The Colombian flower industry and supply-chain practices IX AIR CARGO AMERICAS November 7-9, 2007.

The Colombian flower The Colombian flower industry and supply-chain industry and supply-chain practicespractices

IX AIR CARGO AMERICASNovember 7-9, 2007

1. Flower industry2. Supply-chain practices: farm to

customers3. Asocolflores and logistics4. Next steps

ContentContent

1. Flower industry2. Supply-chain practices: farm to

customers3. Asocolflores and logistics4. Next steps

ContentContent

World flower exports 2006World flower exports 2006

Ethiopia2%

Israel2% Kenya

5%

Ecuador6%

Colombia13%

Netherlands42%

China1%

Thailand1%

Others28%

Fuente: AIPH 2007

Ecuador6%

Per capita consumptionPer capita consumptionAIPH, 2007 (Euros)

Country Per cap. Country Per cap.

Switzerland 80 Slovenia 3Norway 59 Italy 23Holland 55 Spain 22Japan 54 USA 21Austria 45 Portugal 16 Denmark 44 Greece 16 UK 44 Hungary

15Sweden 38 Chec Republic 10Germany 36 Poland 8Ireland 35 Slovaquia 7Finland 34 Croacia 7France 31 Russia 3Belgium 30 China 1

Flower market trends in Flower market trends in U.S.AU.S.A

Size of the floriculture industry: US$19.4 billion (US Department of Commerce U.S.A)

Over the last ten years, the supermarket share has grown from 41% to 52%, while the florist shops have lost market share falling to 32% to 20%.

Specialty-cut flowers increased their share in sales to US homes.

Ten years ago, half the sales of ornamental products in supermarkets were flowers, today they represent two thirds.

Fresh-cut flowers make up 75% of the transactions in florist shops.

Internet sales of flowers held its participation at between 5% and 6% of the number of transactions.

Ipsos/AFE Consumer Tracking Study, 2005

The Colombian flower The Colombian flower industryindustry 182,184 jobs (98,641 direct / 83,533 indirect) 1,000,000 Colombians depend on floriculture Exports 2007: US$967 million 7,266 hectares 60% of the workforce are women 95% of total production is exported Colombia is:

the first supplier of flowers to the United States the first supplier of carnations worldwide the second largest flower exporter in the world.

Largest non-traditional agricultural export (10%) 75% of air cargo exported from Colombia in the

last 10 year were flowers

Colombian flower exportsColombian flower exports

-

50

100

150

200

19

701

971

19

721

973

19

741

975

19

761

977

19

781

979

19

801

981

19

821

983

19

841

985

19

861

987

19

881

989

19

901

991

19

921

993

19

941

995

19

961

997

19

981

999

20

002

001

20

022

003

20

042

005

20

06

Th

ou

sa

nd

to

ns

-

100

200

300

400

500

600

700

800

900

1.000

Millio

ns

do

llars

Thousand tons Million dollars

Exports by marketExports by market

United States79%

Germany0,9%

Netherlands1,6%Canada

2,0%Japan2,2%

Spain2,2%

United Kingdom4,2%

Russia4,4%

Others3,6%

Exports by productExports by product

Other34%

Rose31%

Chrysanthemum and pompon

8%

Standardcarnation

15%

Miniature carnation

7%

Alstroemeria5%

AreaArea

5.906

6.201

6.544

6.953 6.974

7.266

5.000

6.000

7.000

8.000

Has

2002 2003 2004 2005 2006 2007

RegionsRegions

Regions(Flowers)

% of Area

AltitudeMeters( Feet)

Avg. TempCentigrade

(Fahrenheit)

Sabana de Bogotá(Carnations-roses)

792600

( 8000)13

(55)

Rionegro ( Pompons)

172000

(6100)17

(62)

Other areas( Anthurium-

Heliconia)4

1600(4900)

21(70)

Share of the U.S. import Share of the U.S. import marketmarket

77% of flowers imported by the USA are Colombian

98% of Alstroemerias 97% of Carnations 82% of Chrysanthemums and

Pompoms 67% of Roses 35% of other types of flowers

Source: USDA, 2006

Bouquet exports to U.S.A.Bouquet exports to U.S.A.

703.9

25

1.0

66.1

77

1.2

33.5

02

1.4

45.8

61

2.0

21.0

56

2.0

27.3

81

2.9

53.6

06

3.1

14.6

37

3.3

66.6

07

3.5

79.3

76

0

500.000

1.000.000

1.500.000

2.000.000

2.500.000

3.000.000

3.500.000

4.000.000

4.500.000

Fu

ll e

qu

ivale

nt

bo

xes

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

76.8% comes from Colombia

Comparative advantagesComparative advantages

Supply of labour

Soil quality

Abundance of water

Luminosity

Proximity to main markets

Cluster conditions Importers of plant material and agro-chemical

products located in Bogotá

Closeness to Eldorado and Rionegro airports

Main research centers located near Bogotá

1. Flower industry2. Supply-chain practices: farm to

customers3. Asocolflores and logistics4. Next steps

ContentsContents

Supply-chain PracticesSupply-chain Practices

This is not a new issue, but a common factor for anyone in the market

This is used to respond effectively to world competition

Competition is stiffer because of technology, globalization, market saturation, lower productions costs, etc.

The objective is that customers receive the product with the required quality and on time, always adding value

Logistics and Logistics and competitivenesscompetitiveness The Netherlands is the European perishables hub and the first flower exporter worldwide; Kenya has been doing sea shipments to The Netherlands, and is their first supplier; Ecuador is reevaluating the process of cargo consolidation; the Mexican flower industry has been stimulated with subsidies and has the opportunity of sending flowers overland by truck

World maritime shipments, including Colombia, have grown significantly in the last years

Supermarkets require more efficiency in shipping and traceability

We still have reports of problems with the cold chain, as it is currently managed in the US

Air tariffs are still 30% of the cost of flowers CIF

Flower Exporting by airFlower Exporting by air

Airport El Dorado: most important airport in Latin America because flowers exports

Flowers: 223,000 tons per year

Bogotá 79% cultivated area

Rionegro 17% cultivated area

Daily: 709 tons on average. During Saint Valentine’s there were close to 1,500,000 boxes, or 111,000 boxes daily, and 816 pallets

El Dorado and Rionegro El Dorado and Rionegro facilitiesfacilities 30.600 m2 + 11.000 m2 in the international cargo

areas In Bogotá:

37% for flowers flowers 50% are cold rooms 212,000 per year only in 5,660 m2 37 ton/m2 per year 2035 boxes m2/year 2 kgs m2/day

Four years ago, delays were up to 13 hours, today with logistic coordination they have been reduced to 2.5 hours

The industry handles The industry handles around 60,000 boxes/day, around 60,000 boxes/day,

one by one …there is one by one …there is room for improvementsroom for improvements

The flower export processThe flower export processThe product

In the cold room

Cargo identification

Preparation of the load

Analyses truck-airline

•Coordination with brokers, airlines,

merchandising areas.•Define type of truck•Planning the cargo

according to destination

•End of the load•Flights

•Real Weight / volume

Temperature verification

Verification of: temperature,

SecuritySchedule of load

To the airport

Yes

No

If the truck is going to another farm, procedures for

loading the truck must be followed

Transport to other farms

A

Posthaverst

Planning

Planning a load

Load a truck

Move into the

cold room

The flower export processThe flower export process

At airport

Cargo to the consolidators agencies or

airlines

Security checks

Cargo consolidation

Pallets configuration

Storageto weigh pallets

Airplane loading

planLoad

airplaneTake-off

Time and temperature verification

Verification of temperatures in cold room. Limits to have

this cargo in storageWeight-Balance

Verification of the

temperature in load

conditions

Verification

of time

The product

The flower export processThe flower export processWith the cargo agency

Inform the farm # of the AWB assigned

Farm prepares the boxes

Verification of arriving farm trucks

Final AWB. AWB with# of pieces and weights

Gives the AWB and cargo requirements to the airline

Pre-alerts destination and Track & Trace

The flower export processThe flower export processCargo agency and airline

Security warnings

Projections for next week

Program itinerariesvs capacity

Confirmation of projections

Confirmation of quota

Allocation of flightand arrival slot

The flower export processThe flower export processAt destination

Pre-alert Flight

Unload

AMS documents and customs manifest

CBP (antiterrorism and

plant health inspections) (separate sample, prepare

listing, call inspector)

Pick up order

The costumersThe costumersThey are increasingly more powerful.

They reject based on quality and tardiness and demand social and environmental standards.

Customers’ requirements:– Colour– Size– Freshness– Sturdiness– Shape– Free of residues– Free of

agrochemicals– Free of pests

– Price – Brand– Destination

And they want to be sure of– Sustainability– Environmental standards– Social standards

Quality is a pillar for Quality is a pillar for creating value and creating value and

customer satisfactioncustomer satisfaction

The exporter or importerThe exporter or importer usually end usually end up paying for the inefficiency of the up paying for the inefficiency of the

chainchain

Logistic practicesLogistic practicesTo get quality requires

Effective coordination of the chain Coordinated cargo and document flow

We can improve if:The chain can respond effectively to

• cold chain management...• many box sizes…• coming from many farms...• going to many clients...• asking for special packing, standards and varieties

In a sample of over 200 firms, the critical logistic delays occur mostly during loading and unloading

1. Flower industry2. Supply-chain practices: farm to

customers3. Asocolflores and logistics4. Next steps

ContentsContents

Asocolflores in LogisticsAsocolflores in LogisticsThe Asocolflores Logistic Committee has worked towards better document and physical cargo procedures in Colombia and foreign markets.

We are part of the WF&FSA´s Logistics Coalition (cold chain, packing, GTIN project)

52 farms have been trained in Logistics Management

Asocolflores actively participated in establishing the procedures for the bids for the airports of Eldorado (Bogotá) and Jose María Cordova (Rionegro)

We provide simulation models to optimize procedures in transportation and management of cargo at the airport

We offer timely information about new legislation, procedures and its implementation to our affiliated companies

LogisticsLogisticsDuring high seasons, we coordinate with cargo agencies, airlines, governments and concessionaries so as to ensure better attention to the supply of flowers

LogisticsLogistics

Postharvest Best

Practices Manual

(includes logistics topics

such as traceability)

Asocolflores Asocolflores Non-intrusive inspections (DIAN)

Protocol for narcotic inspections

BASC - CTPAT

Aeronautic issues (open skies, IATA – CASS)

Colombian custom and exports procedures: MUISCA, Plan Vallejo, VUCE, certificates of origin

International customs and requirements

1. Flower industry2. Supply-chain practices: farm to

customers3. Asocolflores and logistics4. Next steps: chain

ContentsContents

1. Operational improvements1. Operational improvementsEfficiency between LTO and ATO contact

Consolidation areaUnified security process

2. Protocol for Cold Chain2. Protocol for Cold Chain

With the national and international LTO and ATO

Verification of temperature at critical points of the chain

Data-bases and feedback

Management throughout the chain

3. Packing3. Packing

On the farm, LTO, ATO

Protocol of consolidation, palletization and deconsolidation processes

Indicators

4. Increase efficiency4. Increase efficiency

ConsoIidation Non intrusive inspections Cargo through-put

In recepction of palleted boxes

5. Register indicators5. Register indicators

Ex. Delays, load time, consolidation time

Management and processes

6. Enforce security standards6. Enforce security standards

Certification of members of the floriculture chain (farm, LTO, ATO, cargo agency, broker)

7. Fullfill international 7. Fullfill international requirementsrequirements

Sustainable floriculture with social responsibility

Thank you