Top 25 Third-Party Logistics Providers Extend Their Global Reach

Thomas A. Foster and Richard Armstrong |

An elite group of just 25 3PLs increasingly dominate logistics outsourcing around the world, and that is just how their customers like it. This closed club promises to become even more exclusive in the years ahead as acquisitions concentrate the power among fewer but larger 3PLs.
With international trade mushrooming and supply chains expanding around the world, third-party logistics providers have taken on an increasingly important role for multinational manufacturers and retailers. Manufacturers need absolutely reliable sources of supply. Retailers need flexible links to suppliers with low-cost production. These suppliers are often in remote regions. At the same time, retailers need rapid delivery channels for an ever-expanding distribution network of consumers. Simultaneously, burgeoning prosperity and intensifying competition for new markets is putting more and more pressure on supply-chain managers to get the job done and find competitive advantage. Increasingly, the linchpin for successful worldwide supply chains is a core group of global 3PLs that can provide the expertise, reach, reliability and flexibility that multinational corporations need. These global 3PLs provide transportation, consolidation, forwarding and customs brokerage, warehousing, fulfillment, distribution and virtually any logistics and trade-related services that their international customers need. About 100 3PLs now control almost a third of an estimated $270bn that is spent on outsourced valueadded logistics services each year around the world. Within this group of global 3PLs, an elite group of 25 companies account for about one-third of all global 3PL activity. Their annual revenues exceed $79.5bn, and in 2004, these revenues will grow between six and eight percent twice the world GDP rate. Europeans Rule Not surprisingly, the seven largest global 3PLs are all European-based companies. The top seven companies on our list together earned more than $42bn last year, which is more than all of the other 3PLs in the Top 25 combined. U.K.-based Exel holds the top spot on the list with revenues of $8.3bn. The number two and three spots go to Swiss-based Kuehne & Nagel and German-based Schenker, respectively. These two companies, along with Panalpina and DHLs Danzas Air & Ocean operations, have been leading forwarders and transportation management 3PLs in Europe for decades. History, empire and exports helped create the large European 3PLs. To illustrate this, we can compare revenues of the major players in their home countries. Less than one-third of Exels revenue is derived from business conducted in its British Isles home base. Kuehne & Nagel derives 45 percent of its turnover in Europe but less than 5 percent of it is within Switzerland. By comparison, 80 percent of UPSs business is conducted in the United States. European countries, which have always had significantly more cross-border traffic, have relied more on outsourcing than Americans, especially since World War II. Outsourcing rates in Europe are estimated by country to be 26 to 60 percent by Peter Klaus in his Die Top 100 Der Logistik. 3PL market penetration rates were estimated at 12 percent for 2003 by Armstrong & Associates. German and Japanese 3PLs grew rapidly during the industrial growth of their countries exporting economies after World War II. The importance of freight forwarding to supply-chain management is also a key variable in choosing the largest global players. First, the revenues used throughout this article are turnover (gross revenue). These revenues included purchased transportation, a major expense for most of the 3PLs on our list. Second, global supply chains rely heavily on freight forwarding activities for their construction. Most of the key events in any international supply chain are controlled by the freight forwarder. The services that global 3PLs provide frequently include: Air Freight Forwarding (door to door) Ocean Freight Forwarding (door to door) Transportation Network Planning and Optimization Transport Execution/Freight Bill Payment Carrier Management Merge in Transit Security Systems and Control Incoterm Control shifting from Ex works (EXW) to delivered duty paid (DDP) Letters of Credit/Negotiable Bills of Lading Cargo Insurance

Consolidation/Deconsolidation/NVOCC Operations Systemwide Track & Trace/Internet Supply Chain Visibility Customs Brokerage and Licensing Imports/Export/AMS/C-PAT Duty Drawback Value-Added Warehousing, Inventory Control and Supplier Management

Over the last few years nearly every company in Europe has been able to take some advantage of the free movement of goods across borders. This shift has been good for the large European 3PLs, but cultural differences still prevent centralization of operations at U.S. levels. Most 3PL operations in Europe still have to be designed on a country-by-country basis to be effective. U.S, Asian 3PLs to Expand Only three of the companies on the Top 25 list are Asian-based, which reflects slower adoption of thirdparty logistics in that part of the world. Japan especially has been an enigma. Most major Japanese companies are still hesitant to outsource more than basic transportation to 3PLs. The slowdown in the Japanese economy and pace of change for traditional business practices reflects in the conservatism of Japanese 3PLs. Companies like Yamato, Nippon Express and Kintetsu are leaders in Japan and with Japanese companies all over the world, but they have been slow to expand dramatically into nonJapanese connected western markets. NYKs new direction is an exception to the rule. However, these companies are now making aggressive efforts closer to home, in China. Singapore-based SembCorp Logistics, on the other hand, has taken a progressive approach to becoming to global player. SembCorp owns 20 percent of Kuehne & Nagel, and it is expanding rapidly in India and China. Leading the global 3PL expansion are UPS, FedEx and DHL. These multibillion-dollar enterprises already service most of the world on package shipments and are expanding their offerings to give similar results for less-than-container-load and container-load shipments. UPS SCS and DHL/Danzas are tied to corporate parents with large free cash flows to fuel expansion. In the U.S., for the ninth consecutive year, growth in the 3PL services market exceeded overall economic growth. Total 3PL turnover increased by 8.2 percent to $76.9bn. Net revenues for FY 2003 grew by 6.1 percent to $32.9bn following 7 percent growth for FY 2002. Net income increased to 3.9 percent of net revenue from 3 percent in FY 2002 and 1.7 percent in FY 2001. Individual company results varied with select companies posting strong results. The largest U.S.-based 3PL is UPS Supply Chain Solutions (SCS), which has reached $4.1bn in turnover. UPS SCS was profitable in all four quarters of FY 2003. Standard UPS operating efficiencies are apparently taking hold. Valueadded transportation manager C.H. Robinson continued to improve its best-in-class results by increasing net revenue by 12.6 percent to $545m. Its net after-tax income margin increased to 20.9 percent. Turnover was $3.6bn. Net income was $114m. International transportation manager, Expeditors International, maintained its excellent operations. Net revenues were up 10.1 percent. Profitability continued at high levels with net after-tax income margins of 16.2 percent. Among value-added warehouse distribution providers (VAWD), Exel and UPS SCS continue to be the major players and both had good growth and improved profitability. Among mid-sized VAWD 3PLs, such as Kenco, Genco, Jacobson and DSC, revenue growth exceeded 10 percent. These mid-sized, privately held VAWD 3PLs are often very competitive and are gaining business quickly. They all also increased their profitability. These companies are improving their core warehousing offerings, adding more value-added options, expanding their transportation offerings and improving integrated solutions. They are not yet among the global players. The trend overall is for more integrated, technical and velocity-driven solutions for all 3PLs. Web-based inventory tracking and event management are necessities. In recent research done by Armstrong & Associates on the VAWD segment, the most requested value-added services were reverse logistics, vendor/inventory management and customization/subassembly. With regard to transportation valueadds, the major requirements are for international transportation/ customs brokerage assistance, expanded IT/visibility and domestic transportation network management. These value-added preferences reflect the global trends to overseas outsourcing, longer supply chains and better information control. The ranks of these global players will continue to concentrate in the near future. Three important trends are driving this path to fewer and larger global 3PLs: 1. The worlds largest manufacturers and retailers have solidly adopted the logistics outsourcing concept, and they prefer to do business with other larger companies, including their 3PLs.

2. While more and more manufacturing, sourcing and other supply chain activities are happening in places like China, India, Latin America and other emerging markets, required logistics capabilities often do not yet exist in these regions. The Global 1000 companies operating in these markets want global logistics providers that can expand operations wherever they are needed and move from region to region as manufacturing sources change. 3. To quickly grow in size, capability and geographic reach, global 3PLs must expand by acquisition. The big 3Pls that intend to be among the handful of truly global players are under great pressure to eat or be eaten by their competition. Bigger is Better Global corporations increasingly want single points of contact for their outsourced logistics. For example, a few years ago, General Motors formed Vector, a logistics management company that it jointly owns with CNF Inc., the parent of Con-Way Transportation, Menlo Worldwide and its subsidiary, Menlo Logistics. This so-called 4PL runs much of GMs supply chain in the U.S., but the actual logistics operations have been subcontracted to other 3PLs, including TNT North America, Penske and several others. The logistics subcontractors are doing the inbound materials management, dedicated contract carriage, cross-docking and other logistics tasks, but Vector is GMs one point of contact. We are seeing this trend play out as the Global 1000 corporations send out their requests for proposal for logistics services. Often only the very top players are being asked to bid, and the bar for what constitutes a top player keeps rising. The smaller players may be great companies, but they end up performing parts of the total logistics contract as subcontractors. Large corporations are often looking for larger 3PLs with financial stability and wide geographic coverage. This trend will increase as more companies become virtual manufacturers producing nothing themselves. Cisco, for example, outsources its production operations except for marketing, sales and high level management. Virtual companies use world-class contract manufacturers like Solectron and Flextronics, but they also need the best logistics capabilities to manage their extended supply chains. Increasingly, that means using 3PLs. In the automotive industry, large 3PLs dominate the market because they can offer a combination of asset and non-asset capabilities. Penske, Ryder and TNT all have a combination of supply-chain management, transportation execution management and planning capabilities, as well as cross-docking and VAWD capabilities. Automotive logistics 3PLs often provide assets for dedicated contract carriage milk runs from suppliers to plants and value-added services on components just before they are delivered to the production line. The financial muscle to afford these capabilities only exists at a handful of 3PLs. Expanding Coverage Booming world trade has fostered longer and more complex supply chains, which in turn has created a pressing need for better logistics in all corners of the world. In China, where a few hundred factories manufacture a large portion of the worlds garments, consumer electronics and other products, the logistics infrastructure can be quite primitive, especially as one moves inland. The major retailers and manufacturers outsourcing to these factories are using their relationships with large 3PLs to control how their overseas vendors perform their logistics. A few large 3PLs under the control of the U.S. or European buyers handle the logistics from the factories to the ultimate destination. Since these buyers are likely to change their suppliers as cost savings dictate, the 3PLs must be able to manage the logistics flows from any origin to any destination. The actual logistics operations needed currently center on fairly simple operations such as transportation, consolidation and forwarding, but information technology and logistics planning requirements are growing rapidly more complex. Growing prosperity in Southeast Asia is also building thriving consumer markets. Large 3PLs in Europe, the U.S. and Japan want to ramp up their activities in this region to position themselves for this coming wave. Both U.S. and European operators are looking for local acquisitions to accelerate their capabilities. At least one major U.S. 3PL will announce acquisitions in Asia later this year. The globalization of 3PLs will spread around the world, although more slowly in many areas where 3PLs have gained limited market entry. The modern outsourced logistics model, where manufacturers and their 3PLs have become business partners with shared authority and responsibility over entire supply chains, has yet to be adopted in many regions. This model is the norm in the U.S., Western Europe, Australia, Singapore, Hong Kong and some parts of Mexico and Brazil. Outside of these areas 3PLs are still treated functionally: The 3PL is hired to perform one task such as warehousing. In many developing nations, the problem is a lack of infrastructure. For example, in much of Latin America, warehouses are rudimentary. They often lack docks, material handling equipment, and have no

IT systems to manage inventory or provide information sharing with carriers or customers. Even in highly advanced parts of the world such as Japan, 3PLs still primarily perform functional roles. As large corporations expand their businesses and their processes to all regions of the world, the need for better logistics continues to transform 3PLs and forces them to become supply-chain partners. In most cases, this transformation is accompanied by acquisition. Expanding the Footprint The acquisition wave is building momentum again. The center of activity is in the developed economies of Western Europe and the U.S. UPS SCS, Penske, Menlo and C.H. Robinson have established footholds in Europe, mainly by acquiring well-established companies in this region. These U.S. companies are now well positioned to grow their European business on an even footing with the big local competitors. On the other hand, European 3PLs continue to add to their capabilities in the U.S., which remains the largest and most attractive market. Last year Deutsche Post, through its DHL subsidiary, acquired Airborne to expand its express business. In the near future, we expect Deutsche Post or its competitor, Schenker, to add to capabilities in the U.S. with acquisitions in warehousing, distribution and transportation. We are also likely to see other European players, and perhaps some Asian-based 3PLs acquire mid-sized U.S. 3PLs that have long been strong players in the VAWD sector. Recent examples include the purchases of USCO by the Swiss-based Kuehne & Nagel and Standard Warehouse by UTI. Companies like Kenco, based in Chattanooga, and Chicago-based DSC receive inquiries continually. These 3PLs, many of which are family owned or closely held, are reluctant to sell because business is good and the owners enjoy what theyre doing. The attractiveness of the U.S. market is not the only reason foreign companies are interested in U.S.based 3PLs. European 3PLs are coming to the U.S. to make sure that they are strong enough to compete against UPS, FedEx and other U.S.-based logistics providers that are aggressively entering their home markets. It is market positioning on a global scale. Regardless of where a global 3PL is based, it is going to have to make acquisitions in foreign markets to fill out its offerings, both in terms of capabilities and geographic coverage. If the economy continues to recover worldwide, the acquisition pressure will be intense. Evolving Payment Models Of course, the 3PL industry can only grow if it is profitable enough to attract investment capital. At times the growth of segments of this industry has been hampered by inability to make money. In the VAWD segment, large customers have traditionally wanted to pay on cost-plus open-book arrangements. Margins were kept low. In addition, under gain-sharing arrangements 3PLs have often been unable to collect their full shares. In the transportation management sector those who operate on transactional freight bill models have had a particularly difficult time making money. On the other hand, 3PLs that take full responsibility for all transportation services do much better. These transportation-oriented 3PLs can leverage the volume and freight flows of multiple customers to obtain better rates than any one customer could negotiate. A good portion of these savings goes to the 3PLs bottom line. Good examples of transportation-oriented 3PLs that understand how to make money are C.H. Robinson, Expeditors and Landstar. These profitable companies control the transportation spend. They are not interested in having accounts where they simply provide transportation management and clerical functions on a cost-plus basis. Conclusion There will be winners and losers in the global 3PL race. The shakeout that is coming parallels what happened in the U.S. during the 1980s after transportation deregulation. Then, a small group of carriers grew rapidly by out-performing the competition. They won market share. Other primarily higher cost companies either went out of business, or retreated to small, defensible niches. In todays 3PL market, there will be a small group of big operators with global reach and international skills that will dominate worldwide logistics. They will have to grow fast enough to service the largest customers and to avoid being commoditized by those customers. At the other end of the market, there will also be niche players that will often end up working for the global 3PLs. There will be limited room for mid-sized generalists. Only time will tell who the winners and losers will be. For now, we present a comprehensive analysis of the 25 3PLs that are leading in the global race. This selection has been made on turnover, current coverage, breadth of skills and parent company gravitas. Top 25 3PLs

1.

Exel plc Berkshire, UK, London: EXL Exel Americas Westerville, OH, 800-272-1052, Brice Edwards, CEO www.exel.com 3PL Revenue: 8.3bn Parent Revenue: 8.3bn Coverage: Global (Service to over 95% of World GDP) 3PL Assets: 74,000 employees; 300 warehouses; 5923 tractors, 7544 trailers Information Systems: Very good; TMS i2, RedPrairie, G-Log; WMS Irista, Topex, Insight, RedPrairie Services: Warehousing and distribution (contract logistics), air and ocean freight forwarding, supply-chain consulting, customs brokerage, transportation management, returns management, home delivery Industry Focus: Consumer goods, retail, computers and electronics, automotive, chemical, healthcare. Key Customers: Adolph Coors Co., Apple Computer, BP, Compaq, Daewoo, Ford Motor Co., Hewlett-Packard, Home Depot, Honda, Intel, International Paper, Kodak, Maxtor, Miller Brewing, Mitsubishi Corp., Motorola, Nissan, Owens Corning, Pepsi Americas, PPG, Procter & Gamble, SC Johnson, Shell, Sony, Sun Microsystems, Unilever Bestfoods, Wal-Mart, Xerox Armstrong & Associates Evaluation: Exel is the worlds largest 3PL. It was made from two British companies meant to be merged together. Exels contract logistics and MSAS freight forwarding have complemented each other well. Cross-selling and supply-chain opportunities are abundant. Exel has a host of solid operations with varied functionality around the globe. Coverage is provided for all major verticals. Revenues are evenly divided between transportation management and contract logistics operations. MSAS continues as one of the largest airfreight forwarders. CEO John Allen has promised to improve margins. This will be an ongoing challenge because two-thirds of Exels contract logistics operations are open book. As part of the effort, Exel is emphasizing supply-chain/lead logistics provider services with more value-adds and better margins.

2.

Kuehne & Nagel International Schindellegi, Switzerland, SWX: KNIN Kuehne & Nagel Logistics, Inc. Dan DeSoto, Managing Director, 201-413-5500 www.kuehne-nagel.com 3PL Revenue: 6.9bn Parent Revenue: 6.9bn Coverage: Global (Service to over 85% of World GDP) 3PL Assets: 19,000 employees; 50 warehouses Information Systems: Very good; TMS CIEL 4000, KN Road, i2; WMS EXCEED Services: Ocean and airfreight forwarding, value-added warehousing and distribution, transportation management, customs brokerage, supply-chain management Industry Focus: Automotive, industrial, healthcare, high-tech, retail/consumer products

Key Customers: Dupont, Nortel, Siemens, Memorex, Harman, Dana Armstrong & Associates Evaluation: Kuehne & Nagel is a well-run, transparent Swiss company with consistently good financial results. It is the worlds largest ocean freight forwarder, handling over 900,000 TEUs per year. It is also one of the top five airfreight carriers. Kuehne & Nagel has ISO 9001 certification for all of its company locations. Recent acquisitions were designed to broaden contract logistics capabilities. These acquisitions give Kuehne & Nagel much better North American and Asian coverage, although they have yet to add to profits. Primary contract logistics emphasis is on pharmaceuticals and high-tech. 3. Schenker Assen, Germany; (U.S.) Freeport, NY, 516-377-3000 Patrick Moebel, CEO www.schenkerusa.com 3PL Revenue: 6.4bn Parent Revenue: 19.5bn Coverage: Europe, Asia, South America, Africa, North America 3PL Assets: 36,000 employees; 405 warehouses Information Systems: Good; TMS SWORD, Procars, ILS; WMS HTS, SAP, SoLiNET Services: Air and ocean freight forwarding, customs brokerage, warehousing and distribution, transportation management Industry Focus: Automotive, computers and electronics, consumer goods, healthcare Key Customers: BMW, DaimlerChrysler, Subaru, IBM, Intel, Procter & Gamble Armstrong & Associates Evaluation: Schenker is a German industry giant with logistics management capabilities. Schenker is part of Stinnes Logistics, a large German conglomerate (over $11bn in sales) involved in oil trading, raw materials, steel and other operations. The German Railway purchased Stinnes/Schenker in 2002. Schenker is a key transportation and distribution company in Europe but not a major player in the United States. In the fall of 1998, Schenker re-designed its operations to create Schenker Logistics. Schenker Logistics has moved slowly in making acquisitions in the United States where operations continue to be limited. The corporate preference is to build shared networks globally. Most recent purchases have been made in Scandinavia, France and Poland, strengthening overall European operations. 4. DHL Danzas Air & Ocean Basel, Switzerland, Deutsche Post World Net (U.S.) Newark, NJ, 973-639-1989, Hans Toggweiler, President & CEO www.us.danzas.com 3PL Revenue: 5.7bn Parent Revenue: 49.7bn Coverage: Global (Service to 99% of World GDP) 3PL Assets: 13,000 employees Information Systems: Good; TMS LOGIS, proprietary; WMS

ELIS Services: Air and ocean freight forwarding, customs brokerage, transportation management, warehousing and distribution, supply-chain consulting Industry Focus: Electronics, automotive, consumer products, chemicals, industrial Key Customers: Caterpillar, John Deere, Gatorade, Rodenstock Lens, Bell & Howell, Cole Vision, Xerox, Satis Vacuum, IBM Armstrong & Associates Evaluation: Logistics activities account for 15% of the revenues of Deutsche Post World Net. DHL does two billion dollars in revenue from contract logistics, primarily in Europe. Operations in the U.S. are mainly in freight forwarding but are expanding with the acquisition of Airborne Logistics. Airbornes strength is value-added warehousing and distribution for high-value products and parts. Asian presence is the result of decades of experience and positioning by DHL, Danzas and AEI before acquisition. DHL Danzas is a strong brand in Asia and number one in several markets. 5. P&O Nedlloyd Rotterdam, Netherlands Euronext: Nedlloyd (Royal P&O Nedlloyd N.V.); P&O Nedlloyd Ltd. East Rutherford, NJ, 201-896-6200, Michael J. White, CEO www.ponl.com 3PL Revenue: 4.8bn Parent Revenue: 4.8bn Coverage: Europe, Asia, United States 3PL Assets: 10,000 employees; 166 Vessels, 1,000 containers, 2,000 trucks, 6,700 trailers Information Systems: Good; TMS LOG-NET Services: Warehousing and distribution, ocean shipping, supplychain consulting, customs brokerage, port services Industry Focus/Key Customers: Retail, fast moving consumer goods, industrial, chemicals Armstrong & Associates Evaluation: P&O Nedlloyd is a major container line that operates mixed transportation and logistics operations in Europe. Its logistics operations are primarily an extension of its container business. U.S. operations are centered on retail consolidation-deconsolidation business, particularly involving garment-on-hangers. P&O Nedlloyds logistics division, Gilbert, has been a major player in this business for decades. P&O Nedlloyd returned to profitability last year. 6. TPG/TNT Hoolddorp, Netherlands, TPG NV TNT Logistics North America Jacksonville, FL, 888-LOGISTX, David Kulik, CEO www.tntlogistics.us 3PL Revenue: 4.7bn Parent Revenue: 14.8bn Coverage: Europe, Americas, Asia 3PL Assets: 40,000 employees; 357 warehouses Information Systems: Very good; TMS Vector 21, Reply; WMS J.D.Edwards, MA, LIS, Reply, MARC

Services: Manufacturing support and subassembly, transportation management, supply-chain consulting, dedicated contract carriage, warehousing and distribution, returns management Industry Focus: Automotive, electronics, rail, tire, consumer goods, utilities, heavy machinery Key Customers: Andersen Corp., BMW, Compaq, CSX, DaimlerChrysler, Fiat, Ford, General Motors, Goodyear, Home Depot, CSX, Sears, Honda, NACCO Materials Handling Group Armstrong & Associates Evaluation: TNT is the worlds largest automotive logistics 3PL. It is a master of value-added warehousing and manufacturing support. Expansion of its services in Asia and standardization of operating procedures, including IT, are on the front burner. Logistics and express divisions are being trained to work as one. Expect TNT to acquire a freight forwarder to complement its express/logistics offering and keep it competitive with UPS, FedEx and DHL. Parent TPG generates large free cash flows. 7. Panalpina Basel, Switzerland; (U.S.) Foster City, CA, 650-6536600, David Beatson, Regional CEO www.panalpina.com 3PL Revenue: 4.6bn Parent Revenue: 4.6bn Coverage: Europe, Asia, Americas, Africa 3PL Assets: 12,000 employees; 300 warehouses Information Systems: Good; Emphasis is on internet-native SCM Services: Air and ocean freight forwarding, transportation management, warehousing and distribution, oil and gas services Industry Focus: Automotive, computers and electronics, oil and gas, consumer goods, beverages, apparel, healthcare Key Customers: Chevron, Delphi, Hewlett Packard, IBM, Philips Electronics, Robert Bosch, Shell Chemical, Sun Microsystems Armstrong & Associates Evaluation: Panalpina is a highly respected freight forwarder. Airfreight operations are its main product, but it is a competent ocean forwarder. Panalpina has good 3PL skills and project logistics. Panalpina is fiscally conservative and profitable. Financial activity is transparent. Quality of coverage is uniform. Primary ownership of Panalpina is by the Ernst Goehner foundation. This relationship complicates Panalpinas acquisition attractiveness. 8. UPS Supply Chain Solutions Atlanta, GA, NYSE: UPS, (United Parcel Service) Bob Stoffel, President, Joseph Pyne, Senior Vice President, 866822-5336 www.UPS-SCS.com 3PL Revenue: 4.1bn Parent Revenue: 33.5bn Coverage: Global (Service to 99% of World GDP) 3PL Assets: 22,000 employees; 550 warehouses; 1100 tractors, 2425 trailers

Information Systems: Excellent; TMS i2, Roadnet; WMS operates all major systems Services: Air and ocean freight forwarding, customs brokerage, transportation management, warehousing and distribution, supply-chain consulting, dedicated contract carriage, trade finance and insurance, equipment leasing, mail services Industry Focus: Computers and electronics, telecommunications, healthcare, automotive, retail, consumer goods Key Customers: Alcatel, Birkenstock, Cisco, Daimler/Chrysler, Dell, Fabricut, General Motors, Honeywell, Lucent Technologies, Nike, Siemens, Therasense Armstrong & Associates Evaluation: UPS SCS has become the largest North American-based 3PL. It had its first profitable year in 2003 and is now an integral part of the total UPS global offering. UPS SCS is improving operations in all areas. Revenues are evenly divided between U.S. and international operations. Having a financial and operational powerhouse as a parent is a tremendous plus. UPS has generated over $2 billion in free cash flow each of the last two years. UPS SCS is likely to make a significant purchase if it can make the right deal. UPS SCS, like its parent, has important mid-market strength. 9. Nippon Express Tokyo, Japan, Tokyo: 9062 Nippon Express U.S.A., Inc. New York, NY, 212-758-6100 Tadaaki Hashimoto, President & CEO www.nipponexpress.com 3PL Revenue: 4bn* Parent Revenue: 13bn Coverage: Global (except Africa) 3PL Assets: 15,000 logistics employees; 1,450 service centers and warehouses Information Systems: Good; TMS NEWINS; WMS NEWINS, Rewards Services: Air and ocean freight forwarding, warehousing and distribution, transportation management, supply-chain consulting, customs brokerage Industry Focus: Automotive, healthcare, computers and electronics, industrial Key Customers: Apple Computer, Baxter Healthcare, DaimlerChrysler, Honda, IBM, Mitsubishi, Toyota Armstrong & Associates Evaluation: Nippon Express is a large, capable freight forwarder with solid procedures and systems for handling global transportation. Nippon provides FedExs pickup and delivery in Japan where it is a major transportation operator. Revenues and employees shown are worldwide numbers. 47,000 employees are in Japan. Nippon is now moving aggressively in China. However, like many companies in Japan, it has been slowed by the weakness of Japans economy over the last few years and its inability to develop a broader, less Japanese-centric identity. 10. C.H. Robinson Worldwide Eden Prairie, MN; Nasdaq: CHRW John Wiehoff, CEO, 952-937-8500

www.chrobinson.com 3PL Revenue: 3.6bn Parent Revenue: 3.6bn Coverage: North America, Europe, Brazil 3PL Assets: 4,100 employees; 100 warehouses and cross-dock affiliates Information Systems: Very Good; TMS Express; WMS High Jump Services: Freight brokerage, air and ocean freight forwarding, transportation management, warehousing, print logistics Industry Focus: Technology, food and beverage, retail, paper products and printed materials, agriculture, consumer goods Key Customers: AOL, Wal-Mart, International Paper, Best Buy, Dana Corp, Clorox, Anheuser-Busch Armstrong & Associates Evaluation: CHRL has a flexible, flat organization, and most operating decisions are made on a local level. It has been a very profitable operation for a long time. CHRL has a talented top management team. Robinsons core business is as a multi-faceted 3PL and freight broker providing North American trucking and intermodal services. Nearly 60% of revenues are food and beverage related. It designs unique, efficient consumer response and supply chain management processes. CHRLs software has been redesigned to emphasize a detailed order management system linked to transportation execution. Robinsons LTL transportation website approach provides a significant consolidation and cost saving methodology. About 12,000 shipments per day are handled through Robinsons website. Most of Robinsons warehouse space is leased or involves the use of subcontractors. 11. Menlo Worldwide Redwood City, CA John Williford, President & CEO; NYSE: CNF, 650-596-4000 www.menloworldwide.com 3PL Revenue: 3.1b Parent Revenue: 5.6bn Coverage: Americas, Asia, Europe 3PL Assets: 16,500 employees; 125 warehouses; 180 tractors, 900 trailers Information Systems: Excellent; TMS TTMS, LMS; WMS WMS (Provia-modified) Services: Transportation management, warehousing and distribution, airfreight forwarding, customs brokerage, supplychain consulting, returns management and expedited Industry Focus: Computers and electronics, chemicals, retail, beverage Key Customers: IBM, Hewlett-Packard, NCR, Nike, Electrolux, Dow Chemical, AT&T, Sears, Stanley Works, Dr. Pepper/SevenUp, HALO Branded Products, Ricoh Family Group, Takata, Nortel Networks Armstrong & Associates Evaluation: Menlo is one of the leading U.S.-based logistics companies. It has solid inbound supply-chain management and good finished goods distribution

management. Its LMS solution makes it a good transportation and supply-chain manager. Interfaces to SAP have been made at HP and other companies. A firm toehold has been established in European logistics. Menlo Worldwide (Emery) Logistics freight forwarding company adds a host of customers and forwarding, particularly of airfreight. It continues to operate in the red, however, negatively affecting overall CNF results. Vector SCM, its successful joint venture with GM and lead logistics IT, now has revenues of $18m per year. 12. NYK Logistics Tokyo, Japan; Tokyo: 9101; (U.S.) Secaucus, NJ Saburo Yamagata, CEO & President www.nyklogistics.com 3PL Revenue: 3bn Parent Revenue: 10.4bn Coverage: Japan, China, Southeast Asia, Americas, Europe 3PL Assets: 11,000 employees; 50 warehouses; 350 vehicles (Europe) Information Systems: Good; TMS Via View (Provia Cargo Information System); WMS Provia, SCM visibility Services: Freight forwarding, customs brokerage, intermodal transportation, value-added warehousing Industry Focus: Food and beverage, retail, consumer goods, automotive, high-tech Key Customers: Cadbury, Clark Shoes, Casio, Johnson & Johnson, Isuzu, Johnson Controls, Spontex, UK Paper, Hitachi, Sony, Yamaha, TESCO Armstrong & Associates Evaluation: NYK Logistics is a new company (2001) put together by adding New Wave (consumer and retail), UCI (manufacturing and retail) and GST (intermodal) to existing warehousing and airfreight-based operations. Valueadded contract warehousing and distribution is strong in Europe. North American emphasis has been on transportation management, intermodal and export-import. NYK Logistics emphasis is different than other ocean liner-based 3PLs. NYK has more automotive and industrial business in addition to its retail emphasis. Roll-on/roll-off automotive operations, JIT and parts distribution are part of standard operations. 13. Expeditors International of Washington Seattle, WA; Nasdaq: EXPD Peter Rose, CEO & Chairman, 206-674-3400 www.expeditors.com 3PL Revenue: 2.6bn Parent Revenue: 2.6bn Coverage: Asia, Americas, Europe 3PL Assets: 8,000 employees; 149 warehouses Information Systems: Good; TMS Tradeflow, SNEP, Exp.0 Services: Airfreight forwarding, customs brokerage, transportation management, warehousing and distribution, supply-chain consulting Industry Focus: Automotive, electronics, retail, chemicals, healthcare

Key Customers: Ace Hardware, Costco, Ford, General Motors, Motorola, Toyota, Trane Armstrong & Associates Evaluation: Expeditors is a very profitable freight forwarder with a strong base in China and Asia. It is run by the most entertaining logistics CEO, Peter Rose, who is candid and satirical. As evidence that he has his head screwed on straight, Rose never lost sight as a freight forwarder on turning good margins on purchased transportation. Operational quality is highly valued and Rose has surrounded himself with a good team. Expeditors is tied into an organic growth strategy that may not be sustainable over the long haul, but works well now. 14. Penske Logistics Reading, PA Vince Hartnett, President, 610-775-8285 www.penskelogistics.com 3PL Revenue: 2.5bn* Parent Revenue: 3.6bn Coverage: North America, Europe, Brazil 3PL Assets: 9,700 employees; 134 warehouses; 3190 tractors, 6723 trailers Information Systems: Very Good; TMS LMS, i2, proprietary; WMS EXE, RT Systems, MARC, proprietary Services: Dedicated contract carriage, transportation management, supply-chain consulting, warehousing and distribution, equipment leasing Industry Focus: Automotive, retail, food, appliances, utilities Key Customers: Whirlpool Corp., Mission Foods, Ford Motor Co., Iams, Carrefour, International Truck and Engine, Panasonic, Amcor Sunclipse Armstrong & Associates Evaluation: Penske Logistics strongest operations are related to the automotive industry. These operations constitute about 50% of Penske Logistics business. Penske often functions as a lead logistics provider. Dedicated contract carriage is a strength as is its transportation routing center. Penske is a beta test site for new i2 innovations. Penske has done well at implementing business expansion plans. Penskes successes with Saturn and Ford show the muscle of its marketing and automotive logistics abilities. Penskes European operations include 11 supply-chain customers, warehousing, cross-docking and trucking. The operation is headquartered in Roosendaal. Brazilian operations involve eight customers in Sao Paulo and Vitoria. Penskes Europe TMS center is based in Maastricht. Penske will add significant new operations in Asia this year. 79% of Penske is owned by GE Capital. 15. Eagle Global Logistics Houston, TX; Nasdaq: EAGL, Jim Crane, President & CEO, 800-888-4949 www.eaglegl.com 3PL Revenue: 2.2bn Parent Revenue: 2.2bn Coverage: Asia, United States, Europe 3PL Assets: 8,000 employees; 87 warehouses, 400 service centers Information Systems: Good; TMS proprietary; WMS

proprietary Services: Air and ocean freight forwarding, transportation management, warehousing and distribution, customs brokerage, expedited, project management Industry Focus: Automotive, aerospace, trade shows, telecommunications, computers and electronics, pharmaceuticals, printed materials, oil and gas, apparel and entertainment equipment Key Customers: Amdahl, Neiman Marcus, Visteon Corp., U.S. Military Traffic Management Command Armstrong & Associates Evaluation: Eagle has returned to profitability after taking three years to absorb Circle Internationals international freight forwarding operations. During the same period, Eagle has adjusted to the changing U.S. market by putting more time-definite freight on trucks. Major verticals for Eagle are manufacturing/telecom, high-tech, aerospace and fashion/retail. 16. BAX Global Irvine, CA; NYSE: BCO (The Brinks Company) Joseph L. Carnes, President, 404-768-2003 www.baxglobal.com 3PL Revenue: 2bn Parent Revenue: 4bn Coverage: Asia, North America, United Kingdom 3PL Assets: 10,000 employees; 48 warehouses; 35 aircraft Information Systems: Very good; TMS CAPS, i2; WMS EXE, Ultramain Services: Airfreight forwarding, transportation management, warehousing and distribution, supply-chain consulting, freight payment and auditing, customs brokerage Industry Focus: Computers and electronics, automotive, aerospace, airlines, healthcare, retail Key Customers: NEC, GE Medical Systems, Epson, Boeing, Airbus, Bombardier, Microsoft, Philips Consumer Electronics, Subaru Armstrong & Associates Evaluation: BAX is a heavy airfreight, time-definite provider that continues to place more of its emphasis on logistics. Customers indicate a preference for the time-definite approach and are little concerned about what kind of vehicle their shipments move on. BAX has reduced the number of its aircraft to 20. BAX Logistics operates cross-dock and other transportation value-added warehousing to buttress transportation management. BAXs change of direction has returned the company to profitability while increasing revenues. 17. Ryder Miami, FL; NYSE: R Gregory Swienton President & CEO, 305-500-3726 www.ryder.com 3PL Revenue: 1.9bn Parent Revenue: 4.8bn Coverage: North America 3PL Assets: 16,500 employees; 184 warehouses; 48,800 tractors, 44,800 trailers

Information Systems: Good; TMS Dedicated Systems, i2, JIT, Capstar; WMS V3, PkMS Services: Supply chain consulting, transportation management, warehousing and distribution, dedicated contract carriage, air and ocean freight forwarding, equipment leasing, returns management, freight payment and auditing, insurance Industry Focus: Automotive, aerospace, industrial, telecommunications, computers and electronics, food and beverage, pharmaceuticals, building materials, utilities, consumer products and retail, newspaper distribution Key Customers: General Motors, Philips Consumer Electronics, DaimlerChrysler, Applied Materials, Cadburry Schweppes, Visteon Corp. Armstrong & Associates Evaluation: Ryder has the most recognized brand name in North American logistics. For two decades Ryder has been one of the largest U.S. providers of dedicated contract carriage, often converting leasing customers to expanded service. Ryders dedicated operations average 15 trucks each and it is a particularly good choice for small, standalone replacements. In recent years, Ryder has expanded its inbound supply chain management and distribution management capabilities. Greg Swientons team has forced Ryder SCS into the black. Ryders established position across many verticals in North America makes it an attractive takeover candidate. 18. Schneider Logistics Green Bay, WI Tom Escott, President, 800-525-9358 www.schneiderlogistics.com 3PL Revenue: 1.9bn* Parent Revenue: 2.4bn Coverage: North America, Europe 3PL Assets: 1,400 employees; 8,750 tractors, 17,450 trailers Information Systems: Excellent; TMS SUMIT Services: Transportation management, supply-chain consulting, dedicated contract carriage, freight payment and auditing Industry Focus: Consumer products and retail, automotive, heavy equipment, computers and electronics, food and beverage, chemicals, healthcare, paper Key Customers: Anheuser Busch, Baxter Healthcare, CHN Corp., DaimlerChrysler, Dow Chemical, Fort James, General Motors, Guardian Glass, Honda, Kimberly-Clark, Kroger, Nabisco, Ocean Spray, 3M, Thomson Multimedia, TRW, World Kitchen Armstrong & Associates Evaluation: Schneider Logistics (SLI) is a premier automotive logistics transportation management company. It has built a multi-client network for automotive parts distribution. In the 1990s, Schneider developed the SUMIT suite of transportation management, logistics and supply chain execution applications. SUMIT optimizes consolidation, carrier selection and routing and is one of the best in the 3PL industry. SLI has a large network of carriers in all modes of transportation. Schneider is one of the largest customers for FedEx Express. About 85% of this business is from GMSPO which is a $40 million account. 90% of Schneiders freight bill payment is automatic. Including its freight bill payment

service, SLI has $7 billion in freight bill payments annually. 19. UTi Worldwide Rancho Dominguez, CA; Nasdaq: UTIW Roger MacFarlane, CEO, 310-604-3311 www.go2uti.com 3PL Revenue: 1.2bn Parent Revenue: 1.2bn Coverage: Japan, China, Southeast Asia, Americas, Europe 3PL Assets: 10,000 employees; 84 warehouses and logistics centers; 350 tractors, 900 trailers Information Systems: Good; TMS eMpower; WMS eMpower Services: Air and ocean freight forwarding, customs brokerage, warehousing and distribution Industry Focus: Chemicals, health and beauty products, apparel, automotive, computers and electronics Key Customers: Dow Corning, General Motors, Johnson Controls, Owens Corning, Sara Lee, Bristol Meyers Squib Armstrong & Associates Evaluation: UTi is a well-run, aggressive forwarder founded by three South Africans in 1995. The trio were executives at a leading competitor and had to leave to fulfill their visions. However, Peter Thorrington, the very capable COO, is in the process of retiring. He may be hard to replace. UTi continues to have double-digit growth while maintaining profitability. UTis purchase of Standard Corporation, a value-added warehousing operation, has been a success while similar moves by other forwarders have failed. 20. Caterpillar Logistics Morton, IL; NYSE: CAT, (Caterpillar Inc.) Steven Wunning, CEO, 800-240-2126 www.catlogistics.com 3PL Revenue: 1bn* Parent Revenue: 22bn Coverage: 160 countries 3PL Assets: 7,200 employees; 86 warehouses Information Systems: Excellent; TMS CAT TIS, i2; WMS CLSS, SAP Hybrid Solutions, Facility Logistics Services: Warehousing and distribution, transportation management, logistics consulting Industry Focus: Automotive, industrial, aerospace, manufacturing, technology, consumer goods, defense, energy Key Customers: Ford Motor Co., Hyundai, Saab USA, Delphi, United States Navy Armstrong & Associates Evaluation: Cat Logistics has heavy U.S. and European operations with a growing presence in South America and Asia, distributing to more than 160 countries from over 50 facilities. Its scope reflects the parents global reach and dealer network. Business is split equally between North America and the rest of the world. Warehousing and manufacturing supply chain software are completely integrated. Visibility is very good. Demand and supply forecasting and material planning is based on proprietary probability models. Forecasting for low turnover items is particularly good. Cats warehouse operations are low-tech with

an emphasis on well-controlled operating procedures. Caterpillars transportation department was merged into Cat Logistics in 2001, bringing with it its transportation management capability. It limits new customers to those with high-value durable goods. Cat Logistics uses a combination of brokers and forwarders for selected customs functions. A major initiative involves automotive logistics for China. 21. APL Logistics Oakland, CA Singapore: NOL (Neptune Orient Lines Ltd.) Hans Hickler, CEO; 800-331-4289 www.apllogistics.com 3PL Revenue: 990m Parent Revenue: 5.5bn Coverage: Asia, North America, Europe 3PL Assets: 4,500 employees; 155 warehouses; 95 tractors, 229 trailers Information Systems: Excellent; TMS i2, proprietary; WMS Irista, Manhattan, proprietary Services: Ocean and airfreight forwarding, warehousing and distribution, transportation management, dedicated contract carriage, customs brokerage Industry Focus: Automotive, retail, consumer goods, electronics and government Key Customers: Panasonic, Turtle Wax, Thomson Multimedia, Colgate-Palmolive, General Motors, Toto, Nike, Baxter Healthcare, Philips Electronics, Procter & Gamble, DaimlerChrysler, Ingersoll-Rand Armstrong & Associates Evaluation: APL Logistics strengths have been its Asian base and the retail vertical. Its Singapore parent (NOL) has been profitable over the years and patient with APL Logistics efforts to overcome its unprofitable GATX acquisition. APL has good coverage in China and throughout Southeast Asia. Its Asia-North America supply-chain operations are solid and well staffed. Consolidation/deconsolidation operations are good. Value-added warehousing is getting less emphasis. 22. Wilson Logistics Group Goteborg, Sweden (U.S.) Wilson Logistics U.S., Inc., Clark, NJ Andreas Schaefer, CEO, 732-669-0505 www.wilsonlog.com 3PL Revenue: 860m Parent Revenue: 860m Coverage: Europe, Asia, North America 3PL Assets: 2,200 employees; 10 warehouses Information Systems: Good; TMS Wilshipper; WMS Wildoc, Wiltrack Services: Warehousing and distribution, air and ocean freight forwarding, customs brokerage, transportation management, supply-chain consulting Industry Focus: Automotive, medical equipment, sporting goods, electronic components and telecommunications equipment

Key Customers: Volvo Trucks North America, Lego, Electrolux, Pirelli Cables, Royal Caribbean Cruise Lines, United Nations World Food Program Armstrong & Associates Evaluation: Wilson is an aggressive Swedish company with a nice mix of contract logistics and freight forwarding skills. Recent expansions have been in India, China, Germany and Malaysia. It handles some perishables. Wilson maintains its own software solutions, which may have limits for very large global clients. Wilsons size, mix of offerings and geographical range make it an attractive takeover target. 23. FedEx Supply Chain Services Hudson, OH; NYSE: FDX, (FedEx Corp.) Douglas Witt, President & CEO, 800-222-7657 www.fedex.com 3PL Revenue: 603m Parent Revenue: 22.5bn Coverage: Global (Service to 99% of World GDP) 3PL Assets: 2,000 employees; 35 warehouses; 298 tractors, 1094 trailers Information Systems: Excellent; TMS Optum: SCE Transportation i2; WMS EXCEED 4000 Services: Domestic and international transportation management, customs brokerage and freight forwarding, supplychain consulting, warehousing and distribution services Industry Focus: Apparel, automotive, healthcare, computers and electronics, industrial, retail Key Customers: Philips Semiconductor, Ford Motor Co., DirecTV, Mitsubishi, Hewlett Packard, GM PowerTrain, DaimlerChrysler Armstrong & Associates Evaluation: FedEx Supply Chain Services follows its parents emphasis on transportation and supply-chain solutions. Preference in transportation is given to other FedEx companies (FedEx Express, Ground, Custom Critical and LTL carriers). Sister company FedEx Trade Networks is a quality international transportation manager. The 3PL revenue shown above is for FedEx SCS and related non-expenses, nonpackage businesses. 24. Maersk Logistics Copenhagen, Denmark; Copenhagen: Maersk A / Maersk B (A. P. Moller-Maersk A/S) Maersk Logistics USA Inc. Madison, NJ, Tony Chiarello, President, 973-574-5000 www.maersk-logistics.com 3PL Revenue: 350m* Parent Revenue: 25bn Coverage: Asia, Europe, North America 3PL Assets: 60,000 employees; 15 warehouses Information Systems: Excellent; TMS proprietary; WMS proprietary Services: Ocean and airfreight forwarding, warehousing and distribution, customs brokerage, supply-chain consulting Industry Focus: Consumer products, retail, sporting goods,

apparel and garments, cosmetics and personal care, electronics Key Customers: Adidas, Federated Stores, Footstar Inc., Hudsons Bay Co., Ikea, Liz Claiborne, Nike, Reebok, Target Corp., Home Depot, Wal-Mart Armstrong & Associates Evaluation: Maersk is the worlds leading container line. It is financially strong, aggressive and successful. Its logistics arm has emphasized low margin Asian retail traffic for most of its history. It does not report its financial results separately. Margins are then compared to its parent. 55% of its business is warehousing and distribution; 21% of revenue is from forwarding and consolidation. Supply-chain management, airfreight forwarding and customs brokerage account for the rest of revenues. Revenues are 55% Asia to North America, 30% Asia to Europe and 15% between Europe and North America. 25. SembCorp Logistics Singapore; Singapore Stock Exchange SembCorp Logistics (USA) Inc. Inglewood, CA, K. K. Chan, Sr. Vice President, Americas, 310-215-3725 www.semblog.com 3PL Revenue: 275m Parent Revenue: 275m Coverage: Asia 3PL Assets: 2,700 employees; 101 warehouses Information Systems: Good; TMS Route Pro, Maxload; OMS ELIMS Services: Warehousing and distribution, air and ocean shipping, supply-chain management, dangerous goods management, offshore logistics Industry Focus: Automotive, consumer goods, computers and electronics, healthcare, oil, food and groceries Key Customers: Abbott Labs, Apple Computer, Bridgestone, Firestone, Gillette Co., Exxon, Colgate-Palmolive, Nestle, Pepsi Armstrong & Associates Evaluation: SembCorp is one of Asias largest and best run 3PLs. It is solidly profitable and owns 20% of Swiss 3PL Kuehne & Nagel. SembCorp is expanding rapidly in India and China. It is profitable in both countries. SembCorp has limited its U.S. operations in deference to Kuehne & Nagel and USCO (now Kuehne & Nagel Logistics). *Most 2003 Revenue numbers are derived from public records or company self-reporting. Where no such information was available (companies with *), these numbers are based on Armstrong & Associates own research. Where companies report their revenue in Euros, a conversion rate of $1.25 per Euro has been used.