The document discusses opportunities for streamlining supply chains in Eastern Europe and the Black Sea region. It notes that consumer demand is growing as GDP per capita increases. Shipping directly to ports in the Black Sea from Asia can provide significant cost and emissions savings compared to shipping through Western European ports. Consolidating shipments and increasing efficiencies across the supply chain, such as through direct shipping from factories of origin, can reduce logistics costs by up to 30%. However, piracy remains a major threat to shipping in some areas.
Globalise the Outsourced Supply Chain, Jeremy Davidson, Deputy MD, NYK Logistics
1. • Click to edit Master text styles
• Second level the Outsourced Supply Chain
Globalise
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Opportunities in Eastern Europe & Beyond
• Fourth level
Jeremy Davidson
• Fifth level
25th November 2010
Opportunities in Eastern Europe & Beyond Slide No. 1
2. Key Themes
Black Sea region is recovering from recession
• Click to editgrowth in demand critical
o Consumer-led Master text styles
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Second level
Black Sea has considerable potential as a key Gateway for C & E Europe as
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well as Central Asia
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o Shipping FE Imports via N Europe no longer makes sense; direct
shipment a viable and better alternative
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W Europe retailers already dominant and changing logistics practices
Controlling logistics cost as important as in W Europe
Opportunities in Eastern Europe & Beyond Slide No. 2
3. Black Sea Region Overview
GDP per capita
• Click to edit Master text styles Pop (m) Per Capital GDP
• Second level Russia
2009
142
in 2009
$15,176
Turkey 75 $13,952
• Third level Ukraine
Romania
46
22
$6,873
$12,214
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Bulgaria 8 $12,296
Fourth level
Average EU-27 $30,651
• Fifth level Average OECD $33,732
Per capital GDP & Consumption half of EU-27 average
Growth potential in consumption greater than EU
Large populations looking to improve standard of living
Increase in demand for FMCG & Consumer Durables
Opportunities in Eastern Europe & Beyond Slide No. 3
4. Recovery from Recession
GDP Change in Black Sea Economies
2008 - 2011
10.0%
5.0%
• Click to edit Master text Effect of 2008-09 Recession
styles
Major Economies
0.0%
• Second level
Russia Turkey Ukraine Romania Bulgaria 2008
2009
-5.0% % change GDP Exports Imports
•
2010F
-10.0%
Third level Canada
France
-3.1
-3.2
-19.2
-15.0
-19.0
2011F
-12.5
•
-15.0%
Fourth level Germany
Italy
-6.3
-6.5
-18.2
-23.9
-12.9
-19.0
-20.0% Japan -8.0 -32.1 -20.5
• Fifth level United Kingdom
United States
-5.9
-3.5
-13.3
-12.6
-16.7
-19.5
Decline in region similar to that
Euro area -5.1 -17.8 -15.3
seen in leading economies OECD total -4.7 -15.7 -17.4
RU & TU expected to recover Russian Federation -9.7 -12.9 -35.1
strongly
RO & BG slower recovery forecast
Projected growth rates expected to
be higher than in W Europe
Opportunities in Eastern Europe & Beyond Slide No. 4
5. Investment in BS Region
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• Third level
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• Fifth level
Sharp decline in GDP
Fall off in foreign direct investment
Reduction in relative County Risk
Scores vs EU-15
Fundamentals still sound
Opportunities in Eastern Europe & Beyond Slide No. 5
6. Retail Logistics: Key Sector
Retail logistics spend >50% of total market in W Europe; probably even
higher in BS Region
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BS countries
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• Second levellabel & cheaper brands
o Growth of own
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Most leading retailers are W European and often supply the BS Region
ThirdNlevel ports and ship down (road/rail)
through European
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o Critical mass/economic quantities
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Fifth level costsrepresent up to 50% of value of goods. Hence
Often freight costs can
reducing logistics critical
o More centralisation
o Direct shipment from countries of origin
o For cheap footwear at €15/pai5, logistics can represent 15%
On-carriage from ports to RDC’s still problematic; poor road infrastructure
Opportunities in Eastern Europe & Beyond Slide No. 6
7. The Black Sea as a Gateway
Black Sea (BS) strategically placed as
Gateway to both West & East
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Imports from Far East can be landed in BS
• Second level Ports and shipped inland
• Third level Infrastructure improving with rail an
increasing option
• Fourth level
Turkey a critical gateway to Iran, Iraq and
• Fifth level Central Asia
CONTAINER SHIPMENTS IN BLACK SEA - 2009
BULGARIA
Russia to develop BS ports as alternative
GEORGIA
UKRAINE to Baltics
RUSSIA Istanbul terminals effective for
ROMANIA transshipment
1.9 M TEU forecast for 2010 vs 1.5 M TEU in 2009
Opportunities in Eastern Europe & Beyond Slide No. 7
8. Leading Retailers in Region
Romania Ukraine Turkey Bulgaria
1 Metro Fozzy Migros Kaufland
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Carrefour Metro Bim Rewe
•3 Second level Fursnet
Selgros Carrefour CBA
4 Kaufland ASB Metro Picadilly
•5 Third level Kishenya
Billa Tesco Familia
6 Rewe Auchan BTT Carrefour
•7 Fourth level Anastor
Plus Teknosa Metro
•8 Mega
Fifth level Tayriya Kiler Fantastico
9 Auchan Eko Tespo c/c Billa
10 Dederman Rewe Carsi Europa
Region targetted by retail multiples from W Europe
Displacing traditional retailers and stimulating demand
Transferring retailing practices and approach to logistics
W European 3PL’s have followed – not always successfully
Opportunities in Eastern Europe & Beyond Slide No. 8
9. Black Sea Retailers & FE Imports
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• Second level
• Third level
• Fourth level
• Fifth level
Regional retail multiples source from the same FE vendors as
in W Europe
Purchasing often remains centralised at Retailers’ HQ’s
Opportunities for local solutions esp logistics
Opportunities in Eastern Europe & Beyond Slide No. 9
10. Centralisation & Outsourcing
Centralisation of Logistics by leading retail
multiples vary, on average 20%
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Problems with ‘critical
• Second level compliance, vehicle utilisation etc
Centralisation depends on efficient inbound
• Third level collection & consolidation
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Outsourced Logistics in CEE
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Country
Direct store deliveries common
Outsourced
2008 2012
Poland 23% 35% Local produce and products still
Hungary 22% 30%
Czech Republic 23% 35% important
Slovakia 13% 25%
Romania 28% 35% Shortage of suitable 3PL’s
Bulgaria 18% 30%
CEE Total 21% 32% Level of outsourcing set to increase & 3PL
W. Europe 50% + little change
market will grow
Source: Analytica & NYK
Opportunities in Eastern Europe & Beyond Slide No. 10
11. Direct Shipment to Romania
Nautical
Miles
Shanghai to Rotterdam 10,409
Shanghai to Constanta, RO 7,980
• Click to edit Master text styles Kg CO /ton
2
• Second level
Rotterdam Sea
via Rotterdam via Constanta
327.7 251.2
• Third level Road/rail
Road
Rail
167
0
0.3
6.1
Total 494.7 257.6
• Fourth level Constanta
Reduction via Constanta 48%
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• A retailer importing 2,000 containers/year through Constanta
can save €1.8 million & reduce CO2 footprint by 7,000 t
Opportunities in Eastern Europe & Beyond Slide No. 11
13. Supply Chain Efficiencies
END-TO-END LOGISTICS COSTS
Delivered to store Cost per cbm
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ex-China
Sea Freight 78 € 51 € 81
Qtr 1 08 Qtr 2 09 Qtr 2 10
DELIVERY TO STORE
& RETURNS
33%
€ 37 € 36 € 37
OCEAN FREIGHT
Warehousing & ON-CARRIAGE
• Second level168 €€142 €€176
€ 54 55 58
Delivery to store 46%
Total €
• Third level € 1.40
Cost per pair of shoes € 1.18 € 1.47 WAREHOUSING
21%
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What if…. Savings
Cost/pair
€ 0.03
Increase stock-turns by 30%
Average selling price of a pair of
• Fifth level € 0.06
€ 0.15
Increase drop size by 50%
Increase container loading by 20%
shoes lower in BS Region but
Shipped direct from FE € 0.16
Did all this … € 0.40
logistics cost the same
Savings of 27% Even more critical to make supply
chain more efficient
Shipping direct from FE easy to do
and implement
Opportunities in Eastern Europe & Beyond Slide No. 13
14. Streamline the Supply Chain
V Retail RDC R
Origin CFS
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E
N
E
T
D A
• Second level
O
R Mfr DC
I
L
S
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DC Bypass
•Challenges faced by retailers in BS region no different to those in W Europe.
Fourth level
•Opportunities to streamline & save money by:
Fifth level
o Shipping direct to RDC in region (€20-30/cbm)
o Performing more operations in origin countries (eg Origin DC’s)
W Europe wages for warehouse worker € 25,000 pa vs €6,000 in RO
and € 3,000 pa in China
o Consolidating across product ranges & co-loading with competitors:
better container fill & lower cost per cbm.
Opportunities in Eastern Europe & Beyond Slide No. 14
15. Shipping can be risky !
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• Second level
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Opportunities in Eastern Europe & Beyond Slide No. 15
16. Piracy still a major threat
Reported incidents each month during past 12 months
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Opportunities in Eastern Europe & Beyond Slide No. 16
17. THE WORLD IS FOUR-
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•
FIFTHS WATER
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THE REST IS THERE FOR
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MOORING PURPOSES !
Opportunities in Eastern Europe & Beyond Slide No. 17