analysts meeting presentation roberto rossi

11

Logistics StrategyRoberto Rossi

22

Agenda

• Introduction and overview

• Strategy

• Diagnostics

33

Representing TNT Logistics

Alsopresent

Presenters

Name Responsibility

• Roberto Rossi

• Neil Crossthwaite

• Fausto Forti

• Pierre Girardin

• Dave Kulik

• Keith Goldsmith

• Managing Director

• UK & Ireland

• Italy and South America

• France

• North America

• IT North America

• Keith Nichols

• Joris Kaak

• Menno Groeneweg

• Finance Director Logistics

• Senior Manager Logistics

• Manager Marketing & Strategy

Years ofexperiencein Logistics

28

24

25

12

28

13

44

TNT Logistics Mission

To lead the global logistics industry in designing, implementing and

operating solutions to manage complex supply chains, and exploiting

technology to achieve optimisation, integration and visibility

throughout the process

55

TNT Logistics spans the entire supply chain

Execution/Physical operations

• Milk runs• Cross-docking• Consolidation &

warehousing• Kitting & value added

services• Freight management• Inventory planning &

control

• Work in Progresswarehousing

• Work in Progresstransportation

• Sub-assembly• Assembly fitting• Inventory planning

& control

• DistributionResource Planning

• Warehousing• Inventory planning &

control• Value added services• Distribution via

dedicated & sharednetworks

• Cross-docking• Track & Trace• Freight management

• Returns logistics• Recycle logistics• Spare parts

distribution• Coordination &

management of repairactivities

Procurementand

Inbound

Customer Service

ManufacturingProcess

Outboundand

Distribution

Integration and visibility through technology

Strategy,design &

optimisationof the supply

chain

Geographies & Sectors

66

Global footprint

The AmericasEUR 0.8 bn

EuropeEUR 2.2 bn

Asia PacificEUR 0.1 bn

TNT Logistics Global Revenue 2001 EUR 3.1 billion

TNT Logistics presence

77

Rapid growth

TNT Logistics Revenues 1999 - 2002(Billion Euro)

1999 2000 2001 2002

1.5

2.2

3.13.4CAGR 30%

Note: 2002 full year based on analyst consensus estimate

• Operating in 35 countries

• More than 1,150 contracts

88

Rapid growth

Average of top 10 players

TNT Logistics

Annual revenues (Billion Euro)

1997 1998 1999 2000 2001

1.00.9

1.21.0

1.5 1.5

1.8

2.1

1.8

3.1

99

TNT - Top Logistics player

3.7

3.1

2.2

2.1

1.5

1.4

1.4

1.2

1.2

1.2

Exel Logistics

TNT Logistics

Tibbett & Britten

Ryder Logistics

Deutsche Post Logistics

Hays Logistics

UPS Logistics

Christian Salvesen

P&O Trans European

Wincanton

Global Logistics Providers Ranking(Year 2001, Euro Bn.)

Source: Annual reports (web sites)

1010

3%

4%

5%

6%

7%

1996 1997 1998 1999 2000 2001 2002June

TNT

Average of 8 top players

Margins under pressure

Note: Players included: Hays, TDG, Tibbett & Britten, Wincanton, Christian Salvesen, TNT, Ryder, ExelSources: Annual reports; websites, press articles, investor reports,

Market Leader EBITA Margins1996 - 2002

1111

Action plan in place for margin protection

Cost reduction

Operational efficiency

Business Developmentefficiency

Initiative Steps taken

Impact onmargin

expectedin 2003 of

0.3 to0.5%

• Freight procurement• Portfolio management• Non-freight procurement

• Central support teamsin place to facilitateimplementation

• Operations best practice• Sector specific

benchmarking• Overhead

• Implementation pilotsstarted

• Key AccountManagement

• Shared networks

• In progress for top 20accounts

• Will be discussed incase studies

1212

Agenda


• Strategy

• Diagnostics

1313

Logistics Strategy

• Consistentgeographicalfootprint

• Freightforwardingcapabilities

• Sector centersof excellence

• Key accountmanagement

Shared globalIT system

Requirements Outcome

• Leadingworldwidelogisticsprovider

• Aboveindustryaveragegrowth ratesand margins

Aspirations

• Provide new andadditional services

• Reduce costs andoptimize servicelevels

Penetrationof focuschains

Manage restof portfoliofor margin

1414

Aspirations

RequirementsAspirations OutcomeRequirements

Requirements

Requirements

1515

Become the Network Innovator

Networkinnovator

• Global footprint• Superiorre-engineeringskills

• State of the artIT solutions

• Solid sectorexpertise

• Additionalservices


• Operationalexcellence

• Sharednetworks

• Reduce costs byreconfiguringsector networks

Low cost vs.competition

High value tocustomers

3. Manageand design

changes in thesupply chain

2. Improveservice levels

1. Costeffectivelogisticssolutions

• Implementingbest practices inTNT

• Cost reductions

1616

RequirementsAspirations OutcomeRequirements

Requirements

Requirements

Requirements

1717

First focus areas already selected

US

E U

AmbientChilledFrozenSpareparts

Out-bound

In-bound

TyresSpareparts

In-bound

FMCG/RetailElectronicsAutomotive

Auto-motivesparepartsUS

TyresUS

Auto-motivespareparts

Europe

TyresEurope

Consumerelectro-

nicsoutboundEurope

Computingspareparts

Europe

Auto-motiveinbound

US

Auto-motiveinboundEurope

FMCGchilledEurope

FMCGambientEurope

Discussed later today in case studies

1818

Required actions to meet strategic aspirations

Freightforwardingcapabilities

Other whitespots

Germanywhite spot

• Required capability in some geographies andsectors

• Entry options are under consideration

• Germany is largest Logistics market in Europe• Substantial progress made with integration of

In-Night operations

• Korea and Japan important markets inautomotive and electronics

• Sector driven acquisitions for footprintcalibration

Rationale

1919

Sector centers of excellence implemented

Center of excellence

Responsibilities of sector centersAuto spares EU

Auto inbound US

Tyres EU, US

Computingspares EU

Consumerelectronics EU

IT UK NL F US

Retain country P&L

• Shared automotive spare partsnetwork in Europe

• Shared automotive inboundnetwork in North America

• Shared electronics spare partsnetwork EMEA

Specific initiatives

•P&L or pro-forma P&L•Operate network•Manage key accounts•Benchmark and share bestpractices

2020

Shared global IT platform in development

• IT solutions oftendedicated percontract

• Competency centersin place -- Lyra, Clickand Matrix

• Matrix is anintegrated solution

• Easy interfacingfor clients

• end-to-endvisibility

Current situation Competitive advantagesPilot

Customersolution A

Customersolution B

Customersolution C

Shared global platform

Enterprise application integration

• Configurebusinessprocesses rapidly(weeks)

TMSWMS Visibilitysystems

Other

Library

Customer process

• Library ofstandardizedcomponents

Ware-housing

Trans-portation

Tracking …

2121

Outcome

• Leadingworldwidelogisticsprovider

• Aboveindustryaveragegrowth ratesand margins

RequirementsAspirations Requirements

Requirements

Requirements

2222

Strategy enables above average growth and margins

Any newTNT

offeringcould bematched

Competitiveparity

SustainableSustainablecompetitivecompetitiveadvantageadvantage

Barriers tocompete

with TNTHigh

Network innovator

• Global footprint

• Superiorre-engineering skills

• State of the art ITsolutions

• Solid sectorexpertise

• Additional services


• Operationalexcellence

• Roll out ofsharednetworks

• Reconfiguringsectornetworks

• Implementingbest practices

• Ongoing costreductions

Low/medium

Medium

High

2323

Example - Newsfast

Low cost

High value

Distinctive3 PL

Soundvalue

Network innovator

Re-designed road basednetwork for NewsInternational

Improvedservice to99.8%

Increased density byadding new newspapersand magazines

Developed web-basedvisibility

Added last remainingnewspapers Integrate with Taylor

Barnard operations

6

Service to 99.8%

5

4

3

21

2424

Elephant hunting

2525

Key messages

TNT Logistics has:

• Solid growth with attractive margins

• Action plan in place to deal with current tough economicconditions

• Clear strategy and roadmap to create a sustainable competitiveposition

• Clear focus on specific industry chains and large clients

• Operational excellence and continuous management of risks ascore elements of our management principles

• Highly experienced management team

2626

Agenda


• Strategy

• Diagnostics

2727

55%

45%

71%

15%

14%

Overall split by physical activity 2001

Split by activity

Split by dedicated versus sharedrevenue • Taylor Barnard (UK)

• Newsfast (UK)• Italy non-Automotive• Barlatier (France)• Schrader (Germany)• Mendy (France)

Warehousing & added value

Distribution

Shared distributionShared warehousing

Dedicated

Main shared activities:

2828

Sector split

InitiativesRevenue split by sector

•Targeted acquisitions in non-automotive, such as Nicolas

•Additional resources inBusiness Developmentallocated to non-automotive

Dependence onAutomotive is

decreasing

Other

Hi-tech ElectronicsPublishing MediaFMCG

Tyres

Automotive

2000 2001 2002YTD

13%

11%

10%

16%

13%

7%

42%

6%7%

46%

19%

11%

7%

38%

6%

16%13%19%

2929

Automotive

Split by activity

Split by geography

• 65 vehicle manufacturers and equipmentmanufacturers

• > 200 contracts in place

• Significant contract wins 2002:– BMW, North America– American Honda– International Engines, South America– Valeo, France

54%

39%

7%

Inbound

Outbound

Other

60%

36%

4%

Europe

Americas

Asia Pacific

3030

Split by activity

Split by geography

FMCG

• 89 retail chains in food, drink and consumergoods

• 19 clothing companies


• Significant contract wins 2002:• Carrefour, France (multiple contracts)• L’Oreal, France• Johnson & Johnson, Turkey• Migros, Turkey• Gardena, Nordics• Starbucks, UK

84%

50%

50%

Europe

Transport

Warehousing

11% Americas5% Asia Pacific

3131

Split by activity

Split by geography

Electronics

• > 100 customers in the High Techindustry


• Significant contract wins 2002:– Wind, Italy– Hagemeyer, UK– Bosch / Siemens, Brazil– Embraco, Brazil– Xerox, Brazil

61%

26%

Outbound

Spare parts & repair

13% Inbound

8%2%

AmericasAsia Pacific

90% Europe

3232

Automotive FMCG

Top 5 accounts by sector(in alphabetical order)

Electronics

3333

Contract risk management

• Comprehensive set of Guidelines to minimise risks andprotect financial returns

• Policy must be followed in all contracts and any exceptionsto the Guidelines must be approved by TNT LogisticsDivisional Head Office

• No acceptance of product liability• Liability for loss, damage and theft of Goods limited• Insurance

• Termination by customer for convenience withcompensation

– Redundancy Costs of personnel– Ongoing Lease Commitments of property & equipment– Unamortised assets

Commercialpolicy

Limitation of liability exposure

Compensation for termination

3434

Volume protection is achievedvia various measures

• Open Book Cost Plus contracts 20% of TNT Logistics’revenue -- mostly UK and Asia

• All other contracts are tariff based

• Sliding Scales for tariff adjustments• Fixed Cost components• Re-negotiation of contract when significant change in

volumes or profiles

Pricingstructure

Protection forvolume fluctuations

3535

Duration of contracts

• Average life of new contracts won in 2001 and 2002 is 3.5 years

• Existing contracts with a fixed renewal date have 3 years remainingon average

• Rolling contracts without a fixed end date have an average age of 6years

• Larger contracts have a longer duration to minimise risks for bothparties

• TNT’s hit rate upon renewal of contracts is very high at 83%

3636

End of presentation

analysts meeting presentation roberto rossi

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