Change - It may not be all you hoped for

Responding to Service and Operational Requirements from

Consumer to Producer

Panel Introductions

• Dr. Karl Manrodt, Georgia Southern University

• Chris Owens, SuperValu

• Mike Cole, Kraft

• Steve Wutke, Prime Inc.

Change - It may not be all you hoped for

A Retailer’s / Wholesalers Perspective

Chris Owens, Director Supply Chain Strategy

macro pressures

• Economy

– impact to units, dollars, profits

• Product Cost / Price fluctuations

– shipper price inflation followed by deflation

• Supply Chain Productivity Pressures

– Must adjust to de-leveraging of units and $

EconomyInflationDeflationEarningsInventoryRegulation

Response

Lower operating cost

Leverage Assets

shipper

Typical Retailer

Retailer is a Receiver• Unloading policy changes

– Received seal intact, subject to count and inspection

– Economic order quantities

• Utilization of DSD – vendors deliver to the store– High volume promotions skip the DC

Retailer is a Carrier

• Store delivery cycles

• Combination loads

• Right size fleet

• More backhauls

• Vendor collaboration

• Store delivery cycles

• Combination loads

• Right sized fleet

Retailer is a shipper

• Alternative Modes -

• Regular bidding cycles……

• Secure long term capacity

• Electronic invoicing

Change - It may not be all you hoped for

A Shipper’s Perspective

Mike Cole, Director N. A. Transportation

2010 “The Perfect Storm” External Variables…

Rate Compression Bidding

Driver Capacity

Productivity Pressures

HOS

Economic Uncertainty

Fuel Pricing

Asset Capacity

CSA 2010

15

Annual Internal Variables Driving Expectations

Internal Shift to Regular Bid Cycles

M&A Activity

Productivity Pressures

Private Fleet Rationalization

Lower Volume

CPU

Sustainability

Network Shifts

Key to Successful Transportation Solution is to Balance Internal and External Variables…

Internal Shift to Regular Bid Cycles

M&A Activity

Productivity Pressures

Private Fleet Rationalization

Lower Volume

CPU

Sustainability

Network Shifts

Industry Shift to Regular Bid Cycles

Driver Capacity

Productivity Pressures

HOS

Economic Uncertainty

Fuel Pricing

Asset Capacity

CSA 2010

What is the Industry Saying …

• “The largest factor within the trucking industry that affects its health is the cost of diesel fuel”, according to Chris Work associatecontent.com

• Nearly two out of three trucking executives surveyed by Transport Capital Partners in the fourth quarter said, they expected freight volume to improve in the next seven to twelve months

• According to truckinginfo.com, “Gone with the trucks are as many drivers, paving the way for a driver shortage worse than the industry has ever seen – a shortage that will be exacerbated by new stricter federal safety regulations such as CSA 2010 and regulations targeting driver health issues.”

What are our opportunities / expectations …

Issue / Opportunity• Rate inflation without capacity

increases• Customer collaboration

expectations• Bid award reconciliation• Freight Forecasting• Mode Balancing

Potential Resolution• Maintaining “Shipper of

Choice” mindset with bidding predictability

• Balancing win/win solutions with retailers & carrier partners

• Forward baseline development vs. historical baseline

• Introduction of Terra Forecasting

• Rightsizing Private/Dedicated/CC

18

Change - It may not be all you hoped for

A Carrier’s Perspective

Steve Wutke, VP Sales and Marketing

WEATHERING THE STORMTHE NEXT CHAPTER

REEFER GROSS RATE VS. NET RATE

$0.03 $0.03 $0.03

$0.13 $0.13

$0.32

$0.42

$0.46 $0.47

$0.50

$0.33

$-

$0.05

$0.10

$0.15

$0.20

$0.25

$0.30

$0.35

$0.40

$0.45

$0.50

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Gross Rate Net Rate

THE NEXT CHAPTER

REEFER DRIVER EARNINGS VS. NET RATE

2000 2005 2010

$41,920

$59,180

$45,220

An

nu

al E

arn

ings

Bas

e Bas

e +

$.3

3

Bas

e +

$.2

4

THE NEXT CHAPTER

EQUIPMENT CHANGES & FUEL

EPA COMPLIANT

o 2002 EGR (Exhaust Gas Recirculation)

o $5,000 & 130 lbs.

o 2007 ATD (After Treatment Device)o $8,400 & 400 lbs.

o APU’s an additional $8,000 & 450 lbs

o 2010 SCR (Selective Catalytic Reduction)o $9,000 & 450 lbs.

EIA 2000 = $1.50

EIA TODAY = $2.87

THE NEXT CHAPTER

REEFER DRIVER EARNINGS VS. REEFER TEAM PERCENTAGE

20.0%

22.0%

24.0%

26.0%

28.0%

30.0%

32.0%

34.0%

36.0%

38.0%

40.0%

$150

$250

$350

$450

$550

$650

$750

$850

$950

$1,050

$1,150

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Team

%

Dri

ver

We

ekl

y Ea

rnin

gs

Driver Earnings Reefer Team %

THE NEXT CHAPTER

SUSTAINABILITY

•Idle reduction

•Improved aerodynamics

•Improved logistics

•Driver training

•Automatic tire inflation systems

•Single wide base tires

•Low viscosity lubricants

•Reduce highway speeds

•Weight reduction

•Hybrid power train technology

•SensorTRACS

Prime’s Score = 1.25

*highest score given

THE NEXT CHAPTER

BEWARE OF THE NAKED MAN THAT OFFERS YOU THE SHIRT OFF OF HIS BACK!

THE NEXT CHAPTER

Questions / Responses

• Panelist

• Audience