• 1. July, 2001COSCO IPO SUPPORT MATERIALSLogistics Services Industry Environment & Trend Analysis - COSCO Comments and A.T. Kearney RemarksThe contents of this document were prepared by A.T. Kearney and may not be used, altered or disclosed to other parties, without the written permission of A.T. Kearney. The information contained in this document has been obtained from external sources which A.T. Kearney believes are reliable. However, A.T. Kearney can make no representation as to the accuracy or completeness of the information or projections derived therefrom.
    • 2. Table of ContentsExecutive Summary Market Size & Growth Global China Service Demand Global Trends China Trends Competitive Environment Global China Regulatory Environment Information Technology Appendix
    • 3. Executive Summary
    • 4. A.T. Kearney’s definition of the logistics services industryStructuring and managing, on behalf of cargo owners, solutions involving some combination of parts of the supply chain (i.e. transportation, warehousing, (de)consolidation, etc.)
    • 5. The logistics service industry represent a tremendous growth opportunity, both globally and in ChinaMarket CharacteristicConclusionCustomers are increasingly demanding high value logistics service solutions, requiring global reach and advanced supply chain management capabilitiesIncreasing demand for global reach and capabilities fuels consolidation as large full service providers are positioning themselves for successChina’s entry into WTO is expected to have two main implications - the logistics market will grow rapidly, and competitive intensity will dramatically increaseStrong IT capabilities is becoming a core capability of logistics services providers and is critical to building a logistics services businessMarket Size & GrowthService DemandCompetitive EnvironmentRegulatory EnvironmentInformation TechnologySource: A.T. KearneyThe global logistics services market reached an estimated US$ 190 Bn in 2000. The China market is still small at US$ 0.61 Bn, but will be growing rapidly at CAGR 35% over the next five years
    • 6. The China logistics industry will be shaped by China’s entry into the WTO and the subsequent opening of the market to foreign competitionIndustry Scenario 2006 Rapid increase in M&A activities Key alliances formed within the next 2-3 yearsRapid expansion of global players offering sophisticated end-to-end solution, including logistics, transportation and ITImplementation of e-commerce initiatives and increasing dependence on IT networkMergers, Acquisitions and AlliancesGlobal CompetitorsTechnologyThe logistics market will grow rapidly Competitive intensity will dramatically increaseWTO EntrySource: A.T. Kearney
    • 7. 1. Market Size & Growth
    • 8. The global logistics services market reached an estimated US$ 190 Bn in 2000The global logistics outsourcing market is estimated to US$ 190 Bn in 2000 The transportation and related expenditures market reached an estimated US$ 3.8 Trillion in 2000, and is expected to grow at an annual rate of 2.3% over the next 5 years The Asian logistics outsourcing market is estimated to reach US$ 31 Bn in 2001 and is expected to grow at CAGR 39% over the next five years The greatest opportunities for outsourcing are in transport, warehousing, and transport management The growth of the global logistics services industry is mainly driven by shippers’ propensity to outsource logistics services and organic transportation market growth Customer electronics, automotive and apparel represent the most attractive opportunities for logistics services in China
    • 9. The China market is still small at US$ 0.61 Bn, but will be growing rapidly at CAGR 35% over the next five yearsThe China logistics services market is still small at US$ 0.61 Bn, but will be growing rapidly over the next 5 years The logistics services industry is still at an early stage of evolution in China The transportation and related expenditures are proportionately higher in China than in most developed countries and NIEs - indicating a major improvement opportunity In Coastal China, demand for logistics services is expected to be strong in Guangdong and Shanghai In Inland China, the largest demand potential is in Sichuan and the Hubei/Yangtze river region Growth in the logistics services industry in China will mainly be driven by continued macro economic growth and increased propensity to outsource logistics Favorable macro economic outlook Public policy and spending Increasing interest in outsourcing for logistics needs Growing IT and E-business
    • 10. Market Size & Growth - Global
    • 11. The global logistics outsourcing market is estimated to US$ 190 Bn in 2000Source: Chinainfobank, CSFB, A.T. KearneyGlobal Transportation and Logistics Market Size (2000)Transportation and related activities handled by manufacturers, wholesalers, retailers themselves(e.g. private fleet, private warehousing)Discrete sets of transportation and related services outsourced by manufacturers, wholesalers, retailers (e.g. public warehousing etc.)Combination of “transportation and related services” provisioned by 3rd party logistics service providersUS$ 3,800 BnOutsourcedUS$190 BnGlobal transportation and related expendituresGlobal outsourced transportation and related servicesGlobal logistics outsourcing market
    • 12. US$ Bn The transportation and related expenditures market reached an estimated US$ 3.8 Trillion in 2000, and is expected to grow at an annual rate of 2.3% over the next 5 yearsNote: (1) Asia includes Japan, Hong Kong, Korea, Singapore and Taiwan Source: Bowersox and Calantone; CSFB; A.T. Kearney AnalysisTransportation and Related Expenditures by Region (2000)Transportation and Related Expenditures by Function (2000) US$ Bn Total = US$ 3,837 BnOthers: -1.4%Asia(1): 2.2%Europe: 2.6%North America: 4.0%3,4243,8374,389CAGR=2.3%CAGR=2.8%Warehousing $304 BnTransport $2,204 BnOthers $55 BnShipper-Related $20 BnInventory $1,102 BnAdmin $152 BnCAGR 2000-2006
    • 13. The Asian logistics outsourcing market is estimated to reach US$ 31 Bn in 2001 and is expected to grow at CAGR 39% over the next five yearsNote: Asia includes China, Japan, Honk Kong, Korea, Singapore and Taiwan Source: Bowersox and Calantone; CSFB; A.T. Kearney AnalysisLogistics Outsourcing Market in Asia - Gross Revenue (US$ Bn)CAGR (99-01) = 38%CAGR (01-06) = 39%
    • 14. The greatest opportunities for outsourcing are in transport, warehousing, and transport managementTransportWarehousingTransport ManagementITSupplementary Logistic ServicesPurchase Order ManagementLogistics Management30%47%48%85%20%40%39%76%23%2%5%16%% of respondents outsourcing 1998 % of respondents planed outsourcing 200313%8%Outsourcing by Function Resource require- ments ComplexityNote: The percentage may not add up to 100% due to rounding Source: Based on several A.T. Kearney studies, including: Worldwide study comprising 280 participants (automotive 19%, electronics 25%, retail 27%, chemicals 29%) European study comprising 500 participants (retail 26%, food & beverage 26%, commodities 22%, machinery 12%, automotive 7%, electronics & high-tech 4%)
    • 15. Outsourcing of non-core business activitiesOrganic growth of transportation marketsIncreased complexity of global supply chains Recognition by many shippers that supply chain strategy may be a key competitive advantage Willingness to outsource when logistics not seen as core competency Development of superior logistics capability by a few 3PLsGrowth in demand for transportation services expands with international trade growth Globalization of many industries means goods need to move over longer distances at faster speeds with higher reliabilityGrowth in Logistics ServicesSource: UBS Warburg, IDCGrowth DriversDetails12 The growth of the global logistics services industry is mainly driven by shippers’ propensity to outsource logistics services and organic transportation market growth
    • 16. Consumer electronics, automotive and apparel represent the most attractive opportunities for logistics services in ChinaNote: 1. Size of circle relative to segment size in 2000 2. Analysis is indicative only Source: A.T. Kearney field interviews and researchHighLowGrowth (2001-2006)RemarksHighly market-oriented, need quick response to consumer feedback Manufacturers have to to improve operation efficiency continuously due to intense competition Relatively high product value and less price sensitiveHigh requirement for timing and reliability of liners High gross margin industry, production cost and logistics account for less percentage of sales Prefer timely feedback from destination ports, i.e.trade consulting servicesAutomotive supplies involve over 30,000 parts, which need consolidating suppliers to handle logistics Intense competition drives companies to reduce cost, current inefficiency in self-handling leads companies to consider outsourcing services activelyHigh value products, not very price sensitive, but sometimes decisions are made overseas Packing requirement involves technical difficulties, unwilling to outsource logistics servicesHigh profit industry, not very price sensitive High quality requirement for dry, no smell, no leaking containers, hence containerized in factory Clearance of cigarettes needs to be done by professional I/E companies or manufacturesLarge and special shape, therefore the way to put them into containers can impact the number of containers to be used, which directly related to cost - usually done in-house Cost sensitive, firms usually choose less busy season to get cheaper pricesFrozen products and fresh products need to be handled fast with care Other products are low-value and need no special servicesLow value products, highly price sensitive Lower quality requirement, usually containerized at portsConsumer ElectronicsApparelAutomotiveMachineryTobacco & LiquorFurniturePrimary GoodsChemicals&MaterialsIndustryLowHighConsumer ElectronicsApparelAutomotiveOutsourcing PropensityTobacco, LiquorPrimary GoodsOpportunity Assessment by IndustryChemicals &MaterialsFurnitureMachineryAdd market and trends analysis by industry
    • 17. Market Size & Growth - China
    • 18. The China logistics services market is still small at US$ 0.61 Bn, but will be growing rapidly over the next 5 yearsLogistics Outsourcing Market - Gross Revenue (2000, US$ Bn)Note: Asia includes China, Japan, Hong Kong, Singapore and Taiwan Source: Bowersox and Calantone; CSFB; A.T. Kearney EstimatesCAGR=35%190230.61China Logistics Service Market (US$, Bn)
    • 19. The logistics services industry is still at an early stage of evolution in ChinaCharacteristicsEmerging demand for outsourced logistics services Low value added services such as transport and warehousing are the major type of services outsourced Traditional in-house behaviour being impactedFast growth of logistics user base and higher requirement for broader services Large number of services providers competing for customers and human resources Most high value added services are free and provided as selling pointsLogistics outsourcing becomes common practice and an important lever for competition Consolidated service market with a few established market leaders Logistics penetrate in supply chain and replace traditional business modelsGlobal logistics integrators provide one-stop solution worldwide Specialization and close cooperation among global logistics service providers Optimized allocation and integration of resources along the supply chain StageEmergenceGrowthPenetrationGlobalizationWorld Leading (US)China TodaySource: A.T. Kearney
    • 20. Warehousing and DistributionTrucking Rail Freight Although Heavily Used, Railway Freight Has Long Transit Times and Service Reliability Is Poor Railway Containers Are Not Compatible With Shipping Company ContainersAirlineCustoms Brokerage Courier Limited Presence of Foreign Firms As JV E.G. DHL Sinotrans Regional Segregation in OperationLogistics Center and Freight ForwardingShippingThe domestic warehousing market is currently small and over-supplied with basic warehouses providing virtually no value-added services Some consolidation just started among the large warehousing companies River transportation has declined Most vessels are characterized by low speed and high energy costsTrucking companies are only allowed to operate in restricted regionsGovernment has established 15 Free Trade Zones and some logistics centers are set up there Inland transportation is handled by domestic freight forwarder who is usually sub-contracted by the international freight forwarder Seven domestic airlines dominate regional operations Designated foreign carriers are given a maximum entitlement of 50 tonnes per weekMany customs clearing brokerage firms and considerable confusion about roles Customs clearing procedures took at least ½ - 1 day previously but expected to be shortened to1 hourThe logistics services industry is still at an early stage of evolution in China (continued)Source: A.T. Kearney AnalysisChina Logistics Services
    • 21. Transportation and related expenditures are proportionately higher in China than in most developed countries and NIEs – indicating a major improvement opportunityTotal Transportation and Related Expenditures and % of GDP (2000) Note: (1) VAS: Value-added-services (2) Including packaging, admin, information services, ect. Source: Bowersox and Calantone, CSFB, IMF 1997 study; Chinainfobank; A.T. Kearney AnalysisUS$ Bn China Transportation and Related Expenditures Breakdown by Function (2000)Total = US$ 248 BnUS$ Bn(1)(2)
    • 22. Demand GrowthIn Coastal China, demand for logistics services is expected to be strong in Guangdong and ShanghaiHighLowHebei, Beijing, Tianjin4Beijing is the No. 1 air cargo center in China. In addition, Beijing’s hi-tech industry, which needs a lot of air transportation, is developing very fast Over 80% of the volume through Tianjin port are agricultural products, furniture, metal hardware and raw materials, all being low value products. In addition, most shippers are in poor financial conditions and are very price sensitiveShandong (Qingdao)4Qingdao has several famous local companies, such as Haier, HiSense, Aukma and Qingdao Beer. They are more quality oriented and less price sensitive Frozen products account for 15-20% of the volume. Quality requirements for frozen products are very high in terms of timing and handling care. Hence, frozen products shippers tend to be less price sensitive and more quality concerned Footwear and garments account for significant portion. Some large customers such as Payless Shoes (No. 1 customer of COSCO in volume) requires accurate shipping time and full range of sophisticated 3PL services from P/O management, trade consulting to space booking, warehousing and transportationProvinceLogistics Demand – Selected Provinces in Coastal ChinaGuangdongDemand Size5RemarksMajor exports are processing of lower value-added products  no special requirement for logistics quality; Road transportation is convenient, often containerized in factory to reduce cost  less need for warehousing/ consolidation Electronics industry is booming in Dongguan, which has some leading companies like Huawei  potential large profitable customersStrongWeakShanghai (Jiangsu, Zhejiang)5Shanghai is the fast growing economic/ financial center in China, which has some major MNCs such as SGM, Acer, Philips, etc. They are matured customers of logistics services and less price sensitive. On the other hand, to get the deals from them usually needs to involve high level negociation Large companies in Shanghai and nearby areas are mainly JVs of automobile and consumer electronics industry, which have high product value and lower price sensitivitySource: A.T. Kearney field interviews and analysis
    • 23. Demand SizeSichuan (Chengdu)Have the 3rd largest distribution center in China, the largest population, and important heavy industry base The logistics industry there has already attracted interest of foreign large shippers like Ikea and investors including Hutchison Whampoa Located in mountain areas, road transport infrastructure is inconvenient, so highly relying on rail transportChongqing2Agricultural products, metal products and motor cycles, which totally account for over 80% of the export volume, are all low-value products, price sensitive and have flat growth Underdeveloped infrastructure, esp. road and rail transportation have limited foreign investments in this region. Cargoes usually transported by barges, which is the cheapest modeProvinceIn inland China, the largest demand potential is in Sichuan and the Hubei/Yangtze river regionLogistics Demand – Selected Provinces in Inland ChinaYunnan2Demand GrowthRemarksMost important export industry is tobacco, which has high profit margin, high quality requirement for logistics services, and not very price sensitive Exports for wood, wooden materials and furniture, which accounted for over 30% of export volume before, are largely reduced due to newly imposed government sanction on cutting treesHighLowStrongWeakSource: A.T. Kearney field interviews and analysisHubei, Yangtze River Region3Exports are low-value products including tobacco, cotton, chemicals and steel materials Many imports are material for JVs (e.g. Citreon and Dongfeng Cummins), of which decisions are usually made overseas Market is very fragmented and shippers generally have small scale/volume No warehouses/piling centers with modern container handling capacity and advanced IT structure are available, can be a potential development area3
    • 24. Growth in the logistics services industry in China will mainly be driven by continued macro economic growth and increased propensity to outsource logisticsGrowth DriverImplicationThe Chinese economy is expected to grow at CAGR 7% over the next five years. Increased international and domestic trade will drive demand for logistics services Public policy and spending supports improvements in China’s logistics infrastructure, providing opportunities for further expansion of logistics service providers. Capable foreign service providers are limited in business scope by regulation, and their full entry after WTO will drive the industry toward international best practicesThere is increasing interest among China-based enterprises in outsourcing for logistics services. Overseas businesses are extending their supply chains deeper into ChinaThe fast growing market in online B2B transactions provides an additional market segment for logistics servicesFavorable Growth Outlook for the China Logistics Services IndustryFavorable Macro Economic OutlookPublic Policy and SpendingIncreasing Interest in Outsourcing for Logistics NeedsGrowing IT and E-Business1234Source: A.T. Kearney Analysis
    • 25. The Chinese economy is expected to grow at CAGR 7% over the next five yearsSource: Chinainfobank, A.T. Kearney AnalysisProjection of China’s GDP Growth and Structure (RMB, Bn)Continuous growth in GDP indicates a robust and fast growing macro economy, providing opportunities for sophisticated logistics service providers The economic structure will be continuously optimized and upgraded Logistics is directly correlated with the manufacturing industry, therefore growth of secondary industries will lead to the growth of logistics services Improved services industries will also have a positive impact on the logistics sector Improved supportive services such as legal, accounting, etc. Improved telecommunication capabilitiesRemarksSecondary: 7%Tertiary: 9%CAGR (01-06)Total: 7%Primary: 3%13,3679,560Favorable Macro Economic Outlook1
    • 26. Demand for logistics services comes from both international and domestic tradeSource: Hong Kong Trade Development Council Research; ChinainfobankDemand for Logistics ServicesMore International TradeMore Domestic TradeInternational trade International trade has sustained the global economic fluctuation and kept fast growing in the past 5 years It is projected to grow at a CAGR of 7.5%, with total trade value reaching US$ 680 Bn in 2005 Exports Expected to rise by an additional 2.4% per year over the first five years of WTO entry Share as world exports is projected to rise from current 3.5% to 7.3% in 2005 Imports Projected rise of US$ 21.3 Bn after WTO Projected annual growth rate will be marginally faster than exportDomestic Trade CAGR of retail sales of consumer goods in the “Ninth 5 Year” was 11% Positive outlook due to continuously growing purchasing power Development of chain stores Sales revenue of chain store corporations has experience double digit rise from 1997 Multinational chain stores have been aggressively improving their presence in China market Inter-city trade Currently more than 50% of the foreign industrial and retail firms distributed their products in more than 50 cities Inter-city trade will be frequent after WTOFavorable Macro Economic Outlook1
    • 27. The State Economic and Trade Commission has established a master plan for developing logistics services in ChinaState Economic and Trade Commission Logistics Industry Trade PlanSource: Business Alert – China at www.tdctrade.com30 Pilot CentersInter-regional NetworksSupply Chain SystemsSelect suitable enterprises in various key cities to establish 30 pilot logistics and distribution centers10 National EnterprisesAbout 10 specialized key enterprises with national logistics and distribution networks will be developedRealign assets to form inter-regional, inter-sector and inter-ownership logistics and distribution networksEfforts will be made to explore the possibility of using 3PL and distribution enterprises to build supply chain systems, and to bring facilities and services of logistics companies closer to advanced international standardsPublic Policy and Spending2
    • 28. A wide array of government supported logistics infrastructure development programs are under way across ChinaSource: ChinainfobankExamples of Government Initiatives to Improve Logistics InfrastructureA number of national logistics centers are under construction, with reasonable size, standardized operation, and modern facilities Coastal Large Cities - Logistics CenterInland Areas - Road/RailwayModern third party logistics and distribution base Its main body will be linked to 7 railways and hundreds of railway transit points Expected to serve for the dispatch of over 90% of daily necessities in the city Also serve eastern China and the whole countryShanghai Commercial Logistics CenterPublic Policy and Spending2High way density will grow to about 1650 km/10000sq.km in year 2005 Invest RMB 270 Bn to upgrade railway infrastructureNew railways, electric railways, highways, expressways are in phase:
    • 29. Interviews with SOEs and foreign invested enterprises in China indicate a relatively strong interest in outsourcing logistics servicesSource: A.T. Kearney field interviews and researchSOEs usually have own warehouses and trucking divisions, therefore, they demand less warehousing, transportation and other related value-added services. However, in face of increased competition, SOEs have a growing interest in outsourcing logistics Foreign invested enterprises have the highest requirement for logistics services in terms of range and quality. These companies are extending their supply chains into China - replacing middle men who used to get China origin cargo to the port. MNCs will be looking for logistics services companies in China to help them fill the void Import/export companies have the least demand for logistics services providers, because most of these companies also provide transportation, customs clearance services, etc.Remarks% of Respondents with Interest in Outsourcing Logistics Services (2001)Increasing Interest in Outsourcing for Logistics Needs3
    • 30. China-based companies have a positive attitude towards purchasing advanced logistics services and quality, speed, and price are the most important purchasing criteriaNote: (1) Survey by the China Warehouse Association (2000) Attitudes and preferences for distribution of 450 large and medium-sized enterprises (2) The responding enterprises deal in electrical home appliances, electronics, foodstuffs and chemicals for daily use Source: Chinainfobank, China Warehouse Associate, A.T. Kearney filed interviews and research7%22%26%29%44%52%64%75%Looking for distribution servicesPrefer transportation companiesUse general logistics agentsPrefer trunk line servicesLooking for new logistics agentsHire third party agentsHope that new logistics providers will provide comprehensive logistics servicesLooking for modern logistics companiesInterest in Logistics Services – Survey Results (2000)Logistics Services Purchasing Criteria - China0.880.810.790.770.680.910.910.93NetworkDocumentationReputationInfo TrackingProfessionalismPriceService SpeedService QualityRelative ImportanceHighAvg. = 0.82Increasing Interest in Outsourcing for Logistics Needs3Low
    • 31. Online transactions provides an additional source of growth for logistics servicesSource: Research Report of China E-Business Association and Network Evaluation Center, Apl. 2001Growth of Online Transaction in China (US$, Bn)B to B (US$, Bn)B to C (US$, Bn)CAGR (00-04) B2B: 53% B2C: 167% Growing IT and E-Business4Industry - Public information platform Reducing cost and overlap in investment, information share Customers/shippers Standard bar coding system, easier for outsourcing Better facilities to communicate with service providers, easier to manage and supervise Service providers - Intranet Cost reduction from higher efficiency Better service quality, because of internet/intranet enabled real-time cargo tracking, etc. Broader service range, e.g. trade consultingCurrent Industry Initiatives
    • 32. 2. Service Demand
    • 33. Customers are increasingly demanding high value logistics service solutions, requiring global reach and advanced supply chain management capabilitiesService Demand - Global Trends Traditionally, cost reduction has been the main reason for companies to outsource logistics Today, customers are increasingly demanding more advanced services and end-to-end solutions “Demand-Pull” logistics requires the logistics service providers to be flexible and to ‘control’ a large part or the entire supply chain Leading logistics service providers are developing logistics one-stop-shops - from raw material sourcing to delivery of finished goods Customers are increasingly interested in contracts with both fixed and variable pricing schemes - based on risk sharing The opportunity for risk-sharing contracts is considered to be greatest in transportation and inventory management Service Demand - China Trends In the China market, logistics demand is still composed of basic services, such as transportation and warehousing Going forward, demand for logistics services in China will mainly come from Transportation/Distribution, Warehousing/Consolidation as well as Customs Brokerage and Forwarding The quality of logistics services offered in China are not good – as indicated by poor performance on on-time delivery, cargo loss and document accuracy However, satisfaction levels for logistics services in China are relatively high, possibly indicating low expectations
    • 34. Service Demand - Global Trends
    • 35. Traditionally, cost reduction has been the main reason for companies to outsource logistics1. Reduce and control operating costs 2. Improve company focus 3. Gain access to world-class capabilities 4. Free internal resources for other purposes 5. Resources are not available internally 6. Accelerate reengineering benefits 7. Function difficult to manage/out of control 8. Make capital funds available 9. Share risks 10. Cash infusion 15% – 25% 15% 10% – 15% 6% – 8% 3% – 5% 4% – 6% 20% – 28% 10% – 15% 10% – 12% 7% – 10% 10% – 13%Estimated Cost SavingNote: (1) Use of 53-foot equipment (2) Consolidation, scheduling and mode selection Source: CSFB Hard Savings (mainly transportation) Dynamic consolidation Dedicated operations Mode conversion Cube utilization(1) Carrier optimization Rate management Inbound(2) Soft Savings (mainly warehousing) Reverse logistics Location study Inventory Distribution design systemAreaTop-ten Reasons Companies Outsource Logistics
    • 36. Today, customers are increasingly demanding more advanced services and end-to-end solutions, such as supply chain integration733333333475353536666667373808087Labor Cost Savings Transportation Cost Savings Access to Skills Freedom to Focus on Core Competencies Capital Asset Flexibility Balance Sheet Relief Project Management and Start Up Improved Customer Service Inventory Cost Reduction Access to Information Systems Systems Integration Cycle Time Reduction Global Access Supply Chain Integration Facilitation Supply Chain Integration Implementation Freedom From Regulation OtherPast Service DemandCurrent Service Demand% Respondents3242637453899510010010010074849510010095% RespondentsExpected Future Service Demand% Respondents20339393100536666736666465373666660Source: A.T. Kearney 1998 Logistics Survey
    • 37. “Demand-Pull” logistics requires the logistics service providers to be flexible and to “control” a large part or the entire supply chainSuppliersManufacturingDemand indirectly drives manufacturing volume through forecastsWarehouseWholesale/Retail“Supply-push” Logistics ChainSuppliersB2B ExchangeManufacturingDirect Delivery“Demand-pull” Logistics ChainManufacturing driven by actual demandThe rate of supply was set by the manufacturer in advance, based on expected demand It was the role of the logistics providers to ensure a just-in-time supply of componentsThe rate of manufacture is determined on a real-time basis by the rate of demand While this model is more efficient, it requires perfect integration of all logistics operations within one processSource: Lehman Brothers, A.T. Kearney Analysis
    • 38. Leading logistics service providers are developing logistics one-stop-shops - from raw material sourcing to delivery of finished goodsRaw Materials SourcingProduction PlanningFactory SourcingManufacturing ControlQuality AssuranceExport DocumentationShippingCustomerOrder PlacementReceipt of Finished GoodsSource: A.T. KearneyFinance materials Finance production Arrange payment for transportationFinancingPurchase raw materials: fabric and trim Select factories with the required skills, specialty or capacitySourcingCoordinate production transportation Consolidate and ship goods to customers Prepare import/export documentation Provide shipment trackingLogistics ServicesArrange and schedule materials delivery Create and manage production schedules Ensure quality Provide trackingSupply Chain ManagementFull Service ProvisioningKey Capabilities
    • 39. Customers are increasingly interested in contracts with both fixed and variable pricing schemes - based on risk sharing Note: (1) 17 respondents Source: A.T. Kearney 1998 3PL surveyType of Pricing Schemes in Logistics Contracts (1) - GlobalTrend in Pricing SchemesCost-PlusMixture of Fixed/ VariableOthersTransactionPercent of RespondentsTransaction
    • 40. The opportunity for risk-sharing contracts is considered to be greatest in transportation and inventory managementMain Hurdles for Risk-sharing ContractsIdentifying Baseline/BenchmarksEnforcement/ Commitment/ Willingness on Part of CustomerSelecting Metrics and MeasuresConcern about Out-YearsScope Limit or ExpansionAgreeing on Targets and When They Are MetSource: A.T. Kearney 1998 3PL surveyRisk-sharing OpportunityLarge Opportunity Medium OpportunitySmall Opportunity No Opinion
    • 41. Service Demand - China Trends
    • 42. In the China market, logistics demand is still composed of basic services, such as transportation and warehousingNote: (1) Survey by the China Warehouse Association (2000 and 2001) Attitudes and preferences for distribution of 450 large and medium-sized enterprises (2) The responding enterprises deal in electrical home appliances, electronics, foodstuffs and chemicals for daily use Source: Chinainfobank, China Warehouse Associate Logistics Services Outsourced by Manufacturers (2000)Logistics Services Outsourced by Distributors (2000)
    • 43. Going forward, demand for logistics services in China will mainly come from Transportation/Distribution, Warehousing/Consolidation…Warehousing/ ConsolidationTransportation/ DistributionPurchasing /Manufacturing1 33In-house Truck companies MOR COSCO China PostPort bureaus Haier, TCL Maersk, APL, P&O In-housePurchase order management Vendor screening and managementTruck Container towing Rail BargeStorage Inventory control Sorting/Labeling Packaging/ Unpacking Consolidation/ DeconsolidationPurchase order management and vendor screening are the least demanded services with less than 5% interviewees indicating interest. Manufacturers generally don't feel comfortable allowing outside service providers to get involved in key decisions like purchasing, sourcing, etc.Railway is largely MOR monopoly, and some large companies like COSCO and Sinotrans have unit trains which have lower prices better service levels Trucking market, including container towing, is very fragmented. Current supply exceeds demand, resulting in price competition and the trend of decreasing prices It might be more cost effective to have long-term relationships with 2 to 3 trucking companies than to have own trucksTraditionally, large manufacturers have own warehouses, therefore they don’t need to outsource. But the quality of those warehouses is usually outdated and value-add services are limited Warehouses/ CYs at ports are owned and managed by port bureaus For logistics services providers, lack of modern warehouses/distribution-centers is one of the bottlenecks In coastal areas, Maersk and P&O have provided warehousing related new value added services for MNCs, esp. footwear companiesInterest LevelService ProvidersService TypeRemarksSource: A.T. Kearney field interviews and analysis
    • 44. … as well as Customs Brokerage and ForwardingD-to-D542Port bureaus Freight agents Professional brokerage housesCOSCO, Penavico Sinotrans MaerskMaersk P&O COSCOCustoms clearance and duty payment BOL and other document managementSpace booking with linehaul carrier Cargo tracking Trade consultingDoor-to-door services Interest LevelService ProvidersService TypeCustoms BrokerageForwardingSource: A.T. Kearney field interviews and analysisShippers usually outsource customs clearance to 3rd party, or like to have the service providers’ consulting/support on that On top of the traditional document services, increasing demand comes for more client-centered service, such as the delivery service of BoL, and with better qualityEmerging requirement for more value added services such as trade consulting on contract term, L/C (esp. for small to middle sized local companies) and destination market information feedback (esp. for demand sensitive products such as apparel, furniture, etc.) Cargo tracking is one of the gaps between Chinese companies and those global leading companies with GPSDemand for door-to-door services and ex-works (EXW) terms is increasing, in order to reduce damage rate during transportation, guarantee quality of cargo/delivery services, and improve shippers’ perception among customers These requirements are usually from contracts signed overseas, therefore sales efforts should cooperate with group HQ and overseas companies Remarks
    • 45. The quality of logistics services offered in China are not good – as indicated by poor performance on on-time delivery, cargo loss and document accuracyOn Time Delivery Ratio (>90%)Cargo Loss Ratio (<2%)Document Accuracy Ratio (<2%)Note: (1) Survey by the China Warehouse Association (2000 and 2001) Attitudes and preferences for distribution of 450 large and medium-sized enterprises (2) The responding enterprises deal in electrical home appliances, electronics, foodstuffs and chemicals for daily use Source: Chinainfobank, China Warehouse Associate
    • 46. However, satisfaction levels for logistics services in China are relatively high, possibly indicating low expectationsNote: (1) Survey by the China Warehouse Association (2000) Attitudes and preferences for distribution of 450 large and medium-sized enterprises (2) The responding enterprises deal in electrical home appliances, electronics, foodstuffs and chemicals for daily use Source: Chinainfobank, China Warehouse Associate Satisfaction of Logistics Services Indicated by Manufacturers (2000)Satisfaction of Logistics Services Indicated by Distributors (2000)
    • 47. 3. Competitive Environment
    • 48. Increasing demand for global reach and capabilities fuels consolidation as large logistics service providers are positioning themselves for successCompetitive Environment - Global The logistics services industry is composed of a number of different types of players Four factors are shaping the competitive environment in logistics services and drives the accelerating pace of consolidation in the industry - Economics of scale, demand-pull logistics, new capabilities & global reach, and “one-stop-shops” The importance of scale has become evident as only large players can capture the high value end of the business that is emerging in large, complex and long-term contracts Thus, M&A activity has surged dramatically in the last couple of years Going forward, Asia is likely to experience increased M&A activity - especially as China enters the WTO Container shipping companies are aggressively developing logistics capabilities and APL, Maersk, Hapag-Lloyd and NYK line have built separate business units to focus on the market for value-added logistics services: Case study - Maersk Logistics strategy Case study - APL Logistics strategy Global players are positioning themselves for success: Case study - UPS Logistics Case study - FedEx Logistics Case study - C.H. Robinson A new type of internet-based logistics service provider has recently emerged Internet-based logistics services companies are offering a multitude of value-added services, e.g. automated tracking and tracing
    • 49. Increasing demand for global reach and capabilities fuels consolidation as large logistics service providers are positioning themselves for success (cont’d)Competitive Environment - China In China, the transportation and forwarding sectors are dominated by domestic, mainly state-owned, companies Six types of service providers are competing - transportation companies, China Post, manufacturing enterprises, domestic logistics companies, foreign logistics companies and e-commerce provider Case study - SinoTrans Case study - China Post Case study - Maersk Logistics Case study - PG Logistics Case study - Haier Case study - www.56net.com Currently foreign companies have limited presence outside China’s free trade zones. This is largely due to current restrictions on foreign participation The logistics business of major global service providers is expanding aggressively in China and will represent a significant threat to domestic players
    • 50. Competitive Environment - Global
    • 51. The logistics services industry is composed of a number of different types of playersSupply Chain Mgmt.Sales Function - Freight AgglomerationAsset OperationAsset ProvisioningFreight ForwardersShipping LinesTerminal operatorsPort, Ship Container lessorLogistics Service ProvidersLogistics Services ProvisioningTypes of Service/ProviderSource: A.T. KearneyAbility to DifferentiateAsset BaseCore ExtensionRegular ActivitiesIntegrators
    • 52. Four factors are shaping the competitive environment in logistics services and driving the accelerating pace of consolidation in the industryScale Scale is the key to capture high-value market segments Source: Lehman Brothers, A.T. Kearney AnalysisCompetitive EnvironmentNew Capabilities & Global Reach Industry-specific skills and geographic coverage are increasingly important capabilities “Demand-pull” logistics The move away from supply-push to demand-pull logistics increases the need for integrated logistics companies “One-Stop-Shops” Customers’ drive to focus on a limited number of core logistics service suppliers1234
    • 53. Drivers - Scale and “Demand-Pull” logistics“Demand-Pull” LogisticsThe move from supply-push to demand-pull logistics strategies increases the need for integrated logistics companies that provide complete supply chain coverage and advanced information systems to link all components of the chainSource: Lehman Brothers, A.T. Kearney AnalysisScaleThe importance of scale has become evident as only large players can capture the high-value market segment that is increasingly large, complex and long-tem contract based The surging M&A activity has been an evidence of leading players are seeking scale12
    • 54. Drivers - New Capabilities and “One-Stop-Shops”“One-Stop-Shops”Shipper seeking to obtain a supply chain advantage through the close integration of all logistics operations are increasingly awarding exclusive contracts to integrated, multi-functional logistics service providers for major segments of their supply chain (e.g. inbound auto parts to an assembly plant) - the objective is to reduce costs throughout the supply chain, move inventory faster and control it better, and to obtain transparency across all elements on the supply chain Such shippers are developing “core supplier” strategies with a limited number of hand-picked transportation and logistics service providers who have won the confidence of the shippers to be true strategic partners, working with the shippers on programs to achieve further gains in logistics efficiency Shippers are also coordinating their supply chain strategies with other key suppliers of materials and services (and even with competitors) where significant efficiency gains may be madeSource: Merrill Lynch, A.T. Kearney AnalysisNew Capabilities & Global ReachIndustry-specific or geographic coverage allow logistics companies to develop superior business efficiencies and systems capabilities Shippers looking for a supply chain advantage are increasingly focusing on tightening the interface between different logistics steps to prevent the loss of supply-chain efficiencies in cases where different operators interact poorly due to lack of communication and different commercial priorities This trend is particularly marked where shippers aim to reduce inventory levels by moving away from traditional supply-chain models towards a demand-pull model Logistics service providers are developing the capabilities to meet these needs through both internal initiatives and M&A Several major international logistics service providers have acquired operations in other countries in order to build an international capability to meet customer requirements for global service coverage34
    • 55. The importance of scale has become evident as only large players can capture the high value end of the business that is emerging in large, complex and long-term contractsSource: Company websitesExamples of Logistics Outsourcing Contracts 2000–2001DateProviding storage, warehouse management, pick and pack and UK and Eire distribution services for Boehringer Ingleheim’s product portfolioUS$ 20 MnExel DirectBoehringer IngleheimManaging the inbound transportation for more than 1,500 suppliers into 26 GM Powertrain engine, transmission and component plants, primarily in N. AmericaN/AFedExGeneral MotorsExel will operate Sainsbury’s new Regional Distribution Centre at Emerson's Green, BristolProviding international transportation and logistics servicesManaging the majority of the military's outbound freight shipments from installations in Alabama, Florida and GeorgiaWarehousing service in Mechanicsburg, PennsylvaniaA supply-chain management program between the United States and the United KingdomDelivering online fulfillment and physical distribution servicesServicesN/AExel DirectSainsbury'sN/AEGL Eagle Global LogisticsNokiaUS$ 33 MnEGL Eagle Global LogisticsMilitary Traffic Management CommandN/ADSC LogisticsNabisco Food GroupN/ADanzas AEIBody Shop Inc.N/ADanzas AEIStudioDirectSize (US$ Mn)Logistics Service ProviderCompanyTransporting essential consignments between six production plants and resellers, dealers, wholesalers and consumers throughout Europe Responsible for time-specific deliveries to over 4,000 dealerships from five central locations N/ATNT LogisticsMotorolaN/ATNT LogisticsGeneral Motors Pharmaceutical AutoGrocery retail TelecomGovernmentFoodHealthcareE-commerceIndustryTelecomAutoJun. 2001Since 1995May. 2001Jun. 2000Apr. 2001Jan. 2001Oct. 2000Mar. 2001Oct. 2000Oct. 2000
    • 56. Source: Company websitesWarehousing management, distribution, inventory deployment of supplies and parts and transportation for the delivery of finished products to marketN/ARyder System Inc.Office EquipmentXerox Corporation Apr. 2000Manage and operate truckload, rail, dedicated fleet and substitute service operations for 31 Wal-Mart Centerpoint distribution centers nationwideUS$ 100 Mn annuallyJ. B. Hunt RetailWal-Mart StoresApr. 2000Implement a transportation management program for its Electronic Sensors and Systems Sector (ES3) and Integrated Systems Sector (ISS)N/ARyder System Inc.ElectronicsNorthrop Grumman Corporation Feb. 2001Manage inbound, outbound and third-party shipments domestically and internationally throughout North America and EuropeN/ARyder System Inc.AutoArvinMeritorMay. 2001Manage SlimoFast's sole distribution center in the U.S. Manage all aspects of HomeLife's supply chain - including supply chain design, information systems design and integration, transportation, warehousing, home delivery and reverse logistics Manage and operate private fleet operations at eleven separate North American locationsServicesN/AMenlo LogisticsFoodSlimoFast Foods Feb. 2001N/AMenlo LogisticsHome furnishingHomelifeAug. 2000N/AJ. B. Hunt PlasticsM.A. Hanna Company Feb. 2000Logistics Service ProviderIndustryCompanyDateSize (US$ Mn)Managing global supply chain US$ 150 MnUPS LogisticsSemiconductorNational SemiconductorAug. 2000Streamline SEMCO’s international transportation and global supply chainN/AUPS LogisticsElectronicsSamsung Electro-Mechanics Co.Nov. 2000The importance of scale has become evident as only large players can capture the high value end of the business that is emerging in large, complex and long-term contracts (cont’d)Examples of Logistics Outsourcing Contracts 2000 – 2001
    • 57. Thus, M&A activities surged in the last couple of yearsGoing forward, Asia is likely to experience increased M&A activity, especially as China enters the WTOSource: Merrill Lynch, A.T. Kearney analysis227Providing truck broker and intermodal marketing servicesMark VII Ocean Group plcJul 27, 991,140Leading U.S.freight forwarderAir Express Inc. Deutsche Post/DanzasNov 04, 99136Information technology Based 3rd Party Logistics ProviderAmerican Backhaulers, Inc C.H. Robinson Worldwide, IncNov 18, 99N.A.Airfreight forwarder in ChileCargo Limitada Eagle USA Airfreight, IncDec 16, 996503PL with specialty in Automotive Customized Transport, Inc TNT Post GroupJul 03, 00934Trucking services providerAmerican Freightways Corp FedEx Corp Nov 13, 00600One of the world’s largest freight forwarding companiesSembcorp Logistics Kuehne & Nagel Nov 28, 00382Truckload motor carrier in North AmericaSwift Transportation M.S.Carriers Dec 12, 00450Leading freight forwarding, custom brokerage and logistics companyFritz UPSJan 10, 01Equity Purchasing Price (US$ Mn)Target/AcquirerDate AnnouncedBusiness of Target
    • 58. Container shipping companies are aggressively developing logistics capabilities and ...321134353555Consolidation111111211535Sourcing121111214545Forecasting inventory121124411455Supply-Chain Consulting323333433454Intermodal333334454555Document Handling1113K-Line2234COSCO1113CP Ships1112Evergreen3332Yang Ming5333OOCL3454MOL5553Hapag-Lloyd4224P&O Nedlloyd (1)5554NYK5555NOL/APL5554MaerskTrackingDistributionWarehousingGlobal PresenceNote: (1) Does not include logistics services of P&O Group that are not well coordinated or integrated with P&O Nedlloyd Source: A.T. KearneyShipping CompanyLogistics Capabilities
    • 59. … APL, Maersk, Hapag-Lloyd and NYK Line have built separate business units to focus on the market for value-added logistics servicesWorldwide Revenues from Carriers’ Logistics Business Units (US$, Mn)1999200019992000199920001999200018%-10%157%29%(1)APLHapag-LloydMaersk-SealandNYKNote: (1) Maersk Logistics is new integrated company of SeaLand Logistics and Mercantile, the revenue in 1999 is only Mercantile. Source: Hapag-Lloyd Annual Reports; NYK website; CSFB report on NOL/APL; A.T. Kearney Analysis
    • 60. Case Study - Maersk Logistics Strategy is providing comprehensive “all-time, all-space, and all-mode” solutions to attract customersVisionStrategic InitiativesCore CompetenciesBusinessMaersk Logistics“By thoroughly planning and executing suitable cost reducing logistics solutions, we secure our clients an important competitive edge.”Logistics business totally independent from shipping lines, main businesses not from shipping lines Aggressively building airfreight unit to become all-mode one-stop provider for its customers Introduced advanced IT systems such as INTRA, M*Power, to enable sophisticated customer tracking of orders and goods Strong reputation in shipping leveraged to logistics business, ensuring customers reliability in service quality and timing Major services divided in to supply chain management, airfreight, warehousing, consolidation, documentation, bar-coding and EDIMaersk Logistics having US$ 10 Mn in revenue in 2000, 12% of that of Maersk Group Main clients including Target, Walmart, Footstar, all with long-term contracts Global presence and local knowledge with about 200 sales offices in over 70 countries around the world, enabling Maersk to “pinpoint the whereabouts and status of important cargo en route” with local representatives Advanced system of warehouses/distribution centers, 195 worldwide and 72 in AsiaSource: A.T. Kearney
    • 61. Case Study - APL Logistics Strategy is focusing on IT capability and selected industries with aggressive development of logistics operating terminals worldwideSource: A.T. KearneyVisionStrategic InitiativesCore CompetenciesBusiness APL LogisticsAPL Logistics is dedicated to providing complex information solutions by enhancing supply-chain visibility and introducing new products and services that help customers run their businesses more efficiently.  Focusing on customer intimacy, aggressive application of Internet technology, absolute commitment to investment and service expansions Focusing on retail, automotive and industrial clients around the world Remained independent with less than 50% of outsourced sea transportation needs carried via APL vessels Acquired GATX Logistics to plug the big gap in the warehouse management and distribution capabilities in North AmericaManaged to leverage on customer relationship built through freight forwarding Experienced management with quick, innovative and aggressive marketing strategy and keen vision into future customer needs Services divided into 4 groups: consolidation, intermodal management, contract logistics consulting and automotive logisticsFY 2000 revenue US$ 479 Mn, roughly 10% of total APL revenue Main clients including Sears, Colgate Palmolive, Kellogg, Rolls&Royce, Honeywell Global presence with offices in 55 countries around the world Strong warehousing and distribution capacity with 115 warehouses in North America, Latin America, Europe, Southeast Asia and China
    • 62. Case Study - UPS Logistics Strategy is leveraging a well recognized parcel services and strong financial position to develop comprehensive global supply chain solutionsUPS Logistics Group seeks to be a provider of “comprehensive global supply chain solutions”  Offering a full portfolio of logistics services on a global or regional level, including logistics design and reengineering, management expertise, and leading edge information systems Recently acquired Fritz., a global freight forwarding, customs brokerage and logistics company, Livingston and First International Bancorp, a leading provider of trade financing Developed ability through UPS Capital to enable businesses to link their cash flows managementStrong global network, reaching almost all major cities, esp. within US Brand image of being fast and reliable established from parcel servicesUPS FY 2000 total revenue reached US$ 29.7 Bn, logistics revenue accounted for less than 5% of its total revenue Continuously helping GM North America to manage its inbound transportation from more than 1,500 suppliers into 26 GM plants (Honored as Supplier of the Year) Strong financial position with large revenue and recent stock offeringsVisionStrategic InitiativesCore CompetenciesBusiness UPS Logistics Source: A.T. Kearney
    • 63. Case Study - FedEx Logistics Strategy is building an integrated transportation, information and logistics solution on strong global network, control of air freight and key customer relationshipsSource: A.T. KearneyVisionStrategic InitiativesCore CompetenciesBusinessFedEx Logistics FedEx seeks to provide “integrated transportation, information, and logistics solutions through a powerful family of companies that operate independently yet compete collectively” Combining American Freightways with Viking Freight to create FedEx Freight, expanding its scope of LTL services in North America Creating FedEx Corporate Services to provide customers with a single point of access to the full range of services Creating FedEx Trade Networks to offer customs brokerage and trade facilitation solutions for global customers Acquired Tower Group International, a leading customs broker and World Tariff, a premier source of customs duty and tax informationKey customer relationship and control of airline resources Strong global network, reaching almost all major cities, esp. within US Brand image established from parcel services of being fast and reliableFor the year ending May 31, 2000, FedEX Freight revenue reached US$ 835 Mn, which is about 4% of FedEX ‘s total revenue. However, FedEX Freight revenue is projected to grow 150% in 2002 Contracted with Ford in North America to reduce its delivery time from plants to dealers and customers Agreement with Compaq North America to manage its service parts network Three-year agreement with Sprint to operate and manage its National Returns Processing Center (USA)
    • 64. Case Study - C.H. Robinson Logistics Strategy is seeking ways to reposition itself and its 14,000 motor-carrier fleetSource: A.T. KearneyVisionStrategic InitiativesCore CompetenciesBusinessC.H. RobinsonReposition as full service logistics provider Converting from traditional carriers to modern full service logistics provider Services include sourcing, logistics and information systems Adding more capabilities to meet needs including in truck, air, ocean, intermodal, customs clearance Contract trucking with 14,000 motor carriers on contract Extensive customer base with over 8,600 customers established in commodity trading Knowledge in commodity trading Fully integrated into food supply chain Extended “high end” experience across industries and servicesUS$ 1.79 Bn in revenues with 1,900 employees Rapid top line growth of over 15% Offices in 38 states and 10 foreign countries
    • 65. A new type of internet-based logistics service provider has recently emergedTransplace.comTMSource: A.T. KearneyInternet-Based Market PlacesProviding shippers with logistics work flow management tools such as order tracking, payment, billing, etc. Company Strategic FocusRoleExampleWeb-Based Logistics Management SolutionsSupply-Chain Integration SolutionsProviding the architecture and integration engines which enable inter-enterprise integration and empower marketplacesProviding internet-based transportation exchange/auction servicesResultClear failure as a strategy - carriers typically refused to cooperate in their own disintermediation. Virtually all exchanges have either closed down or moved to another strategyOutcome remains unclear - question remains of whether companies can achieve enough critical mass in customer support to be viableOutcome remains unclear - critical mass also an issue in the face of challenges from SAP, Oracle, etc.
    • 66. Internet-based logistics services companies are offering a multitude of value-added services, e.g. automated tracking and tracingSource: Survey to more than 70 e-logistics companies made by CSFBExisting/Planned Logistics Services by E-Logistics CompaniesAct as a third-party tracking and tracing agent based on the data aggregated from various transportation providersA forum for which the purchase of industry-related goods could be negotiatedClassify the legalities and cost behind the movement of products between countries around the worldA forum for which the transportation component of logistics can be negotiated among various partiesA B2C service offered to manufacturers and retailers in which e-logistics company provides targeted marketing servicesOptimize a fleet of assets given their accelerated visibility into the demand side of the supply chainProvide base tariff rates for given movements and different service criteriaAs the auction/exchange feature gains market penetration with shippers and carriers, an e-logistics company will be able to designate freight movements to carriersAs tracking and tracing technology develops, e-logistics companies will have the capability to proactively warn their customers of certain potential service failuresHandle the flow of funds between each party The storage of supply chain data related to individual carrier performance and broader industry-wide metricsUtilize the flow of information that passes through their systems to automate the documentation processPhysical warehousing and distribution of products purchased from an online retailerBrief descriptionDemand LevelAutomated tracking and tracingPurchasing portalInternational landed costsFreight exchange/auctione-Marketing Lane optimizationIndividual lane price quotesAutomated bookingService Failure NotificationAutomated billingData miningDocumentatione-FulfillmentService
    • 67. Competitive Environment - China
    • 68. In China, the transportation and forwarding sectors are dominated by domestic, mainly state-owned, companiesRoad & Sea Freight Transportation There are significant presences of SOEs – Sinotrans & COSCO Air-freight Market is controlled by firms set up by Civil Aviation Administration of China, but COSCO entered the market in 1995 Inland Forwarding Handled by domestic freight forwarders who are usually sub-contracted by the international freight forwarders Railways Rail freight transportation is governed by the Ministry of Railway (MoR). COSCO works with MoR occasionally on co-operation basis Trucking Most trucking companies involved in inland transportation are domestic. Freight transport between HK and China are either Chinese state-owned or Sino-HK JVs Customs Brokerages As part of a move to restructure the industry, the Customs General Administration stopped approving customs brokerages license in 1998Domestic Company DominationSource: A.T. Kearney AnalysisStopped approving customs brokerage license, not only to foreign firms
    • 69. Six types of service providers are competing – transportation companies, national postal operator, manufacturing enterprises, domestic logistics companies, and foreign logistics companies and emerging e-commerce providersTypeTraditional Transportation CompaniesNational Postal OperatorManufacturing EnterprisesForeign Logistics CompaniesDomestic Logistics CompaniesStrategic AdvantagesOwning logistics resources, such as warehouses and vehicles Established country wide distribution network Ready access to business - internalGlobal network coverage and scale economy Recognized brand name, broader service offering and better service quality Strong resource integration capabilities Financial support for long term investmentLess business know-how of local market Lack of inland network and resource accessibilities Less relationships with local customers Certain restrictions from regulationsCustomer base from long-term transport customers Better resource accessibility due to strong relationship with port bureau, customs, and government bureaus Broad network all over China, with unitrains, warehouses and vehicles Privileged position as government player Already establish cooperation with high profile clients like Dell, IBM, HP, Haire, etc.Strong ability in integrating resources Good internal management and willingness to invest in human resource and IT systemExamplesCOSCO Sinotrans China PostHaier; TCLMaersk Logistics; APL LogisticsPGLSource: A.T. Kearney AnalysisStrategic DisadvantagesInsufficient understanding and limited service offering Lower service quality due to lack of experienced logistics experts and IT platformLack of overseas network Lower service quality due to lack of experienced logistics experts and IT platform Relatively poor internal managementCan hardly achieve economies of scale Move away from core business/competence Lower service quality due to lack of experienced logistics experts and IT platformLack of strong government/regulation support Lack of own logistics resources/facilities Can hardly achieve economy of scaleE-commerce ProvidersOnline service provision backed by rich offline resources of the member alliance The best approach to reduce the information asymmetry and to speed up the information exchangeYet to identify the best positioning in China logistic landscape Yet to enhance the management and IT capability to truly add value through enabling integrated e-logistics services 56NET.com
    • 70. Currently, foreign companies have limited presence outside China’s Free Trade Zones. This is largely due to current restrictions on foreign participationThere are 444 Sino-foreign JVs in the form of headquarters, branches and subsidiaries. However, many of them are in the Free Trade ZonesPacific East Asia Cargo Airlines has entered a tie-up with a regional airlineDHL-Sinotrans International Air Courier Ltd operates in big citiesEvergreen, Maersk, OOCLA few customs brokerage houses have set up electronic systems with Customs General Administration and banks in the Free Trade ZonesForeign JV has set up warehousing capacities in various FTZAPL is engaged in American Consolidation servicesInchcape, through a JV with COSCO, operates a fleet of container trucks serving key ports and industrial citiesFritz invested in a logistics centers at Yantian FTZ, integrating the consolidation, warehousing and trucking functionsFederal Express is currently the only dedicated US cargo carrier flying to ChinaOOCL is engaged in cargo systems Example of foreign participation4Courier Services5Airline3Shipping Line5Customs Brokerage2 (Encouraged in FTZ)Warehousing4Consolidation4Domestic Trucking 2 (Encouraged in FTZ)Logistics Center4Airfreight Forwarder4International Freight Forwarder Restrictions on Foreign Participation Sector= low= highSource: A.T. Kearney Analysis
    • 71. The logistics business of major global service providers is expanding aggressively in China and will represent a significant threat to domestic playersHas been in China since 1995, offers a wide range of logistics services through centers in 13 locations, Opened its first national distribution center in Shanghai, as an important first step in Maersk's "fully controlled pan-China distribution network" APL Logistics is expanding on its strong Asian base (e.g., 10 logistics centers in China) through major acquisitions of logistics companies in America and Europe APL Logistics will focus on China and India, where the company is moving to retail business and local distribution OOCL operates 4 major logistics centers in China and is seeking to leverage Cargo Smart technology Started China business in 1988, first JV with Sinotrans in 1996 Planning to double its offices in China to 40 in year 2001 and is now operating 6 flights to China this year Plan to expand its service area in China from about 200 cities currently to 300 cities in the next 5 years, plan to open JVs in Shanghai and Shenzhen this year China business grew over 30% in year 2000MaerskAPLOOCLUPSFedexSource: JoC Online, A.T. Kearney AnalysisCompanyChina Operations
    • 72. Case Study - Sinotrans is aspiring to become a national logistics leader by leveraging its established customer base and national reachCurrent StatusFounded in 1950 National coverage with 13 business units, 497 rep. offices/branches and 238 JVs International access with 12 overseas rep. offices and 29 JVs/branches. Long term relationships with more than 400 freight forwarders, shipping agents and carriers in more than 150 countries 64,000 employees, 3.32M Sq.M warehouses, 2.38M Sq.M freight yard, 3000 trucks, 15 proprietary terminals, 77 unit trains and 2M DWT shipping capacity National IT system with global cargo tracking capability Established JV with leading express parcel service providers such as DHL, UPS, TNT and OCS in more than 20 cities in China Major InitiativesEstablished logistics development division in mid-2000 with initial focus on developing large accounts: Multinationals: Inventory management and distribution in China. Recent accounts include Philips Engineering projects: International multimodal transfer. Recent accounts include two leading hydro power plants Strengthening IT supporting function Currently partnering with leading IT vendors, such as CA Realigning sales, marketing, operation and financial processes in regional branches To become a national leader in providing full-range integrated logistics solutions by leveraging its extensive national networks and customer baseObjectiveSinotrans - Competitive StrategySource: Various company websites, www.yesky.com
    • 73. Case Study - China Post is seeking to enter the logistics market by leveraging its brand and extensive networkCurrent StatusAn unprofitable national post monopoly struggling with declining traditional business and increased competition in high growth business 236 regional dispatch bureaus which can become regional distribution centers, 57,000 branches (15,000 of them are networked), 41,000 vehicles, 593 train wagons, 3 proprietary aircraft A national financial transaction network (“Green Card Net”) connecting 975 cities in 30 provinces A national call center service called ”185” and an emerging e-commerce platform called ”183” Major InitiativesPositioning logistics as a major business line for growth by leveraging current national coverage and brand Improving its national IT backbone of “Green Card Net” Branches in more developed areas positioned as logistics integrators: Guangdong Post is partnering with Legend on e-logistics Guangdong Post has acquired large accounts such as Haier, Panasonic and P&G Recently added three new domestic air service routes while facing an increasing presence of UPS and FedEx Established strategic alliance with China Southern Airlines for door-to-door services Negotiating with banks on possible overseas listing with logistics as one major business lineTo make logistics one of China Post’s key growth areas and a tool for turnaroundObjectiveChina Post - Competitive StrategySource: Company website, China InfoBank, Qinghai Securities News, CAAC Journal
    • 74. Case Study - Maersk Logistics is investing heavily in China and has established a relatively large presenceCurrent StatusOffices in 14 cities in coastal areas, central China (Wuhan & Chengdu) and north-east China (Shenyang) Warehouse access in 11 cities in China Working with agencies to cover areas across China First European logistics company granted incorporation (as wholly owned foreign enterprise) in China and obtained operating license in 1998Major InitiativesInvesting heavily in PR and government relationships by advocating China trade relations, sponsoring Beijing Olympic bid and charities etc. Launching wide range of services, including In & out bound supply chain management Export and import service Distribution Warehousing Contract logistics Forwarding and groupage Air freight Offering special services including Q.I.C Bar-coding & labeling GOH carton & paper pallet Shrink-wrapping & slip-sheeting Continue to expand logistics services offering throughout coastal and interior of China Meet and surpass the clients’ most complex and challenging requirementsObjectiveMaersk Logistics - Competitive StrategySource: Various company website, COSCO, A.T. Kearney field survey
    • 75. Case Study - PG Logistics, a pure domestic logistic integrator, has invested heavily in IT capabilities and provides a range of SCM servicesCurrent StatusFounded in 1994 to serve P&G in China A professional logistics integrator with headquarter in Guangzhou and 45 branches/offices nationwide Revenue in 2001 is expected to be US$ 30 Mn with above 500 employees A web based logistics IT platform connecting all offices nationwide More than 50 accounts currently, most of which are multinationals, e.g. Philips, Electrolux and Bayer Major InitiativesProviding a range of services aiming at supply chain integration Logistics planning Logistics management - transportation, warehousing, consolidation/de-consolidation and packaging etc. Information management - IT planning, support and management Heavily investing in IT capabilities Integrating own process with customers’ processes Recently investing in distribution center in Suzhou (50K Sq.M warehouse) Become a leading logistics integrator with light asset baseObjectivePG-Logistics - Competitive StrategySource: Company websites, China InfoBank
    • 76. Case Study - Haier, a leading domestic consumer goods manufacturer, is leveraging its extensive network and capabilities to grow in logisticsCurrent StatusThe No. 1 domestic electrical appliance producer in China, founded in 1984 More than 38,000 distribution branches in 160 countries Currently has 42 distribution centers serving 1550 specialty stores and 9000 sales outlets in China Major InitiativesStarted logistics process reengineering in 1999, aiming at Purchase for order Global supply chain streamlining JIT A new system enabling increased service levels: 100% online bidding and purchasing Reduced purchasing lead times from 10 days to 3 days Suppliers reduced from 2,336 to 978 8-hour delivery in major cities, 24-hour regional delivery and 4-day national delivery Recently inaugurated a state-of-the- art distribution centerZero inventory Zero working capital Shortest order-delivery cycle time Making logistics capability a core competenceObjectiveHaier - Competitive StrategySource: Company websites, China InfoBank
    • 77. Case Study - Domestic Chinese logistics e-commerce companies, such as 56net.com, are emerging as logistics information platforms Current StatusFirst logistics web site in China, founded in May of 2000 by 25 China logistics companies as a common logistics e-commerce platform Back-up by extensive physical logistics networks of China Logistics Enterprise Alliance Leveraging the proprietary information sources nationwideMajor InitiativesProviding real-time information exchange of shipper demand, shipping capacity and warehousing capacity Targeting to improve participants’ shipping and warehousing capacity utilization by 15% by reducing information asymmetry and speeding up information exchange Expanding participants’ 3PL capability by providing: Online consignment Online process visibility through advanced technology, such as GPS Customized LAN services to the membersTo become the most influential and most comprehensive logistics information platform in ChinaObjectivewww.56net.com - Competitive StrategySource: Company website, China InfoBank
    • 78. 4. Regulatory Environment
    • 79. China’s entry into WTO is expected to have two main implications - (1) the logistics market will grow rapidly, and (2) competitive intensity will dramatically increaseImplication of WTO EntryDetails1. WTO will trigger rapid growth of logistics services 2. WTO will increase competitive intensityWTO reduces trade barriers. Chinese companies will access overseas market much easily and MNCs can develop the China market Possible devaluation of RMB will encourage more exports and more foreign direct investments, both of which will significantly increase trade volumeWTO will reduce barriers for international logistics providers to directly enter the China market. Maersk, P&O, OOCL have started to aggressively build relationships with local shippers As shipping agencies are doing a large portion of their business with international shipping companies, direct local relationship between the international players and shippers will significantly reduce the need for independent shipping agencies in fixed container liners. In addition, currently the price for shipping agency related services is fixed by the government WTO will have relatively less impact on the cargo forwarding business of current players. Local players still have advantages in relationships with shippers and local knowledgeSource: A.T. Kearney Analysis
    • 80. As China enters WTO, the competitive environment will change through opening of several market segmentsType of Price Control1. Providing officially deifined freight forwarding services2. Operate own terminals3. Operate own warehouse Port area Outside port4. Operate own trucks Port area Outside port5. Operate own door-to-door B/L Port cities Inland prvovincesMajor Activities by Foreign Freight Forwarders1. Minority share allowed 2. Minimum investment of US$ 1Mn 3. Geographic limitation 4. Few JVs are allowed for domestic freight forwarding1. Can take majority share in development of proprietary terminal 2. Can take minoriy share in common ports 3. No actual case exist in China1. Port area - No legal framework exists. Subject to negotiation with port 2. Outside port - JV CY/CFS exist 3. Freign ownership in general warehouse is forbidden1. Port area - No legal framework exists. Subject to negotiation with port 2. Outside port - No legal framework exists. Subject to MOC approval case by case. JV exists This service falls into the NVOCC category. NVOCC is not an officially defined business in China yet. A regulation to rectify its legal status and relevant terms has been drafted by MOC and is under review. Details is not available yetMarket priceMOC stipulated price, with flexibilityMarket priceMarket price1 year after WTO entry - Majority share 4 Years after WTO entry - wholly owned, no restriction on domestic freight forwardingThis piece is treated as MFN exception during WTO negotiation. It will be subject to bilateral negotiations case by caseUpon WTO entry - minority ownership 1 year after entry - majority onership 3 years after WTO - wholly ownedUpon WTO entry - minority ownership 1 year after entry - majority onership 3 years after WTO - wholly ownedNowMarket Opening StatusType of Price ControlMarket priceFurther loosening upMarket priceMarket priceFuturePotential Market OpeningSource: Interview with MOC; A.T. Kearney, WTO research
    • 81. 5. Information Technology
    • 82. Strong IT capabilities is becoming a core capability of logistics services providers and is critical to building a logistics services businessAs the supply chain becomes increasingly digitised, IT based services are becoming a core competency for any major logistics services provider Leading logistics players have dedicated extensive resources to making web-based supply chain solutions a key priority: Maersk has invested heavily in IT through its on-line system, M*Power, which enables integrated and customized logistics solutions APL is a leader in shipping related on-line services and has extensive IT capabilities to supply chain management solutions Danzas has invested in a number of B2C and B2B solutions to support a full range of supply chain service offering UPS has invested in NetCel360, formed an alliance with Network Solutions and developed a set of on-line tools to improve e-commerce capabilities FedEx has created a portal, invested in TradeCompass, and formed alliances with SAP and KPMG to boost FedEx capability to manage digital supply chains
    • 83. As the supply chain becomes increasingly digitised, IT based services are becoming a core competency for any major logistics services providerElectronic commerce supporting supplier relationships via EFT and EDI Real time visibility into production /material control systems for replenishment Long-term contracts with built-in joint cost objectivesForecasting augmented by advanced sharing of all necessary information Demand information pulls orders throughout Real time visibility of production schedule and JIT supplier delivery Early warning systems of problemsElectronic order tracking, communications and inquiry Electronic visibility of stock levels by location Technology tools for customer interface Common supply chain database “Total Product” concept with single view of inventorySupply chain partners act in parallel based on shared information Consumer demand information drives supply chain Common understanding of supply chain fact-base On-line order tracking Price tools ConsumerWholesalerSuppliersManufacturersRetailerFunds ConduitProduct ConduitInformation ConduitSource: A.T. KearneySelected E-logistics Services
    • 84. Maersk has invested heavily in IT through its on-line system, M*Power, which enables integrated and customized logistics solutionsM*Power™ Web provides full information on the status of each individual order M*Power™ Airfreight enables tracking of airfreight consignments M*Power™ SPOT provides all clients with an on-line view to the status of their cargo M*PowerTM Analysis is the reporting tool for in-depth analysis of all information M*Power™ Shipper enables the shipper to do all main tasks related to exporting of goods To Establish a unique suite of IT systems called M*Power™ – designed for on-line access to logistics data and individually adapted to each client’s unique requirements To allow increased visibility for both shippers and consignees of their purchase orders and inventory of goods in the supply chain To offer integrated E-enabled logistics solutions to clientsSource: Company reports; A.T. Kearney Analysis“…expanding our clients options to obtain complete supply chain visibility, from the time the purchase orders are issued, until the goods have arrived as planned. Depending on the level of sophistication we offer tailor-made solutions, combing one or more M*Power™ products that suit the requirements of specific clients at any given time”IT InitiativesRationaleObjectiveMaerskCase Study
    • 85. APL is a leader in shipping related on-line services and has extensive IT capabilities to supply chain management solutionsNetTrac provides customer-specific IT tracking down to the individual purchase offer and SKU level E-booking offers internet-based electronic booking including maintenance of account Domestic Tracking captures information about the domestic distribution of merchandise including management and control of inventories, tracking and providing logistics, schedule and warehouse reports Scan & Pak Weblink allows downloading of PO data or sending of factory ASN data via the InternetTo be the industry leader in supply-chain visibility, and the first to send and receive PO and ASNs (advanced shipping notice) electronically, as well as to put a PO/shipment tracking application to the Internet To develop a global Information Services organization integrating the systems capability with established logistics experienceSource: Company reports; A.T. Kearney Analysis“APL Logistics is uniquely positioned to leverage its considerable IT capabilities with the extensive infrastructure of the NOL Group… Management of all supply-chain elements allows us, as a carrier-neutral service provider, to deliver one-stop cargo-flow solutions” IT InitiativesRationaleObjectiveAPLCase Study
    • 86. Danzas has invested in a number of B2C and B2B solutions to support a full range of supply chain servicesInvestments in B2C applications: eVITA providing online start-up companies with the capability to market products via a safe set-up environment eCommerce Services (ECS) serving back end activities as credit card certification The Post Bank (under development) acting as the largest eTail bank in Europe Investments in B2B applications: Joined an online marketplace venture: I2I (industry to industry) handling transportation and distribution issues Implementing an integrated interface to enhance the module SAPR3 offering direct access to its warehousing application system Launched new eCommerce project to link its own B2C services and applications with those created by its acquirer, Deutsche PostTo offer a full range of E-biz solutions to serve both front and back ends of the marketplace with linkage with such traditional applications as WMS and track and trace To offer tailored solutions to clients in B2B sector and expand the company’s capabilities in serving this sector To provide a seamless service that covers the entire supply chain To ensure all synergies between Danzas and Deutsche Post been exploited and there is no duplication of efforts and developments within the latter’s various transport and distribution divisionsSource: Company reports; A.T. Kearney AnalysisTo develop the necessary E-enabled operations, services, processes and applications to meet new client demands in the logistics industryIT InitiativesRationaleObjectiveDanzasCase Study
    • 87. UPS has invested in NetCel360, formed an alliance with Network Solutions and developed a set of on-line tools to improve e-commerce capabilitiesFormed strategic alliance with Network Solutions to target domestic small businesses Invested in NetCel360 Ltd., a Pan-Asian provider of e-commerce outsourcing solutions Developed system solutions for home grocery delivery industry Formed UPS e-Venture to serve as investment vehicle for technology start-ups Developed, by e-Venture, UPS e-Logistics as a combination of ERP order management and financial systems along with warehouse management and demand planning and forecasting system Created a set of online modules, the UPS OnLine Tools based on various transportation and logistics requirements of clients, some downloadable from website Developed multiple web-enabled applications with links to the company’s ERP system and allowing tracking of events across the supply chain To expand UPS’ e-business product and service offerings To capture rapidly growing B2B e-commerce market in Asia To take advantage of fast growing consumer direct home delivery industry To identify and rapidly develop entirely new business related to supply chain management and e-commerce To offer configurable tools for customers to adapt to their individual needs To help customers streamline their business processes and improve business relationship with the carrier To expand capabilities in offering optimized supply chain management servicesSource: Company reports; A.T. Kearney AnalysisTo become an E-commerce services company by continually adding on more services through internetIT InitiativesRationaleObjectiveUPSCase Study
    • 88. FedEx has created a portal, invested in TradeCompass, and formed alliances with SAP and KPMG to boost its capability to manage digital supply chainsCreated a powerful FedEx internet package shipping portal on Netscape’s Netcenter Invested in G-Log, a global transportation management systems provider Formed strategic alliance with SAP to develop and market a “one-stop” portfolio of supply chain services Formed strategic alliance with KPMG to deliver complete supply chain solutions to large and mid-sized companies Invested in TradeCompass, a company specializing in international trade information To acquire new customers and generate new revenue sources on the internet To incorporate G-Log’s web-based system into the FedEx’s global supply chain solution To meet the growing demand for single integrator for the entire supply chain To leverage KPMT’s supply chain consulting and e-integration skills, which complements FDX’s logistics service expertise To add new content of international trade to its information service portfolio To turn NTE’s capability to wider commercial use Source: Company reports; A.T. Kearney Analysis Become an infomediary between a company and its supply chain on a global basis IT InitiativesRationaleObjectiveFedExCase Study
    • 89. Appendix
    • 90. Maersk LogisticsUS$ 900 MnMaersk LogisticsTotal Company RevenuesFY 2000 Logistics RevenuesLogistics Company Name Maersk Logistics offerings include: Ocean freight, air freight, warehousing and distribution Forecast of inventory and sourcing of raw materials. Manage freight payments, custom duties, letters of credit. Developed INTRA, a common carrier platform for e-commerce that includes booking, tracking capabilities Developed a Management Information System called M*Power. It Tracks cargo from purchase to distribution. Has order updates, notification of exceptions Offers preset corrective measure that are established between Maersk Logistics and customer Links vendors at origin to start the management process of the supply chain Maersk Logistics works with international shippers to reduce the total logistics cycle from production to delivery Represented in 70 countries. Includes the following facilities: 6 offices in Central America, the caribbean and Mexico. 13 offices in China 3 distribution centers in California. 250,000 sq foot facility in Norfolk, VA. Facilities in Seattle and AtlantaSource: 2000 Annual Reports, MSDW, American Shipper, A.T. Kearney analysis
    • 91. NOL/APLUS$ 4,612 MnUS$ 479 MnAPLTotal Company RevenuesFY 2000 Logistics RevenuesLogistics Company Name With the acquisition of GATX became the 12th largest 3PL in the US (measured by revenues) The acquisition added 21 Mn Square feet of distribution space North America: 19,897,000 sq ft Mexico: 145,000 sq ft Canada: 260,000 sq ft Chile: 480,000 sq ft Puerto Rico: 80,000 sq ft Costa Rica: 100,000 sq ft Argentina: 38,000 sq ft APL Services divided in four groups: Consolidation: group shipments together Intermodal management services Contract logistics consulting: Designed solutions to improve the supply chain Automotive logistics: Specialized services for automobile companies Supply chain services from end-to-end, starting from sourcing all the way to finished goods distribution At origin: deliver to warehouse (often their own). Can take care of documents of necessary Consolidation: If it doesn’t take up a full container they will group with other shipments Transportation: By sea, air, intermodal Destination: Warehousing, order processing, order picking, transportation Offer customized event and exception management solutions 115 warehouses in 55 countries, including North America, Latin America, Europe, South-East Asia and China Client can follow product online at the SKU level Less than 50% of APL Logistics outsourced sea transportation needs are carried via APL container shipping vesselsSource: 2000 Annual Reports, MSDW, American Shipper, A.T. Kearney analysis
    • 92. NYKUS$ 10,300 MnUS$ 1,500 MnNYKTotal Company RevenuesFY 2000 Logistics RevenuesLogistics Company Name Offers logistics services through 39 companies in 21 countries in Asia, North America, Australia and Europe. Plans to expand to China, Eastern Europe and Latin America Employs about 5000 for the logistics businesses Has identified logistics as a as a core business Offerings include the following: Supply chain management from sourcing to final sale Minimize inventories NYK wants to link all transport modes, including sea, land and air Warehousing Distribution Consolidation Forwarding NYK owns 85 warehouses and distribution centers around the world. The distribution centers are mostly located in Europe Source: 2000 Annual Reports, MSDW, American Shipper, A.T. Kearney analysis
    • 93. P&OUS$ 6,397 MnPOCL: US$ 154 Mn POTE: US$ 1,456 MnPOTE & POCLTotal Company RevenuesFY 2000 Logistics RevenuesLogistics Company Name 2 logistics division: P&O Trans European (POTE) and P&O Cold Logistics (POCL) POTE: Sector Focus: Industrial: 21% Retail: 5% Consumer Electronics: 21% Automotive: 25% Petrochemical: 25% Other: 3% 800,000 sq feet of warehousing and storage in 160 locations in the UK and Continental Europe 1200 Trucks and 2600 trailer units Has dedicated facilities for clients such as Opel, GM, Dow Chemical POCL Australian market leader (54%) for chilled food distribution facilities and 6th biggest worldwide Highly automated Consolidates shipments and delivers JIT to supermarkets from direct data feeds Manages stocks and sales database Also has strong presence in New Zealand and Southern US Comment: No clear strategic direction. The company is not trying to diversify or grow its logistics activity significantly. Does not have a global presenceSource: 2000 Annual Reports, MSDW, American Shipper, A.T. Kearney analysis
    • 94. Hapag-LloydEURO 940 Mn EURO 166 Mn EURO 329 MnVTG-Lehnkering Pracht Freight Forwarding French AlgecoTotal Company RevenuesFY 2000 Logistics RevenuesLogistics Company Name Logistics is concentrated among three companies: VTG-Lehnkering, Pracht Freight Forwarding, French Algeco VTG-Lehnkering: Owns customized equipment to transfer shipments by road, rail and waterways. Specializes in oil, chemical and petrochemical industries Pracht Freight Forwarding: Offerings include: Consolidation Warehousing Distribution Algeco: Produces, sells and leases container modules Hapag-Lloyd has transport data automatically fed into its Web site. Hapag-Lloyd has the following online capabilities: Cargo booking Tracking Printing of import documentsSource: 2000 Annual Reports, MSDW, American Shipper, A.T. Kearney analysis
    • 95. MOLUS$ 8,300 Mn US$ 652 MnM.O Air System Cougar Holdings PTE Ltd, M.O. Logistics Netherlands B.V. Hong Kong LogisticsTotal Company RevenuesFY 2000 Logistics RevenuesLogistics Company Name MOL has many logistics companies and operations worldwide. It is in the process of consolidating them to better leverage its resources globally. The entity will be know as MOL Logistics Offer forwarding and warehousing services Assists customers in establishing supply chain management systems Has a prominent position in Europe in the distribution of wines and spirits Operates parts center for BMW in Southeast Asia Source: 2000 Annual Reports, MSDW, American Shipper, A.T. Kearney analysis
    • 96. OOCLUS$ 2,400 MnOOCLTotal Company RevenuesFY 2000 Logistics RevenuesLogistics Company Name Cargo System, OOCL’s logistics arm, provides specialized supply chain management solutions to its client base. It has 59 offices and is well established in mainland China OOCL developed CargoSmart, an internet portal that has the following capabilities: Booking Tracking Access to documentation Schedule enquiry Source: 2000 Annual Reports, MSDW, American Shipper, A.T. Kearney analysis
    • 97. General comments from COSCO and A.T. Kearney Remarks Study on partnership opportunities for Logistics BU will be identified in a separate workstreamPlease provide analysis on partnering/ alliance opportunities for logistics business, including potential partnering areas, targets, and feasibility (consider both logistics and IT companies) Pending further discussion on scope and project prioritiesLogistics business is product centered business, please provide study on market demand, competitive environment and trends by product: Key product groups include: Auto (CKD and OEM), home appliance, exhibition, retail goods, distribution center (China), shipping agency, etc.ATK RemarksCOSCO Comments Pending further discussion on scope and project prioritiesIntroduction of IT suppliers for logistics business Modified accordinglyDetailed comments on P68