3PL Industry trends

Observations from a banker.

Didier Keters, Sector Head Utilities, Transport & Logistics – May 29th 2012

Vlerick Alumni – Meet the Industry

• ING Commercial banking & Transport & Logistics• Logistics

– Scope– Value chain– 3PL – Landscape

• Trends in Logistics– Globalisation– Supply chain integration– Know your customer– Technology– Sustainability– Real Estate– Financing

• Concluding remarks

Agenda.

9/24/11 2

ING Commercial bnaking & Transport & Logistics

Corporate FInance

Event FInance

LendingServices

FinancialMarkets Transaction

Services

ClientClient

AssistantRSM

AccountManager

RelationshipManager

SeniorBanker

International Branch Network & Local Account Management

Executive Involved

Research

• Corporate clients in Brussels

• Mid-Corp team in ports of Antwerp & Zeebrugge

Fixed assets

Equity

LT Debt

Creditors

ST Debt

Stock

Debtors

Cash

Corporate balance sheet

SH

OR

T T

ER

MLO

NG

TE

RM

Analysing the balance sheet in a structured manner

Financing Flow

InvestmentFlow

The unified approach is aimed at creating an integral view on the company’s balance sheet and operational processes to provide (integrated) solutions that allow our cl ients to realise their ambition.

• Improving operational process will have a positive effect on the (visibility of) invested capital within working capital• Efficient working capital will have as effect that less bank lines are needed• Creates a better view on the company’s risk• Scenario planning can help to clarify what type of funding is required for financing growth and how growing or

downsizing your business affects the balance sheet.

Relationships

…

Logistics: Scope

1PL

Purchasing Transportation

2PL

Outsourced Operationalactivities (transport &

warehousing) on a contractual basis

3PL

Operational activities extended with tactical activities : controlling,

inventory management, ICT = Value Added Services

4PL

Shipper outsources supply chain, incl. flow of goods and

information = controlling & planning of operational, tactical and strategic

activities

• Value Added Logistics (‘VAL’) = added value to the flow of goods

o Picking, packing and other warehousing activities (inventory management, repair service)

o Postponed manufacturing and final assembly

• Value added Services (‘VAS’) = added value to the flow of information

o customs management, forwarding, transportation mode selection, contact centres, billing, network optimisation, inventory management

• Mixed VAL-VAS : reverse logistics, advanced inventory management (e.g. country specific kitting, lease service provider, mass customisation, etc.)

In accordance with extended complexity of the role of the Logistical Service Provider, price structure varies:

• Activity based pricing: operational services (price per handled pallet etc.)

• Open book: full transparent costing between the two parties

• Management fee: lump sum for all logistics activities performed

• Cost plus: reward based on cost + %-margin

• Gain Sharing: determination of reference cost by both parties (e.g. current shippint cost prior to outsourcing). Gains realised due to partnershiop will be compared to the reference cost and will be split between shipper and logistics service provider, which encompasses an incentive for both paties.

Logistics – value chain

Logistics: landscape

Note: Size of bubble based on turnoverSource: Company accounts, ING estimates

K&N

Focused mainly on CL Combined CL and FM Focused mainly on FM

0% 20% 40% 60% 80% 100%

100% CL 100% FM

NorbertNipponExpress

0% 20% 40% 60% 80% 100%

100% CL 100% FM

DHL

Geographicspread

100% focusin singleregion

Even balanceacross three or

more regions

% business focused on FM vs CL

DSV

DB Schenker

CEVA

GeodisKTN

28

28

30

60

100

220

0 25 50 75 100 125 150 175 200 225 250

Ceva

KTN

DB Schenker

DSV

Kuehne&Nagel

DHL

No. of countries

Source: Company reports

Logistics - landscape

0%

1%

2%

3%

4%

5%

6%

DH

L

DS

V

K+N

Cev

a

EBIT margin

Source: Eestimations & company reprots

Market share

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

DH

L

DS

V

Kue

hne&

Nag

el

Cev

a

The logistics landscape

Logistics: Belgian Landscape

Storage surface

1.650

677 650 647

425340 330 330 300 270 261 225

147 110

0

200

400

600

800

1.000

1.200

1.400

1.600

1.800

1.000 m²

KTN

Essers

Tabak Natie

Sea Invest

Molenberg Natie

DB Schenker

Euroports

De Rijke Oplslg

DHL

DSV

K+N

Nova Natie Logistics

Ceva

ND

Trends: Globalisation

Trends: Globalisation

• Following clients• X-sell

– Freight management– Transport– Contract logistics

• Global replication leveraging– Operational standards– Transfer of best practices

Trends: Supply chain integration

• Consolidation: 3PLs, Freight Forwarders and transporters move on the chain and take on more and more operations.

• Integrate logistics into the highest levels of corporate planning. Producers are including logistics in the strategic planning stages with an equal seat at the table with production and sales. As a result logistics can help to solve the friction between manufacturing (yield on assets) and sales (volume).

Trends: know your client

DHL Ceva K+N DSV KTN Essers

Energy ☺ ☺ ☺

Automotive ☺ ☺ ☺ ☺ ☺

Technology ☺ ☺ ☺ ☺ ☺

Consumer ☺ ☺ ☺ ☺ ☺

Retail ☺ ☺ ☺ ☺

Health Care ☺ ☺ ☺ ☺

Industrial ☺ ☺ ☺ ☺

Food ☺ ☺ ☺

Chemicals ☺ ☺

• Cies aim to work around sectors enabling them to get industry expertise and create added value securing long term relationships

• Will this lead to logistic companies actng as consultant?

Trends: Ever growing importance of Technology

• New ‘internet’ customers are arising looking for transparancy, speed, reliability, …– E-commerce

• IT is a differentiator to support client driven solutions– Increase supply chain visibility– Carbon footprint calculators– Risk management

Trends: Sustainability

• Global trade impacts global warming• Clients are looking to decrease ecological footprint• Cies are investing in green energy

– For own use– Increased profitability of real estate

Trends: Real Estate

• Location – Location - Location– Brussels – Antwerp = St-Tropez– Multimodal locations: Limburg is rising – inland

zones– Port of Antwerp: unseen capacity

• Concept:– Free height: 10/10.6 or 12 m– Storage/office space ratio 95/5 – Increased nr of quays increasing speed

• Sustainability– Low energy consumption

Trends: Real Estate

Trends: Financing

• Rent RE

• Hold RE combined with long term funding – Portfolio based solutions

• Bank debt• Debt capital markets solutions• Equity capital markets

– Asset based: • Lease

Concluding remarks

• Contract Logistics is driven by– Globalisation– Operational excellence based on IT capabilities &

client knowledge– Offering a green supply chain solution based on

good locations

Thanks for your attention

Didier Keters

Didier.keters@ing.be - +32 2 547 28 88

ING Commercial Banking – Corporate Clients