UTi Worldwide Builds upon Two Key Acquisitions

Ontario, Canada Site Visits

November, 2007

By

Evan Armstrong

Key Personnel:

Tim Speed, President - UTi Canada, Inc.

Binny Jind, President & CEO - SPAN International

Patricia Croley, VP & Director of Quality - SPAN International

Tom Krzepkowski, VP & Director of Supply Chain Operations - SPAN International

Shawn Ragoobar, General Manager - USA Supply Chain Operations - SPAN International

Greg Stamkos, SVP & COO - Unigistix

John Brereton, CFO & CIO - Unigistix

UTi Worldwide is a major global third-party logistics provider (3PL) with revenues of $3.6 Billion and staffing of over 19,000. In 2004 and 2006 it made "tuck-in" acquisitions of two very interesting mid-sized Canadian logistics providers: Unigistix, Inc. and the SPAN International group of companies.

Unigistix, a value-add warehousing 3PL, has approximately 350 employees and three warehouses in Canada totaling over 800,000 square feet. It has developed a solid base of telecommunications customers including Bell Canada, Virgin Mobile, Globalstar, and TELUS. Key value-added services offered include handset programming, kitting, packaging, labeling, inventory management, order fulfillment, refurbishment and repair, and asset recovery.

SPAN International was founded in 1981 by its current President and CEO Binny Jind. SPAN began operations as a contract manufacturer for automotive industry customers. Leveraging its manufacturing materials management and parts kitting and sequencing skills, SPAN has built significant value-added 3PL capabilities and now runs an inbound materials management and just-in-time (JIT) parts distribution network supplying many manufacturing lines of North American automotive manufacturers.

Unigistix First Gulf Warehouse

The 302,000 square foot Unigistix First Gulf warehouse is a bonded multi-client facility serving 19 customers including: Estée Lauder and TELUS (Canada's second largest wireless phone company).

UTi's Toronto freight forwarding operation has recently been collocated in approximately 100,000 square feet of the warehouse for increased operational synergies. It manages air shipments of leather seats from Toronto to DaimlerChrysler in South Africa, Psion Teklogix barcode scanners to Europe, and generic pharmaceuticals being distributed in the U.S. In addition, UTi is a  global lead logistics provider (LLP) for Estée Lauder and is managing imports of approximately four to five ocean and air containers per day of inbound materials and a small amount of finished goods to the warehouse.

Once the goods clear customs and are deconsolidated, they are transferred to the collocated Estée Lauder Canadian inbound logistics hub being run by Unigistix. The hub occupies 50,000 square feet and has 2,860 pallet positions. Once deconsolidated, items are putaway into storage. Unigistix then fills orders from over 30,000 stock keeping units (SKUs) of on-hand inventory destined to Estée Lauder's three main Canadian cosmetics manufacturing plants. To support operations, it utilizes Unigistix's Infor/EXE WM4000 warehouse management system which is integrated with UTi's eMpower supply chain management suite for full order management from origin pick up to delivery.

UTi air freight forwarding pallet ready for loading

TELUS Mobility clamshell packaging operation

The TELUS Mobility kitting and clamshell packaging operation is run in a separate section of the warehouse. Approximately 5,000 phone handsets are processed each day. The process begins with the inbound receiving of product and an electronic serial number (ESN) capture for each handset. Each ESN is scanned into the WMS using radio frequency scanners. The handsets are then put into retail packaging and sequenced onto the line for clamshell packaging. Once the clamshell has been applied, the phones are then transferred to the distribution center for order fulfillment. As part of the operation, Unigistix has supported TELUS in preparing Wal-Mart compliant labeling.

Bell Canada "ExpressVu" satellite television receiver orders ready for shipping

Globalstar satellite phone packaging

Unigistix Airport Warehouse

A short drive from the First Gulf warehouse is the 230,000 square foot Unigistix Airport warehouse. Key customers served include: Bell Canada's retail division, Dickies clothing, Globalstar satellite phones, and Marklyn Automotive aftermarket parts. The warehouse is very secure with closed caption television monitoring and a high-security cage for high-value products.

Unigistix is an LLP for Bell Canada and manages approximately 30,000 SKUs of inventory for its retail division. Unigistix supports 40 Bell Canada customer service call centers and manages all major supply chain functions including: inbound reverse logistics, outbound order fulfillment, accessory packaging, and used phone recycling.

An average of 2,000 mobile phone returns are processed for Bell Canada each day. Each phone is inspected and assigned one of thirty different return disposition types. Unigistix is responsible for warranty processing between Bell Canada and its vendors. Unigistix processes each return within 48 hours of receipt using a staff of 30-90 workers depending on the time of year; many of the annual returns occur just after Christmas.

The outbound business to consumer fulfillment operation processes approximately 500 to 3,000 orders each day. Orders for mobile phones, satellite television systems and other Bell Canada retail products are received electronically from Bell Canada's SAP enterprise resource planning (ERP) system and picked from on-hand inventory. Using material handling conveyors, product is moved to an outbound phone activation and shipping area.

For Globalstar satellite phones, Unigistix performs phone "flashing" (programming) and activation. It also performs software upgrades as needed. On average, 5,000 phone orders are processed each month. During hurricane Katrina, Unigistix processed approximately 5,000 phone orders in three days to support relief efforts.

Unigistix receives inbound product from Pakistan and Hanover, Ontario for "workwear" clothing manufacturer Dickies. Value-added services performed by Unigistix include sewing, bagging, and price labeling. Each outbound order is picked to tote, packaged, and barcoded according to Uniform Product Code (UPC) 128 specifications. Final product is then shipped to big box retailers including: Wal-Mart, Sears, and Zellers.

One of SPAN International's Surface Mount Technology (SMT) manufacturing lines

Sanyo center stack console face plates being transported to assembly

A center stack console ready for installation in a Ford or Mazda vehicle

SPAN International

Up the road from Unigistix is the headquarters of SPAN International in Markham, Ontario. SPAN was founded in 1981 and began as an electronics equipment manufacturer/supplier to Ford and Chrysler. Today, SPAN has a network of 25 facilities in five countries and over 1,000 employees. SPAN's operations total 1.3 million square feet and it manages over $5 billion of inbound materials for customers annually. In addition, the majority of SPANs operations are ISO9001:2000 certified.

Approximately 70% of SPAN's revenues are derived from automotive related electronics manufacturing and supply chain management services. SPAN supports 75 automotive original equipment manufacturer (OEM) and Tier-1 automotive supplier manufacturer plants. Its OEM automotive customer agreements incorporate an average of 42 key performance indicators (KPIs) measuring SPAN's operational quality.

In addition to its automotive customer base, SPAN has developed key high-tech customers in banking, contract manufacturing, and telecommunications industry verticals. Customers include: Diebold, Flextronics/Solectron, Foxconn, Jabil, Sanmina SCI, and Symbol Technologies. 

SPAN offers a wide array of contract electronics manufacturing and supply chain management services. These include: materials management, warehousing, kitting, manufacturing support, JIT operations, Kanban, sequencing, sub-assembly, pre-delivery inspection, sorting, product design, procurement, prototyping, assembly, interconnect, product testing, final system build, packaging, repair/refurbishment, and global distribution through UTi's transportation management network. SPAN focuses on service intensive inbound operations located near its customers' manufacturing operations.

At one of its Markham manufacturing operations, SPAN is assembling Ford and Mazda vehicle center stack consoles for Sanyo Electronic. Approximately 600,000 consoles are assembled by SPAN annually. Daily demand/production schedules are electronically received from Sanyo. Individual faceplates, controls, and audio electronics components are assembled in four tightly monitored manufacturing cells. SPAN performs a 100% visual and functional quality assurance test on every center stack console assembled. All assembled consoles must ship to the specified automotive manufacturer by 7:50 P.M. the same day.

In addition to the Sanyo operation, SPAN is manufacturing, from circuit board up, car antennas for DaimlerChrysler in Markham.

To support its manufacturing and supply chain management operations, SPAN has developed a proprietary information system dubbed "Global Inventory Control System" (GICS). GICS provides

customers with detailed inventory information and a wide range of functional capabilities. These include functionality to support Kanban systems, kitting, sequencing, skid-in (ship pack) carton-out (JIT pack) operations, automatic label verification, custom barcoding, and packing slip/bill of lading printing. GICS also provides automatic warnings of low stock and overstock conditions that are necessary in managing lean supply chains.

SPAN has also developed an online web portal called "Customer Information System" (CIS). CIS is designed to support vendor managed inventory (VMI) operations. It provides the necessary inventory detail and control to manage inventory at geographically disperse sites and support global electronics and automotive manufacturing plant operations.

Summary

By going north of the border, UTi Worldwide has made two significant acquisitions to help round out its North American contract logistics portfolio. Both Unigistix's Canadian operations and SPAN International's Mexican operations boost UTi's warehousing network coverage and provide it with added expertise for addressing the needs of automotive and electronics industry customers. As it further integrates its operations, we anticipate that SPAN will play a major role in providing UTi with additional resources in pursuing high-margin electronics repair and refurbishment business. These acquisitions provide UTi with greater depth in providing true end-to-end solutions from inbound logistics through final delivery with reverse logistics support for its customers.

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