Practical collaboration to improve logistics performance Alan Waller –Chairman ELUPEG John Doran –User Group Leader ELUP

1. Logistics and Supply Chain Forum Practical collaboration to improve logistics performance Alan Waller –Chairman ELUPEG John Doran –User Group Leader ELUPEG Oriana 9 October 2003

2. AGENDA • Business Pressures • The New Customer • The Changing Organisation • The Value Chain • Outsourcing and Collaboration • The Role of Technology • What is Needed-A Case Study • European Logistics Users Providers and Enablers Group • Collaboration in Action • The Way Ahead

3. AGENDA • Business Pressures • The New Customer • The Changing Organisation • The Value Chain • Outsourcing and Collaboration • The Role of Technology • What is Needed-A Case Study • European Logistics Users Providers and Enablers Group • Collaboration in Action • The Way Ahead

4. Business pressures in the new millennium The top 5 • Globalisation • Hypercompetition • Focus on core competence • Speed of change • Stakeholder pressures Source: European Supply Chain Directors Discussion Forum, - 2000 to 2002 Doing nothing is not an option

5. AGENDA • Business Pressures • The New Customer • The Changing Organisation • The Value Chain • Outsourcing and Collaboration • The Role of Technology • What is Needed-A Case Study • European Logistics Users Providers and Enablers Group • Collaboration in Action • The Way Ahead

6. A new customer is emerging … Consistency Service • Customers want buying to be • easier • faster • cheaper • more fun • … real value Convenience MORE Selection Quality LESS Risk Price Effort Time These trends are forced up through the value chain

7. AGENDA • Business Pressures • The New Customer • The Changing Organisation • The Value Chain • Outsourcing and Collaboration • The Role of Technology • What is Needed-A Case Study • European Logistics Users Providers and Enablers Group • Collaboration in Action • The Way Ahead

8. “Our Focus is on markets and brands, but without an effective supply chain, we cannot even begin to compete” Chairman, Unilever

9. Network organisation Vertical integration Focus on core competence Businesses are responding by focusing on core competencies and outsourcing non-core activity creating networked organisations Source: Chatham House Forum

10. AGENDA • Business Pressures • The New Customer • The Changing Organisation • The Value Chain • Outsourcing and Collaboration • The Role of Technology • What is Needed-A Case Study • European Logistics Users Providers and Enablers Group • Collaboration in Action • The Way Ahead

11. Economies of scope in technology and innovation ...In automotive production resource sharing has already happened • One people carrier • Galaxy • Sharan • Vehicle manufacturers’ share • One plant • One assembly track • “Purchased by the hour”? Contract Manufacturing “Co-Makership” will increase “Partner with your competitors and compete with your partners”

12. Drivers of the 21st Century Value Chain • Ever more demanding • Pro-active • Interactive • Consumers • Retailers • Global • Seek solutions • Increase range VALUE CHAIN RESPONSE • Manufacturers • Focus on core • Network/outsource • Agility • Co-makership • Mass customisation • Process driven • Systems • ERP • Bolt-ons • Process driven • Technology • New channels • New business • Low cost

13. “By end 2003, around 60% of SCM functionality will be provided from outside the enterprise ” Gartner Group

14. Bridging the Implementation Gap Pan-regional supply chain integration across Europe % of Companies 100% Opportunity Awareness Strategy Planning 75% Active Implementation 50% 25% Effective Implementation 0% Source: Surveys 1992, 1994 , 1996 and 2002 ‘86 ‘90 ‘88 ‘92 ‘94 ‘02 ‘96 ‘98 ‘00 There are major challenges in translating vision into reality

15. AGENDA • Business Pressures • The New Customer • The Changing Organisation • The Value Chain • Outsourcing and Collaboration • The Role of Technology • What is Needed-A Case Study • European Logistics Users Providers and Enablers Group • Collaboration in Action • The Way Ahead

16. Supply chain outsourcing requirements in the new millennium The top 5 • help with developing strategic supply chain vision • help with implementing supply chain vision • access to economies of scale • access to skills and competence • access to technology and innovation Source: European Supply Chain Directors Discussion Forum – 2000 to 2002

17. Collaboration - putting technology into perspective “A business can have all the technology in the world, but if I don’t trust my trading partners then it becomes very difficult.” “This is not about beating a supplier into submission - it’s actually about sharing information, some of it competitive.” Gartner Group

18. AGENDA • Business Pressures • The New Customer • The Changing Organisation • The Value Chain • Outsourcing and Collaboration • The Role of Technology • What is Needed-A Case Study • European Logistics Users Providers and Enablers Group • Collaboration in Action • The Way Ahead

19. Leveraging Technology – the key issues “The technology is now available to do whatever we want in the supply chain ---- ---- the problem is that either it is not mature enough to be used or we are not mature enough to use it” Source – Discussions groups Logicon Interactive 2001 , 2002 and 2003

20. How to move forward Improving European Transport/Logistics – Catalysts for Change Initiative Source Ranking Collaboration 1 Shippers 2= LSPs 2= E-Freight Exchanges 4 E-Marketplaces 5 Technology Providers 6 Capital Providers 7 Consultants 8 Source-European Survey Alan Waller 2001-2002

21. AGENDA • Business Pressures • The New Customer • The Changing Organisation • The Value Chain • Outsourcing and Collaboration • The Role of Technology • What is Needed-A Case Study • European Logistics Users Providers and Enablers Group • Collaboration in Action • The Way Ahead

22. The Present – A Case StudyShow me the network! John DoranLogistics Director (until 30/9) Sony Europe – EMCS(Engineering, Manufacture & Customer Service)

23. About Sony Corporation FY to end March 2003 • Sales $ 58.5 billion • Operating Profit $ 1.8 billion • Employees 181,800

24. About Sony Corporation • Electronics $44.1 billion (68%)(TV, HiFi, Cameras, PCs, etc) • Games $5.3 billion (8%)(Playstation) • Music $4.9 billion (7.5%) • Pictures $4.4 billion (7%)(Columbia Tristar) • Insurance & Finance $6.6 billion (10%) N.B. Does not relate back to first number because of internal sales, financial treatment of subsidiaries etc

25. About Sony Corporation • Japan $22 billion • USA $18.5 billion • Europe $10.4 billion • Others $ 7.5 billion

26. Sony Europe EMCS logistics Current situation • Direct control and influence • Consumer electronics 3PL / 4PL • Games – Playstation • REE (Recording, Energy, Europe) • BPE (Broadcast & Profesional Europe) Total logistics spend > €300 million

27. Current network locations 5 Hub Warehouse 18 Country Stockholding Location Helsinki 5 Plants Copenhagen Dublin Hamms Hall Pencoed Thatcham Tilburg Cologne Prague Eragny Ribeauville Trnava Zurich Vienna Godollo Milan Lisbon Barcelona Athens

28. Network locations 2003/2004 5 Hub Warehouse 3 Country Stockholding Location Helsinki Plant Copenhagen Closed Whs. Pencoed Thatcham Tilburg Prague Ribeauville Trnava Zurich Godollo Milan Barcelona Athens

29. Sony Europe EMCS logistics Current situation • Warehousing mostly internal some outside • Transport • Very fragmented • 125 companies • 25 relationships with Deutsche Post • 200+ accounts with DHL • Project to rationalise

30. 3PL / 4PL Partnerships:Is it all B.S? • 1992 single market • One stop shopping • Integrated networks • One set of tariffs • KPI’s etc No 3 PL offers this yet!!

31. Who Can Satisfy Sony Requirements ? • European One Stop Shop • Channel • Geography • Relationship management • Uniform standards • Service • KPI’s • Tariffs • Partnership • Share risk & benefits • Build long term • Flexibility • Allow our business to change • Manage resource up & down • Share risk • Innovate • What value to do you add? • Why should I choose TNT above Versteijnen Transport?

32. AGENDA • Business Pressures • The New Customer • The Changing Organisation • The Value Chain • Outsourcing and Collaboration • The Role of Technology • What is Needed-A Case Study • European Logistics Users Providers and Enablers Group • Collaboration in Action • The Way Ahead

33. ELUPEG Mission Achieving step-change in the performance of European Logistics To achieve real improvements in the performance of European Logistics by action -based collaborative projects involving users, providers and enablers whose business success depends on sound European Logistics.

34. Background to ELUPEG • Alan Waller and John Doran (Sony) gave a presentation on board the Oriana for the Logistics Forum 2001 to tell the story of European Logistics as they saw it - the history, the current situation and the potential future developments. • This was backed up by a survey which showed that the satisfaction levels of users, providers and enablers with the various aspects of European Logistics were between 40% and 60%. • At the request of Oriana 2001 delegates, a group was assembled to tackle the issues on a joint collaborative basis - this was the origin of ELUPEG

35. ELUPEG Formation and Development • Members engage in collaborative action-based projects to improve European Logistics. • Open to all users, providers and enablers of European Logistics services - but members must engage in collaborative projects, which are intended to be self-funding. • Representation must be at appropriate and senior level. • Over 200 European companies are registered to receive ELUPEG progress reports. • Full membership is currently approaching 100 major businesses, with users representing some 20% of the logistics spend in Europe. • Run by members for members, with independent chairman plus steering group of user/provider/enabler leaders and secretariat. • User driven but democratic. • Non-profit-making with modest meeting/joining fee for 2003 to cover costs.

36. ELUPEG – The Future • Collaborative Working Groups will generate commercial partnerships to the mutual benefit of participating companies. • Lessons learned will be shared with the wider ELUPEG community. • Future projects can include • ; Standards – Information / KPI’s / Processes Systems / IT Transport / Warehousing physicals Synergies from membership growth will drive additional project opportunities. Group meetings are important touch points & can drive project milestones BUT the action & benefits must be driven by the Collaborative Working Groups outside these meetings. ELUPEG IS NOT A SPECTATOR SPORT

37. ELUPEG – Code of Conduct • No selling - but it might happen. • No criticism of competitors. • No breach of confidence. • Open discussion. • Be constructive. • Promote the group. • Share learning. • Network with other networks. • Ensure fair play. • Get results – Win / Win / Win.

38. ELUPEG Collaborative Working Group Leaders • CPG-Patrick Jahan (Georgia Pacific) • FMCG-Malcolm Pope (H.J.Heinz) • Automotive –Andy Spratt (Ford A.G.) • High Tech-John Doran/Dan Bowers (Sony Europa B.V) • Automotive Aftermarket-Ludo van de Putte(G.M Aftersales) • Logistics Services Providers-Steve Whyman (Exel) • E-Portal-Brian Bolam (Columbus Logistics) • Bulk Liquid Foods-Peter Jeffery(Logistics Support Services) • Chemicals & Industrial-Mark Bedeman (Accenture)

39. ELUPEG Progress 2003 High Tech/Electronics Collaborative Working Group Opportunities being addressed • Network Integrity: Security/Track-and-Trace/e-POD • Asset-sharing:Combine deliveries/Warehouse use/Air Freight • Benchmarking • Customs User Companies Involved Include • Sony • Samsung • Philips • Panasonic • EMI • Xerox

40. ELUPEG Progress – 2003 Automotive Collaborative Working Group Opportunities being addressed • Common Inbound • Spares and Repair • Reverse Logistics User Companies Involved Include • Ford/PAG • GM • Honda • Pirelli • Unipart • Renault-Nissan

41. ELUPEG Progress – 2003 CPG/FMCG Collaborative Working Group Opportunities Being Addressed • Common Trunking/Delivery Lanes • Road Freight Cubing:Heavy on Light • Reverse Flows:Scandinavia/Baltic User Companies Involved Include • Kimberly Clarke • Georgia Pacific • Rexam • Heinz • Sylvania • Sara Lee

42. ELUPEG Progress – 2003 Chemical/Industrial Collaborative Working Group Opportunities Being Addressed • Return Flows • Tanker Pooling • Shared Fleet Facilities • IBC Consolidation User Companies Involved Include • Du Pont • Wavin • Atlas Copco • Dow

43. ELUPEG Progress – 2003 Collaborative Working Group Road-Map Find Suitable Partners Find The Value Enable The Value Extract The Value Share The Value Share The Experience Find More Partners

44. ELUPEG Progress – 2003 Thought-Provokers for Collaboration Seasonality Inbound/Raws Consolidation Flow Synchronisation Empty Running Security Issues Customs Issues Standards Night-time Distribution High-Street Delivery Reverse Logistics/Returns Others………

45. AGENDA • Business Pressures • The New Customer • The Changing Organisation • The Value Chain • Outsourcing and Collaboration • The Role of Technology • What is Needed-A Case Study • European Logistics Users Providers and Enablers Group • Collaboration in Action • The Way Ahead

46. Collaboration in Action-1 Manufacturing Consolidation Centre (NL) Opportunity • Historically independent logistics hubs serving each manufacturer and separate delivery to retail DCs Approach • Single Consolidation Centre serving both manufacturers with consolidated deliveries to retailer DCs • Start-up Feb 2003 Benefits • Increased delivery frequency • Fewer truck movements • Increased on-time performance • Lower inventory • Fewer out-of-stock situations Players • Lever Faberge • Kimberly Clarke (NL)

47. Collaboration in Action-2 Asset Pooling (UK) Opportunity • Two Competing Breweries run own delivery using own barrels • Three deliveries to outlets per week for each brewery Approach • One consolidated delivery per week-or more-using common barrels • Third party buys the barrels • RFID tags on barrels • Announced Sept 2003 Benefits • Reduced Barrel investment • Reduced Supply Chain Inventory • Reduced Distribution Costs Players • Scottish Courage • Carlsberg-Tetley • Trenstar

48. Collaboration in Action-3 Fleet Pooling (UK) Opportunity • Two Competing Dairy Businesses collect 4.5 m litres of milk from 7,500 farms using 500 trucks in the UK Approach • Consolidated collection using common LSPs • 6 month project to set the strategy • Announced Aug 2003 to start Autumn 2003 Benefits • Increased fleet utilisation • £8m pa saving Players • First Milk • Dairy Farmers of Britain • Wincanton • Lloyd Fraser • Bibby • Interoute

49. AGENDA • Business Pressures • The New Customer • The Changing Organisation • The Value Chain • Outsourcing and Collaboration • The Role of Technology • What is Needed-A Case Study • European Logistics Users Providers and Enablers Group • Collaboration in Action • The Way Ahead

50. Conclusions • The most important core skill for the future will be the ability to develop and sustain effective partnerships between providers, shippers, customers, business partners and with competitors • This skill is probably the one shortest in supply at this point in time • There is now an appetite for collaboration that is essential to drive forward improvement in Supply Chain Performance