Third Party Logistics Providers Help Shippers Improve Operations and Respond to Specific Industry Needs, Despite Challenging Economic Environment

| Press release
15th Annual Third-Party Logistics Study from Capgemini Consulting, Georgia Institute of Technology and Panalpina examines the global market for 3PL services.

Paris, September 27, 2010 – Capgemini Consulting, the global strategy and transformation consulting brand of the Capgemini Group, in cooperation with the Georgia Institute of Technology and global logistics provider, Panalpina, today announced the findings of the 15th Annual Third-Party Logistics (3PL) Study, examining the global market for 3PL services. The report reveals that 3PLs continue to provide important strategic and operational value to shippers throughout the world. However, significant uncertainty about the global economy has impacted spending, with an average of 11 percent of company sales revenues devoted to logistics, and an average of 42 percent of that directed to the outsourcing of logistics services, a decrease of 10 to 15 percentage points from recent years. At the same time, 65 percent of shippers reported an increase in the use of outsourced logistics services relative to total logistics services, suggesting that while outsourcing may have increased, expenditure on 3PL services overall has decreased.

The 2010 Third-Party Logistics Study is based on almost 1,900 responses from both shippers and logistics service providers in regions including North America, Europe, Asia-Pacific and Latin America, and also provides an in-depth look at the life sciences and fast-moving consumer goods (FMCG) industries. It reveals continued progress and improvement in the shipper-3PL relationship, with 89 percent of shipper respondents overall viewing their 3PL relationships as generally successful and 68 percent indicating that 3PLs help provide them with new and innovative ways to improve operations. However, the report’s findings show that shippers continue their tendency to outsource transactional, operational and repetitive activities and less so those that are strategic, customer-facing and IT-intensive despite a large proportion of 3PLs offering more advanced services.

“Many shippers regard logistics and supply chain management as key components of their overall business success. Increased use of outsourcing and high satisfaction levels suggest that 3PLs can certainly take some credit for helping shippers to weather the economic storm,” said Dr. C. John Langley Jr., Professor of Supply Chain Management, Georgia Institute of Technology. “Despite a challenging environment, 3PLs have an opportunity to continue to mature and grow by offering an increasing number of value-added services for shippers.”

Challenges in Comprehensive Cost-Reporting
One of the critical capabilities most highly valued by shippers in their 3PL provider is accurate reporting and analysis of total landed cost (TLC) – the sum of all costs associated with making and delivering products to the point where they produce revenue. The benefits of solid TLC calculations include more agility and confidence in decision making, better insight into the financial performance of products and partners and improved supply chain visibility. However, despite the relatively high number of shipper respondents reporting an extensive use of TLC (45 percent), the precision and level of detail of those calculations differ widely.

Calculating the TLC of materials and finished goods is not always an easy task. Difficulty in defining all the factors contributing to total cost, and then obtaining all the necessary data, can be challenging. Too often, businesses rely on only partial data or inaccurate estimates that can lead to incorrect results, with 58 percent of 3PLs reporting a hesitance from shippers to share information with them. That might be the reason why, despite the high value of TLC calculations, just 23 percent of 3PL respondents reported providing extensive TLC analysis to their customers. This level of interaction requires a high level of trust, and considerable discussion is required among 3PLs and their customers to better understand the factors, roles and KPIs to be used in a shared end-to-end calculation effort.

“TLC enables companies to capture both the obvious and hidden costs associated with product movement, revealing the true cost of sourcing and logistics decisions,” said Dennis Wereldsma, Global Transportation Sector Lead, Capgemini. “Transforming from basic to more sophisticated TLC application requires C-level leadership, process change and systems transformation. However, while TLC is highly important, because of the complexities, TLC adoption must be approached as an evolutionary, rather than revolutionary process.”

Spotlight: 3PL in the Life Sciences Industry
Within the Life Sciences industry, careful and expedient handling is often critical for product safety and because of this, control and visibility is essential. Logistics challenges here include product integrity and compliance requirements, an inherently complex trading partner ecosystem and demanding customer service and cost requirements. 54 percent of life sciences shippers surveyed felt the complexity of the supply chain model represents a significant challenge, but 87 percent felt 3PLs could add significant value here by linking together the various different parties involved. In addition, 62 percent of shippers within the Life Sciences industry cite ensuring product quality as a significant challenge and rank quality procedures highly (70 percent) as a service they want 3PLs to provide. Shipment visibility, quality and compliance procedures, stringent inventory control, temperature control capabilities and security are important steps to ensure product integrity, prevent counterfeiting and ensure safe delivery, and momentum is moving towards the use of RFID tags here. Indeed, around half of shipper and 3PL respondents agree that there is a strong business case for RFID in Life Sciences.

Spotlight: 3PL in the Fast-Moving Consumer Goods (FMCG) Industry
Large volumes and low margins mean FMCG companies must respond quickly to deliver in-demand, on-trend products to increasingly demanding shoppers. After cost reduction, FMCG companies’ biggest priorities for
logistics include perfect order fulfillment (87 percent), rapidly sensing and responding to changes in consumer demand (83 percent) and shortening new product time-to-market and supply chain integration (81 percent).

Also, as sustainability grows in importance for consumers, shippers’ interest in strategies such as improving shipment density and load utilization has also increased. Shippers within the FMCG industry value the role 3PLs play here, as well as with reducing costs and dealing with supply chain disruption, although are less likely to see 3PLs playing a key role in shortening new product time-to-market and supply chain integration. FMCG shippers’ efforts to reduce logistics costs include warehouse and transportation sharing. Two-thirds of those engaging in these strategies have recognized cost savings but this has been limited, with 58 percent of respondents recognizing less than 5 percent cost savings.

“The differences in the priorities reported by shippers in the Life Sciences and FMCG industries show how important it is for 3PL providers to provide industry specific solutions and to work closely with their customers to really understand their needs and provide the best possible service, ultimately helping contribute to their overall business success,” said Sven Hoemmken, Global Head of Sales, Panalpina.

About the 2010 Third-Party Logistics Study
1,879 logistics executives from both 3PL users and providers in North America, Europe, Asia-Pacific and Latin America, as well as other regions and geographies, participated in the 2010 Third-Party Logistics Study via a web-based survey. The findings were supplemented with a significant number of focus interviews with industry observers and experts, primarily relating to the special topics identified for this year. A facilitated workshop was also conducted where shipper participants collaborated on shared issues to help provide a better understanding of the survey’s results and to gain their valuable perspective as 3PL users.

About Capgemini
Capgemini, one of the world’s foremost providers of consulting, technology and outsourcing services, enables its clients to transform and perform through technologies. Capgemini provides its clients with insights and capabilities that boost their freedom to achieve superior results through a unique way of working, the Collaborative Business ExperienceTM. The Group relies on its global delivery model called Rightshore®, which aims to get the right balance of the best talent from multiple locations, working as one team to create and deliver the optimum solution for clients. Present in more than 30 countries, Capgemini reported 2009 global revenues of EUR 8.4 billion and employs 95,000 people worldwide.

Capgemini Consulting is the Global Strategy and Transformation Consulting brand of the Capgemini Group, specializing in advising and supporting organizations in transforming their business, from the development of innovative strategy through to execution, with a consistent focus on sustainable results. Capgemini Consulting proposes to leading companies and governments a fresh approach which uses innovative methods, technology and the talents of over 4,000 consultants world-wide.
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About The Georgia Institute of Technology
The Georgia Institute of Technology, located in Atlanta, is a leader in supply chain and logistics education. Through its School of Industrial and Systems Engineering (ISyE) and the Supply Chain and Logistics Institute (SCL ), Georgia Tech is committed to serving logistics educational needs through its degree programs and its comprehensive professional education program. Georgia Tech also conducts a fully accredited Executive Masters in International Logistics and Supply Chain Strategy (EMIL -SCS ) program, a Supply Chain Executive Forum and a Leaders in Logistics Research Program. Soon to commence will be the Georgia Tech M.S. Degree in Supply Chain Engineering. Global involvement is facilitated through The Logistics Institute Asia Pacific, a program in partnership with the National University of Singapore, and the SCL ‘s recently developed network of Logistics Innovation Centers in Latin America helping countries to improve logistics performance and facilitate trade. SCL currently has centers in Costa Rica and Panama, and is developing plans for Mexico, Chile and Brazil.

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About The Panalpina Group
The Panalpina Group is one of the world’s leading suppliers of forwarding and logistics services, specializing in
end-to-end supply chain management solutions and intercontinental air freight and ocean freight shipments.
Thanks to its in-depth industry know-how and state-of-the-art IT systems, Panalpina provides globally
integrated door-to door services tailored to its customers’ individual needs. The Panalpina Group operates a
close-knit network with some 500 branches in over 80 countries. In a further 80 countries, it cooperates closely
with partner companies. Panalpina employs over 14,000 people worldwide.

Panalpina has extensive experience with customers in many key industries. With dedicated experts in key global
markets, Panalpina has the people, products, skills and capabilities to meet the demanding needs of its global

Panalpina’s business is Global Supply Chain Management. Panalpina delivers compelling solutions that provide
value to all customers - every time.

Panalpina has a passion for solutions.

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