Menlo Worldwide's Cougar Acquisition puts a "Roar" in its Asian Market Strategy

Singapore

February 9, 2008

By

Evan Armstrong

Key Personnel:

Bob Basset, Vice President of Sales and Marketing, Menlo Worldwide

Todd Johnson, Vice President - International Operations, Menlo Worldwide

Tom Nightingale, Vice President - Communications and Chief Marketing Officer, Con-way

Peter Baumann, Director of Business Development - Asia Pacific, Menlo Worldwide

Heinz-Peter Faust, Regional Managing Director - South East Asia, Menlo Worldwide

Desmond Chan, General Manager - South East Asia, Menlo Worldwide

Edwin Chan, Senior Director of Business Development - South East Asia, Menlo Worldwide

Overview

With the 2007 acquisitions of Singapore based Cougar Holdings and Chic Logistics in Shanghai, China, Menlo Worldwide has greatly extended its presence and capabilities in the Asia-Pacific third-party logistics (3PL) market. Major markets served by Menlo include: Australia, China, Hong Kong, India, Singapore, Malaysia and Thailand. Its Asia-Pacific headquarters is in Singapore and is led by industry veteran Todd Johnson, Vice-President - International Operations.

Menlo provides customers with dedicated and multi-client warehousing; domestic transportation management, managed international transportation services; as well as a variety of value-added services including: inventory management, light assembly, kitting, foreign trade zone (FTZ) services, labeling, manufacturing support, pick/pack operations, packaging, service parts management, and reverse logistics. Key Asia-Pacific customers include: the Australian Wine Index, BMW, Bosch, Canon, CHEP, Danfoss, Embraer, Ford Motor, General Motors, Mitsubishi Chemical, Pernod Ricard, and West Pharmaceutical.

The increase in Menlo's South East Asia 3PL operating footprint from the Cougar acquisition is shown in the table below. The combined South East Asia operation had approximately $60 million in revenues in 2007.

Cougar Logistics and Menlo Worldwide Combined South East Asia 3PL Resources

Note: Headcount excludes temporary workers

Source: Menlo Worldwide

Menlo's South East Asia operating locations are detailed below:

• Singapore operating locations:

  - Airport Logistics Park of Singapore (FTZ)

  - Jurong Port (FTZ)

  - Benoi

  - Boon Lay (Jurong East)

  - Pandan

  - Penjuru

• Malaysia operating locations:

  - Johore Bahru

  - Port of Tanjung Pelapas

  - Port Klang

  - Kuala Lumpur

  - Penang

• Thailand operating location:

- Bangkok

ALPS FTZ Warehouse Site Visit

Near the Changi Singapore airport is the 136,000 square foot multi-client Menlo "ALPS" (Airport Logistics Park of Singapore) office and multi-level foreign trade zone warehousing operation. Customers served at the ALPS facility include: 3Com, Embraer, Nike, and Solectron. Summaries of these operations are below.

In approximately 40,000 square feet on the first floor of ALPS, Menlo runs a regional vendor managed inventory (VMI) hub and South East Asia-Pacific distribution operation for 3Com. The operation is managed by a staff of 15 working in a "lean" environment. Products including routers, switches, and components such as power cords are received from 3Com's global suppliers and stocked in the ALPS warehouse.

In the remaining 10,000 square feet of the first floor, a staff of five runs an inbound parts consolidation operation for Solectron. Menlo receives parts, performs customs clearance and commercial invoices and then ships parts to Solectron's manufacturing facility in Batam, Indonesia.

The Asia-Pacific regional service parts fulfillment operation for Brazilian aircraft manufacturer Embraer occupies approximately 17,000 square feet on the second floor of the ALPS. Over 15,000 SKUs of inventory are maintained and range from bolts to whole aircraft wings. Upon receipt, a quality control check is performed on all parts. Item serial numbers are captured in the WMS and if applicable, corresponding expiration dates are noted. Embraer has two onsite personnel collocated in the Menlo operation to certify every part prior to putaway.

Embraer's main Asian customers are Taiwan Airlines and Virgin Blue in Australia. Menlo tightly coordinates parts orders with Embraer's customer service department in Brazil. This is a low order volume high-service operation. In some "aircraft on ground" cases, service parts are required to be delivered to the airline's maintenance crew within two hours of the order being placed. The next level of service is for "critical" orders which must be delivered within 24 hours. All other "routine" orders are filled to meet scheduled aircraft maintenance intervals.

As a value-added service, Menlo maintains an environmentally controlled storage room for products

Embraer small service parts bins

Environmentally controlled storage

of aircraft tires

such as aircraft tires that cannot be stored in sunlight and need required controlled humidity levels.

The entire third floor of the ALPS (36,478 square feet) is staffed by 28 associates dedicated to the Nike South East Asian value-added warehousing and distribution operation. Nike's SAP enterprise resource planning (ERP) system electronically "drops" retail sales orders for apparel, equipment, footwear, and accessories into Menlo's SIMS WMS for picking. Approximately 100 orders consisting of 15,000 items are filled each day from approximately 10,000 SKUs of on-hand inventory. Eighty percent of the retail sales orders filled are for local distribution within Singapore;

Price tagging Nike apparel items for local retailers

the remainder are primarily destined to retailers in India, Pakistan, and Vietnam.

Menlo receives advance shipment notices (ASNs) on all inbound product. Nike requires an 100% inspection on every item received. After the inspection, the majority of footwear product is putaway into storage racks and most apparel is stored in shelves. Menlo tracks eight different key performance indicators to measure work performance quality.

As a value-added service, Menlo applies price tags to retail merchandise for sale in local markets. It is also processing returns.

Boon Lay Warehouse Site Visit

A 15 minute drive from the ALPS takes us to the 328,302 square foot multi-client Boon Lay Cougar Logistics bonded warehousing operation. Much of the Boon Lay operation (just over 118,400 square feet) focuses on handling  imports and providing regional and local distribution for Wine and Spirits customers.

The first operation we toured was the regional distribution hub for Pernod Ricard which occupied approximately 12,000 square feet of the warehouse. It markets well known brands such as: Beefeater Gin, Jameson Whiskey, Malibu Rum, and Stolichnaya Vodka. Inbound containers of product are received and checked against orders to verify quantities. Much of the product is then labeled to meet the regulatory requirements of the final countries of distribution; these countries include: China, Indonesia, Singapore, and Vietnam.

On the second floor a similar operation is being managed for Bacardi & Company. However, all of its product is destined to retailers in Singapore. Product is received in, checked, and placed in a bonded area. Once duties are paid, product is moved into either air conditioned or dry storage depending on its characteristics until being shipped. Menlo/Cougar is performing all of the final deliveries using its local trucking fleet.

The largest value-added warehousing customer at Boon Lay is Canon Consumer Imaging. Its products include copiers, printers, imaging systems, fax machines, cameras and lenses, camcorders, flatbed scanners, and other specialized products and accessories. The operation is run on two floors, has a staff of 14, and occupies 43,100 square feet.

Approximately 500 40-foot containers of product are received each month. Menlo/Cougar handles all of the customs clearance and export documentation preparation for Canon. It is also managing truck deliveries of product within Singapore using it own fleet.

The first floor warehouse operation fulfills an average of 100 Canon orders per day for the domestic Singapore market. Supporting the operations is "Cougar Web" an in-house developed WMS with solid functionality. The second floor operation fulfills orders for regional distribution with triangular boundaries from Hong Kong to Australia and as far west as the Middle East. Physical inventories are performed every month and thus far Menlo/Cougar has been running at 99.5% inventory accuracy.

Individual bottles being labeled for distribution

Cougar has a mix of transportation equipment

The second floor Canon operation

The last contract warehousing operation we toured at Boon Lay was for the Australian Wine Index which builds a market for fine Australian wines across South East Asia. Menlo/Cougar supports its efforts by holding valuable benchmark wines in storage in one secured Singapore location under ideal conditions. The wine is stored in four separate temperature and humidity controlled rooms totaling just over 23,000 square feet. Each case and bottle is tracked in inventory and traded within the Index membership.

Additional Menlo/Cougar Singapore Operations

In addition to the operations detailed above, we toured a new Pandan warehouse which was approximately 125,000 square feet on the fifth floor of a warehouse park by the port of Singapore. The warehouse had 93,000 square feet dedicated to the Asia-Pacific regional distribution operations of Danfoss.

Menlo/Cougar also runs large new automobile lots for BMW and General Motors. As a value-added service, it provides final preparation services for new cars and then delivers them to local automobile dealerships. As part of the operation, it designed a 40-foot car hauling trailer to meet the exacting trailer restrictions for operating in Singapore.

Summary

Through its acquisitions of Cougar Holdings in Singapore and Chic Logistics in China, Menlo Worldwide has taken significant steps in becoming a major Asian 3PL. The combined Menlo/Cougar enterprise is one of the largest players in contract logistics in South East Asia and compliments Menlo's Chic Logistics Chinese operations. Together they provide a significant Asia-Pacific operating footprint and a good "springboard" for future growth.

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