Supply Chain ContinuityHow GoPro Coped with US West Coast Ports Congestion 2014-2015

2015 NAFTZ Annual Conference – Los Angeles, CA

Jeremiah Pomerleau

Senior Manager, Transportation and Trade Compliance

Key Milestones – US WC Port Congestion

Supply Chain Overview

Business Factors & Constraints

Options & Competing Forces

Strategy, Execution & Rationale

Financial & Delivery Impact

Success Factors

Agenda

MAY DEC

Port Congestion – Key Milestones

JAN MARFEB

2015

FEB 16

JUN JUL AUG SEP OCT MAYNOV APR JUN JUL

ILWU / PMA Negotiations Begin Tentative 5-year Deal Reached

ILWU/PMW Ratify DealUS Labor Secretary Mediates

ILWU Initiates Slowdown

Contract Expiration!

End of Backlog In-Sight

JUN 30

FEB 20MAY 14

2014

OCT 31 JUN 15

Congestion Meter

MAY 15

4

2014 AMR Postponement Supply Chain – Inbound

Ocean Freight (SEA)

Transit: 40/40HC service @ 24 Days DTD

Lower-box Assemblies (LBA)

Finished Goods Accessories (ACC)

International Air Freight (IAF)

Transit: 3 Services @ 1.5 to 4 Days DTD

Bulk Cameras only (CAM)

HKG->LGB

GoPro DC (B2B)

Riverside, CA

Futian FTZ

Hong Kong X-Dock

HKG

Intra-China Logistics Flow

Key Metrics

IAF/SEA Mix @ 60% SEA

IAF Premium @ ≤ 25%

2014 AMR Postponement Supply Chain – Outbound (B2B)

In-Region Final Assembly – LBA + CAM

Domestic Air Freight (DAF)

Transit: Deferred and Expedited Trucking and

Air Services offering Same-day to 5 days DTD

Finished Good Cameras (FG CAM)

Finished Good Accessories (ACC)

Key Metrics

DAF Premium @ ≤ 20%

Future FTZ – Expected GoLive 10/2014

MPF Reduction

Inverted Tariff Benefit

Duty Avoidance (Export and Scrap)

Brokerage Fee Reduction

Business Factors & Constraints

Finished good cameras cannot be shipped via ocean freight

HERO4 product launch – 10/14

Extended production lead-times

Product quality issues

Pending FTZ Implementation – Riverside, CA Production Authority – 9/14

Activation – 10/14

Direct Delivery approval – Expecting 10/14?

Contingencies & Competing Forces

Forward deploy via SEA to GoPro

DC: LBA & ACC

Extended transit times ~ 37 to 45 days

Equipment capacity (e.g. chassis)

Terminal prioritization

Route through alternative SEA ports

of entry to GoPro DC: LBA & ACC

Leverage IAF to GoPro DC: LBA, ACC

& FG CAM

Direct ship Customer via SEA or IAF

(DC bypass): ACC & FG CAM

Forwarder or Integrator (e.g. FedEx Direct

Distribution or UPS Trade Direct)

Requires post-bid negotiations

Forfeit FTZ benefits

IAF rate differential

LBA $/unit @ 91%

ACC $/unit ~ 87% to 92%

Everyone else is doing it – capacity?

East Coast / Houston ~ 33 to 37 days

Requires post-bid negotiations

Strategy, Execution & Rationale

•Avoided rerouting due to DC’s proximity to port

•Built inventories of LBA and ACC

•Factored 45 days transit into forecast

•Shifted to a new vessel operator, Evergreen -dedicated terminal (~37 to 38 days)

Forward deploy via SEA to GoPro DC:

LBA & ACC

•Sustainable flat-rate pricing - immune to peak season

•Guaranteed capacity with hard block space agreements

•Imported primarily ACC and LBA while CAM continued to ship in bulk

Leverage IAF to GoPro DC:

LBA, ACC & FG CAM

9

Level-set customer expectations

Communicated business continuity plan

Enhanced order management focus –

inventory levels and customer forecasts

Sourced contingency IAF direct rates to key

customer DCs and Stores

Strategy, Execution & Rationale

Impact: Inbound Ocean Freight (SEA)

21%

41%

70% 69%

36% 34%

25%

14%

31%

51%

64%

25%

48%

0%

10%

20%

30%

40%

50%

60%

70%

80%

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15

SEA

To

nn

age

% (

KG

)

Ton

nag

e (

KG

)

Inbound SEA vs. IAF (Delivered) - US West Coast Ports Congestion

SEA Tonnage (KG) IAF Tonnage (KG) Target (SEA) SEA %

HERO4 Launch

HERO+LCD

Launch

Congestion Meter

IAF/SEA Mix - AVG 38% SEA

MAY/JUN: SEA

Forward DeploymentSEP: Convert to IAF

DEC: Post Launch - Resume SEA

Impact: Inbound International Air Freight (IAF)

45%

28%

37%

55%58%

83%

71%

35%

12%

29%

19%

36%

51%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

100,000

200,000

300,000

400,000

500,000

600,000

Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15

IAF

Pre

miu

m %

Ton

nag

e (

KG

)

Inbound IAF Premium % (Delivered) - US West Coast Ports Congestion

Standard IAF Premium IAF Target (Premium) IB IAF Premium %

Increased utilization of premium IAF from Jun-Jan 2015 to meet FYE demand

HERO4 Launch

HERO+LCD

Launch

Congestion Meter

IAF Premium - AVG 43%

Impact: Outbound Domestic Air Freight (DAF)

7%

17%

12%

29%

16%

11%9%

6%

3%

8%

2%

25%

5%

0%

5%

10%

15%

20%

25%

30%

35%

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15

LAT/

DA

F P

rem

ium

%

Ton

nag

e (

KG

)

B2B Outbound DAF Premium (Delivered) - US West Coast Ports Congestion

Standard LTL/DAF Premium LTL/DAF Target (Premium) DAF Premium %

With exception of Sep 2014, remained below premium target driven by reshaping customer expectations and heavy-use of premium IAF

HERO4 Launch

HERO+LCD

Launch

DAF Premium - AVG 12%

Key Success Factors

Focused attention to market news and industry analysis

Communication of business continuity plan to customers

Production output and lead-time planning aligned with real-time visibility to customer demand

Close collaboration with internal functions and external supply chain partners

Sustainable pricing structure with healthy mix of hard and soft block space agreements

All About the Love of Compliance…

GoPro

US CBP

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