How supply chain innovation can

drive customer valuedrive customer value

John Pattullo, CEO

CEVA

1. CEVA

2. Innovation and value

3. Operational excellence

4. How supply chains can deliver value4. How supply chains can deliver value

Logistics market overview

€300 billion market€m

DHL 27.0

Schenker/ Bax 14.7

Kuehne + Nagel 11.3

CEVA 6.3

UPS 6.1

CH Robinson 5.9

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CH Robinson 5.9

Panalpina 5.6

Geodis 5.1

DSV 5.0

Agility 4.6

Source: Annual reports, ED Wolfe Research, Morgan Stanley, CEVA estimates (2008 figures)

Very fragmented, top 10 have 30% market share

Our vision & mission

● UNITY: One company – one team

CEVA will be the most admired company in the supply

chain industry exemplifying Unity, Growth and Excellence

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● GROWTH: Outperform market growth

● EXCELLENCE: Perfection is our goal

CEVA –Making business flow

Balanced global portfolio

Employees: 21,700 +

# Countries: 100+

Revenue ’08: €2.9bn – 48%

Europe, Middle East, Africa

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Asia Pacific

Employees: 13,100 +

# Countries: 30+

Revenue ’08: €1.5bn - 20%

The Americas

Employees: 19,300 +

# Countries: 40+

Revenue ’08: €2.1bn – 32%

1. CEVA

2. Innovation and value

3. Operational excellence

4. How supply chains can deliver value4. How supply chains can deliver value

A thought on innovation?

Human DNA and dinosaur DNA are 97% the same.

What matters is the 3% that separates the two species.

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Invention vs. innovation

Few ‘new to world’ ideas will ever come from logistics

BUT many innovation opportunities exist

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Some thoughts on innovation

• In the 1970s The automotive industry was fragmented & unprofitable

Industrial relations were poor

Car quality was worse

….and Toyota sparked a quality revolution

• In the 1980s The retail industry was national and fragmented

The customer proposition was narrow and limited

The prices were high (relatively)

…and Wal-mart gave us “every day low prices”…and Wal-mart gave us “every day low prices”

• In the 1990s The PC industry was fragmented with multiple players

Sold high price products that were often out of date

Had sales channels full of inventory

….and Dell reinvented the “supply chain”

• In 21st century The global logistics industry was highly fragmented

The service suffered from inconsistency

The customer saw little innovation and pushed margins down

….and how will our industry breakthrough?

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Drivers of supply chain innovation?

• Globalisation has increased the strategic and financial

significance of logistics

• Reducing product life-cycles creates a state of almost continuous

change

• Global imbalance of human talent supply and demand is • Global imbalance of human talent supply and demand is

challenging international business

• Consumers and governments force business to accept social

responsibility re-shaping supply chain design

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Accenture

4PL, adding a consultation/ strategic level to SC thinking

Toyota

LEAN techniques and approach to improve efficiency

Dell

Innovation in the supply chain – track record

Dell

Responsive manufacturing & 100% demand pull

Zara

Putting the supply chain at the heart of the company &

introducing global standardization

PODS

Bringing standardization to moving house and storage

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Innovation from the 3PL’s?

Some great, but isolated, examples eg NHS Supply

Chain

As an industry we are not known for innovation

There are several barriers:

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There are several barriers:

- open book contracts;

- development of supply chain mastery;

- low margins

Prerequisites for 3PL innovation

• Customer confidence in the industry

• 3PL industry willing to invest in R&D

• Greater industry education and professionalism

Innovation fuelled by strong partnerships

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The journey to innovation

Innovation

Responsiveness

Operations Excellence

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1. CEVA

2. Innovation and value

3. Operations excellence

4. How supply chains can deliver value4. How supply chains can deliver value

Operations Excellence culture in CEVA is built

on five pillars

LEANSmart

Solutions

Zero Defect

Start ups

Health, Safety

and

Environment

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Global Standard Metrics

Process driven approach

Leveraging

scale

Integrated service

portfolio

Sector

expertise

Smart Solutions• Leveraging

best-in-class

Zero defect startup

Operational review

• Full LEAN

implementation

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Project

management

Trained

experts

LEAN

• Operations Excellence

• Robust project management

• Trained experts

Implementation review

• Identification of

improvement potential

implementation

• Ongoing continuous

improvement

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1. CEVA

2. Innovation and value

3. Operations excellence

4. How supply chains can deliver value4. How supply chains can deliver value

Creating economies of scope

Inbound

4PL for an international automotive supplier

By re-engineering the supply chain and acting in a 4PL capacity, CEVA delivered a

productivity commitment over the five years of the contract and reduced total logistics cost

by 24%

Outbound

The LLP provided;

Centralised and standardised

- Communication, Project Org, Account Mgmt

- KPI Management and Reporting

- Blueprint specifications

(Processes in Material Flow and IT)

Standards for local Sub-Agreements

Customer Commitment: global exclusivity

CEVA Commitment: productivity

Delivering;

Reduced transportation

Reduced transaction cost

Reduced / variable transaction costs

Lower Inventory

Increased fill rates

Reduced waste

Increased productivity

17%

TRSP

cost

33%

WHS

cost

27%

In-Plant

cost

24%

Total

Logistic

cost20

Innovation in ocean freight

By focusing on the entire ocean freight operation and implementing enhanced visibility

processes throughout, CEVA delivered benefits in container utilisation, product

throughput and reduced cost

� Pre-payment of any origin fees under ex-works terms

� Monthly itemized billing

Management of supply chain from Asia = 1,700 FEUs pa

Management of complex CFS program

Vendor management to ensure bookings meet ordered ship windows and quantity commitments are maintained

Ocean carrier allocation management

Key Benefits� Option to build container direct to customer or trans-load in CEVA US facility enables postponement

distribution option & cost savings related to domestic re-handling

� Provide customized EDI 856 ASN information where needed

� Improved container utilization through consolidation process by 7%-10%.

� Enable earlier visibility to production issues and potential delays prior to scheduled ex-factory dates thus reducing charge-backs from customers. Dynamic in-transit decision making options.

� Manage carriers to ensure compliance and reducing ocean freight expense

� Control supply chain earlier in the process and enjoy reduced costs by negotiating local trucking charges

� Number of pairs shipped per container increased by 22%21

� Monthly itemized billing of all import-related fees

� Packaging engineering

commitments are maintained

Goal is 40% of the cargo bypasses customer DC and ships direct to customer

Leveraging information in the supply chain

Optimizing our integrated solution to provide

real time visibilityFor a leading automotive company, our complex solution includes the management of

facilities and delivering the physical flows. IT is the critical enabler in managing all the

elements and provides real time visibility for supply chain milestones

Resulting in

synergy savings

of $1.8 millionof $1.8 million

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Customer

Using information to develop International

capabilities

Lines side staging

Multiple deliveries per shift

Air / Ocean Freight

500 air pallets p.a.

Global competition has resulted in this customer sourcing components internationally.

In partnership with CEVA has evolved the supply chain from purely domestic, to a fully

integrated, international operation.

68 Suppliers

• S.E Asia

• China

• Mexico

• Canada

• N America

• Europe

1000 containers p.a.

Warehouse receipts

International and domestic

102 Domestic

Suppliers

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Each partner focuses on core competencies

Fully integrated domestic and international JIT supply chains

CEVA is an extension of the customer’s manufacturing facility

No surprises, lowest total cost, and service reliability to the customer

Global Suppliers

Demand schedule

Demand Schedule

via Internet/EDI

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Customer

Transferring best practice to ‘white space’

Aftermarket logistics for Chinese automotive manufacturer

Warehousing

� Operate Shanghai Central Parts Depot (50,000 m2) and Xian Regional Depot

(10,000m2)

� Types of storage includes mezzanine, racking, stacking, vertical carousel, car

body cantilever

� Parts repackaging in warehouse

Distribution

� Distribute from Shanghai and Xian warehouses to more than 299 dealers in

By using LEAN and proved aftermarket solutions, productivity increased by 50% with

service, inventory and cost improvements at all stages of the supply chain.

Key Statistics:

� Total warehouse size: 60,000 m2

� No. of warehousing staff: 262

� Part numbers handled: 25,000+

� No. of dealers covered: 300

� No. of truckloads per year:

8,600+

Benefits to Customer:

� LEAN warehousing adopted and improve pick productivity by

> 50%

� Service level enhanced direct customer satisfaction improved

� Cost savings via transparent control on transportation

� CPD inventory well controlled -> cost reduction

� Distribute from Shanghai and Xian warehouses to more than 299 dealers in

Eastern China and Western China.

� Linehaul replenishment from Shanghai CPD to 4 Regional depot

� Direct delivery from suppliers to dealers

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Transferring best practice across sectors – I2M

CEVA has combined its GMM & VMI solutions with production capabilities to create an

I2M solution which has traditionally been utilised by technology and automotive

customers. This solution is moving more and more into the FMCG marketplace with

multiple projects and programs underway

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Fostering social responsibility

-18% CO2

-1399 ton

CO2 Reduction through supply chain

re-engineering By re-engineering all supply chain operations and focusing on CO2, emissions

reduced by 18% with more opportunities identified for the future

� Existing supply chain with

9 warehouses in Europe

� Customers all over Europe

and Suppliers all over the

World

� Different volumes per service

level and related transport

modality (air/road/sea)

Situation Analysis

� Compare CO2 emissions for 9

regional warehouses versus 1

central warehouse

(preferred)

� Predetermined modality per

origin–destination and

customer service level

� Predetermined emissions per

modality per ton-km

Results

� Optimal solution is

1 central warehouse:

� 18% CO2 reduction

� Inbound CO2 increases +7%

however outbound CO2

decreases -27%

� Even more CO2 reduction

opportunities identified

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In summary

• Historically, an industry which has under delivered on innovation

• Innovation starts with Operations Excellence and

• Is fostered by an environment of strategic partnership

• There are several broad channels:

- economies of scale- economies of scale

- leveraging information

- transferring best practice

- fostering social responsibility.

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Of course, there is an alternative ...

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