Supply Chain Management Logistics revenues boosted by attractive solutions The net revenue growth of 4.7% to CHF 1,196 million, is proof that <strong>Panalpina</strong>’s logistics services enjoy great popularity among customers. And thanks to new and innovative approaches, the Group still sees considerable potential for the future. The unbroken trend towards outsourcing is making production and supply chains ever more complex. Against this backdrop, net forwarding revenue in supply chain management has surged forward again in the year under review thanks to a large number of new contracts (see <strong>Report</strong>ing Regions). Broad range of logistics services from a single source <strong>Panalpina</strong> offers comprehensive solutions in the field of logistics and supply chain management, but only in conjunction with air freight and ocean freight. This interlinking of its three core activities is a central element in <strong>Panalpina</strong>’s strategy. Experience has shown that this approach promotes customer loyalty, generates synergies and taps into new sources of potential for all three areas of activity. The logistics services offered comprise warehousing, secondary distribution, justintime and justinsequence delivery, along with addedvalue services such as order management, re packaging, order picking, labelling and reverse logistics. Innovative directtomarket solutions In <strong>2006</strong>, <strong>Panalpina</strong> scored resounding successes with a number of new approaches, offering clients more flexible freight distribution while reducing their working capital. With this “directtomarket” concept, clients can dispense with highrisk warehousing because <strong>Panalpina</strong> looks after the delivery of the products right through to the endcustomer while “storing” and controlling stocks “on the way”, i.e. during the transportation flow. This approach is proving to be highly popular in the hitech and retail and fashion sectors in particular. For example, the Group delivers a computer manufacturer’s products right to the consumer’s front door in Europe, and ships bulky hospital scanners weighing several tons each straight to American and Australian hospitals, where it also supervises the laborious task of installation. IT backed monitoring of the entire supply chain Nowadays, realtime monitoring of freight across the whole supply chain is essential, not only in complex directtomarket contracts but also in more straightforward logistics operations. This is why <strong>Panalpina</strong>’s sophisticated IT systems are responsible for roughly half of customer contracts being clinched. The Group offers Internetbased consignment tracking, reporting and logistics management software plus integrated applications for order and warehouse management. Any discrepancy in the transport chain, however slight, causes the event management system to send an automatic message to the client. Transparency is enhanced by stock control and supply chain management visibility applications. Lead logistics provider vs. contract logistics Assetlight flexibility rather than highrisk infrastructure Unlike its chief competitors, who use their own infrastructure to provide most of their contract logistics and are often forced into risky investments, <strong>Panalpina</strong> consciously minimizes the amount of resources tied up by its supply chain management operations. As lead logistics provider, it focuses on the service aspects of these complex contracts, delegating subtasks, wherever possible, to a select group of firstclass supply partners. In successfully implementing this strategy, the Company draws on many years of experience in subcontractor management across all geographical regions. Not only does this flexible approach minimize capitalintensive investments in warehouses, truck fleets etc., it also affords <strong>Panalpina</strong> a competitive edge by enabling the Company to respond swiftly to marketdriven shifts in demand. www.panalpina.com/logistics Core Activities <strong>Panalpina</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2006</strong> 4
“The balance between large, medium and smaller customers enables <strong>Panalpina</strong> to pursue sustained growth.” 44 <strong>Panalpina</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2006</strong>