1. Brazilian Logistics Infrastructure

3. Historical Development of International Logistics  Framework  The term “Logistics” is based on the physical movement of goods.  The modern interpretation of the term “logistics” has its origins in the military.  Business logistics include all the activities related to the physical movement of goods (upstream and downstream) and related information.

4. Definition of Logistics and Supply Chain Management “Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers' requirements.”

5. The Economic Importance of International Logistics  The costs of International Logistics represent about 15% of the total volume of the international trade - that is about US$ 1.5 trillion worldwide.  In addition, International logistics generate approximately US $500 billion in additional government revenues (customs duty). Source: © 2007 Thomson

6. Objectives of Supply Chain Activities Supply Chain is the integrating control tool between: Market - Manufacturing- Market Objectives: Adapt production flexibly & economically to market needs  secure market supply quickly and reliably  secure continuous and economic production LOGISTICS PRODUCTION Capacities Market-Oriented Demand Instruments for a Demand & Capacity Management Conceivable Production Schedules S&M Dynamic Markets

7. Drivers for Supply Chain Strategy  The market requires prompt reaction  short Time to Market  order to delivery  development to sale  The global enterprise strategy leads to a merger of different companies  This is only beneficial, if the new cooperation gains synergy through  usage of standard parts and modules  focus on competence center in manufacturing and supply  Supply Chain Strategy and methods are ideal tools to support the enterprise objectives

8. The South American PUZZLE 8 Planning Process VW Group ProductsExport Human Resources / Culture Processes / Systems

9. 9 The Blocks of the Standard Logistics Process Material Procurement (long-term Bill of Materials) External Material Flow (Procurement logistics) System Standards “General Development Plan” Log-Rules Later on: Logistical Capability Evaluation of Suppliers and Service Providers Internal Material Flow (Production Material Supply) Program Planning & Production Follow-up Pre-series Logistics International Logistics (CKDProcess)

10. Exports  Production capacity  Price 10 HIGHLIGHTS / CHALLENGES StrengthsWeaknesses OpportunitiesThreats  Quality  Few Global Projects  Image  No Sales Orientation  Lack of Internal Structure  Distance  Economic Instability of the Country  Suppliers Platform  Taxes and Duties  Flexibility  Emerging MKTs  Potentially, every plant in the VW Group  Diminishing logistics costs (boxing / freight)

11.  Cross-cultural differences  German company x Latin American culture  Latin American?  Communication breakdown  internally  with the "Konzern" 11 HIGHLIGHTS / CHALLENGES

12. Logistics Overview in Brazil 2008 From 2002 to 2007 Export Growth: 166% US$ 161 billion

13. Major Destinations of Brazilian Exports in 2007 Source: Ministério do Desenvolvimento, Indústria e Comércio Exterior (Ministry of Development, Industry, and Foreign Trade or MDIC)

14. Logistics Overview in Brazil 2008 A. Cargo Transportation B. Warehousing C. Third Party Services Provider Development D. Logistics and supply chain management opportunities and Trends

15. Cargo Transportation The Brazilian transportation system strongly depends on its highway system Low price and a lack of other equivalent and reliable modes of transportation Source: Agência Nacional de Transportes Terrestres (Terrestrial Transportation Agency or ANTT)

16. Brazilian Transportation Matrix (TKU) Source: Logistics Panorama–Logistics Cost in Brazil 2008/2006

18. Brazilian Highways Source: Ministry of Transportation—Brazil

20. Cargo Transportation Railroad system  Concentrated in 4 states  Low connectivity  From 2001 to 2007, railroad cargo transportation grew 59% Brazil 29,000 Km US 226,000 Km

21. Railroad system Source: Ministry of Transportation—Brazil

23. Cargo Transportation  Waterway  Strongly concentrated on the movement of solid bulk  Inland transportation represents only 1%  Air  Until recently highly regulated  Investment in airport infrastructure was performed and operated by Infraero, a state owned company linked to the Federal government

24. Map of Main Brazilian Harbors Source: Ministry of Transportation—Brazil

26. Major Air Cargo Terminals (INFRAERO operated) Source: Infraero

28. Warehousing  Most industrial and commercial companies will only use their own warehouses  Warehousing management is becoming more and more complex due to the growing number of SKUs  Location of a warehousing facility in Brazil can be highly influenced by tax legislation

29. 3PL  Largest, most well-known international players (such as Ceva, DHL and Ryder)  National players (such as Vale and ALL Logística)  Medium size national operators (such as Cesa, Rapidão Cometa)  The small-package delivery market is ruled by Empresa Brasileira de Correios

30. Governo do Brasil

31. PAC’S OBJECTIVES  To accelerate the growth rhythm of the economy  To increase employment and income and reduce social and regional inequalities  To keep the macroeconomic foundations:  Inflation under control, tax consistence, and solidity in the external accounts

32. INVESTMENT OPPORTUNITIES  Highways, Railroads and Ports  Highways : Concession  Railroads: High Speed Train, North-South Railway, Bi-oceanic Railroad Corridor, East-West Integration Railroad  Harbors: Dredging

33. PROGRAM OF CONCESSIONS OF FEDERAL HIGHWAYS  Object: duplication and maintenance of highways  Concession Revenue: collection of toll fare  Monitoring by result indicators  Auction Winner : smallest toll fare  Period: 25 years

34. Work is Yet to Start  The launch of the Program of Acceleration of Growth in the country has created the expectation that the infrastructure sector could, finally, into the relationship of national priorities.  The biggest project of the current government is at critical state. The schedule for much of the work has experienced delays due to bureaucracy and environmental barriers.

35. Program of Acceleration of Growth 10 most important projects Source: Exame Magazine

36. This is What The Government Says… Source: Brazilian Presidency

37. International Airport of Cumbica According to project baseline, the project would be due by the end of 2008. There’s no way it is going to be concluded before early 2010 UPDATE: Feb 2012

38. International Airport of Cumbica Tribunal de Contas da União raised supect of project overpricing 83.5 million Reais 31 services

39. Main Constraints for PAC Success  Bureaucracy  Environmental Issues  Inefficient management of public resources  Scarce Credit

40. Logistics and supply chain management opportunities and Trends  Integrated logistics and supply chain management are quite recent in Brazil  Growing concern about tracking and improving the quality of logistics services.  Attempt of large shippers to change the mix of modes used  PAC

42. Interesting links and sources  http://portalexame.abril.uol.com.br - Exame magazine http://portalexame.abril.uol.com.br  https://www.pac.gov.br/ - Brazilian Government site for PAC https://www.pac.gov.br/  http://www.ilos.com.br/ - Instituto de Logística e Supply Chain http://www.ilos.com.br/  Eduardo Araújo eduardo@executivebc.com.br