Logistics: 21st Century
Competitive Advantage
How good are you?
Harry Drajpuch
Executive Vice President & General Manager
USCO Logistics
USCO Logistics Overview

Business unit of Kuehne & Nagel International AG

Leading provider of supply-chain solutions

35 years’ experience

Manage 15M sf in 70+ facilities

Process 1.9M lines monthly

Integration with 75+ client enterprise systems

Partner to 36 of top 100 global companies*
USCO Corporate
Hamden, CT
*BusinessWeek Global 1000, 7/9/01
Distribution Center
Reno, NV
KN Corporate
Schindellegi, Switzerland
Page 3
KN Global Reach
Pacific Rim
KN Global Contract Logistics Reach
Locations:
Logistics Space:
Employees:
70
15 M sq ft
3,000
Locations:
Logistics Space:
Employees:
Locations:
150
15 M sq ft
3,600
Locations:
Logistics Space:
Employees:
100
10 M sq ft
3,100
320
Logistics Space: 40 M sq ft
Employees:
9,700
Global reach & local know-how
Page 4
USCO Core Services
Integrated Supply Chain Management Solutions
Information Logistics
Warehousing
Solutions
Transportation
Management
Order
Management
• Dedicated & shared
• Delivery solutions
• Online order placement
• Kuehne & Nagel
• Flexible & scalable
• Non-asset based
• Largest NA network
of distribution centers
• Optimized service
& savings
• Fulfillment & call-center
services
• 180 multi-client DCs
in 90 countries
• Supply chain visibility
010010110011100
• Lead logistics service provider
• Information driven
8G
Global
Logistics
• Collaboration & visibility
Page 5
North American Network
Edmonton
Calgary, Alberta
Winnipeg
Dorval, Quebec
Portland OR
Montreal, Quebec
Ottawa, Ontario
Franklin MA
Shakopee MN
Toronto
Port Clinton OH
Jersey City NJ
Allentown
Sheffield OH
Chicago IL
Reno NV
Denver CO
Hayward CA
Ventura CA
Independence, MO
Lenexa KS
Gaithersburg MD
Bridgeport NJ
Joppa MD
Baltimore MD
Louisville KY
Durham NC
Zebulon NC
Nashville TN
Ontario CA
Memphis TN
Cerritos CA
Charlotte NC
Atlanta GA
Dallas TX
Lewisville TX
Lakeland FL
Miami FL
Monterrey
Shared Distribution Centers
Guadalajara
Mexico City
Dedicated Distribution Centers
Page 6
Industries & Customers
Integrated Supply Chain Management Solutions
High Tech
Healthcare /
Pharmaceuticals
Page 7
Retail
Consumer /
Industrial
Impact of Companies Like USCO

Link world’s businesses & people through
globalization

Connect North America

Reduce economy-wide inventory

Lower business-cycle risks
While information technology makes global &
national linkages virtually possible -companies like USCO make them physically
possible.
Page 8
Brush-Fire Management

Typical focus is on daily operating problems, sales
& marketing promotions, & service issues, etc.

How often do you review logistics functions?
• What’s overall impact & interaction with rest of business?

Does logistics function:
• Respond directly to present & future needs?
• Support primary business mission?
• Drive most cost-effective & customer-service support?

How can you find out?
Page 9
Recommendation

Conduct a self analysis of your logistics strategy
• Focus on what your logistics activities should be doing to
support your business
• Consider the following 7 key areas
Page 10
Logistics Strategy – Self-Analysis

Company Markets
• Have you moved into new markets?
• Has there been shift in customer shipments? (I.e.,
wholesalers, distributors, retailers, etc.)

Company Products
• Have you added or deleted product lines?

Customer Service
• Has representative customer survey indicated service
problems?
• Have there been any systems or order processing
changes that have affected order cycles?
Page 11
Logistics Strategy – Self-Analysis

Logistics Operations
• Have labor or facility costs resulted in changes to location
or operations?
• Have type, quality or size of product packaging changed?
• Have you reached capacity in existing distribution
facilities?

Transportation Operations
• Has the profile of product shipments changed? (i.e.,
UPS, full truckload, less-than-truckload)
• Do you move inbound & outbound products across
common shipping lanes?
Page 12
Logistics Strategy – Self-Analysis

Product Operations
• Have you changed or introduced new source points for
products?
• Has product capacity changed at existing production
locations?

Other
• Have distribution & transportation costs increased as
percent of sales?
• Have there been internal structural changes?
Page 13
Assembling the Jigsaw Puzzle
Order Management
e-Logistics
Portals + TMS
EAI
Int’l trade & compliance
3PL
LLP
Global
in-transit
visibility
Event management
Supply chain
collaboration
e-Fulfillment
All freight –
All modes –
All over the world
Internet
ASP
Warehouse management
Transportation planning
& management
Customer relationship
management
Merge-in-transit,
diversions
ERP
Private vs. public exchanges
Single command &control center
Page 14
Develop In-house? Outsource?
Significant investment & development required
to support evolving supply chain. Best source of your $?
Real-time logistics
management
capabilities
Predictable,
reliable & rapid
transport
Integrated logistics
network
Scaleable,
Variable-cost
infrastructure
Common (global)
processes
Page 15
Why Outsource?

Manufacturers are now embracing third-party
logistics providers (3PLs)
• Alternative to running their own distribution operations

3PLs have been providing distribution operations to
companies for years
• Most have roots in transportation, warehousing or freight
forwarding

Providing 3PL logistics services a $56B industry*
• Increasingly seen as distribution option by companies in
range of industries
* Armstrong & Associates “Logistics Management & Distribution Report” 7/02
Page 16
3PL Benefits

Although not right answer for every company, where it’s “right” it can
provide cost, service & strategic benefits
Cost
•Lower cost warehousing
(scale economies)
•Lower cost transportation
•Flexibility — pay for what
you use
•Network optimization —
wring costs out of all supplychain links
Service
•Quicker delivery
•Increased geographic reach
— closer to customer or
manufacturing site
•Access to leading-edge
information technology
•Customization to specific
needs
•Specialized services at lower
cost
Page 17
Strategic
•Allows management to focus
on core business
•Rapid ramp-up (and rampdown) capability
•Minimizes company assets
tied up in non-core
operations
•“Best of Breed” applications
can provide competitive
advantages
3PL Usage Rates Growing
Percent Using or Considering 3PLs
100.0%
80.0%
68.8% 70.4%
80.0%
84.3%
60.7%
67.9%
60.0%
40.0%
20.0%
0.0%
Auto
Chemical Computer Consumer Medical
“What’s ahead for 3PLs?” Modern Materials Handling, 4/01
Page 18
Retail
Evolutionary Cycles Continuing
• Greater Functional Integration
• Boarder Operational Autonomy
Business Process
Management
Client
Client
Client
LLP
1990s-2000s
LLP
3PL
Provider
IT Service
Provider
Outsourcing
1980s-1990s
In-sourcing
1970s-1980s
3PL
Provider
Client
Client
Internal Logistics
Operations
Source: Adapted from John Gattorna 1998
Page 19
QUESTIONS?
Example: “Designed In” Flexibility
Forward
Buys
3PL
3PL
Seasonal
Overflow
3PL
Seasonal
Overflow
3PL
Disaster
Relief
Sampling of Wal-Mart’s own distribution centers
Page 21
Example: “Designed In” Flexibility

Rapid marketplace changes

“Time to money”
Page 22