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Copyright © SpringTide 2016 www.SpringTideProcurement.comCopyright © SpringTide 2016
The Logistics Challenge:
Driving the Value Chain all the Way to the Customer
Presented by Mike Utting

Copyright © SpringTide 2016
www.dssmith.comPrivate & Confidential | © 2013
www.SpringTideProcurement.com
General Perceptions of
Procurement 01

Copyright © SpringTide 2016 3 www.SpringTideProcurement.com
From this…
If me hit
hard, me get
good price

Through an evolution that has taken time…
3000 BC
Egyptians
track
building
materials on
papyrus rolls
1887
First book on
Procurement
published by
Marshall M.
Kirkman
1964
Procurement
advances
with MRP
being first
used in Black
& Decker
1980
Electronic
data
interchange
&
procurement
pooling
1994
Online
Catalogues &
Framework
Agreements
Late 1980’s
Catman &
SRM start to
become
more
mainstream
2000
SRM starts
to evolve
2002
Enterprise
Resource
Planning
(ERP)
Technological Revolution
Procurement Practices & Behaviours still Evolving

Although, some are stuck in the 1960s
BottleneckOrder placement
Little valueRubber stamping
BureaucracyDefault profession

Transport is a lower spend Priority on the Corporate Agenda
Procurement
Finance
0%
5%
10%
15%
20%
25%

Very few see Procurement as being entirely “Strategic”

…but Procurement can move into the 21st Century
Many businesses
resist embedding
Procurement as part
of their value-chain
because it hasn’t
passed first base!

Current State of Transport
Procurement 02

Sales
Drive demand
Respond to client performance needs
Everything focuses on getting the product to the
customer; cost is secondary
Procurement’s role in transport is peripheral
Operations
Fulfil demand
Measure own performance
Compliance
Track & report the delivery

The Procurement of Transport is driven by operational needs
with commercial needs being a secondary and often relegated
priority
Our support for clients in general suggests…
Price

Comments we often hear
We get the
best deal as
we buy on
spot
Sales just
discount to
get an
order
We don’t
know how
much we
spend
Service is
paramount
Our
requirements
are special
How can
Procurement
help? This is
too complex
OTIF is 99%
- no way
will we
change
Our remote
location
inhibits who
we can use

But, when we start to investigate further, we find…
Administratively heavy
Cost drivers not understood
Internal v external debate
Over-reliance on technology
Multiple hauliers
Vast array of contracts Tariff focus
Inconsistent HS&E

To which we often respond…
What technology platforms will be used?
How will you benchmark your current state versus future state?
Are there incentives to take cost out of the operation?
Are you going to strategically bid the 3PL package or just gift the work to
Company x?
Do you know what assets you need and the mix of core and 3rd party
fleet?
Are you sure this solution works for your entire geographic
footprint?
How will you drive price, cost and value beyond year 1?

What do we know about the Procurement of Transport?
Political & Economic
HS&E paramount
Demographics
Tax regimes
Training / qualifications
Technology
(engines, trailers, emissions)
Fuel 17–33% vehicle/range
Average profit 16.5%
Within an organisation
Typically Top 5 spend
Largely transactional
Output orientated
Owned by Supply Chain / Logistics
Little Commercial Focus
Client & SLA-driven
Structurally
Market-led solutions: 3PL / 4PL
Thousands of hauliers: top 4 = 17.1%
<4 employees = 81.4%
Primary growth in mid-size & large
fleets
HGVs >7–8t in decline
v >41t increasing

The 25 largest third-party logistics operators by turnover in the UK
Operator Name Financial Year End
Latest Year
Turnover (£)
Latest Year Pre-Tax
Profit (£)
Number of
Employees
Growth in
Turnover
1 Royal Mail 30/03/2015 7,757,000,000 470,000,000 143,000 -0.39%
2 DHL 31/12/2014 5,078,091,000 115,902,000 44,643 6.36%
3 Kuehne + Nagel 31/12/2014 1,364,662,000 35,634,000 8,874 3.73%
4 XPO Logistics 31/12/2014 1,084,169,000 22,407,000 14,880 4.90%
5 Wincanton 31/03/2015 1,009,800,000 24,900,000 15,600 0.15%
6 DPD Group UK 04/01/2015 872,547,000 105,981,000 6,136 26.04%
7 UPS 31/12/2014 837,245,000 57,493,000 5,219 10.45%
8 TNT UK 31/12/2014 724,921,000 -18,672,000 8,992 -2.42%
9 Eddie Stobart Logistics 30/11/2014 591,500,000 9,100,000 4,823 5.69%
10 Whistl UK 31/12/2014 590,250,000 -3,707,000 3,156 2.66%
11 UK Mail 31/03/2015 485,103,000 20,570,000 2,684 0.77%
12 Yodel Distribution 30/06/2014 461,003,000 -73,009,000 5,051 5.00%
13 Gist 31/12/2014 405,709,000 42,030,000 4,155 1.15%
14 Hermes Parcelnet 28/02/2014 382,314,000 33,554,000 1,695 20.77%
15 Ceva Logistics 31/12/2014 366,067,000 18,536,000 4,347 -4.98%
16 DX Group 30/06/2015 297,500,000 24,800,000 3,196 -2.20%
17 Bibby Supply Chain Services 31/12/2014 242,335,000 -3,648,000 2,429 0.38%
18 Turners (Soham) 03/01/2015 237,599,000 22,396,000 2,264 -1.86%
19 Clipper Logistics Group 30/04/2015 234,778,000 9,485,000 2,964 16.66%
20 FedEx UK 31/05/2014 230,189,000 34,177,000 1,953 4.93%
21 Yusen Logistics (UK) 28/03/2015 193,904,000 2,926,000 1,424 -4.07%
22 DSV Road 31/12/2014 187,462,000 10,195,000 795 2.12%
23 WH Malcolm 31/01/2014 179,704,000 8,851,000 1,809 1.30%
24 Harry Yearsley 29/03/2014 172,053,365 3,957,342 1,067 10.38%
25 NFT Distribution Operations 31/03/2014 169,414,000 1,736,000 1,947 -0.19%

16.9 billion kilometres,
down 2%
Goods lifted:
1.9 billion tonnes, up 1%
Goods moved: 136 billion
tonne kilometres, down 2%
Goods lifted & distances travelled
HGVs lifted more goods in 2014 than 2013 but travelled shorter distances
Empty running
27% in 2004
29% in 2014
29 billion tonne kilometres by
water
23 billion tonne kilometres by
rail
151 billion tonne kilometres
by road

Average length of haul for all HGVs

Operating Licences reveal growth in larger fleets
Sole traders hold the largest share of O-licences in
use/issued: 42% in 2015. However, they account for just
9% of all vehicles specified to UK O-licences.
Primary growth is coming in mid-size and large fleets.
The average number of vehicles per O-licence in 2015
was 4.54. This has risen from 4.36 in 2014, which in turn
rose from 4.18 in 2013. This continued shift in the mean
again illustrates the increasing trend towards a high
concentration of vehicle ownership by large fleet
operators.
Fleet
size
Number of Licences Number of Vehicles
2013 2014 2015 2013 2014 2015
0 10.47% 10.81% 10.66% 0 0 0
1 44.09% 43.27% 42% 10.53% 9.95% 9.07%
2 to 5 31.68% 31.52% 32% 21.48% 20.67% 19.91%
6 to 10 6.83% 7.10% 7.46% 12.28% 12.27% 12.21%
11 to 20 3.78% 3.90% 4.17% 13.02% 12.90% 13.08%
21 to 50 2.17% 2.30% 2.54% 15.85% 16.27% 17.13%
51 plus 0.98% 1.10% 1.14% 26.84% 27.94% 28.58%

Licensed HGVs by weight in Great Britain
Year 3.5 to 7 t > 7 to 8 t > 8 to 18 t > 18 to 31 t > 31 to 41 t > 41 t Total
2010 51,200 134,900 93,100 59,200 49,900 81,800 470,100
2011 51,900 129,900 92,200 58,900 48,100 84,500 465,500
2012 52,800 124,800 91,200 58,200 46,700 86,800 460,600
2013 54,500 121,900 93,300 58,700 47,900 92,700 468,900
2014 56,500 117,400 94,300 59,400 49,000 97,300 473,900

We do still see the Eureka moment…
OK, we know we don’t understand how to buy Transport commercially
So, like many outsourcing deals, let’s ask the
market to tell us what to do
Eureka, we are delighted to announce that we are partnering with xyz to
deliver a total solution to us!

Like most outsourcing we wonder whether the facts were known…
Map showing
all delivery
locations, and
heat map by
volume of
deliveries

Order Value Number of transactions Total spend in category Percent Transax % Percent Spend %
£0 - £10 4405 25,823.04£ 12.1% 0.1%
£10 - £50 6889 196,194.16£ 18.9% 1.0%
£50 - £100 4834 367,698.82£ 13.2% 1.8%
£100 - £200 5046 703,042.01£ 13.8% 3.5%
£200 - £300 2174 549,193.34£ 6.0% 2.7%
£300 - £400 2305 811,979.74£ 6.3% 4.0%
£400 - £500 1632 728,443.37£ 4.5% 3.6%
£500 - £600 1228 675,481.90£ 3.4% 3.3%
£600 - £700 552 357,181.49£ 1.5% 1.8%
£700 - £800 461 344,369.45£ 1.3% 1.7%
£800 - £900 555 476,349.50£ 1.5% 2.4%
£900 - £1000 565 536,221.62£ 1.5% 2.6%
£1000 - £2000 3353 4,784,608.18£ 9.2% 23.6%
£2000 - £3000 1179 2,838,276.57£ 3.2% 14.0%
£3000 - £4000 721 2,490,739.59£ 2.0% 12.3%
£4000 - £5000 231 1,017,544.01£ 0.6% 5.0%
£5000 - £6000 120 647,641.51£ 0.3% 3.2%
£6000 - £7000 61 391,459.05£ 0.2% 1.9%
£7000 - £8000 55 411,752.59£ 0.2% 2.0%
£8000 - £9000 29 246,655.51£ 0.1% 1.2%
£9000 - £10000 15 143,821.90£ 0.0% 0.7%
£10000 - £20000 71 1,013,719.36£ 0.2% 5.0%
£20000 - £30000 10 218,997.61£ 0.0% 1.1%
£30000 - £40000 1 34,328.27£ 0.0% 0.2%
£40000 - £50000 4 168,425.08£ 0.0% 0.8%
£50000+ 1 76,415.14£ 0.0% 0.4%
TOTAL 36497 20,256,362.81£ 100% 100%
Did you understand your profile… even at a basic level?

Did you understand the cost drivers?
The industry has a low level of concentration and the four largest companies are estimated to
control 17.1% of the market in 2015–16.
Companies by employment size (2014)
Employees Share of total
0-4 81.4%
5-9 8.7%
10-19 5.2%
20-49 3.0%
50-99 1.1%
100-249 0.4%
250+ 0.2%
“Other” expenses include subcontracting expenses, administration costs, insurance,
legal expenditure, licensing and advertising. These other costs are expected to combine
to constitute 14.5% of revenue in 2015–16.

Were alternative technologies even considered?
Dec 2014 July 2015 Trial target = 1,800 LSTs
Trial Take Up
1,439 (80%) 1,641 (91%) LSTs registered on Vehicle Special Orders (VSOs) (% of trial target of 1,800 trailers)
1,194 (66%) 1,323 (74%) LSTs on the road and submitted trial data
114 123 Number of operators with trailers on the road
Safety incidents involving LSTs
Collisions resulting in
injury
Casualties Collisions / Casualties on public highways or public access areas
7 7 Personal injury incidents involving an LST (2012–2014, public highway or public place)
To date, the experience from LSTs in the trial is that, on a per kilometre basis, they have been involved in around 60% fewer injury collisions and
70% fewer casualties, in comparison to the average for standard articulated HGVs. There have been no fatal LST incidents and no vulnerable road
users injured.
Utilisation and km saved
0.93m 1.18m Journey legs travelled by LSTs during the trial
108m 137m km travelled by LSTs during the trial
4.2 – 5.2m Vehicle km ‘saved’ by LST operations
Journeys saved Estimates of equivalent ‘standard trailer' journeys saved across trial period and all operators
1 in 22 Average saving across all operators
1 in 9 Highest saving achieved by individual operators

How did Industry benchmarks shape the commercial outcome?
The average profit margin in the industry is estimated to be 16.5% in
2015–16
…which is higher than for the overall transport sector for three main reasons:
1. Need for capital reinvestment
2. Smaller operators reinvest heavily, taking out less in remuneration
3. Less competition in rural areas where smaller operators dominate
Wage costs are ~22% of revenue in 2015–16 and have dropped as a
proportion of revenue since 2010–11, but this is likely to change
1. Employee numbers have fallen for last 5 years due to technology efficiencies
2. Fewer empty trucks = less in overtime payments
3. Wage growth is expected, with demand since 2013/14 exceeding supply
4. The workforce is also ageing; the majority of UK lorry drivers are over 40, the oldest
preferring to exit than undertake new qualifications

Vision & Strategy 03

Evolution NOT Revolution is the key to the Procurement of Transport
as it is inherently complex and takes years not months to resolve!
Price Drift
Competitive and
opportunistic
Market Driven
using
competition
Some notion of
% Transport
represents
Unknown
concept
Price Down
Preferred with
frameworks
Structured
challenge
Some cost
drivers under
control
Pockets of
internal
resistance
Cost Down
Collaborative
with right mix of
assets
Intelligent
understanding
of all variables
Deeper
modelling and
asset
understanding
Strategy widely
embraced
Cost Out
Symbiotic with
value-based
decisions
Principled
approach and
recovery in
selling price
Right-sized to
business
Category Plans
are integrated
into the
Business Plan
Minimal
professional
sourcing strategy /
process
Tactical techniques
used – price
deconstruction for
leverage categories
Strategic
techniques – key
cost drivers, cost
modelling
Continuous
Improvement /
VA/VE / Supply
Chain Modelling
Overall Cost Model
Deployment of Category
Management
Tactical Control Strategic Control
Relationship with
supply chains
Pricing mechanics / tools
used
Implementation of
Procurement Change Process
Procurement Strategy

Opportunity Analysis helps as a driver to prioritize activity

Fuel – it will recover!
Finance – interest rates likely to move within 12 months
Non-compliance – increasing all the time
Taxes – we all know they won’t go down!
Space – land for warehouses
CapEx – manufacturing costs do increase
Labour – shortages and training overheads
With some certainty, we know cost drivers will go up

Fuel as a % of Total Operating Costs
Vehicletype Low
mileage
(miles p.a.)
Average
mileage
(milesp.a.)
High
mileage
(milesp.a.)
7.5 tonnes rigid 30,000 40,000 50,000
10-12 tonnes
rigid
42,500 50,000 60,000
12-14 tonnes
rigid
35,000 40,000 50,000
16-18 tonnes
rigid
50,000 60,000 70,000
26 tonnes rigid 50,000 60,000 70,000
32 tonnes rigid 50,000 55,000 65,000
33 tonnes (2+2)
artic
60,000 75,000 85,000
38 tonnes (2+3)
artic
65,000 75,000 85,000
38 tonnes (3+2)
artic
50,000 70,000 85,000
32 tonnes
drawbar
45,000 60,000 80,000
40 tonnes (2+3)
artic
50,000 70,000 80,000
44 tonnes (3+3)
artic
70,000 85,000 100,000
The percentage is calculated by taking the annual fuel costs and dividing that by the annual total costs for low, average and high mileage for
each type of HGV shown.
The annual fuel costs are based on a weighted average combination of bulk and forecourt prices using a matrix of 80 per cent bulk prices and
20 per cent forecourt prices and exclude VAT.
The annual total costs include the standing costs, running costs, the employment cost of the driver and the overheads costs.

Short-term bulk diesel forecast to Q4 2016
incl. Fuel Duty & Delivery Margin (ppl)
Rotterdam Diesel
Spot Price
($/tonne)
Sterling/USD
Exchange Rate
($)
Diesel
Commodity Price
excl. Fuel Duty
(ppl)
Bulk Diesel Price
incl. Fuel Duty
& Delivery Margin (ppl)
Q1 2015 550.60 1.51 30.24 90.07
Q2 2015 597.12 1.52 32.68 93.00
Q3 2015 587.91 1.50 32.61 92.92
Q4 2015 589.52 1.50 32.70 93.04
Q1 2016 593.02 1.50 32.89 93.24
Q2 2016 592.67 1.50 32.87 93.19
Q3 2016 597.26 1.50 33.13 93.44
Q4 2016 598.89 1.50 33.22 93.56
Note:
• Fuel duty for Ultra Low Sulphur Diesel (ULSD)
currently 57.95 pence per litre (ppl)
• Main fuel duty rates will not rise until September
2016 per Budget March 2015 (may be revised in
July 2015 Budget)
• Delivery margin is estimated at 2.38 ppl based on
bulk diesel prices supplied by EnergyQuote JHA

Percentage change in freight transport fuel costs
Diesel Gas Oil Marine Bunker Fuel Jet Kerosene

So to commercially succeed we must buy Transport differently
Efficient
movement
Harness
software
(S2P; P2P)
Collaboration
(internal & external)
Deeper data
modelling
Greater
intelligence
Technology
Make transport
a priority

Consequences of getting it wrong
Loss of
business
Hauliers not
prequalified
Warehouses
in wrong
locations
Supply chain
not optimised
Fleet under-
utilised
Assets
misaligned
Excessive
miles and CO²
Loss of
business
Increase in
incidents
Loss of
competitive
advantage

About SpringTide 04

How do we deliver sustainable solutions for our Clients?
Our business is structured to support all expenditure (direct/indirect/capex), with experts in:
Project Management
Analysis and Modelling
Market Intelligence
Implementation and support
Supply chain management
Supplier and stakeholder relationship
management
Procurement
Logistics
Typically, many of our team have worked at senior levels across both public and private sectors, this helps us to
recommend solutions that fit both culturally and commercially.
Our team has extensive industry experience from both client and supplier perspectives: we understand
constraints, opportunities and best-fit models and know how everything works on a practical level.
We recognise no single approach is the same: only through deep understanding can solutions be implemented
and sustainable benefits realised.

We offer a Spectrum of Solutions
Strategic
Sourcing
Strategic Direction
(In)Direct Category
Support
Models &
Templates
Tendering support
Hands-on delivery
of savings
Transformation/
Change
Management
Current State
Analysis
Project & Change
Plans
Resource Profiling
Restructuring
Team Creation
Policies and
Procedures
Team Support
Interim Resources
Competency
Profiling
1-2-1 Support
Surgeries /
Intervention
Sourcing Guides
Transport
Procurement
Tactical & Strategic
Tendering
Modelling &
Diagnostics
Optimisation
Initiatives
Contract Review
Strategy
Technology
Platforms
Evaluation of
Providers
Benchmarking
Diagnostics
Driving
Optimisation
Training & Adoption

Solutions developed with our clients have been nationally recognised
Winner of the Supply Chain Best
Practice Category
2015
Runner-up for the Best
Procurement Consultancy
Project
2014
Winner of the Professional &
Financial Services Category
2nd fastest growing company in
Wales
2014
Winner of the Professional &
Financial Services Category
Runner-up for Export Category
8th fastest growing company in
Wales
2015
Winner for leadership in Supply
Chain & Procurement
Consultancy
2015
Short-listed for Supply Chain
Best Practice Category
2015

Since 2008, we have worked to support businesses of all shapes and
sizes…
…with solutions being wide and varied

How do we deliver sustainable solutions for our Clients?
People
We are IiP Accredited
Training is constant
We are practitioners and enjoy ‘hands-on’ activity
Academically and professionally strong
Learning curves are constantly accelerating
Process
Our processes, guides and plans are used and deployed nationally and globally
Internally, governance is achieved via our Project Management Office
Everything we do is structured, methodical with sign-off at each stage
Waste is eliminated as we are a lean organisation
Technology
We utilise a range of platforms
Extensive analysis and modelling
We understand how to get the best from technology

Thank you for your time
Any questions or comments?

Any questions now?… or get in touch later
SpringTide Procurement SpringTide Procurement
SpringTide Procurement@SpringTide_News
Mike Utting
Managing Director
Mobile: +44 (0) 7973 445297
mike.utting@springtideprocurement.com
Enquiries@SpringTideProcurement.comwww.SpringTideProcurement.com
David Wightman
Business Development Director
Mobile: +44 (0) 7495 468 488
david.wightman@springtideprocurement.com
Acknowledgements & Sources
WaxDigital Resource – CPO Viewpoint – Finance
Texaco Report 2015
Statista Road Haulage report
Department for Transport
• Domestic Road Freight Statistics
• Evaluation of the Longer Semi-Trailer Trial Annual Report
Freight Transport Association Information Service
IBIS World Freight Road Transport in UK
Icons made by Freepik from www.flaticon.com

I apologize, I do not have enough context to fully understand or evaluate the document. As an AI assistant, I do not make procurement or business decisions on my own

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