campanelli

Logistics in Motion:The Changing Landscape: 

Logistics in Motion: The Changing Landscape John Campanelli March 25, 2003

Delivery: Past Assessment: 

Delivery: Past Assessment Postage costs unstable and increasing Distribution cost / price stability Supply and demand in balance

Slide3: 

Std Mail CAGR 3.7% Delivery is the Largest Single Cost for Many Mailers and Rates Have Exceeded Inflation 0.12 0.14 0.16 0.18 0.2 0.22 0.24 0.26 0.28 0.3 0.32 1984 1988 1992 1996 2000 Periodical CAGR 5.1% Periodical - 8 oz 50% editorial content 50% BMC, 40% SCF, 10% origin Std Mail - 6 oz 50% BMC, 40% SCF, 10% origin Freight and postage accounts for 30% of mailer’s cost Postal rate increases exceed inflation $/piece

Delivery: Current Assessment: 

Delivery: Current Assessment Postage costs are stable Distribution costs are increasing Capacity is shrinking Demand is soft

The Fuel Roller Coaster: 

The Fuel Roller Coaster Source: Business & Finance, Transport Topics, March 17, 2003

Delivery: Future Assessment (2003 / 2004) – Best Case: 

Delivery: Future Assessment (2003 / 2004) – Best Case Postage cost remain stable Distribution operating costs will increase Demand will return Supply and demand will collide Distribution prices will increase Flight to supplier quality

Pricing Power Will Return with Freight Demand: 

Pricing Power Will Return with Freight Demand Source: Morgan Stanley Research

Printing Market Profile Follows a Similar Pattern: 

Printing Market Profile Follows a Similar Pattern Source: “Printing Market Discussion for Primex Conference” Randal Rudniski, CFA Credit Suisse / First Boston

There Will Be A Flight To Quality in Logistics: 

There Will Be A Flight To Quality in Logistics Over-the-road transportation pressures Fuel prices volatile, fuel taxes Insurance costs rising dramatically Industry not reinvesting with uncertainty over emission regulations and engine performance Bankruptcies, capacity shortage and new equipment cost increasing Teamsters contracts create a driver wage umbrella Additional security provisions are adding costs Result: print distribution specialists, particularly those dependent on a “spot buy” model will be vulnerable by second half of 2003

So What Needs to Happen?: 

So What Needs to Happen?

Slide11: 

Collaboration

Postal Collaboration: 

Postal Collaboration Co-palletize: The latest work sharing opportunity Co-bills HR 735 and S380: Civil Service Retirement System (CSRS) Commission: President’s Commission on the United States Postal Service United efforts are achieving significant results.

Slide13: 

Barcode Label Generation Program Donnelley Logistics Sortation Facility USPS DSCF/DADC And applied to bundles, identifying destination Co-palletization Process Bundles placed on mixed pallets Pallets shipped to Consolidation Center… Magazine Production Barcode labels generated… Sortation creates geographic CoPallets Mail Management Software allows postage to be paid Load Optimization occurs CoPallets mixed with others with same delivery requirements Optimized Loads are tracked and transported to the USPS

Slide14: 

Need Sortation Technology High Speed Automated Sortation System Reduces handling and dwell time… Automated sortation investment for Parcel can be leveraged for Print Bundles/Trays. Industry-leading load optimization leads to industry-leading postal penetration… …and lowest total delivered cost! Sortation Technology Supports Co-palletization

Slide15: 

Lower Postage Costs, Increased Reliability, Improved Bindery Operations

Transportation Collaboration: 

Transportation Collaboration Connect with information Co-load Consolidate Co-locate / co-market

Slide17: 

Our Current Network Delivery Model Contains 113 Facilities Servicing 6,500 Postal Destinations and 5,500 Business Addresses MLI York Effective execution requires trust, communication and information.

Facts…The Realities of Today’s Marketplace: 

Route Density is the biggest opportunity that has not been addressed Today Returns 11% Warehousing 19% Merchandising 13% Delivery 32% Administrative Overhead 25% Wholesaler Operating Cost Structure and Concerns Facts…The Realities of Today’s Marketplace A Newsstand Channel Perspective Wholesaler Economics Source: “Newsstand Circ Dynamics” Primex 2003, Michael L. Sullivan, President/CEO COMAG Marketing Group

Slide19: 

Key West, FL Washington, DC Memphis, TN 326 Miles 541 Miles 656 Miles Atlanta, GA Pittsburgh, PA Minneapolis, MN Exhibit 1 - (Midwest) Exhibit 2 - (Southeast) Route Density is the biggest opportunity that has not been addressed A Newsstand Only Plan Does Not Maximize Route Density Wholesaler Inefficiencies…Route Density Source: “Newsstand Circ Dynamics” Primex 2003, Michael L. Sullivan, President/CEO COMAG Marketing Group

Slide20: 

Solutions in Motion ...is the theme for IDEAlliance's 2003 Distribution Conference. Widely considered the most productive event of its kind in the industry, the 2003 Distribution Conference is presented by IDEAlliance, in association with the National Magazine, Book & Film Carriers, the Alliance of Nonprofit Mailers, the Association of Postal Commerce (PostCom), Graphic Arts Technical Foundation/Printing Industries of America, and the Gravure Association of America. Addressing/Distribution Spring Conference / National Magazine, Book & Film Carriers Conference March 23-27, 2003 • Sheraton Sand Key Resort • Clearwater Beach, FL PRESENTED BY IN PARTNERSHIP WITH 2003 DISTRIBUTION CONFERENCE

H.R. 735 Could Be Brought to the House Floor This Week: 

H.R. 735 Could Be Brought to the House Floor This Week CALL your representatives Washington or district office with the following message: "Please support swift passage of H.R. 735, a bill that changes the manner in which the U.S. Postal Service funds its Civil Service Retirement System obligation, in the exact form as reported by the Committee on Governmental Reform. Please pass this bill WITHOUT the encumbrances of any amendments. Passage of this bill is VITAL to my business and our industry." Call, telegraph, email...do whatever you have to do...JUST DO IT!