Discussion Topics <ul><li>Introduction to the Surveys and the Report Findings </li></ul><ul><li>Summary of Major Regional ...
The 2006 Third-Party Logistics Provider CEO Surveys <ul><li>This is the 13 th  year that the annual 3PL CEO Surveys have b...
North American Survey CEOs of 22 of the largest North American 3PLs participated in the survey <ul><li>Cardinal Logistics ...
North American Survey 3PL operating revenues in North America continue to grow Average Annual  Revenues of Participating C...
North American Survey During the past three years, these companies have become more successful in meeting their regional r...
North American Survey The majority of CEOs indicated that their companies and the North American 3PL industry had been mod...
North American Survey Industry dynamics again highlighted continued pricing pressures, growing demand for 3PL services, an...
North American Survey For the second straight year, the CEOs saw the greatest industry opportunities in the possible expan...
North American Survey Finding/keeping management talent is the region’s top problem, followed by the high-cost/ low return...
North American Survey Rising fuel prices have impacted 3PL costs, but contract provisions have allowed most of those incre...
European Survey CEOs of 11 of the largest European 3PLs participated in the survey <ul><li>Caterpillar Logistics Services ...
European Survey Average annual 3PL operating revenues in Europe were reported at approximately the same level as the previ...
European Survey Some European 3PLs continue to have problems meeting their revenue growth projections European 3PL Perform...
European Survey The majority of European CEOs indicated that their companies and the European 3PL industry had been modera...
European Survey During the past several years European 3PLs have responded to the 2004 expansion of the EU in a number of ...
European Survey  Industry dynamics again highlighted pricing pressures, growing demand for 3PL services, and large-scale m...
European Survey According to the European CEOs their companies face a number of important management challenges in Europe....
Asia-Pacific Region Survey CEOs of 11 of the largest Asia-Pacific Region 3PLs participated in the survey <ul><li>Caterpill...
Asia-Pacific Region Survey 3PL operating revenues in Asia continue to grow Average Annual APAC Operating Revenues of Parti...
Asia-Pacific Region Survey On average, China will still remain the region’s most important 3PL revenue source in 2008, but...
Asia-Pacific Region Survey The majority of APAC CEOs indicated that their companies and the regional  3PL industry were at...
Asia-Pacific Region Survey Industry dynamics highlighted pricing pressures, large-scale merger activity, and increased pre...
Asia-Pacific Region Survey Many providers have established operations in China, but their success in meeting various goals...
Asia-Pacific Region Survey In identifying regional growth opportunities, some CEOs focused on specific countries, while ot...
Asia-Pacific Region Survey The CEOs identified a wide range of regional problems <ul><li>Human resources management issues...
Key Comparative Findings: Mergers and Acquisitions (M/A ) The industry consolidation movement continues in all three regio...
Key Comparative Findings: Mergers and Acquisitions (M/A) There are typically a variety of post-acquisition issues to be ad...
Key Comparative Findings: Managing Customer Relationships In all three regions 3PLs are increasingly customer-selective, a...
Key Comparative Findings: Managing Customer Relationships CEOs identified many barriers to improved collaboration includin...
Key Comparative Findings: Managing Customer Relationships 3PLs have made many organizational changes to promote collaborat...
Key Comparative Findings: Managing Customer Relationships 3PLs have made many operational changes to promote collaboration...
Key Comparative Findings: Managing Customer Relationships Many of these companies are also using technology to support col...
Key Comparative Findings: Market Differentiation Factors Most Frequently Cited Differentiation Factors by Region We found ...
Key Comparative Findings: The Use of 4PLs or LLPs Many CEOs in all three regions believe there is increased customer inter...
Key Comparative Findings: The Use of RFID The percentage of 3PL customers either “committed to RFID” or conducting pilot s...
Key Comparative Findings: Revenue growth projections North America CEOs still bullish about regional company growth prospe...
North American CEO Projections of Industry Growth Rate Survey year Projected growth rate Key Comparative Findings: Revenue...
Key Comparative Findings: Revenue growth projections APAC CEOs project substantially higher company and industry growth ra...
Conclusions and Expectations <ul><li>Where do we find similarities across the regions? </li></ul><ul><li>Company profitabi...
Conclusions and Expectations <ul><li>Problems similar across regions—they included depressed margins, talent shortages, ri...
Conclusions and Expectations <ul><li>Where do we find differences across the regions? </li></ul><ul><li>Growth rate projec...
Conclusions and Expectations <ul><li>Opportunities—service expansion highlighted in NA; CEOs in other regions often focuse...
Conclusions and Expectations <ul><li>What do we expect? </li></ul><ul><li>Continued solid revenue growth in all three regi...
Conclusions and Expectations <ul><li>Significant increases in 3PL industry investment in recruiting, training and retentio...
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2006 Conference CEO Survey

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  • Questions to be answered What are current trends What, how, what’s most effective Systems and Technology Applic. Of IT systems Future development/investment What are the metrics/how in comparison
  • Transcript of "2006 Conference CEO Survey"

    1. 2. Discussion Topics <ul><li>Introduction to the Surveys and the Report Findings </li></ul><ul><li>Summary of Major Regional Findings </li></ul><ul><ul><li>Americas </li></ul></ul><ul><ul><li>Europe </li></ul></ul><ul><ul><li>Asia-Pacific </li></ul></ul><ul><li>Comparative Key Findings </li></ul><ul><li>Conclusions and Expectations </li></ul>
    2. 3. The 2006 Third-Party Logistics Provider CEO Surveys <ul><li>This is the 13 th year that the annual 3PL CEO Surveys have been conducted. </li></ul><ul><li>Forty-four CEOs of the world’s leading 3PLs participated in our three regional surveys. The regions examined were North America, Europe, and the Asia-Pacific region. </li></ul><ul><li>Collectively their companies generated nearly $50 billion in 3PL revenues in those markets in 2005. </li></ul><ul><li>The surveys provide a global overview of the 3PL industry from the perspective of the CEOs. </li></ul><ul><li>The data generated not only give insight into the specifics of the regional markets, but also allow comparisons across geographies. </li></ul><ul><li>The survey data also provides an industry benchmark, and has been used by 3PLs in their strategic planning efforts. </li></ul>
    3. 4. North American Survey CEOs of 22 of the largest North American 3PLs participated in the survey <ul><li>Cardinal Logistics </li></ul><ul><li>Caterpillar Logistics Services </li></ul><ul><li>DSC Logistics </li></ul><ul><li>Exel Logistics </li></ul><ul><li>Genco </li></ul><ul><li>Kuehne & Nagel Logistics, Inc. </li></ul><ul><li>Landstar </li></ul><ul><li>Maersk Logistics </li></ul><ul><li>Menlo Logistics </li></ul><ul><li>MeridianIQ </li></ul><ul><li>NAL </li></ul><ul><li>NYK Logistics </li></ul><ul><li>Panalpina </li></ul><ul><li>Penske Logistics </li></ul><ul><li>Pittsburgh Logistics </li></ul><ul><li>Ryder </li></ul><ul><li>Schenker </li></ul><ul><li>Schneider Logistics </li></ul><ul><li>TNT Logistics </li></ul><ul><li>Transplace.com </li></ul><ul><li>UPS Supply Chain Solutions </li></ul><ul><li>UTi </li></ul>
    4. 5. North American Survey 3PL operating revenues in North America continue to grow Average Annual Revenues of Participating Companies
    5. 6. North American Survey During the past three years, these companies have become more successful in meeting their regional revenue growth projections North American 3PL Performance in Meeting Growth Projections
    6. 7. North American Survey The majority of CEOs indicated that their companies and the North American 3PL industry had been moderately profitable in 2005 For the third straight year, none of the participating CEOs reported that their North American business unit failed to record a profit during the year.
    7. 8. North American Survey Industry dynamics again highlighted continued pricing pressures, growing demand for 3PL services, and increased pressure to internationalize service offerings Total points
    8. 9. North American Survey For the second straight year, the CEOs saw the greatest industry opportunities in the possible expansion of their international services Total points
    9. 10. North American Survey Finding/keeping management talent is the region’s top problem, followed by the high-cost/ low return on IT investments, and s teadily increasing customer expectations Total points
    10. 11. North American Survey Rising fuel prices have impacted 3PL costs, but contract provisions have allowed most of those increases (86%) to be passed on to customers The Impact of Increasing Fuel Costs on 3PL Costs
    11. 12. European Survey CEOs of 11 of the largest European 3PLs participated in the survey <ul><li>Caterpillar Logistics Services </li></ul><ul><li>Exel Logistics </li></ul><ul><li>Geodis </li></ul><ul><li>Kuehne & Nagel Logistics, Inc. </li></ul><ul><li>Maersk Logistics </li></ul><ul><li>Menlo Logistics </li></ul><ul><li>Penske Logistics </li></ul><ul><li>Ryder </li></ul><ul><li>Schneider Logistics </li></ul><ul><li>TNT </li></ul><ul><li>UPS Supply Chain Solutions </li></ul>
    12. 13. European Survey Average annual 3PL operating revenues in Europe were reported at approximately the same level as the previous year Average Participating European 3PL Company Revenue
    13. 14. European Survey Some European 3PLs continue to have problems meeting their revenue growth projections European 3PL Performance in Meeting Revenue Growth Projections
    14. 15. European Survey The majority of European CEOs indicated that their companies and the European 3PL industry had been moderately profitable in 2005
    15. 16. European Survey During the past several years European 3PLs have responded to the 2004 expansion of the EU in a number of ways Total points
    16. 17. European Survey Industry dynamics again highlighted pricing pressures, growing demand for 3PL services, and large-scale mergers of 3PL providers in the region Total points
    17. 18. European Survey According to the European CEOs their companies face a number of important management challenges in Europe. These include: <ul><li>Effectively integrating recent acquisitions into their companies </li></ul><ul><li>Accessing adequate funds to support IT expansion efforts </li></ul><ul><li>Development of adequate resources to support company moves into Eastern Europe and Russia </li></ul><ul><li>Hiring and retaining high quality human resources </li></ul><ul><li>Effectively managing company growth in Europe </li></ul><ul><li>Developing good implementation skills with respect to new accounts </li></ul><ul><li>Building a Pan-European platform from which new services might be launched </li></ul><ul><li>Improving processes to lower costs </li></ul>
    18. 19. Asia-Pacific Region Survey CEOs of 11 of the largest Asia-Pacific Region 3PLs participated in the survey <ul><li>Caterpillar Logistics Services </li></ul><ul><li>DHL </li></ul><ul><li>Eagle Global Logistics </li></ul><ul><li>Exel Logistics </li></ul><ul><li>Kuehne+Nagel Logistics </li></ul><ul><li>Landstar Logistics </li></ul><ul><li>Maersk Logistics </li></ul><ul><li>Menlo Logistics </li></ul><ul><li>MeridianIQ </li></ul><ul><li>UPS Supply Chain Solutions </li></ul><ul><li>UTi </li></ul>
    19. 20. Asia-Pacific Region Survey 3PL operating revenues in Asia continue to grow Average Annual APAC Operating Revenues of Participating 3PLs
    20. 21. Asia-Pacific Region Survey On average, China will still remain the region’s most important 3PL revenue source in 2008, but India’s share of regional revenues will have tripled between 2004-2008
    21. 22. Asia-Pacific Region Survey The majority of APAC CEOs indicated that their companies and the regional 3PL industry were at least moderately profitable in 2005
    22. 23. Asia-Pacific Region Survey Industry dynamics highlighted pricing pressures, large-scale merger activity, and increased pressure to internationalize company service offerings Total points
    23. 24. Asia-Pacific Region Survey Many providers have established operations in China, but their success in meeting various goals in China varies widely among these companies
    24. 25. Asia-Pacific Region Survey In identifying regional growth opportunities, some CEOs focused on specific countries, while others emphasized opportunities related to specific services <ul><li>Servicing the continued growth of the domestic markets in China and India </li></ul><ul><li>Supporting global sourcing efforts of manufacturers of all sizes </li></ul><ul><li>Supporting increasingly complicated supply chain solutions in the region </li></ul><ul><li>Provision of freight management services or reliable ground transportation options in China </li></ul><ul><li>Expansion of the visibility tools offered to clients </li></ul><ul><li>Building and operating shared-use of facilities </li></ul><ul><li>Expansion of value added services </li></ul><ul><li>Provision of customs clearance services </li></ul>
    25. 26. Asia-Pacific Region Survey The CEOs identified a wide range of regional problems <ul><li>Human resources management issues </li></ul><ul><ul><li>Competition for skilled human resources is intense </li></ul></ul><ul><ul><li>It is hard to match the available labor skill set to client requirements </li></ul></ul><ul><ul><li>Managers tend to have single or dual country expertise, but tend to lack “theatre-wide” knowledge </li></ul></ul><ul><li>Compliance with national and local regulations within the region is difficult </li></ul><ul><li>Operating costs continue to rise with wage increases </li></ul><ul><li>There is a lack of political stability in the region </li></ul>
    26. 27. Key Comparative Findings: Mergers and Acquisitions (M/A ) The industry consolidation movement continues in all three regions <ul><li>Twenty-three of the 44 CEOs involved in the regional surveys reported their companies had been involved in significant M/A activity in their regions during the past year </li></ul><ul><li>Two-thirds of the CEOs ranked continuation of the consolidation movement among the most important regional changes they expect during the next three years </li></ul><ul><li>CEOs in all regions expect a significant percentage of their revenue growth in the next three years to come from M/A activity: North America—15.4%; Europe—17%; and, Asia-Pacific Region—22.5% </li></ul><ul><li>To date, the impact of the M/A movement on the 3PL marketplace has varied substantially by region </li></ul>
    27. 28. Key Comparative Findings: Mergers and Acquisitions (M/A) There are typically a variety of post-acquisition issues to be addressed <ul><li>Integration of operations, reporting and IT systems </li></ul><ul><li>Addressing a wide-range of people issues including blending different “cultures,” handling redundancy, and compensation issues </li></ul><ul><li>Maintaining customer relationships throughout the transition period </li></ul><ul><li>Blending sales and marketing strategies </li></ul><ul><li>Presenting a “single-face” to the marketplace </li></ul>
    28. 29. Key Comparative Findings: Managing Customer Relationships In all three regions 3PLs are increasingly customer-selective, and have generally been successful in developing more collaborative relationships with key customers More customer selectivity over the past several years Success in developing collaborative working relationships with key customers
    29. 30. Key Comparative Findings: Managing Customer Relationships CEOs identified many barriers to improved collaboration including: <ul><li>Lack of top management commitment to the concept in client companies </li></ul><ul><li>Client perception that 3PLs provide a service not a strategic partnership </li></ul><ul><li>Lack of necessary resources in one or both organizations to support true collaboration </li></ul><ul><li>Too many contact points within the client organization at different organizational levels </li></ul><ul><li>Lack of client willingness to share critical information with the 3PL </li></ul><ul><li>Increased use of consultants to manage the bid process—”they get in the way” </li></ul><ul><li>Lack of trust in one or both organizations </li></ul><ul><li>Internal conflicts within the client organization </li></ul><ul><li>The short time horizon of many clients </li></ul>
    30. 31. Key Comparative Findings: Managing Customer Relationships 3PLs have made many organizational changes to promote collaborative relationships with key accounts, including formation of: <ul><li>Executive sales teams to focus on key accounts </li></ul><ul><li>New business development organizations </li></ul><ul><li>Customer advisory teams and consumer councils that are involved in strategic planning exercises </li></ul><ul><li>A larger customer solutions group </li></ul><ul><li>Industry-specific groups to focus on the dynamics of particular industries </li></ul><ul><li>Focused account leadership groups </li></ul><ul><li>A key account management organization </li></ul><ul><li>A restructured customer service organization to assure that key accounts receive a uniform quality of service around the globe </li></ul><ul><li>A new customer care organization </li></ul><ul><li>A global account management program that focuses on key accounts </li></ul><ul><li>Positions for key customers on the company’s board of directors </li></ul>
    31. 32. Key Comparative Findings: Managing Customer Relationships 3PLs have made many operational changes to promote collaboration with key accounts. These have included: <ul><li>A commitment to longer-term contracts with key customers </li></ul><ul><li>The use of consultative selling techniques </li></ul><ul><li>Regular operations reviews </li></ul><ul><li>Support for collaborative transportation planning among customers </li></ul><ul><li>Co-development of new SCM capabilities with key customers </li></ul><ul><li>More frequent customer visits, and investment in more contact people </li></ul><ul><li>Investments in more sales and relationship management training for employees </li></ul><ul><li>More customer involvement in analytical projects </li></ul><ul><li>More aggressive linkages between the company’s sales and customer service activities </li></ul><ul><li>The use of more individual incentives related to key accounts </li></ul><ul><li>A commitment to constantly evaluating customer requirements </li></ul><ul><li>Presentation to key accounts of more strategic proposals with larger potential payoffs to both parties </li></ul><ul><li>Focus on value creation for customers even in areas in which the company doesn’t directly provide the service. </li></ul>
    32. 33. Key Comparative Findings: Managing Customer Relationships Many of these companies are also using technology to support collaboration Use of technology in attempting to build collaborative working relationships with key customers <ul><li>CRM software </li></ul><ul><li>Supply chain visibility tools </li></ul><ul><li>Supply chain integration software </li></ul><ul><li>Software that supports analytical projects for customers </li></ul><ul><li>Customer performance portals (not CRM) </li></ul><ul><li>EDI linkages to customers </li></ul>Technology used
    33. 34. Key Comparative Findings: Market Differentiation Factors Most Frequently Cited Differentiation Factors by Region We found similarities and differences in what these companies emphasize in attempting to differentiate themselves from competitors in the regional markets <ul><ul><li>A commitment to high-quality customer service </li></ul></ul><ul><ul><li>The company’s global reach </li></ul></ul><ul><ul><li>Breadth of company service offerings </li></ul></ul><ul><ul><li>The company’s superior IT support capabilities </li></ul></ul><ul><ul><li>The company’s excellent operational execution </li></ul></ul>North America <ul><ul><li>The talent of company employees </li></ul></ul><ul><ul><li>The company’s global reach </li></ul></ul><ul><ul><li>Breadth of company service offerings </li></ul></ul><ul><ul><li>The company’s superior IT support capabilities </li></ul></ul><ul><ul><li>The company’s non-asset based approach to 3PL </li></ul></ul>EMEA <ul><li>The company‘s long-term presence in the region </li></ul><ul><li>The company‘s global reach </li></ul><ul><li>Breadth of company service offerings </li></ul><ul><li>The company‘s superior IT support capabillities </li></ul><ul><li>The company‘s experience in particular industry verticals </li></ul>APAC
    34. 35. Key Comparative Findings: The Use of 4PLs or LLPs Many CEOs in all three regions believe there is increased customer interest in the possible use of 4PLs or Logistics Lead Providers (LLP) Question: Many industry observers believe that there is growing interest in the use of 4PLs or LLP to manage multi-company relationships. Do you agree? Especially in Europe the respondents believe there is an increased customer interest in 4PLs or LLP
    35. 36. Key Comparative Findings: The Use of RFID The percentage of 3PL customers either “committed to RFID” or conducting pilot studies of RFID remains quite limited in all three regions Percentage of 3PL customers “already committed to the use of RFID” Percentage of 3PL customers conducting pilot studies of the technology
    36. 37. Key Comparative Findings: Revenue growth projections North America CEOs still bullish about regional company growth prospects North American CEO Projections of Their Company’s Growth Rate Survey year Projected growth rate North American CEO Projections of Their Company’s Growth Rate Survey year Next year Next three years
    37. 38. North American CEO Projections of Industry Growth Rate Survey year Projected growth rate Key Comparative Findings: Revenue Growth Projections North America CEOs continue to project solid growth for the North American 3PL industry Next year Next three years
    38. 39. Key Comparative Findings: Revenue growth projections APAC CEOs project substantially higher company and industry growth rates than their European counterparts APAC and EMEA CEO Projections of Company and Industry Growth Rates Projection 2005 2006 2005 2006 1 year - Company 18% 30.9% 16% 15% 3 year - Company 18% 23.3% 13% 17% 1 year - Industry 20% 16.5% 9% 9% 3 year - Industry 16% 14.8% 9% 9% APAC EMEA
    39. 40. Conclusions and Expectations <ul><li>Where do we find similarities across the regions? </li></ul><ul><li>Company profitability—nearly all companies in the surveys were profitable in 2005 </li></ul><ul><li>Industry profitability—nearly all CEOs categorized the 3PL industry in their region as being profitable in 2005 </li></ul><ul><li>Growth projections—3PL service demand was projected to grow substantially in all three regions over the next three years </li></ul><ul><li>Market dynamics—continued growth, price compression, M/A activity and pressures to expand internationally are major drivers in all three regions </li></ul>
    40. 41. Conclusions and Expectations <ul><li>Problems similar across regions—they included depressed margins, talent shortages, rising customer expectations, post-acquisition integration issues </li></ul><ul><li>Customer relationship focus—in all regions 3PLs are becoming more customer-selective, more industry focused, and have made many changes to promote more collaboration with key customers </li></ul><ul><li>Consolidation will continue—will happen in all regions and impact will increase </li></ul><ul><li>4PL interest and potential—growing interest across regions, but few CEOs expect extensive use in the future </li></ul><ul><li>RFID “commitment” still low—this is the case in all regions, CEO consensus is that major impact is three-five years off </li></ul>
    41. 42. Conclusions and Expectations <ul><li>Where do we find differences across the regions? </li></ul><ul><li>Growth rate projections—the rates were high and nearly identical for NA and Europe, but substantially higher for APAC </li></ul><ul><li>Realization of revenue growth goals—Only five companies didn’t meet their 2005 revenue goals; four were in Europe </li></ul><ul><li>Stage of industry development—in APAC the 3PL network is being built; in NA and Europe 3PLs are adjusting their networks and marketing mix </li></ul><ul><li>Growth rates of economies being served—highest in APAC, lowest in Europe </li></ul>
    42. 43. Conclusions and Expectations <ul><li>Opportunities—service expansion highlighted in NA; CEOs in other regions often focused on specific geographies as the best opportunities </li></ul><ul><li>Regulatory complexity—this appears to be a much more significant problem in APAC than elsewhere </li></ul><ul><li>Scale issues—in APAC many 3PLs are still attempting to achieve marketplace scale; in other two regions many 3PLs are re-assessing their scale of operation—is bigger necessarily better? </li></ul>
    43. 44. Conclusions and Expectations <ul><li>What do we expect? </li></ul><ul><li>Continued solid revenue growth in all three regions </li></ul><ul><li>Increasing customer-selectivity and further customization by large 3PLs </li></ul><ul><li>Standardization of service offerings by niche players to increase their market share of small to medium size customers </li></ul><ul><li>Increased emphasis on risk-sharing and gain-sharing in 3PL contracts </li></ul><ul><li>More parent company board scrutiny of 3PLs if price compression and margin erosion continue </li></ul>
    44. 45. Conclusions and Expectations <ul><li>Significant increases in 3PL industry investment in recruiting, training and retention efforts </li></ul><ul><li>Continuation of the consolidation movement in all three regions with post-acquisition integration issues demanding even more attention </li></ul><ul><li>Differentiation pressures will increase to counter “commoditization” within the 3PL industry </li></ul>
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