Hot Topics in International Business Logistics Charlie Zidek Managing Director SEKO Logistics

© SEKO Logistics 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 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 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 Panama Canal As an Option Panama Canal Expansion Purpose to Reduce Transit Time $5.25 Billion Cost Scheduled Opening – 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 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 4 th Quarter Sales

© SEKO Logistics 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 Logistics Charlie Zidek Managing Director SEKO Logistics