1. The Future Mike Wallis

2. Topics for today Trend changes in world demographics and economic activity Trend changes in world demographics and economic activity Latest developments and market pressures Latest developments and market pressures Integration in Global logistics Integration in Global logistics

3. Trend changes in demographics and economic activity Does the world catch a cold if America sneezes? Does the world catch a cold if America sneezes? 5.2% global growth in past 2 years is better than anything in 80’s & 90’s 5.2% global growth in past 2 years is better than anything in 80’s & 90’s Only Zimbabwe, Fiji & Tonga shrinking Only Zimbabwe, Fiji & Tonga shrinking Countries from mixed turmoil hitting the heights Countries from mixed turmoil hitting the heights –Turkey; average 6.9% –Slovakia; 5 mil out of work to < 1mil –Chile to GDP per head $10000 COUNTRIES BY GDP GROWTH

4. Trend changes in demographics and economic activity High growth meets high populations High growth meets high populations High growth meets commodity export led countries High growth meets commodity export led countries Stability is being caused by wealth creation, people do not want to risk losing it. Stability is being caused by wealth creation, people do not want to risk losing it. Debt is being repaid Debt is being repaid –Russia $22 billions in 2006 China9.5 Developing Asia 8.4 India7.8 Central Asia 7.5 Sub-Saharan Africa 6.1 Russia5.9 CEE5.5 Middle East 5.5 Global Average 4.9 Brazil4.2 EU2.7 USA2.2 Japan1.9

5. Trend changes in demographics and economic activity Middle class being created in all of these territories Middle class being created in all of these territories Consumption will increase Consumption will increase –China will consume all it makes by 2025?? –Infrastructure behind this is mixed We have all seen international trade increase We have all seen international trade increase –How can we take advantage?

6. Trend changes in demographics and economic activity Service consistency Service consistency –Right product at right time –Clear and accurate information Know your market, know the rules! Know your market, know the rules! –Localise where you can –Utilise foreign nationals Launch the next market or supply point Launch the next market or supply point –Keep existing markets moving –Repeat success formulas Treat supply chain as a core competence Treat supply chain as a core competence –You have to use service providers at a level, work with them –Maintain or improve internal competence In future we might catch a cold when China sneezes In future we might catch a cold when China sneezes

7. Latest developments and market pressures Carbon footprint Carbon footprint –Research and statistics as a defence –Headline moves e.g. Offset schemes –Big hitting initiatives missing as they have service effect, sales! –Return to local sourcing has no critical mass yet, but clients are asking! –It is getting traction –Taxation and regulation will accelerate the trend Sustainability Sustainability –Sea freight is cheaper –50 tons on a container and then by rail –“Filler freight” –Biofuels? –Packaging We will see clients & suppliers changing strategy We will see clients & suppliers changing strategy –specific products –sourcing policy –collaboration

8. Latest developments and market pressures Globalization Globalization –Political changes Iron Curtain Iron Curtain China in trade talks China in trade talks Western initiatives Western initiatives –Africa –Middle East –Communications and technology –Standardization EDI EDI Packaging Packaging Deregulation Deregulation Privatisation Privatisation Rapid growth in trade Rapid growth in trade Rapid growth in competition Rapid growth in competition Speed and certainty of supply is an area of differentiation Speed and certainty of supply is an area of differentiation

9. Latest developments and market pressures Consolidation Consolidation –DHL buys Exel & T&B –NYK buys Panalpina –K&N buys Hays –Schenker & BAX –Similar trend in retail and manufacturing and service industries Margin squeeze Margin squeeze –20% of UK freight forwarders at risk –Procurement techniques Small can be beautiful Small can be beautiful Scale is a good defence Scale is a good defence Service & cost recipe Service & cost recipe One stop shop One stop shop Can you get consistency? Can you get consistency?

10. One to watch The old Silk Route rail network The old Silk Route rail network –China – Kazhakstan – Russia – EU border & Balkans & Turkey Potentially 1,750,000 40’ containers per year Potentially 1,750,000 40’ containers per year –= to 5-7 large container ships departing each week Potentially 20% cheaper than traditional routes Potentially 20% cheaper than traditional routes 14-18 days Shanghai to Berlin 14-18 days Shanghai to Berlin

11. Integration in Global Logistics The leading supply chain integrators are manufacturers; The leading supply chain integrators are manufacturers; –Not Logistics companies –The manufacturer is the key element They have created the demand for services that Logistics companies are trying to supply They have created the demand for services that Logistics companies are trying to supply –Automotive –Pharmaceutical & chemical –Hi-tech Large logistics companies have responded; but Large logistics companies have responded; but –There are relatively few examples of real global integration, more tactical and regional –The most successful ones are long-term –Japanese and American

12. Integration in Global Logistics Supply Chain is also the target of IT and Consultants Supply Chain is also the target of IT and Consultants Range of systems out there; Range of systems out there; –i2 –Keywill, is an interesting one. It is the process and information flow that is needed as well as some trust, and longevity It is the process and information flow that is needed as well as some trust, and longevity Who has best knowledge of your processes? Who has best knowledge of your processes? –More important, your threats and opportunities and your culture Most services you need are out there, but not necessarily joined up, or maybe not adding enough value Most services you need are out there, but not necessarily joined up, or maybe not adding enough value

13. Integration in Global Logistics an example B&Q were sourcing many products from China Theoretically low cost suppliers Theoretically low cost suppliers Packaging in branded materials Packaging in branded materials Producing and shipping in economic quantities Producing and shipping in economic quantities –Peaks and valleys of stock and availability We suggested that we took over the “packaging” part of production We suggested that we took over the “packaging” part of production Opened 3 factories Opened 3 factories –Ordered raw material from original suppliers, unpackaged –Received sales data –Used VMI techniques aligned to freight purchasing knowledge and other traffics –Delivered to UK DC on just in time basis by sea Reduced landed cost by 30% Reduced landed cost by 30% Information systems, trust, transparency, long-term, process ownership Information systems, trust, transparency, long-term, process ownership Plan to roll out to 9 departments Plan to roll out to 9 departments

14. Integration in Global Logistics