Logistics Performance in Baltic Sea Area Managing Director Mikko Melasniemi Finnish Association of Purchasing and Logistics LOGY

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi Topics Trends in global logistics Logistics Performance Indicator State of logistics in Finland Regional projects between Finland and Russia Northern Dimension in Naples Potential beyond the near future Mutual competition over cross cultural supply chain Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

"Excellence in Logistics" European Logistics Association (ELA), 2004 Biggest challenge is the explosion of supply chain complexity Larger share of purchases and sales outside Western Europe less failure tolerant supply chains Ever increasing customer requirements service levels, lead times, delivery reliability Increasing amount of value added services Shifting activities from manufacturing to distribution centres Higher product complexity Shorter product life cycles, arising number of stock keeping units (SKU) Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

"Excellence in Logistics" European Logistics Association (ELA), 2004 Leading capabilities to manage complexity Collaboration Sharing and utilizing information along the entire supply chain, which leads to higher supply chain quality and lower costs Value chain management Holistic view of all the end-to-end issues Integrating supply chain partners Outsourcing in a sophisticated way Differentiation of supply chains Meet specific requirements of customers, sales channels, type of product, regional specifications The time of “one size fits all” is over! Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

Logistics professionals Ojala & Solakivi CSCMP Sept.22, 2009 5 What is the LPI? Logistics Performance Index (World Bank 2007) A set of indicators that measure the performance of the logistics environment of countries Data for the LPI Professor Lauri Ojala Turku School of Economics, Finland lauri.ojala@tse.fi Logistics professionals in international freight forwarding Turku School of Economics, Finland International Federation for Freight Forwarders Associations Global Facilitation Partnership for Transportation and Trade Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi Ojala & Solakivi CSCMP Sept.22, 2009 5

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi International comparison of the Logistics Performance Index (World Bank 2007) 1. Efficiency and and effectiveness of Customs and other border procedures 2. Quality of Transport and IT infrastructure for logistics 3. Ease and affordability of arranging shipments 4. Competence in the local logistics industry (e.g. transport operators, customs brokers) 5. Ability to track and trace shipments 6. Domestic logistics costs (e.g. local transportation, terminal handling, storage) 7. Timeliness of shipments in reaching destination Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

Logistics Performance Indicatior Globally Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

The level of Logistics Performance varies a lot in Europe 15 16 4 47 99 42 58 11 74 9 3 40 7 18 22 115 26 139 Source: World Bank, Logistics Performance Index Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi ”Logistics gap” among countries in BSR Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi What does low LPI mean in practice? ”…lower costs for logistics reduces the cost of delivered products – and thereby encourages sales, increases trade, opens new markets, breaks down local monopolies, increases competition and generally encourages business.” (Waters 2003)  prosperity, competitiveness Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

Ojala & Solakivi CSCMP Sept.22, 2009 11 Similar trend despite research method: logistics costs decrease till end-90s, and rise after that % of sales % of GDP Costs indexed; 2008 = 100 14 % 2008 0 % 2 % 4 % 6 % 8 % 10 % 12 % 14 % 12 % 10 % 8 % 6 % 4 % 2 % 0 % 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Finland state of logistics ELA/A.T .Kearney CLM/CSCMP VINNOVA Ojala & Solakivi CSCMP Sept.22, 2009 11 Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi Distribution of turnover for different types of logistics services – 2006 and 2010 Pure transportation services Pure warehousing services Standardised logistics service packages Customized logistics service packages In terms of logistics service providers, the survey provides insight to the state and the future development of the logistics services market. The picture depicts the estimated change in service offering from 2006 to 2010. Slight increase in the shares of broader and more complex, both customised service, as well as standardised service packages, is expected to take place in the focus period. Essentially this may mean more value added services, such as postponed labelling and packaging, offered by the service providers. Transport services offered alone will reduce in significance, i.e. narrow and routine services. The picture also demonstrates the differences in terms of the logistics services market development level, in various countries and regions. Slide as originally presented by Professor Wolfgang Kersten The demand for more individualised products is expected to increase in the future Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

MoA of Northern Dimension Partnership Signed in Naples in October 2009 Memorandum of Understanding setting out the modalities of establishing the Northern Dimension Partnership on Transport and Logistics Mutual understanding by European Commission, Ministries responsible for transport, infrastructure and logistics Norway, Russian, Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Poland, Sweden, Republic of Belarus Was agreed about Goal of partnership to improve major transport connections and logistics in the Northern Dimension region Other matters: Action plan, Exchange of information, Cooperation framework, Cooperation with regional bodies, Participation of private sector and social partners Next step in December, when officers from ministries meet Resources and guidelines over the projects Important because Baltic states have mutual forum for Northern Dimension Formal way to go ahead with projects Helps to take logistics into practise Goal: to have a momentum in EU budget for Northern Dimension Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi Conclusions Focus on value in supply chains, not only transportation Two-way supply chains instead of one way transit traffic Supply chain from supplier to final customer can bee complicated but competitive Logistics performance is a case of competitiveness Logistics costs are rising, time is money Efficiency and visibility Northern Dimension needs a line in EU budget Act regionally, think collaborative Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

Thank you for your attention! Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi

LOGY Mission and Values offers its members an innovative forum for continuous development of their competence and aims at improving the competitiveness of members business aims at improving the valuation of logistics and purchasing. Development Members Competence Cooperation Finnish Association of Purchasing and Logistics LOGY/ Mikko Melasniemi