1. Where is the Logistics Service Provider Industry Going? Thomas J. Goldsby, Ph.D. Associate Professor of Supply Chain Management University of Kentucky April 20, 2006

2. Logistics Quarterly Executive Exchange (April 20, 2006) Slide 2 Participants by industry and job title [in %] IndustriesPositions 18 17 5 83 11 5 10 9 15 Food and beverage Automotive Consumer goods Industrial equipment Electronics and related instruments Computer hardware and peripheral equipment Chemicals and plastics Retailing Healthcare Others Logistics manager 76 Vice president logistics 20 President, CEO, COO; 1 Logistics employee 2 Others; 1

3. Logistics Quarterly Executive Exchange (April 20, 2006) Slide 3 Participants by revenue and employees [in %] Revenue (in Million $)No. of employees < 100 mil. $ 7 100-249 mil. $ 11 250-499 mil. $ 12 500-999 mil. $ 10 1,000-4,999 mil. $ 29 ≥ 5,000 mil. $ 31 less than 100 100 -249 250 -499 500 -999 1,000 -2,499 2,500 -4,999 5,000 -9,999 10,000 and more 13 10 18 11 14 9 16

4. Logistics Quarterly Executive Exchange (April 20, 2006) Slide 4 Outsourced Services 1 = not at all, 7 = completely 2.4 2.8 2.9 3.2 3.4 3.5 3.6 3.8 4.1 4.4 1 234567 Assembly Consulting services Lead logistics management Inventory control/management Product returns Cross-docking International freight forwarding Pick/pack operations Customs clearance Logistics information systems Transportation planning Warehousing Transportation operations

5. Logistics Quarterly Executive Exchange (April 20, 2006) Slide 5 1.5 2.8 3.3 3.9 4.1 4.4 4.7 4.8 4.9 5.8 1234567 Logistics is a rather unimportant process Decrease damage- or error ratio Limited management capacities Leverage LSP’s logistics skills Level peaks when order volumes vary Turn fixed costs into variable costs Increase speed of logistics Improve process flexibility and response times Improve ability to deliver Reduce capital employed Reduce logistics costs Reasons for Logistics Outsourcing

6. Logistics Quarterly Executive Exchange (April 20, 2006) Slide 6 Goal Achievement The pre-set goals are achieved by 74% of respondents 1234567 fully disagree fully agree Mean = 5.03

7. Logistics Quarterly Executive Exchange (April 20, 2006) Slide 7 Goal Exceedance Goals are exceeded in only 39% of surveyed firms 1234567 Mean = 4.22 fully disagree fully agree

8. Logistics Quarterly Executive Exchange (April 20, 2006) Slide 8 Key Factors of Outsourcing Success Trust Commitment Communication Openness Relationship Factors Cooperation Proactive Improvement Shared Values Opportunism Goal Achievement Goal Exceedance Outsourcing Success

9. Logistics Quarterly Executive Exchange (April 20, 2006) Slide 9 A Focus on Action Variables Trust Commitment Communication Openness Relationship Factors Cooperation Proactive Improvement Shared Values Opportunism Goal Achievement Goal Exceedance Outsourcing Success

10. Logistics Quarterly Executive Exchange (April 20, 2006) Slide 10 The Paths to Goal Achievement vs. Exceedance Communication Cooperation Proactive Improvement Goal Achievement Goal Exceedance R² = 52.5 % R² = 34.2 % R² = 71.3 % R² = 38.2 % +++ + 0 Strong Influence Medium Influence Weak Influence No Influence +++ ++ + 0

11. Logistics Quarterly Executive Exchange (April 20, 2006) Slide 11 So what!?! Good communication is the driver of cooperation – and good cooperation leads to proactive improvement. Proactive improvement is what sets apart “excellent” outsourced logistics performance from “acceptable” or “good” performance. Customers of outsourced logistics services distinguish goal exceedance from goal achievement.

12. Logistics Quarterly Executive Exchange (April 20, 2006) Slide 12 For more information… Thomas J. (Tom) Goldsby Ph. (859) 257-2979 e-mail: goldsby.1@uky.edu