The Global Logistics & Infrastructure Landscape

Contents

• The Changing Landscape of Global Logistics 2

– M&A Playing Field in Global Logistics 3

– The Landscape of Logistics is Changing 4

– Unbundling the Global Logistics Industry? 5

– New Capabilities in Last Mile Fulfillment 6

• Infrastructure Challenges from Around the World 7

– Builders of the Backbone 8

– Human Capital will Make or Break Infrastructure Projects 9

• Capacity Shortage + Labor Shortage = ? 10

– Capacity Shortage Globally 11

– An Unprecedented Skill Shortage 12

– The Skill Shortage Will Alter Workforce Challenges 13

– Initiatives for Talent Management 14

– Neil Collins 15

THE CHANGING LANDSCAPE OF GLOBAL LOGISTICS

M&A Playing Field in Global Logistics

309 348 435

49

283 382 430

48

Shipping Logistics Trucking Rail

2013 2014

Source: Thomson Reuters, News articles, Capgemini Consulting Analysis

Overcapacity, rise in fuel prices and falling freight prices

Large players are entering into alliances instead of acquiring companies

Expanding into new emerging economies through acquisitions

Further, the emergence of e-commerce and new delivery option is also increasing pressure

Non-asset brokerages were sold for eight to ten times the EBITDA

The trend of acquisition is expected to continue in 2016

The congestion in road and sea is ramping investment in rail projects

Number of 3PL companies providing rail services increased by 13% in 2014

The Landscape of Logistics is Changing

Two-Day delivery was launched

Grocery delivery at convenient time

Examples:

Introduction of same-day delivery services by Shutl

— The company helped to match same-day orders with high-speed couriers

Examples:

Shop for items from local store and get delivery same day or overnight by Google

Sunday delivery was started by Amazon

Adoption of free and same day delivery by various e-commerce companies

— Amazon launched same day delivery in the US and the UK

— China Smart Logistic Network (CSN) was launched by Alibaba to offer same day delivery across all cities in China

Examples:

2005-2007

2008-2011 time period 2012-2014

Reduced fulfillment days and customized delivery time

Introduced one day Fulfillment

Complete adoption of one day fulfillment and introduction of overnight, same day and Sunday delivery

Over the past decade, the delivery time has shrunk from a couple of days to same day

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Unbundling the Global Logistics Industry?

Package, Envelope , or Express Freight

Freight Shipments

Expedited Extra-Care Handling

Air/Ocean Freight Forwarding

New Capabilities in Last Mile Fulfillment Last Mile

Requirements Description Constraints to

Implementation

Source: Talking Logistics, Capgemini Consulting Analysis,

High Medium Low

Adoption

Electronic Confirmation and Proof of Delivery

The confirmation of delivery of goods has evolved from mobile signatures

The system confirms appointments while en route; validates presence (they came and you were not home); electronic proof of delivery; and follow-up on customer satisfaction

The wide industry still uses paperwork for closing the financial transaction

Mobile and Telematics

Logistics players use GPS and AVL for precise locating and directing of vehicles

Technologies also provide driver instructions, monitor delivery status, and link to execution for real-time routing changes

Many fleets are yet to fully implement these services

Regulation will aid the adoption of telematics

Dynamic Incentivized Scheduling

Logistics providers need to devise economic models and dynamic schedules which are attractive choices to the customer and profitability to shipper

Logistic providers provide a variety of pickup or drop points and also time slots for delivery

Limited availability Lack of visibility and

predictive analysis over delivery operations

Continuous Route Optimization

Logistics companies need to optimize the large number of stops within a route

The traditional ERP or TMS system are unable to deal with constraints such as real-time congestion, vehicle type, driving time regulations and delivery time windows

Need complex decision making and powerful optimizers to cope with the last mile process

INFRASTRUCTURE CHALLENGES FROM AROUND THE WORLD

Rebuilders of the Backbone

The uniqueness of infrastructure programs globally

Multi stage, multimillion dollar projects

Need for complexly integrated leadership teams

Regulatory hurdles to be passed

Competitive financial return for private investors while navigating needs of the public sector

Human capital challenge due to scarcity of talent

Human Capital will Make or Break Infrastructure Projects

Competencies for high performing teams include: Business Insight-Applying knowledge of the business and the marketplace to advance organizational

goals Customer focus-delivering customer-centric solutions Managing complexity-making sense of complex, high-quality, and sometimes contradictory information

to effectively solve problems Balancing Stakeholders-Anticipating and balancing the needs of multiple stakeholders Action Oriented-Taking on new opportunities and tough challenges with a sense of urgency, high energy,

and enthusiasm Planning and Aligning-Planning and prioritizing work to meet commitments aligned with organizational

goals Effective Communication-Developing multimode communications that convey a clear understanding of

the unique needs of different audiences

At each phase of a project, leadership is critical

A tight alignment without overlap with cohesion brings the jig-saw together

Aligning teams to bring about success

CAPACITY SHORTAGE & LABOR SHORTAGE =?

Capacity Shortage Globally

High trucking capacity utilization

67% 55%

2014 2013

Logistics Players facing Capacity Challenges

Total survey respondents = >300 3PL companies

Increasing regulations on transportation

Shortage of drivers

In the US, the trucking industry has functioned at a 95-97% capacity over the past three years

The capacity crunch is expected to persist till 2017

The European directive to reduce the sulphur emissions (LSS) of ships has added to cost of operation

– According to Maersk, environmental cost will surge to $80 per TEU

This will lead to the closing of small shipping companies

Regulation in the trucking industry

– In 2013, new regulations were introduced related to electronic logging devices, speed limits and hours-of-service requirements

Major economies such as Europe and the U.S. have a large aging population and smaller workforce

The American Trucking Associations (ATA) estimates that the U.S. will need 100,000 truck drivers per year

Port Congestion

Ports in the U.S. and Europe have witnessed rise in congestion due to increasing container ship sizes

Terminals have not been upgraded simultaneously

– Next generation of vessels will have capacities of 22,000 to 24,000 20-foot container units and will enter the fleet by 2018

Capacity challenges are expected to continue in the coming years as consumer demand increases on improving economic conditions

Source: News articles, Capgemini Consulting Analysis

An Unprecedented Skill Shortage

• High insurance rates for the youth

• Licensing laws increasing waiting periods

Australia

• Other Industries more attractive than trucking

• Regulation scrutinizing driver operations

• Abolition of compulsory military service

• Three year training period

• Fall in Large good vehicle licensing

• Regulation scrutinizing driver operations

• Lower wages

• Aging population

• Lack of proper training

US Germany

UK Japan Canada

Worldwide transportation functions across various industry face a major labor shortage in blue collar jobs

Worldwide warehousing and logistics functions face a shortage mainly in middle management jobs

Major countries facing a truck driver shortage

The Skill Shortage Will Alter Workforce Challenges

• Today’s workforce challenges for 3PLs and shippers

Developing bench strength

Developing leaders

Retaining high performers

Attracting the best talent

Enhancing employee motivation and engagement

1 2 3 4 5

Workforce challenges of tomorrow due to labor

shortages

Growing turnover

Lack of continuity and thus quality of service or product

Wage growth

Not finding the right people fast enough

Decreased productivity and output

1 2 3 4 5

Initiatives For Talent Management Partnering to Develop Curriculum Graduate Training Programs School & University Guest Lectures

Automation of Operations Real Time Monitoring to Improve Productivity

Labor Forecasting, Planning & Scheduling

► Logistics companies are trying to bring logistics curriculum up to par with current operational needs

► Paid Internships, sponsoring projects and consulting assignments or research are some of the practices adopted

Example

Adoption High

► Graduate training programs offer employees the opportunity to cross train across various departments

► Companies connect with other industry graduate trainees and the broader future workforce

High

Example

Adoption

► Interweave theory with practice through collaboration with institutions

► Employees from leading logistics companies give guest lectures to attract and contact potential employees at a early stage

Example

Adoption High

► Accurate forecasting of labor requirement and scheduling based on demand

► Logistics companies are able to cater to more business with less capacity

► Some logistics companies are trying to improve their current productivity to deal with labor shortage

► Companies are adopting real time monitoring to increase labor productivity

► Automation has been introduced across various material handling and warehousing operations

► However, a vast majority of the industry still run a human driven process for most logistics operations

Example

Adoption

Example

Adoption

Example

Adoption

Low Medium High

Neil Collins

Neil Collins is a Senior Client Partner in Korn Ferry’s Atlanta office. He is also the Global Sector Leader, Logistics & Transportation Services, within the Firm’s Global Industrial Market.

Mr. Collins is responsible for leading and building Korn Ferry’s efforts globally, covering the third party logistics, freight forwarding, trucking, maritime, rail and airports sectors. He works with a diverse client base as a leadership talent advisor, focusing on building effective boards, CEO succession planning, and effective hiring strategies for their respective executive teams.

Previously, Mr. Collins worked with a leading global executive search firm for nearly twelve years, initially in the United Kingdom before relocating to Atlanta, where he was managing partner, America’s transportation and logistics.

His early professional experience was at Shell U.K. Exploration and Production, working in the

human resources/engineering support functions. Mr. Collins’s career continued with Ward Wilson, a boutique U.K. management consultancy firm, where his focus was on developing competency frameworks for senior management at a European blue-chip company.

He is a member of the business advisory council, transportation at Northwestern University.

Mr. Collins graduated from Heriot-Watt University, Edinburgh with a bachelor of science degree (Hons) in business and quality management.

1201 WEST PEACHTREE STREET, NW

ATLANTA, GA 30309

TEL: +1.404.783.8811

E-MAIL: neil.collins@kornferry.com

Senior Client Partner

Global Sector Leader, Logistics & Transportation Services