This document discusses logistics in Ukraine. It provides an overview of Ukraine's ranking in logistics performance compared to other countries like Germany and Russia. It also discusses the main operators in Ukraine's logistics market, including transportation, warehouse, and forwarding companies. Finally, it analyzes some of the challenges facing Ukraine's logistics sector, such as outdated transportation infrastructure and a lack of skilled professionals.

1. Logistics in
Ukrainian
Dmitry Seleznev
«PGK Groupe»
Trade Mission to Ukraine
Odessa, 20 – 21th of September 2012

2. Eurasia
 53,893 km ²
 36% of land
 population - about 5 billion people
 about 3/4 of potential buyers at the
planet Earth

3. CHINA
The largest manufacturer and exporter of consumer
goods of the Eurasian continent
China's foreign trade turnover for the first half of
this year grew by more than 25% compared to
the same period in 2011 when it was 1.704 trillion.

5. Logistics Performance Index
of Ukraine 2012 *
Logistic
Rating Cust Infrastructur International Cargo Timeliness
Country Grade competenc
position oms e deliveries tracking of logistic
e
Germany 4 4,03 3,87 4,26 3,67 4,09 4,05 4,32
Ukraine 66 2,85 2,41 2,69 2,72 2,85 3,15 3,31
Russia 95 2,58 2,04 2,45 2,59 2,65 2,76 3,02
* - World logistics efficiency ranking by the World Bank - Logistics Performance Index - is based on
the criteria of: efficiency of customs procedures, infrastructure, transportation logistics, availability
and simplicity of international deliveries arrangement, competence of logistic industry, and the
ability to control the arrangement of international deliveries.

6. Singapore
Hong Kong
Finland
Germany
Netherlands
Lithuania
Estonia
Ukraine
Latvia
Kazakhstan
Belarus
Russia

7. Operators of the logistics market
 Today in Ukraine most players are 2PL-providers which offer
traditional transportation and / or storage facilities
management services
 3PL - (distribution logistics) represented mainly by western
providers
 4PL - basically, distribution companies (manage relationships
and supply chain “from manufacturer to the buyer")
 5PL - providers (?)
 Courier companies (cash on delivery) and Postal companies
(consignment).

8. Operators of the logistics market
Transport logistics - 89%
Warehouse storage - 8%
Forwarding - 2%
Supply Chain management - 1%
Delivery
Shipper Cnee
Pick-Up
Depo Depo
HUB
Pick-
Offer Sorting LH Sorting Del-ry
Up

9. The main "brakes"
Transport problems -
lack of road
networks, lack of
modern cargo
terminals, high level of
road, rail and other
transport
deterioration, as well
as its growing
obsolescence.

10. The main "brakes"
Staff - the market is experiencing an acute shortage of
skilled professionals of high-level oriented to the
modern principles of the logistic schemes
management, having an appropriate level of
knowledge in the field of informational technologies.
- Do you have
references from
the previous job?
-Yes, I was
recommend to
find a new one.

11. The main "brakes"
Low level of informational technologies development
and lack of funds in domestic companies to acquire
more advanced software

12. The main "brakes"
 Not defined order of e-
money circulation
 Tax code
 Customs code
 Lack of affordable credit
resources for development

13. Ukrainian e-commerce market
Increase of the Internet penetration :
 March 2011 - 32%
 March 2012 - 42%
 Forecasted that till the end of 2012 - up to 50% of
adult (over 16) population = 15 million users!
Turnover of the Ukrainian e-commerce market
increase on average by 60-80% per year, and in
some product categories - by 150-200%
and, according to analysts, it is more than $ 1 billion.
Thus, to achieve the level of perfect competition in
this industry, we need at least 3-5 years.

14. The is always a choice ...
Often, in dynamically developing companies 'sales'
go ahead, and "Operating Systems" stay behind.
Sooner or later, every company pays for loss
appeared due to damage, breakage, returns, lack of
second purchases and faces delivery strategy choice.

15. Factors influencing delivery strategy
choosing
Company's priorities:
 reducing expenses, logistic costs
 specifics of the customer's product
 time frames of delivery
 client’s recipients geography
 availability of storage facilities
 restrictions on goods turnover
 stuff qualification
...
 recipient’s / buyer’s satisfaction

16. Own delivery
 
 No intermediaries between  Expenses for
the carrier and the goods purchasing, leasing, running
receiver machinery, equipment, wareh
ouses
 Full control and  High administrative costs
management of  Availability of warehouses in
transport, money and the regions
informational flows  Additional "communications"
with the sanitary-
epidemiological
center, firefighters, traffic
police ...
 Risk of non-core business
effectiveness loosing

17. Outsourcing logistics
 
 Reduction of logistics  Initial difficultness of
expenses technology and
 Ability to deliver small business - processes
shipments of goods integration (ERP, WMS)
 Time ​of delivery - 24-48
hours  Risk of poor service
 Payment for the services
after order
implementation
 Reduction of risks
connected with running
of assets, buildings

18. Evaluation of logistics business
effectiveness
Delivery efficiency Service level
 Primecost of services  Timeliness of delivery, no
 Marginal income errors in storage, while
placing an order
 Satisfaction with service
Goal of the company is Goal of the company is a
a positive return on delivery quality level of 99%
delivering

20. Analyzing the cost of services
Logistics provider
attracting new customer
definitely will try to offer
attractive rates.

21. Facts and trends of transport
services market in 2011-2012 *
 Diesel fuel price change (in % to January-October 2010): +31%
 Consumer price index for fuel and petroleum products
(in % to Jan-Oct 2010): 28.7%
 Inflation rate (total for the country): 4.2%
 Cargo turnover (road as % to January-September 2010r.):
14.6%
* - Own data, data from http://www.ukrstat.gov.ua and
http://index.minfin.com.ua/index/infl/, magazine «Distribution and Logistics».

22. Как уменьшить стоимость транспортных услуг
Analyzing the cost of services
 Not always announced prices are final
 Give logistic companies maximum possible
information on the volume specifics your
expectations
 Three typical cases when one shall negotiate about
lower prices:
o Competition. When competitor’s prices are lower
o Similar product. If there is a difference in final price
of carriage using different approaches (mixed
delivery, partial load, calculating by weight)
o Large volume. To convince operator that you will
have large volumes of goods, but it should also be
benefitial to your contractor

23. Consider an opportunity to become
a partner for
logistics services provider and
create common values

25. growth rate, %
Investments in Ukraine
million U.S. dollars

26. Foreign direct investments in Ukraine
(01.01.2012) *
* - data from the State Statistics Committee of Ukraine

27. Investments in Ukraine
 Questions of investment assistance are stated in the program of
economic reforms for 2010 - 2014 years "Prosperous society, competitive
economy, effective government.“
 During 2011 administrative barriers of doing business were removed. Thus,
in comparison with previous years next positive changes took place:
reduction of procedures number, time, cost and minimum capital to start
business. In addition, lower cost on building permits, as well as increase of
compensation rate in case of insolvency of the business.
 Today, advanced legal framework for investments is created in Ukraine.
Ukrainian legislation provides necessary guarantees of activity for
investors. In Ukraine, national investment regime is applicable for foreign
investors, thus they receive equal conditions for activities compared to
domestic investors. Foreign investments in Ukraine are not subject to
nationalization.
 In case of termination of the investment activities return of investment is
guaranteed to foreign investors in kind or in a currency invested without
payment of duty, as well as incomes on investments in money or goods.
The state also guarantees a smooth and immediate transfer abroad of
profits and other funds in foreign currency obtained legally as a result of
foreign investments.

28. Dmitry Seleznev
Strategic Development
Director
«PGK GROUPE»
+38 067 265 72 10
d.seleznev@pgk.ua
www.pgkgroupe.com