UTi Worldwide (NASDAQ: UTIW) is a shipping company that helps companies move goods between international manufacturers and markets. Outsourcing to a third-party logistics firm like UTi allows a company to focus on their core business rather than devoting personnel and resources to supply chain management. When companies expand into international markets and outsource production, their operations become more complicated, and UTi handles details like language translation, tariff variations, and custom clearing operations.
As the need for third-party logistics firms has grown, so has the number of competitors in UTi's space. Shipping goods internationally creates potential government and global economic risks, as the changing of tariff or trade regulations (possibly resulting from terrorist acts) could impact UTi Worldwide's business. Also, volatility in exchange rates can impact the significant revenue and assets produced from foreign operations.
UTi Worldwide makes money when companies outsource their supply-chain management to the firm. UTi uses an expansive global network, company-designed software, relationships with transportation carriers, and general expertise to provide supply-chain management services to customers at an expense less than the firms can achieve on their own. UTi Worldwide uses a sales team to target companies in the pharmaceutical, retail, apparel, chemical, automotive, and high technology electronics industries.
UTi Worldwide typically provides services to a customer with complex international shipping needs. For instance, an American retailer obtains raw materials from Australia and outsources manufacturing services to China. UTi Worldwide can manage the supply-chain needs of this firm by facilitating movement of materials from Australia to China and finally to the United States. By doing so, the American firm can have lower cost of sales and satisfy time schedules. UTi Worldwide charges its customers based on the complexity of services and the size and distance of goods being transported.
In 2009, UTi earned $41.1 million in net income on $3.57 billion in revenue. This represents a turnaround from 2008, when the company incurred a net loss of $4.6 million on $4.54 billion in total revenues.
UTi has two operating segments and one corporate expense segment.
UTi Worldwide competes with a variety of asset-based and non-asset based logistic and brokerage service companies. Asset based logistic companies, which do own transportation vehicles, include YRC Worldwide (YRCW) and Conway Inc (CNW). Non-asset logistics, like UTi Worldwide, do not own ships, planes, or trucks, and include C.H. Robinson Worldwide (CHRW), Expeditors International of Washington (EXPD) and Pacer International (PACR). These firms compete for shipping orders and logistic management from customers primarily based on price, reliability, technological solutions, and breadth of services available. Due to UTi Worldwide's size and focus on clients with multiple shipping locations, smaller, regional competitors cannot easily compete for UTi Worldwide's customers.
Management sees a greater number customers shifting to logistic companies that have global and comprehensive technological solutions. UTi Worldwide's existing global network, self-produced software, relationship with transportation carriers, and logistics expertise are its competitive advantages. UTi Worldwide has made several acquisitions to increase services available, and is developing software to link all operations.