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Jeremy Davidson from NYK Logistics; ‘Globalise the Outsourced Supply Chain: Seize New Market Opportunities in Eastern Europe, the BRIC Countries and Beyond’
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Jeremy Davidson from NYK Logistics; ‘Globalise the Outsourced Supply Chain: Seize New Market Opportunities in Eastern Europe, the BRIC Countries and Beyond’

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  • 1. • Click to edit Master text styles • Second level the Outsourced Supply Chain Globalise • Third level Opportunities in Eastern Europe & Beyond • Fourth level Jeremy Davidson • Fifth level 25th November 2010Opportunities in Eastern Europe & Beyond Slide No. 1
  • 2. Key Themes  Black Sea region is recovering from recession • Click to editgrowth in demand critical o Consumer-led Master text styles •  Second level Black Sea has considerable potential as a key Gateway for C & E Europe as • Third level well as Central Asia • Fourth level o Shipping FE Imports via N Europe no longer makes sense; direct shipment a viable and better alternative • Fifth level  W Europe retailers already dominant and changing logistics practices  Controlling logistics cost as important as in W EuropeOpportunities in Eastern Europe & Beyond Slide No. 2
  • 3. Black Sea Region Overview GDP per capita • Click to edit Master text styles Pop (m) Per Capital GDP • Second level Russia 2009 142 in 2009 $15,176 Turkey 75 $13,952 • Third level Ukraine Romania 46 22 $6,873 $12,214 • Bulgaria 8 $12,296 Fourth level Average EU-27 $30,651 • Fifth level Average OECD $33,732  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 DurablesOpportunities in Eastern Europe & Beyond Slide No. 3
  • 4. Recovery from Recession GDP Change in Black Sea Economies 2008 - 2011 10.0% 5.0% • Click to edit Master text Effect of 2008-09 Recession styles Major Economies 0.0% • Second level Russia Turkey Ukraine Romania Bulgaria 2008 2009 -5.0% % change GDP Exports Imports • 2010F -10.0% Third level Canada France -3.1 -3.2 -19.2 -15.0 -19.0 2011F -12.5 • -15.0% Fourth level Germany Italy -6.3 -6.5 -18.2 -23.9 -12.9 -19.0 -20.0% Japan -8.0 -32.1 -20.5 • Fifth level United Kingdom United States -5.9 -3.5 -13.3 -12.6 -16.7 -19.5  Decline in region similar to that Euro area -5.1 -17.8 -15.3 seen in leading economies OECD total -4.7 -15.7 -17.4  RU & TU expected to recover Russian Federation -9.7 -12.9 -35.1 strongly  RO & BG slower recovery forecast  Projected growth rates expected to be higher than in W EuropeOpportunities in Eastern Europe & Beyond Slide No. 4
  • 5. Investment in BS Region • Click to edit Master text styles • Second level • Third level • Fourth level • Fifth level  Sharp decline in GDP  Fall off in foreign direct investment  Reduction in relative County Risk Scores vs EU-15  Fundamentals still soundOpportunities in Eastern Europe & Beyond Slide No. 5
  • 6. Retail Logistics: Key Sector  Retail logistics spend >50% of total market in W Europe; probably even higher in BS Region •  Click to increasing imports from China & SE Asia BS countries edit Master text styles • Second levellabel & cheaper brands o Growth of own •  Most leading retailers are W European and often supply the BS Region ThirdNlevel ports and ship down (road/rail) through European • Fourth level o Critical mass/economic quantities •  Fifth level costsrepresent up to 50% of value of goods. Hence Often freight costs can reducing logistics 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 infrastructureOpportunities in Eastern Europe & Beyond Slide No. 6
  • 7. The Black Sea as a Gateway  Black Sea (BS) strategically placed as Gateway to both West & East • Click to edit Master text styles  Imports from Far East can be landed in BS • Second level Ports and shipped inland • Third level  Infrastructure improving with rail an increasing option • Fourth level  Turkey a critical gateway to Iran, Iraq and • Fifth level Central Asia CONTAINER SHIPMENTS IN BLACK SEA - 2009 BULGARIA  Russia to develop BS ports as alternative GEORGIA UKRAINE to Baltics RUSSIA  Istanbul terminals effective for ROMANIA transshipment 1.9 M TEU forecast for 2010 vs 1.5 M TEU in 2009Opportunities in Eastern Europe & Beyond Slide No. 7
  • 8. Leading Retailers in Region Romania Ukraine Turkey Bulgaria 1 Metro Fozzy Migros Kaufland •2 Click to edit Master text styles Carrefour Metro Bim Rewe •3 Second level Fursnet Selgros Carrefour CBA 4 Kaufland ASB Metro Picadilly •5 Third level Kishenya Billa Tesco Familia 6 Rewe Auchan BTT Carrefour •7 Fourth level Anastor Plus Teknosa Metro •8 Mega Fifth level 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 successfullyOpportunities in Eastern Europe & Beyond Slide No. 8
  • 9. Black Sea Retailers & FE Imports • Click to edit Master text styles • Second level • Third level • Fourth level • Fifth level  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 logisticsOpportunities in Eastern Europe & Beyond Slide No. 9
  • 10. Centralisation & Outsourcing  Centralisation of Logistics by leading retail multiples vary, on average 20% • Click to edit Master text styles mass’, supplier  Problems with ‘critical • Second level compliance, vehicle utilisation etc  Centralisation depends on efficient inbound • Third level collection & consolidation • Fourth level Outsourced Logistics in CEE • Fifth level Country  Direct store deliveries common Outsourced 2008 2012 Poland 23% 35%  Local produce and products still Hungary 22% 30% Czech Republic 23% 35% important Slovakia 13% 25% Romania 28% 35%  Shortage of suitable 3PL’s Bulgaria 18% 30% CEE Total 21% 32%  Level of outsourcing set to increase & 3PL W. Europe 50% + little change market will grow Source: Analytica & NYKOpportunities in Eastern Europe & Beyond Slide No. 10
  • 11. Direct Shipment to Romania Nautical Miles Shanghai to Rotterdam 10,409 Shanghai to Constanta, RO 7,980 • Click to edit Master text styles Kg CO /ton 2 • Second level Rotterdam Sea via Rotterdam via Constanta 327.7 251.2 • Third level Road/rail Road Rail 167 0 0.3 6.1 Total 494.7 257.6 • Fourth level Constanta Reduction via Constanta 48% • Fifth level • A retailer importing 2,000 containers/year through Constanta can save €1.8 million & reduce CO2 footprint by 7,000 tOpportunities in Eastern Europe & Beyond Slide No. 11
  • 12. © via donau 2006 Using the Danube • Click to edit Master text styles • Second level • Third level • Fourth level • Fifth level  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 savingsOpportunities in Eastern Europe & Beyond Slide No. 12
  • 13. Supply Chain Efficiencies END-TO-END LOGISTICS COSTS Delivered to store Cost per cbm • Click to edit€ Master text styles ex-China Sea Freight 78 € 51 € 81 Qtr 1 08 Qtr 2 09 Qtr 2 10 DELIVERY TO STORE & RETURNS 33% € 37 € 36 € 37 OCEAN FREIGHT Warehousing & ON-CARRIAGE • Second level168 €€142 €€176 € 54 55 58 Delivery to store 46% Total € • Third level € 1.40 Cost per pair of shoes € 1.18 € 1.47 WAREHOUSING 21% • Fourth level What if…. Savings Cost/pair € 0.03 Increase stock-turns by 30%  Average selling price of a pair of • Fifth level € 0.06 € 0.15 Increase drop size by 50% Increase container loading by 20% shoes lower in BS Region but Shipped direct from FE € 0.16 Did all this … € 0.40 logistics cost the same Savings of 27%  Even more critical to make supply chain more efficient  Shipping direct from FE easy to do and implementOpportunities in Eastern Europe & Beyond Slide No. 13
  • 14. Streamline the Supply Chain V Retail RDC R Origin CFS • Click to edit Master text styles E N E T D A • Second level O R Mfr DC I L S • Third level Origin RDC DC Bypass  •Challenges faced by retailers in BS region no different to those in W Europe. Fourth level  •Opportunities to streamline & save money by: Fifth level 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.Opportunities in Eastern Europe & Beyond Slide No. 14
  • 15. Shipping can be risky ! • Click to edit Master text styles • Second level • Third level • Fourth level • Fifth levelOpportunities in Eastern Europe & Beyond Slide No. 15
  • 16. Piracy still a major threat Reported incidents each month during past 12 months • Click to edit Master text styles • Second level • Third level • Fourth level • Fifth levelOpportunities in Eastern Europe & Beyond Slide No. 16
  • 17. THE WORLD IS FOUR- • Click to edit Master text styles • FIFTHS WATER Second level • Third level THE REST IS THERE FOR • Fourth level • Fifth level MOORING PURPOSES !Opportunities in Eastern Europe & Beyond Slide No. 17