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Confidential
June 28, 2012
Using Freight Market Intelligence to Focus Your Ocean Freight Strategy
Freight Market Intelligence Consortium
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2
Today’s Speakers
Kevin
Zweier
Principal,
Transportation Practice
CHAINalytics
Matthew Harding
Principal,
Transportation Practice
CHAINalytics
Rolando Portal
Director, Inbound Logistics
and Customs Compliance
Moderator: Mike Hane, Sr. Director, Business Development, Chainalytics
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3
Today’s Agenda
Who is Chainalytics?
Ocean Freight Market Intelligence
Chainalytics’ Benchmarking Reports and Deliverables
Ocean Sourcing Overview
Petco Strategy and Experiences
Q&A
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4
Today’s Agenda
Who is Chainalytics?
Ocean Freight Market Intelligence
Chainalytics’ Benchmarking Reports and Deliverables
Ocean Sourcing Overview
Petco Strategy and Experiences
Q&A
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5
Who is Chainalytics?
More Than 80 FTEs Worldwide
Our Clients
180+ Unique Clients
14 of AMR’s Top 25 Supply Chains
57 Fortune 500 Companies
5 of Top 10 Retailers
7 of Top 10 Food & Beverage Manufacturers
5 of Top 10 CPG Companies
6 of Top 10 Forest, Paper and Packaging Companies
Our Experience
More Than 375 Engagements
TODAY
• 1st Named to “100 Great Supply Chain Partners” List by SupplyChainBrain; Recognized for 8 Years Running
• Launch of Freight Market Intelligence Consortium (FMIC)
2001
2002
2003
2004
2005
2006
2007
2009
2010
2011
2008
Our Genesis
• Market Lacked Proven, Focused Supply Chain Analytics Competence
• “Best Analytical Minds in Supply Chain”
Empowering Fact-Based Decisions
Across Your Supply Chain
• Launch of Sales & Operations Variability Consortium (S&OVC)
• Mike Kilgore named a “Pro to Know” by Supply & Demand Chain Executive; Steve Ellet, Gary Girotti, Irv Grossman, Jeff Metersky, Matt Harding, and Kevin Zweier also named Pros to Know
• Established Chainalytics India Private Limited in Bangalore
2012
• Strategic Growth via Mergers & Acquisitions
• Supply Chain Operations (Chainnovations)
• Packaging Optimization (Adalis Packaging Solutions Group)
• FMIC named “Top Supply Chain Innovation” by Supply & Demand Chain Executive
• Named to ARC Advisory’s “10 Coolest Supply Chain Boutiques”
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Years
Quarters
Months
Weeks
Planning
Horizon
Value-Driven Supply Chain Decisions
At what service level can we
profitably satisfy demand?
How should we transport
product through the supply
chain?
How much and where should inventory be
positioned in the supply chain?
Can we reduce our transport and logistics costs by improving cube
utilization?
Should our warehousing and material
operations be insourced
or outsourced?
When should we buy or make product to make the best use of our capacity?
What is the best flowpath?
How well do our current operations
mitigate repair and warranty
costs?
How can we increase
visibility to stakeholders?
6
Sales, Inventory & Operations Planning
Transportation Logistics Operations
Service Supply Chain
Packaging Optimization
Supply Chain Design
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Where should we focus improvement efforts?
What is the best mix of carriers to service my
network?
Can I reduce costs or improve service using alternate shipping
strategies?
Are my processes and systems providing maximum benefit?
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Services We Provide: Transportation
Procurement Mode Analysis
vs.
Best Practice &
System Assessment
Business Intelligence
Deep Capabilities and Expertise in All These Areas
Am I paying a fair price for transportation?
Freight Market Intelligence
• Robust Technology Maximizes Transactional Data for Broad Market Intelligence
• Membership-Based Consortium including TL, LTL, Ocean, and Heavyweight Air
• Analyze $16B+ in Annual Freight Expense from 100+ Customers
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Today’s Agenda
Who is Chainalytics?
Ocean Freight Market Intelligence
Chainalytics’ Benchmarking Reports and Deliverables
Ocean Sourcing Overview
Petco Strategy and Experiences
Q&A
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What is the goal of benchmarking?
Provide Summary and Detailed Market Insights
Freight Rates
Business Practices
Identify Opportunities
Trades
Providers
Enhance Consortium Visibility to External Market
Ocean Freight Market Intelligence
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Model Statistics of January 2012 Release
$300MM in Transportation Spend
100K Container Loads
14 Model Participants
Process Supports Import, Export, and Global Freight Flows
Freight Market Intelligence Consortium Ocean Shipper Member Demographics
17,454
22,204 60,810
Number of Shipments
$51
$62 $177
Reported Spend (MM)
Retail
Industrial / Other
Food and Consumer Goods
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Asset Flows
Economic Environment
Ocean Carrier Leverage
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The Ocean Market
Market Price and Service
Niche Markets
New Vessels
Container Supply
Idling & Scrapping
Global Demand
Slow Steaming
GRIs
Anti-Trust Immunity
Changes in MQC
Accounting
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Rate Trends
Company Reports
Market Insights
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Model-Based Benchmarking Approach
DATA CLEANING AND VALIDATION
Text Cross Reference
- Equipment Size
- Equipment Type
- Contract Type
- NVOCC vs. Common Carrier
Numeric Checks
- Seasonal Impacts
- Sea Freight Costs, BAF
- Dates, Transit Times
- Flag Nulls
- Flag Zeros
Geography Checks
- Geography Checks
- Determine Ports as needed
- Geocoding of City, State, Country
- Harmonize Port Names,
Locations
- Calculate Nautical Miles (Ocean
Distance)
- Calculate Domestic Miles (PCM)
- Calculate Non-Domestic Miles
(Latitude/Longitude)
ALL
MO
DE
S
ECONOMETRIC MODELING
1. Testing and Validation of Effects
- Regional Trade Lane Definition
- NVOCC vs. Common Carrier
- Equipment Size
- Equipment Type
- Contract Type
- Inland Moves
- Transit Times
- Nautical Miles
- Peak Season Surcharge
- Shipper Spend
- Product Value
2. Model Development
ALL
MO
DE
S
ALL
MO
DE
S
Dat
a V
alid
atio
n P
roce
ss
Raw Data 1...n
Port to Port Import/Export
Door to Port Import/Export
Port to Door Import/Export
Door to Door Import/Export
HIGHLY INTERATIVE
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Analyzing Beyond Trades
Equipment
Temp Control
Container Size (20,40,45)
High Cube?
Carrier Type
NVOCC
Spot
Shipper Attributes
Shipper Size
Product Value
Fees and Surcharges
Inland Costs
Peak Season Surcharge
Bunker Programs
Ocean Cost Drivers
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$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
25-
Au
g-0
9
14-
Oct
-09
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9
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ay-1
0
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10-
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g-1
0
29-
Sep-
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18-
No
v-1
0
South China to Long Beach
All South China to Long Beach
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
25-
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g-0
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No
v-1
0
South China to Long Beach
All South China to Long Beach
45FT
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
25-
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g-0
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14-
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29-
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No
v-1
0
South China to Long Beach
All South China to Long Beach
20FT
45FT
Demonstrating Complexity Benchmarking Rates
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
25-
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g-0
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14-
Oct
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10-
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g-1
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29-
Sep-
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No
v-1
0
South China to Long Beach
All South China to Long Beach
20FT
40FT HC
45FT
Validation
Validation
Cost Drivers INLAND MOVES
CARRIER vs. NVOCC
SPOT vs. CONTRACT
TIME PERIOD
VOLUME DISCOUNTS
PRODUCT VALUE
PEAK SEASON ECONOMETRIC OUTPUT
40FT DRY CONTRACT CARRIER 2010Q3 3,033.00 $
TEMP CONTROL ($/CONTAINER) 1,127.84 $
20 FT ($/CONTAINER) (299.87) $
45 FT ($/CONTAINER) 378.38 $
HIGH CUBE ($/CONTAINER) 77.60 $
NVOCC ($/CONTAINER) 178.61 $
SPOT MARKET ($/CONTAINER) 396.38 $
VOLUME DISCOUNT ($/ANNUAL VOL) (0.34) $
2009 Q4 MARKET ADJUSTMENT ($/CONTAINER) (1,250.79) $
2010 Q1 MARKET ADJUSTMENT ($/CONTAINER) (935.79) $
2010 Q2 MARKET ADJUSTMENT ($/CONTAINER) (567.37) $
ORIGIN INLAND ($/MILE, >=250 MI) 0.99 $
ORIGIN INLAND ($/CONTAINER, <250 MI) 337.85 $
DEST INLAND LONG BEACH - CENTRAL US ($/MI) 0.74 $
DEST INLAND LONG BEACH - SOUTH EAST US ($/MI) 0.91 $
DEST INLAND LONG BEACH - NORTH EAST US ($/MI) 0.54 $
------- ADJUSTMENTS --------
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Today’s Agenda
Who is Chainalytics?
Ocean Freight Market Intelligence
Chainalytics’ Benchmarking Reports and Deliverables
Ocean Sourcing Overview
Petco Strategy and Experiences
Q&A
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16
Geography: Trade Summary to Lane Detail
Which lanes contribute most to above/below market position?
How is market position distributed across all lanes?
Trends over Time: Market Position by Company, Industry
How is market position changing over time?
How is my industry impacted?
Providers: Carriers/NVO Statistics
How are results aggregated at the SCAC level by mode?
Who contributes most to above/below market position?
ComPair Data: 14 Containership Supply and Transit Time Reports
Delivery Schedule: Twice Annually
Data Collection: January 1 – February 1 and July 1 – August 1
Reporting: September 1 and March 1
Ocean FMIC Deliverables
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Strategic Intelligence and Collective Knowledge
Definitions: BI vs. Market Intelligence
What is happening in the market?
How is my organization/industry impacted?
How should it be navigated in the future?
Impact
Credible Evidence for Better Insight
Focused Contracting and Negotiating Strategies
Improved Partnerships
Augmented Organizational Awareness
Ocean FMIC Opportunities
Freight market intelligence supports
business intelligence and drives strategy.
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Today’s Agenda
Who is Chainalytics?
Ocean Freight Market Intelligence
Chainalytics’ Benchmarking Reports and Deliverables
Ocean Sourcing Overview
Petco Strategy and Experiences
Q&A
Click to edit Master title style Life Cycle of Transportation Sourcing Event
These areas get all the focus…
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Post-Awarding
Scenario Analysis DATA
…but these areas have the biggest impact on actual savings realized.
Rate Collection & Communication
Getting Ready
Click to edit Master title style Typical Sourcing Process
GETTING READY
1 – Project Documents: Project Plan and Task List
2 – Network Summary: Summary of Flows, Lanes, Problem Areas, and Historical
Cost
3 – Carrier Summary: Summary of Geographic Coverage by Carrier / Carrier Size
4 – Negotiation Package: Text Document and Data File of Service and Volume
Requirements, Carrier Questionnaire
RATE COLLECTION
5 – Collect Carrier Quotes: Leverage Web Technology to Distribute Bid Packages,
Support Carrier and Collect Carrier Proposed Rates
SCENARIO ANALYSIS
6 – Response Analysis: Review Carrier Responses and Run Scenario Analysis
7 – Subsequent Round Response Package: Notification of Target Rates and
Current Competitive Position in the Process
8 – Awarding Results: Summary of Awarding Volumes and Cost by Carrier and
Lane Details, Final Negotiations and Adjustments of Lane Assignments
POST AWARDING
9 – Award and Contract Communication: Finalize Routing Guide, Execute
Contracting Process with Carriers
10 – Update Systems: Import Rate Files into TMS and/or Freight Payment System,
Initiate Compliance Tracking, Audit Results
20
CHAIN & CLIENT CLIENT ONLY
Steps that Leverage Freight Market Intelligence
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“Perishable” Capacity
Complex Pricing Structures and Surcharges
AMS, BAF, CHS, CAF, DDC, DDF, FAF, HAZ, IFD, DOC, THC, PAN, SEA, SEC, CWO, WCO, SUZ, …etc.
Numerous Routing Options
All Water, Mini-Landbridge, Alternate Ports
Door, Container Yard, Port on Either End
NVOCC Dynamic
Minimum Quantity Commitments and Dead Freight Penalties
Carrier Alliances and Discussion Forums among a Small Number of Providers
The Challenges of Ocean Sourcing
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Guiding Principles to Transportation Procurement
Transportation is not a commodity; it’s a service. 1
A transportation sourcing event is as much a relationship management process as a pricing event. 2
Going to market on a regular basis should be a healthy part of the relationship management process. 3
Market intelligence is a necessity in today’s volatile transportation markets. 4
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Today’s Agenda
Who is Chainalytics?
Ocean Freight Market Intelligence
Chainalytics’ Benchmarking Reports and Deliverables
Ocean Sourcing Overview
Petco Strategy and Experiences
Q&A
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Confidential
Overview
Petco… where the healthy pets go
Petco is a leading pet specialty
retailer that provides the products,
services and advice that make it easier for our
customers to be great pet parents.
Everything we do is guided by our vision:
Healthier Pets.
Happier People.
Better World.
History • Founded in 1965
• 1,100+ stores serving all 50 U.S.
states
Physical Network Flow • 10 Distribution Centers: 4 MDCs, 6
RDCs
• e-Commerce fulfillment
• Import ~1800 FEUs, both EC & WC
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Confidential
Challenges for the import supply chain
1. Cost reduction without compromising service or increasing variability
2. Be able to quantify the cost/service trade-offs
3. Support the corporate objective to reduce inventory
4. Continue to expand Direct Import program
5. Maintain high visibility on orders and proactively manage shipment
events
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Confidential
Ocean freight sourcing & optimization
Consortium bid process
• 5 participating Shippers, 15 carriers received the RFQ for 12,500 FEU’s across 6,000 + lanes
• Operate as BCO shippers with direct carrier contracts
Utilize a third party consultant (Chainalytics)
• Utilization of leading bid optimization technology and solid ocean sourcing experience
• Well organized and professional approach established high credibility with carrier community
• Ran approximately 78 “What If” scenarios to optimize carrier award allocations by rates and
service
Use of Benchmark data
• Being a smart buyer means going beyond a stack of industry trade articles and dinner with sales
reps
• First time we had actual market data for comparison against current baseline rates and spend
• Ability to have high quality, reliable data as we determined aggressive, but fair ‘target’ pricing
• Focused our effort on top volume lanes where bid rates were relatively far off the market
• High confidence in our negotiating position with carriers
Results
• Savings on all top priority lanes across all participating Shippers
• Ability to report out the savings opportunity cost vs. selection of reliable service
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27
Today’s Agenda
Who is Chainalytics?
Ocean Freight Market Intelligence
Chainalytics’ Benchmarking Reports and Deliverables
Ocean Sourcing Overview
Petco Strategy and Experiences
Q&A
Confidential
Thank you!
For more information, please contact:
Mike Hane Sr. Director, Business Development (678) 384-3581 mhane@chainalytics.com
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