The FutureThe Future

Mike WallisMike Wallis

Topics for todayTopics for today

• Trend changes in world Trend changes in world demographics and economic activitydemographics and economic activity

• Latest developments and market Latest developments and market pressurespressures

• Integration in Global logisticsIntegration in Global logistics

Trend changes in demographics Trend changes in demographics andandeconomic activity economic activity

• Does the world catch a Does the world catch a cold if America sneezes?cold if America sneezes?

• 5.2% global growth in 5.2% global growth in past 2 years is better past 2 years is better than anything in 80’s & than anything in 80’s & 90’s90’s

• Only Zimbabwe, Fiji & Only Zimbabwe, Fiji & Tonga shrinkingTonga shrinking

• Countries from mixed Countries from mixed turmoil hitting the turmoil hitting the heightsheights– Turkey; average 6.9%Turkey; average 6.9%– Slovakia; 5 mil out of work Slovakia; 5 mil out of work

to < 1milto < 1mil– Chile to GDP per head Chile to GDP per head

$10000$10000

0

10

2030

4050

6070

80

90100

1980 1990 2000 2008

>5%

>7%

COUNTRIES BY GDP GROWTH

Trend changes in demographics Trend changes in demographics andandeconomic activityeconomic activity

• High growth meets high High growth meets high populationspopulations

• High growth meets High growth meets commodity export led commodity export led countriescountries

• Stability is being caused Stability is being caused by wealth creation, by wealth creation, people do not want to people do not want to risk losing it.risk losing it.

• Debt is being repaidDebt is being repaid– Russia $22 billions in 2006 Russia $22 billions in 2006

ChinaChina 9.59.5

Developing AsiaDeveloping Asia 8.48.4

IndiaIndia 7.87.8

Central AsiaCentral Asia 7.57.5

Sub-Saharan AfricaSub-Saharan Africa 6.16.1

RussiaRussia 5.95.9

CEECEE 5.55.5

Middle EastMiddle East 5.55.5

Global AverageGlobal Average 4.94.9

BrazilBrazil 4.24.2

EUEU 2.72.7

USAUSA 2.22.2

JapanJapan 1.91.9

Trend changes in demographics Trend changes in demographics andandeconomic activityeconomic activity

• Middle class being Middle class being created in all of these created in all of these territoriesterritories

• Consumption will Consumption will increaseincrease– China will consume all it China will consume all it

makes by 2025??makes by 2025??– Infrastructure behind Infrastructure behind

this is mixedthis is mixed

• We have all seen We have all seen international trade international trade increaseincrease– How can we take How can we take

advantage?advantage?

Trend changes in demographics Trend changes in demographics andandeconomic activityeconomic activity• Service consistencyService consistency

– Right product at right timeRight product at right time– Clear and accurate informationClear and accurate information

• Know your market, know the rules!Know your market, know the rules!– Localise where you canLocalise where you can– Utilise foreign nationalsUtilise foreign nationals

• Launch the next market or supply pointLaunch the next market or supply point– Keep existing markets movingKeep existing markets moving– Repeat success formulasRepeat success formulas

• Treat supply chain as a core competenceTreat supply chain as a core competence– You have to use service providers at a level, work with themYou have to use service providers at a level, work with them– Maintain or improve internal competenceMaintain or improve internal competence

• In future we might catch a cold when China sneezesIn future we might catch a cold when China sneezes

Latest developments and market Latest developments and market pressurespressures

• Carbon footprintCarbon footprint– Research and statistics as Research and statistics as

a defencea defence– Headline moves e.g. Offset Headline moves e.g. Offset

schemesschemes– Big hitting initiatives Big hitting initiatives

missing as they have missing as they have service effect, sales!service effect, sales!

– Return to local sourcing Return to local sourcing has no critical mass yet, has no critical mass yet, but clients are asking!but clients are asking!

– It is getting tractionIt is getting traction– Taxation and regulation Taxation and regulation

will accelerate the trendwill accelerate the trend

• SustainabilitySustainability– Sea freight is cheaperSea freight is cheaper– 50 tons on a container and 50 tons on a container and

then by railthen by rail– ““Filler freight”Filler freight”– Biofuels?Biofuels?– PackagingPackaging

• We will see clients & We will see clients & suppliers changing suppliers changing strategystrategy– specific productsspecific products– sourcing policysourcing policy– collaborationcollaboration

Latest developments and market Latest developments and market pressurespressures

• GlobalizationGlobalization– Political changes Political changes

• Iron CurtainIron Curtain

• China in trade talksChina in trade talks

• Western initiativesWestern initiatives– AfricaAfrica– Middle EastMiddle East

– Communications and Communications and technologytechnology

– StandardizationStandardization

• EDIEDI

• PackagingPackaging

• DeregulationDeregulation

• PrivatisationPrivatisation

• Rapid growth in tradeRapid growth in trade

• Rapid growth in competitionRapid growth in competition

• Speed and certainty of Speed and certainty of supply is an area of supply is an area of differentiationdifferentiation

Latest developments and market Latest developments and market pressurespressures

• ConsolidationConsolidation– DHL buys Exel & T&BDHL buys Exel & T&B– NYK buys PanalpinaNYK buys Panalpina– K&N buys HaysK&N buys Hays– Schenker & BAXSchenker & BAX

– Similar trend in retail and Similar trend in retail and manufacturing and service manufacturing and service industriesindustries

• Margin squeezeMargin squeeze– 20% of UK freight 20% of UK freight

forwarders at riskforwarders at risk– Procurement techniquesProcurement techniques

• Small can be beautifulSmall can be beautiful

• Scale is a good defenceScale is a good defence

• Service & cost recipe Service & cost recipe

• One stop shopOne stop shop

• Can you get consistency?Can you get consistency?

One to watchOne to watch

• The old Silk Route rail The old Silk Route rail networknetwork– China – Kazhakstan – China – Kazhakstan –

Russia – EU border & Russia – EU border & Balkans & TurkeyBalkans & Turkey

• Potentially 1,750,000 Potentially 1,750,000 40’ containers per year40’ containers per year– = to 5-7 large container = to 5-7 large container

ships departing each ships departing each weekweek

• Potentially 20% cheaper Potentially 20% cheaper than traditional routesthan traditional routes

• 14-18 days Shanghai to 14-18 days Shanghai to BerlinBerlin

Integration in Global LogisticsIntegration in Global Logistics

• The leading supply chain integrators are manufacturers;The leading supply chain integrators are manufacturers;– Not Logistics companiesNot Logistics companies– The manufacturer is the key elementThe manufacturer is the key element

• They have created the demand for services that Logistics They have created the demand for services that Logistics companies are trying to supplycompanies are trying to supply– AutomotiveAutomotive– Pharmaceutical & chemicalPharmaceutical & chemical– Hi-techHi-tech

• Large logistics companies have responded; butLarge logistics companies have responded; but– There are relatively few examples of real global integration, There are relatively few examples of real global integration,

more tactical and regionalmore tactical and regional– The most successful ones are long-termThe most successful ones are long-term– Japanese and AmericanJapanese and American

Integration in Global LogisticsIntegration in Global Logistics

• Supply Chain is also the target of IT and ConsultantsSupply Chain is also the target of IT and Consultants

• Range of systems out there;Range of systems out there;– i2i2– Keywill, is an interesting one.Keywill, is an interesting one.

• It is the process and information flow that is needed as well as It is the process and information flow that is needed as well as some trust, and longevitysome trust, and longevity

• Who has best knowledge of your processes?Who has best knowledge of your processes?– More important, your threats and opportunities and your cultureMore important, your threats and opportunities and your culture

• Most services you need are out there, but not necessarily joined Most services you need are out there, but not necessarily joined up, or maybe not adding enough valueup, or maybe not adding enough value

Integration in Global LogisticsIntegration in Global Logisticsan examplean example

B&Q were sourcing many products from ChinaB&Q were sourcing many products from China• Theoretically low cost suppliersTheoretically low cost suppliers• Packaging in branded materialsPackaging in branded materials• Producing and shipping in economic quantitiesProducing and shipping in economic quantities

– Peaks and valleys of stock and availabilityPeaks and valleys of stock and availability

• We suggested that we took over the “packaging” part of We suggested that we took over the “packaging” part of productionproduction

• Opened 3 factoriesOpened 3 factories– Ordered raw material from original suppliers, unpackagedOrdered raw material from original suppliers, unpackaged– Received sales dataReceived sales data– Used VMI techniques aligned to freight purchasing knowledge Used VMI techniques aligned to freight purchasing knowledge

and other traffics and other traffics – Delivered to UK DC on just in time basis by seaDelivered to UK DC on just in time basis by sea

• Reduced landed cost by 30%Reduced landed cost by 30%• Information systems, trust, transparency, long-term, process Information systems, trust, transparency, long-term, process

ownershipownership• Plan to roll out to 9 departmentsPlan to roll out to 9 departments

Integration in Global LogisticsIntegration in Global Logistics