Hot Topics in International Business

LogisticsCharlie ZidekManaging DirectorSEKO Logistics

© SEKO Logistics 2013 2

State of Logistics

2014 Total Logistics Costs = $1.45 Trillion

Logistics Costs as a % of GDP = 8.3%

Inventory Carrying Costs Increased 2.1% in 2014

Transportation Costs up 3.6% - Strong Shipment Volumes

© SEKO Logistics 2013 3

State of Logistics

• Trucking Capacity is Tight• Reduced Productivity Due to Regulations• Positive Economic Signs – GDP Growth, Unemployment

and Labor Participation Rates• Strong Dollar – Lower Exports, Strong Imports• Interest Rates Still Low – Below 1%• Inventories Growth Slowed in 2014• Industrial Production Strong 2014 • Retail E-Commerce Sales Continued Growth• Rail Demand Grew in 2014 – 4.5% (Highest on Record) • Freight Forwarding Revenue Up 5.4% in 2014

© SEKO Logistics 2013 4

West Coast Issues

• Port Congestion Caused Problems for Retailers and Manufacturers Across the Board

• Underlying Issue at Ports Trucks, Chassis and Labor• Large Vessels Bringing More Cargo with in a Condensed

Time with Equipment Shortage to Move Products• Congestion Created Longer Times for Drayage

Companies – Making Lesser Turns per Day• Lack of ILWU Contract Contributed to Slowdown• US Importers Implemented Emergency Plans to Manage

Critical Freight Destined to US – – Canada/Mexico– Air– East Cost

© SEKO Logistics 2013 5

Panama Canal As an Option

• Panama Canal Expansion Purpose to Reduce Transit Time• $5.25 Billion Cost• Scheduled Opening 20015 – Now it is April 2016• Increased Vessel Size from 965 ft. to 1,200 ft. (Length)• Increased Width from 106 ft. to 160 ft.• 5,000 TEU/Vessel to 13,000 TEU/Vessel• 218% increase in Annual Tonnage• Today 66% US Bound Containers goes Through West

Coast, 20% PC and 14 Suez Canal• Best Case 10% of Current West Coast Freight Could Shift

to the PC by 2020 (Reality is 6-7%)• East Coast Port Competition will Increase – Rail, Truck,

Chassis Shifting• East Coast Port Expansion will force Shippers and Carriers

to Modify Strategies and Operations

© SEKO Logistics 2013 9

Tianjin Explosion

• August 12, 2015• Tianjin Shipping Point for Chemicals Used in Electronics

Production• Electronics, Retail and Numerous Industries Will be

Impacted• Explosion Happened at a Chinese Logistics Company• Over 173 People Killed, Hundreds Missing, 6,000 People

Homeless• 1.8 Square Miles Around the Blast Destroyed• Companies Lost Millions of Inventory• Product from the Region Trucked to Qingdao and Shanghai• Product Was Air Freighted to Arrive on Time for 4th Quarter

Sales

© SEKO Logistics 2013 10

Tianjin Explosion What Have We Learned?

• The Logistics Challenge• Manufacturers Have Inventories Destroyed • Lost Revenue• What is the Backup Plan?• Did The Organizations Have Redundancies?• Haven’t We Seen This Before?

Hot Topics in International Business

LogisticsCharlie ZidekManaging DirectorSEKO Logistics