Kirill Vlasov, Strategy Development Director, STS/RLS Logistics delivers a Case Study on 'Segment-based Approaches to the Russian 3PL Market' at the 7th European 3PL Summit in Brussels, November 25th 2009. To download all of the slides from the conference for free visit www.3PLsummit.com/eu_2009ppts

1. Segment-based approach
to Russian 3PL market
Kirill Vlasov
Strategy Development Director
STS/RLS Logistics
7th European 3PL Summit
24 November 2009

2. STS/RLS – a leading Russian 3PL industry player
Company profile
Created by 2009 merger
of STS Logistics and RLS
STS/RLS Logistics
Key company facts and figures
Established in 1990s
Focused on Russia and CIS
Combined 2008 revenues: ca. USD 350 million
Over 1000 clients, among them many Russian and international blue chips
Combined staff: 1200 employees in HQ, 25 regional offices in Russia, 4 CIS and 3 overseas offices
Warehouse space: 150 000 sq. m. A and B-class in 8 cities of Russia
International partner network (China, Germany, Japan, Turkey)
Business focus areas
Freight forwarding Project logistics Contract logistics Services
International and Complex project Integrated LP services Related services
domestic freight solutions for oil/gas (transport, > Customs clearance
operations (air, sea, and power generation warehousing, services)
> Insurance
road, rail) industries for FMCG, retail,
automotive and > Logistics consulting
chemicals industries
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3. Russia: second largest logistics market in Europe
Russian logistics market – international comparisons
Size of logistics markets in USD bn (2008) Logistics costs compared to GDP (2008)
US 1 300 China2 20,0%
Europe1 1 230 Russia 13,4%
China2 540 India2 13,0%
Germany3 280 US 9,7%
Russia 225 Europe Germany3 8,4%
Global avg.
150 = 11,7%
France3
Logistics costs in Russia are relatively high compared to GDP,
under the likely influence vast geography and poor infrastructure
1 EU27+Switzerland and Norway, 2007; 2 2006, estimate; 3 2007
Source: Langley/Capgemini; Fraunhofer Institut
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4. Russian logistics market has been growing at >20%, but is hit hard by crisis
Size and dynamics of STS/RLS market vs. German market and vs. GDP
Russian STS/RLS target market vs. GDP German logistics market vs. GDP
RUR bn USD bn EUR bn USD bn
Drop 08-09FC
CAGR 05-08 Drop 08-09FC EUR = -5%
RUR = -8% CAGR 05-08
RUR = 7% EUR = >2%
2 250 2 270
26 590 2 150
25 180 24 590
23 290 2 190
21 630 2 120
Drop 08-09FC
RUR = -12% Drop 08-09FC
USD = -32% EUR = -8%
CAGR 05-08 USD = -14%
CAGR 05-08 =
RUR = 17%
3 520 EUR = 8%
USD = 22% 3 200
3 100 USD = 14%
2 560 321
125 142 205 276
189
175 218
2 210 281 200
90 237
98 218
80
2005 2006 2007 2008 2009E 2005 2006 2007 2008 2009E
Market in USD bn Market in RUR bn GDP in RUR bn Market in USD bn Market in EUR bn GDP in EUR bn
Russian logistics market has suffered strongly from crisis and rouble devaluation
Note: conversions at appropriate annual avg. rates for historical points; forecast using USD/RUR = 32,2 (average 2009 to date)
Source: Rosstat; IMF; RBC; Fraunhofer Institut
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5. Russian logistics market most likely to return to growth in sync with GDP
Future growth scenarios
Optimistic case Base case Pessimistic case
(Council of National Strategy) (IMF) (MERT)
Market, USD bn Market, RUR bn GDP, RUR bn
RUR bn USD bn RUR bn USD bn RUR bn USD bn
CAGR 08-12 142 CAGR 08-12 CAGR 08-12
USD = - 4% 3 840 USD = - 8% USD = - 9%
142 3 520
104 93 94 96 99
113 119 96 97 100
101 106 3 520
3 520 3 220 3 340
3 620 3 180
3 420 3 100 3 130
3 260 3 080
2 990 3 020
2008 2009FC 2010FC 2011FC 2012FC 2008 2009FC 2010FC 2011FC 2012FC 2008 2009FC 2010FC 2011FC 2012FC
Commodity prices stabilize and continue Commodity prices remain volatile Slow recovery of world economy due to
growing but at acceptable current levels unemployment, diminished consumer
Government stimulus packages help Economy loses only little momentum after spend, continuously limited credit
the economy return to stable growth expiry of governmental stimuli availability, protectionism
Banks making credit available, favorable Lacking efficiency of Russian Stagnating commodity prices
fiscal and monetary policy make manufacturers makes them slow to Lacking efficiency/competitiveness
investments affordable benefit from recovery of world economy of Russian manufacturers
If RUR shows weakness, the market may not reach 2008 levels in USD terms in the next 3 years
Note: conversions at appropriate annual avg. rates for hist. points. FC with USD/RUR = 32,20112 (YTD 08/11/2009)
Source: As indicated, STS/RLS estimates
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6. Continued outsourcing of logistics may soon offset the effects of crisis
Addressable market potential estimates
Share of outsourced logistics
Addressable market estimates (bn USD)
(current vs. forecast)
Outsourced logistics
2009 E (Russia) 2014 E In-house logistics
(addressable market)
Europe 66% 74%
2008 92 50
Asia
62% 70%
Pacific
Optimistic 65 54
Latin
51% 60%
America
2012E
Base 57 47
Germany 49% 57%
North Pessimistic 55 46
47% 54%
America
2014
Forecast Assumptions: by 2012 market gains 60%
Russia 30-40% 50-55% of projected increase from 30-40% to 50-
55%; all calculation based on constant USD
Depending on market scenario, outsourced logistics market may fully recover the pre-crisis level by 2012
1 Data used for calculation: 35% outsourced in 2008; 52,5% outsourcing level to be reached by 2014
Source: Langley/Capgemini; Fraunhofer Institut; STS/RLS estimates
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7. STS/RLS serve some of the largest Russian logistics market segments
Selected Russian domestic logistics market segments (USD bn, 2008) Estimates
FMCG 17,7 20 17,7
1,8
Alcoholic beverages 3,7 3,7 19 1,8
Fashion/Footwear 3,4 3,4 18 2,1
Furniture/DIY 2,2 2,2 17 5,3
Finished consumer
goods Consumer/Commercial vehicles 1,7 1,7 16 7,4
Pharma/Biotech 1,7 1,7 15 7,5
Fresh 1,3 1,3 14 9,2
Consumer electronics 0,8 0,8 13 10,8
Machinery, equipment, vehicles 7,0 7,0 12 0,7
Construction components/materials 8,38,3 11 3,5
Industrial products
Intermediate goods 3,5 3,5 10 8,3
Parts/Components 0,7 0,7 9 7,0
Coal 10,810,8 8 0,8
Oil, LNG, chemicals (except pipelines) 9,2
9,2 7 1,3
Ferrous metallurgy products 7,5 7,5 6 1,7
Commodities Agriculture products 7,4 7,4 5 1,7
and bulk products Bulk construction materials 5,3 5,3 4 2,2
Ore 2,1 2,1 3 3,4
Forestry products 1,8 1,8 2 3,7
Fertilizers 1,8 1,8 1 17,7
Source: GKS; RZD; Industry research$ STS/RLS analysis
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8. Vast experience in industrial and complex project logistics
Segment profile Industrial and project logistics
Service portfolio Key clients
Complex project logistics Oil/Gas Power generation
Transportation of oversized and overweight
equipment Baker Hughes • Boguchanskaya
Provision of all types of transport (air, road, rail, Caspian Pipeline Hydroelectric Plant
sea) Consortium Bureyskaya
Provision of tailored infrastructure solutions CentrCaspneftegaz Hydroelectric Plant
> Land transportation in severe conditions Neftegazengineering • Kambaratynskaya
(e.g., Arctic) Rosneft Hydroelectric Plant
> Temporary installations (jetties, roads, bridges) Tenaris
> Lifting of power lines TNK-BP
Intermediate storage
Project customs clearance, including in all major
seaports of Russia
STS/RLS is able to deliver any equipment to any destination
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9. Ability to provide complex, tailored solutions inside Russia and CIS
Industrial and project logistics
Transportation of
generator wheel for Airlifting of generator wheel
Kambaratynskaya HEP for Bureyskaya HEP (Russia)
(Kyrgyzstan)
Delivery of railway engine from manufacturing Transportation of sodium powder
plant in Russia to Iraq Using sealed containers
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10. Wide range of services in parts’ logistics
Segment profile Automotive and parts logistics
Service portfolio Key clients
Cargo pick-up at consignee warehouse Consumer/Commercial Industrial
Transportation between distribution centers
Break-bulk cross-docking Ford Komatsu
Delivery to final destination Mazda OTIS
Handling of large SKU assortment (> 30k SKUs) Pirelli
Transportation and storage of special goods
> Oversize (above standard pallet size)
> Fragile (glass)
> High value (delivery in cages)
Customs clearance
Value-added services
> Insurance (freight, liability)
> Shipment tracking
> Return of proof-of-delivery documentation
Storage and delivery of rubber tires
Our flexibility allows us to provide tailored solutions to most of our clients
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11. Ability to cover door-to-door supply chain of our clients in Russia & CIS
Automotive and parts logistics
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12. A leading LSP for Russian FMCG and retail industry
Segment profile FMCG and Retail logistics
Service portfolio Key clients
Transportation using all modes of transport FMCG Retail
FTL, FCL, LTL solutions
Warehousing Baltika Auchan
> Network of A-/B-class warehouses in all cities Beiersdorf Metro
with population over 1 million Efes X5 Retail Group
> Storage and cross-docking Kraft
Handling of large SKU assortment (> 30k SKUs) L’Oreal
Transportation and storage of special goods Mars
> Temperature control Nestle
> Humidity control PepsiCo
Customs clearance Procter & Gamble
Value-added services SCA Hygiene
> Insurance (freight, liability)
> Shipment tracking …and 500 more
> Return of proof-of-delivery documentation companies
STS/RLS is serving (or have served in the past) a large part of Russia’s FMCG leaders
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13. Tailored solution for transportation and warehousing
FMCG and Retail logistics
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14. Our drive for quality and high service level never stops
Summary
CRM/ERP (IWIS, developed locally)
IT systems
WMS (Logistic Vision)
development
E-services (tracing of shipments and client notification)
Commercial department includes a team of Key Account Managers (KAMs)
Key account
KAM fulfill the roles of “one-point-of-contact problem solvers” for clients
management
KAM role split based on industry specialization
Certified by Bureau Veritas
ISO 9000:2001
Maintained since 2004
Fast receipt of proof-of-delivery documentation
Customized
Availability of document scans for accelerated client notification
solutions
One bill of lading for complex transit shipments
Quarterly client surveys conducted to measure service quality
Client satisfaction
measurement Surveys linked with quality KPIs, which form an integral part of STS/RLS
performance management and quality assurance systems
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15. We are open for international cooperation
Contact information
Our clients focus on their business
We take care of logistics
Kirill Vlasov
STS/RLS Logistics
Strategy Development Director
+7 (495) 775 02 02 stsmow@stslogistics.net
+7 (495) 933 00 33 moscow@rls.ru
+7 (985) 760 2209 (mob.) kvlasov@rls.ru
www.stslogistics.net
www.rls.ru
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