $30,651
Average OECD $33,732
Black Sea Region Overview
Per capital GDP & Consumption half of EU-27 average
Growth potential in consumption greater than EU
Large populations looking to improve standard of living
Increase in demand for FMCG & Consumer Durables
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Opportunities in Eastern Europe & Beyond Slide No. 4
Recovery from Recession
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
Russia Turkey Ukraine Romania Bulgaria 2008
2009
2010F
2011F
Effect of 2008-09 RecessionMajor Economies
% change GDP Exports Imports
Canada -3.1 -19.2 -19.0
France -3.2 -15.0 -12.5
Germany -6.3 -18.2 -12.9
I taly -6.5 -23.9 -19.0
Japan -8.0 -32.1 -20.5
United Kingdom -5.9 -13.3 -16.7
United States -3.5 -12.6 -19.5
Euro area -5.1 -17.8 -15.3
OECD total -4.7 -15.7 -17.4
Russian Federation -9.7 -12.9 -35.1
GDP Change in Black Sea Economies 2008 - 2011
Decline in region similar to that seen in leading economies
RU & TU expected to recover strongly
RO & BG slower recovery forecast
Projected growth rates expected to be higher than in W Europe
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Opportunities in Eastern Europe & Beyond Slide No. 5
Investment in BS Region
Sharp decline in GDP
Fall off in foreign direct investment
Reduction in relative County Risk Scores vs EU-15
Fundamentals still sound
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Opportunities in Eastern Europe & Beyond Slide No. 6
Retail Logistics: Key Sector
Retail logistics spend >50% of total market in W Europe; probably even
higher in BS Region
BS countries increasing imports from China & SE Asia
o Growth of own label & cheaper brands
Most leading retailers are W European and often supply the BS Region
through N European ports and ship down (road/rail)
o Critical mass/economic quantities
Often freight costs can represent up to 50% of value of goods. Hence
reducing logistics costs critical
o More centralisation
o Direct shipment from countries of origin
o For cheap footwear at €15/pai5, logistics can represent 15%
On-carriage from ports to RDC’s still problematic; poor road infrastructure
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Opportunities in Eastern Europe & Beyond Slide No. 7
The Black Sea as a Gateway
Black Sea (BS) strategically placed as
Gateway to both West & East
Imports from Far East can be landed in BS
Ports and shipped inland
Infrastructure improving with rail an
increasing option
Turkey a critical gateway to Iran, Iraq and
Central Asia
Russia to develop BS ports as alternative
to Baltics
Istanbul terminals effective for
transshipment
UKRAINE
ROMANIA
RUSSIA
GEORGIA
BULGARIA
CONTAINER SHIPMENTS IN BLACK SEA - 2009
1.9 M TEU forecast for 2010 vs 1.5 M TEU in 2009
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Opportunities in Eastern Europe & Beyond Slide No. 8
Romania Ukraine Turkey Bulgaria
1 Metro Fozzy Migros Kaufland
2 Carrefour Metro Bim Rewe
3 Selgros Fursnet Carrefour CBA
4 Kaufland ASB Metro Picadilly
5 Billa Kishenya Tesco Familia
6 Rewe Auchan BTT Carrefour
7 Plus Anastor Teknosa Metro
8 Mega Tayriya Kiler Fantastico
9 Auchan Eko Tespo c/c Billa
10 Dederman Rewe Carsi Europa
Region targetted by retail multiples from W Europe
Displacing traditional retailers and stimulating demand
Transferring retailing practices and approach to logistics
W European 3PL’s have followed – not always successfully
Leading Retailers in Region
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Opportunities in Eastern Europe & Beyond Slide No. 9
Black Sea Retailers & FE Imports
Regional retail multiples source from the same FE vendors as
in W Europe
Purchasing often remains centralised at Retailers’ HQ’s
Opportunities for local solutions esp logistics
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Opportunities in Eastern Europe & Beyond Slide No. 10
Centralisation & Outsourcing
Outsourced Logistics in CEE
Country 2008 2012
Poland 23% 35%
Hungary 22% 30%
Czech Republic 23% 35%
Slovakia 13% 25%
Romania 28% 35%
Bulgaria 18% 30%
CEE Total 21% 32%
W. Europe 50% + little change
Source: Analytica & NYK
Outsourced
Centralisation of Logistics by leading retail
multiples vary, on average 20%
Problems with ‘critical mass’, supplier
compliance, vehicle utilisation etc
Centralisation depends on efficient inbound
collection & consolidation
Direct store deliveries common
Local produce and products still
important
Shortage of suitable 3PL’s
Level of outsourcing set to increase & 3PL
market will grow
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Opportunities in Eastern Europe & Beyond Slide No. 11
• A retailer importing 2,000 containers/year through Constanta
can save €1.8 million & reduce CO2 footprint by 7,000 t
Nautical
Miles
Shanghai to Rotterdam 10,409
Shanghai to Constanta, RO 7,980
via Rotterdam via Constanta
Sea 327.7 251.2
Road 167 0.3
Rail 0 6.1
Total 494.7 257.6
48%
Kg CO2/ton
Reduction via Constanta
Rotterdam
Constanta
Direct Shipment to Romania
Road/rail
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Opportunities in Eastern Europe & Beyond Slide No. 12
© via donau 2006
Using the Danube
Rail from Hamburg to Krems in Austria
Shipped by barge to Central Europe and
Black Sea regions
Can be used in reverse for imports via Constanta
Significant cost & CO2 savings
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Opportunities in Eastern Europe & Beyond Slide No. 13
END-TO-END LOGISTICS COSTS
Delivered to store
ex-China Qtr 1 08 Qtr 2 09 Qtr 2 10
Sea Freight € 78 € 51 € 81Warehousing € 37 € 36 € 37Delivery to store € 54 € 55 € 58Total € 168 € 142 € 176
Cost per pair of shoes € 1 .40 € 1 .18 € 1 .47
What if…. Savings
Cost/pair
Increase stock-turns by 30% € 0.03Increase drop size by 50% € 0.15Increase container loading by 20% € 0.06Shipped direct from FE € 0.16Did all this … € 0 .40
Savings of 27%
Cost per cbm
Supply Chain Efficiencies
Average selling price of a pair of
shoes lower in BS Region but
logistics cost the same
Even more critical to make supply
chain more efficient
Shipping direct from FE easy to do
and implement
DELIVERY TO STORE
& RETURNS
33% OCEAN FREIGHT
& ON-CARRIAGE
46%
WAREHOUSING
21%
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Opportunities in Eastern Europe & Beyond Slide No. 14
Streamline the Supply Chain
Retail RDC Origin CFS
Origin RDC
Mfr DC
R
E
T
A
I
L
V
E
N
D
O
R
S
DC Bypass
Challenges faced by retailers in BS region no different to those in W Europe.
Opportunities to streamline & save money by:
o Shipping direct to RDC in region (€20-30/cbm)
o Performing more operations in origin countries (eg Origin DC’s)
W Europe wages for warehouse worker € 25,000 pa vs €6,000 in RO
and € 3,000 pa in China
o Consolidating across product ranges & co-loading with competitors:
better container fill & lower cost per cbm.
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Opportunities in Eastern Europe & Beyond Slide No. 15
Shipping can be risky !
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Opportunities in Eastern Europe & Beyond Slide No. 16
Piracy still a major threat
Reported incidents each month during past 12 months
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Opportunities in Eastern Europe & Beyond Slide No. 17
THE WORLD IS FOUR-
FIFTHS WATER
THE REST IS THERE FOR
MOORING PURPOSES !