Evan Armstrong from Armstrong & Associates on ‘Examining the State of Third Party Logistics - Current Financial Results and Rays of Hope’

Current State of Third-Party Logistics

Phone: +1-608-873-8929

Website: www.3PLogistics.com

©Copyright 2010 Armstrong & Associates, Inc.

Founded in 1980 Supply Chain Market Research and Consulting Services Current Research:

Who's Who Logistics and Supply Chain Management – Americas Who's Who in Logistics and Supply Chain Management – International Warehousing in North America – 2009 Market Size, Major 3PLs,

Benchmarking Costs, Prices and Practices Targeted in-depth market research papers

Articles & Press Coverage: American Shipper, Global Logistics & Supply Chain Strategies, Journal of Commerce, Logistics Management, Logistics Quarterly, Modern Materials Handling, Traffic World, Transport Topics, Wall Street Journal

Consulting Services: Logistics Outsourcing, 3PL Strategic Planning, Mergers & Acquisitions, Benchmarking, Expert Witness, 3PL Capabilities Audits, Targeted Research

Global Resources: U.S. Organization; Eric Xiang, Shanghai China; Latin America, Japan and South Korea Alliance Partners

Founded in 1980 Supply Chain Market Research and Consulting Services Current Research:

Who's Who Logistics and Supply Chain Management – Americas Who's Who in Logistics and Supply Chain Management – International Warehousing in North America – 2009 Market Size, Major 3PLs,

Benchmarking Costs, Prices and Practices Targeted in-depth market research papers

Articles & Press Coverage: American Shipper, Global Logistics & Supply Chain Strategies, Journal of Commerce, Logistics Management, Logistics Quarterly, Modern Materials Handling, Traffic World, Transport Topics, Wall Street Journal

Consulting Services: Logistics Outsourcing, 3PL Strategic Planning, Mergers & Acquisitions, Benchmarking, Expert Witness, 3PL Capabilities Audits, Targeted Research

Global Resources: U.S. Organization; Eric Xiang, Shanghai China; Latin America, Japan and South Korea Alliance Partners

About Armstrong & Associates, Inc.


http://www.3plogistics.com/Site_Visits.htm

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Value-Added Services & Capabilities Domestic and Int’l Transportation Management

Cargo Insurance Carrier Contracting/Brokering/Freight Payment

Customs Brokerage/ACE/C-TPAT/FAST Duty Drawback Processing

Incoterms Management – EXW to DDP Letters of Credit/Negotiable BOLs

Merge-In Transit NVOCC

Project Logistics Project Management

Transportation Execution Transportation Network Planning/Optimization

Warehousing/Cross-docking Bonded Warehouses

Home Delivery Installation/Removal

JIT/Kanban Kitting/Pick & Pack

Light Manufacturing/Assembly Reverse Logistics

Small Package/Fulfillment Easily Deployable WMS

Both – 3PL/4PL 4PL/Lead Logistics Provider

Call Centers Consolidation/Deconsolidation

Consulting/Process Reengineering EDI Handling

Financial Services Food Grade/Temperature Controlled

Hazmat Skills Purchase Order Management

Internet Supply Chain Visibility Inventory/Vendor Management

ISO Certification Pool Distribution/Cross-docking

Radio Frequency/RFID Security Processes

Sourcing Skills

Tier 1 GSCM’s provide these services and capabilities in global markets. 4


Drivers of Global 3PL Market Growth

3PLs provide the infrastructure necessary to support increasingly complex supply chains involved in global trade.

3PLs provide the infrastructure necessary to support increasingly complex supply chains involved in global trade.

Low-Cost Country Sourcing

Low-Cost Country Sourcing

Off-Shoring & Outsourced Mfg.

Off-Shoring & Outsourced Mfg.

Need Regional & Local Market Expertise Need Regional & Local Market Expertise

Focus on Core Competencies Focus on Core Competencies

Expanding IT Requirements Expanding IT Requirements

Cost Reductions

Cost Reductions

Operational Efficiencies Operational Efficiencies

Regulatory Compliance Regulatory Compliance

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Changes in U.S. Truck Tonnage

Source: American Trucking Associations

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Freight Forwarders Volume 2008 – 2010E

Source: Company data, Morgan Stanley Research

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Freight Forwarders Volume 2008 – 2010E

Source: Company data, Morgan Stanley Research

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2009 Global Logistics Costs & 3PL Revenue

Global 3PL Market = US$ 507 Billion

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Top Global Fortune 500 Buyers of 3PL Services

49

37

32

37

27 26

42

23

30

29

29

23

31

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Trends in 3PL/Customer Relationships

% of Domestic Fortune 500 Companies using 3PLs

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Global 3PL Revenues by Select Vertical Industries

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Kuehne + Nagel DHL Logistics UPS SCS

FedEx SCS/TN CEVA Logistics DB Schenker CAT Logistics

Major Markets Freight

C.H. Robinson Expeditors

Penske Ryder

DSV

Geodis Agility

UTi Worldwide

Hellmann Worldwide

Nippon Express

Kintetsu World Exp

NYK Logistics APL Logistics Panalpina

Forwarders

Global Supply Chain Managers Tier 1 3PLs

Menlo

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U.S. 3PL Market 1996 – 2010E (US$ Billions)

1996 – 2009 CAGR = 10.1%

-16%

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2009 U.S. 3PL Segment Revenues

* Total 2009 gross revenue (turnover) for the 3PL market in the U.S. is estimated at $107.1 billion. $3 billion is included for the contract logistics software segment.

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3PL Segment

Gross Revenue (Turnover)

(US$ Billions) % Decline

2009 vs. 2008 Net Revenue (US$ Billions)

% Decline 2009 vs. 2008

DTM 31.8 ‐15.1 5.2 ‐11.4 ITM 35.1 ‐23.7 14.6 ‐18.9 DCC 9.4 ‐16.0 9.2 ‐15.9 VAWD 27.8 ‐5.3 21.9 ‐6.9

Total* 104.1 ‐16.0 50.9 ‐12.7


2010 U.S. 3PL Gross Revenue Growth Estimates

¹ Total 2010E gross revenue (turnover) for the 3PL market in the U.S. is estimated at $121.4 billion. $3 billion is included for the contract logistics software segment.

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U.S. 3PL Segment Net Revenue Trends (US$ Millions)

3PL Segment

% Decline 2009 vs. 2008

CAGR 1995–2009

% Change 2010E vs. 2009

DTM -11.4% 11.9% 8.0%

ITM -18.9% 15.7% 12.0%

DCC -15.9% 7.3% 6.0%

VAWD -6.9% 14.9% 7.0%

Total -12.7% 12.7% 8.3%

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U.S. 3PL Segment Net Income Margins

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2009 vs. 2008 U.S. 3PL Market Momentum

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Top 25 North American Warehousing 3PLs

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Third-Party Logistics Provider (3PL) Total Square Feet

(Millions) Number of FacilitiesDHL Supply Chain/Exel 99 511GENCO Supply Chain Solutions 37 123Jacobson Companies 35 145CEVA Logistics (The Americas) 33 164Caterpillar Logistics Services 29 130OHL 28.3 120Americold Logistics 27 104APL Logistics 26.1 166Kenco Logistic Services 25 100UTi Worldwide 24.3 234VersaCold Logistics Services 23 126MBX Logistics 20 51UPS Supply Chain Solutions 20 100Menlo Worldwide Logistics 18 120NFI 18 51DSC Logistics 15 37Ryder System 15 252Saddle Creek 15 52


Top 25 North American Warehousing 3PLs (Continued)

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Third-Party Logistics Provider (3PL) Total Square Feet

(Millions) Number of FacilitiesWarehouse Specialists 14 45Penske Logistics 12.3 101DB Schenker Americas 12 80Schneider Logistics 12 33Syncreon 12 70Total Logistic Control 9.1 29Kane Is Able 8.5 17


I.T. is a top reason for companies outsourcing logistics. Solid I.T. is critical to remain competitive and strengthen a 3PLs

brand. 3PLs are striving for an integrated “base” systems

backbone. Menlo: TTMS, Infor/CAPS, Proprietary LMS, WMS (Provia

modified), Menlo VIEW (Viewlocity) Penske: i2 Technologies, Infor/EXE, Proprietary LMS, RT

Systems, MARC C.H. Robinson: Proprietary ExpressTMS, HighJump

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3PL Information Technology Trends

Thank You!

Stoughton Wisconsin Office Richard Armstrong

Armstrong & Associates, Inc. 100 Business Park Circle

Suite 202 Stoughton, WI 53589 USA

608-873-8929

Milwaukee Wisconsin Office Evan Armstrong

Armstrong & Associates, Inc. 10401 West Lincoln Avenue

Suite 207 West Allis, WI 53227 USA

414-545-3838

Evan Armstrong from Armstrong & Associates on ‘Examining the State of Third Party Logistics - Current Financial Results and Rays of Hope’

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