Ocean Freight Sourcing Navigating The Current Storms

Brian Selby

23 May 2012

Elemica – China Sourcing Expertise

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• Providing Sourcing Services in China since 2002 to Top 100 Global Manufacturing Companies

• Dedicated Sourcing Teams in Shanghai, Singapore, Seoul and Tokyo…integrated with other regional teams (NA & EU)

• Executed 600+ e-Sourcing projects in China, with a total value of over US$550M

• 600+ registered suppliers in China

• Sourcing categories include DM, IM, Services, Marketing, Engineering

Global Ocean Carrier Market

“In 2011 container lines are estimated by Drewry to have

collectively lost $5.2 billion…” – Dr. Lian Ping, Chief Economist

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• Tactical or Strategic Opportunity For Shippers?

• How 70% of Shippers Approach The Situation*

– Running a Bid to get a better rate…may be Web enabled – No relationship, No lane/cargo optimization…It’s all about Price

• How “Best In Class” Companies Do It

– Strategic supplier/partner relationship focus – Easy to implement/optimize bids…e-Sourcing platform (enhanced) – Process is Fair & Transparent to suppliers

* Accenture Survey 2011

Ocean Freight is Critical To YOUR Business

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Customers Suppliers

Ocean Carriers

Parts of Ocean Freight Sourcing are primarily about collecting,

analyzing and controlling internal information and

processes

But much involves understanding the interaction

between your customers, suppliers and ocean carriers. All this interaction requires shared

information and processes

Common information and integrated processes lead to

the most efficient, cost effective, high performing

supply chain

Your Company

Logistics, Manufacturing,

Accounting

Tips & Best Practices – Novice

Tips for Novice

• Data, Data, Data

• Internal Alignment

• Small Steps

• Long Term Focus

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Tips & Best Practices – Active

Tips for Active

• Data, Data, Data

• Basic Scenario Planning

• Go Global, Think Local

• Internal Change Management

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Tips & Best Practices – Strategic

Tips for Strategic

• Data, Data, Data

• Advanced Scenario Planning

• Balance Contract vs. Spot

• Collaboration

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Best Practice - China Ocean Freight

Inbound Ocean Project (March `12):

• 7 lanes in Asia to deliver to Shanghai and Dalian ports

• Provided estimated quantity of next 6 months

• Invited 4 incumbents to participate…no “rabbits”

• Used e-action tool (ease of access) and straight forward bid structure

(1 round pre-bid and 2 rounds sealed auctions with rank)

• Carrier’s pre-bid became their starting price during the bidding.

• Due to limited lanes, Carriers need to quote all lanes…no “cherry

picking”

• Savings is 15% (Lowest vs. Average Initial)

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Best Practice – Global Ocean Freight

Global Ocean Project (April `12):

• Global project management/execution moved from NA to China

• 2,000 lanes, 20+ ocean carriers (all pre-qualified), $180MM in annual

spend

• Required real-time optimization for carrier bids with weighting for

price, transit times and other non-price factors.

• Multi-rounds of bidding took place over the span of 3 months with final

face-to-face negotiations focused only on specific lanes or carrier

issues.

• Carriers could quote as many lanes as they felt they could handle…focus

was balancing between price and service quality

• Savings is 10% (vs. `11) 9

Upgrade To A Strategic Approach

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Elemica Vision

To be the leading provider of supply chain integration and optimization services to the industries we serve; tire and rubber, chemical, energy and selected manufacturing industries.

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Established in 2000 by the Chemical and Tire & Rubber Industries

More than 40 of top 50 chemical companies and 10 of top 15 tire & rubber companies transact through Elemica

Who Uses Elemica?

Supply Chain Solutions For:

• Procurement Procure better materials faster with lower costs

• Customer Service and Sales Overcome sales costs increases, margin pressure and customer

acquisition challenges

• Logistics and Transportation Eliminate shipping disruptions and reduce costs

• Finance Capture discounts and better allocate capital

Ocean Freight Sourcing Navigating The Current Storms

Brian Selby