Transportation Strategy SCMN 4780 Mode / Carrier Profile.

Transportation Strategy Transportation Strategy SCMN 4780SCMN 4780

Mode / Carrier ProfileMode / Carrier Profile


Shipper’s Transportation Network Shipper’s Transportation Network

SUPPLIER CUSTOMERPRODUCER

(Shipper)

Inbound Transportation

Outbound Transportation

Reverse Logistics

22Modal Carrier Profile Modal Carrier Profile

Transportation Strategy Transportation Strategy SCMN 4780SCMN 47803Modal Carrier Profile Modal Carrier Profile

2010 Products Shipped ($B) 2010 Products Shipped ($B)

1,759

1,430

1,2671,061

880

696

692

689

578573

Machinery

Electronics

Motorized Vehicles

Mixed Freight

Pharmaceuticals

Textiles / Leather

Manufactured Products

Gasoline

Plastics / Rubber

Raw Materials


Select Best Transport Mode

Transportation Mode Management Transportation Mode Management

Identify Performance Variables

Negotiate Rates & Service Levels

Select Carrier

Establish Freight Control Points

Evaluate Carrier Performance

44Modal Carrier Profile Modal Carrier Profile


Total Logistics Cost* as % of US GDP

* Logistics Cost is cost of moving, storing and managing goods

A major factor in the decline of total logistics cost has been reduced transportation costs. Transportation costs are lower because:

•Deregulation & subsequent restructuring of the freight transportation industry in the 1980s which triggered strong competition and lower shipping prices;

•Public investment in the US Interstate highway system in the 1980s and early 1990s reduced travel time and improved trip reliability for motor carriers; and

•Adoption of new technologies such as intermodal freight containers, e-Business, RFID tags, and satellite communications significantly improved the productivity and reliability of freight operations.

US Transportation – Recent HistoryUS Transportation – Recent History

Transportation Strategy Transportation Strategy SCMN 4780SCMN 47806Modal Carrier AnalysisModal Carrier Analysis

US Domestic Modal StatisticsUS Domestic Modal Statistics

2010 US Shipments * (TONS) ($B)

Truck 12,490 68% 10,515 65%

Rail 1,776 10% 427 3%

Water 860 5% 343 2%

Air 12 0% 999 6%

Intermodal 1,380 8% 2,739 17%

Pipeline 1,494 8% 719 4%

Other 302 2% 323 2%

Total 18,313 16,065

* Source: US Department of Transportation


In a survey commissioned by the Council of Supply Chain Management, logistics costs rose to 8.3% of US GDP in 2010 vs. 7.7% in 2009. •Cost of US business logistics jumped to $1.2 Trillion in 2010 (up $114 B) •Inventory carrying costs increased 10.3% last year due to higher costs of taxes, obsolescence, depreciation and insurance. •Transportation costs were up 10.3% from the 2009 levels with trucking lagging behind the performance of other transportation modes.

With bleak prospects regarding the economy, transportation managers will continue to see freight costs increase and will have to answer to management as to why. What can shippers do to minimize the impact of freight cost increases?

1.Understand what you are paying for, not just base rates but fuel surcharges and all accessorial fees2.Consolidate shipments when possible including consolidating small parcel shipments into LTL quantities and LTL quantities into truckloads 3.Do not use expedited services unless they are absolutely required. 4.Continually benchmark the competition’s rates and charges5.Understand your carriers’ costs; what if anything can you do to reduce their costs so they can pass those savings back to you 6.Perform a comprehensive audit of your entire transportation spend using an outside audit firm

Current Logistics Cost SituationCurrent Logistics Cost Situation


2010 US Shipments - Tons

Truck Rail Water Air Intermodal Pipeline Other

Modal Carrier Profile Modal Carrier Profile



2010 US Shipments - Value ($B)

Truck Rail Water Air Intermodal Pipeline Other

Modal Carrier Profile Modal Carrier Profile



Unites States Highway SystemUnites States Highway System


Highway System CongestionHighway System Congestion

Federal legislation to improve the US highway system discussion


CSA 2010 – Legislation Description CSA 2010 – Legislation Description Compliance, Safety, Accountability is a Federal Motor Carrier Safety Administration initiative to improve large truck and bus safety through reducing crashes, injuries, and fatalities that are related to commercial motor vehicles. CSA 2010 introduces a new enforcement and compliance model that allows FMCSA and its State Partners to contact a larger number of carriers earlier in order to address safety problems before crashes occur. Rolled out in December 2010, the program establishes a new nationwide system for making the roads safer for motor carriers and the public alike!

CSA Operational Model – implement a Safety Measurement System SMS) that …

•quantifies the on-road safety performance of carriers and drivers to identify candidates for interventions•determines the specific safety problems the a carrier or driver exhibits •monitors whether safety problems are improving or worsening

SMS uses a motor carrier’s data from roadside inspections, including all safety-based violations, State-reported crashes, and the Federal motor carrier census to quantify performance in the following Behavior Analysis and Safety Improvement Categories.


CSA 2010 – Improvement Categories CSA 2010 – Improvement Categories 1. Unsafe Driving - Operation of commercial motor vehicles by drivers in a dangerous or careless

manner. Example violations: Speeding, reckless driving, improper lane change, and inattention. 2. Fatigued Driving (Hours-of-Service) - Operation of CMVs by drivers who are ill, fatigued, or in

non-compliance with the Hours-of-Service (HOS) regulations. This includes violations of regulations pertaining to logbooks as they relate to HOS requirements and the management of CMV driver fatigue. Example violations: Exceeding HOS, maintaining an incomplete or inaccurate logbook, and operating a CMV while ill or fatigued.

3. Driver Fitness - Operation of CMVs by drivers who are unfit to operate a CMV due to lack of training, experience, or medical qualifications. Example violations: Failure to have a valid and appropriate commercial driver’s and being medically unqualified to operate a CMV.

4. Controlled Substances & Alcohol - Operation of CMVs by drivers who are impaired due to alcohol, illegal drugs, and misuse of prescription or over-the-counter medications. Example violations: Use or possession of controlled substances/alcohol.

5. Vehicle Maintenance - Failure to properly maintain a CMV. Example violations: Brakes, lights, and other mechanical defects, and failure to make required repairs.

6. Cargo-Related - Failure to properly prevent shifting loads, spilled or dropped cargo, overloading, and unsafe handling of hazardous materials on a CMV. Example violations: Improper load securement, cargo retention, and hazardous material handling.

7. Crash Indicator - Histories or patterns of high crash involvement, including frequency and severity. It is based on information from State-reported crashes.


Truck Driver ProfileTruck Driver Profile


Team Report – Carrier Performance Team Report – Carrier Performance

Carrier Report Card • Identify 4 - 5 areas of carrier

performance / KPI metrics (mode generic)

• Define the metric to be used to calculate performance in each area (mode generic)

• Prioritize the importance of each performance area (weighting factor)


LTL 27

TL 320

Domestic Truck Freight Statistics ($B)Domestic Truck Freight Statistics ($B)

LTL is much more concentrated market than TL• Top 25 LTL carriers = 88% of total LTL revenues (top 6 = 50%)• Top 25 TL carriers = < 10% of total TL revenues


Truckload (TL) Modal Freight Truckload (TL) Modal Freight

Producer Customerpickup delivery

• Shipments typically exceed 20,000 lbs. with weight limitations• Freight pickup at shipper and delivery to customer is scheduled • Delivery transit times based on distance and driver regulations• Carrier selection options are private, common, contract carriers • Rates are established by ______________________________


Truckload (TL) Freight Truckload (TL) Freight


COMPANY NAME SUBSIDIARY PORTFOLIO / COMMENTS 2009 Rev

($ M)

1 Swift Transportation Swift Transportation $ 2,338

2 Schneider National Schneider National, Schneider National Bulk Carriers $ 2,200

3 Werner Enterprises One-way Truckload, Dedicated, Cross-Border $ 1,433

4 U.S. Xpress Enterprises US Xpress, Xpress Global Systems, Xpress Direct, Total Transportation, Arnold Transportation, Abilene Motor Express, C&C Transportation, Smith Transport, Pinner Transport

$ 1,333

5 J.B. Hunt Transport J.B. Hunt Truck, Dedicated Contract Services $ 1,204

6 Prime Inc. Flatbed, Refrigerated, Tanker $ 992

7 C.R. England England North American, England Mexico, England Dedicated $ 979

8 Crete Carrier Corp. Crete Carrier, Shaffer Trucking, Hunt Transportation $ 849

9 Knight Transportation Knight Transportation, Knight Refrigerated $ 585

10 Ruan Transportation Ruan Dedicated Contract Carriage, Bulk Transportation $ 584

11 CRST International CRST Van Expedited, CRST Malone, CRST Dedicated Services $ 561

12 Covenant Transport Group Covenant Transport, Southern Refrigerated Transport, Star Transportation $ 541



Market Challenges: • industry profitability with market-driven pricing • owner / operator vs. corporate ownership vs. hybrid ownership • stricter driver regulations / aging workforce• highway conditions • fuel costs

Specific Customer Selection / Performance Criteria

?



Less-Than-Truckload (LTL) Modal Freight Less-Than-Truckload (LTL) Modal Freight

Producer Customer

Hub

Ter

min

al

Hub

Ter

min

al

line

haul

pickup delivery

• shipments range from 150 – 20,000 lbs.• due to smaller shipment size, costs are less than TL freight rates • LTL freight mixed with other shipper loads to gain trailer density • freight pickup / delivery is typically by regular driver routes • pickup-to-delivery transit times much greater than TL freight • rates are established by ________________________________


• LTL competes on transit times

• Terminals operations similar to distribution centers

• Success of terminal operation requires adopting LEAN principles (cross-docking)

• Challenge is to dynamically match-up terminal locations with customer delivery requirements

• IT solutions are essential •

LTL Hub Terminals LTL Hub Terminals


YRC Transit Times – Kansas City, MOYRC Transit Times – Kansas City, MO

Standard Transit DaysFrom Kansas City, MO


CARRIER NAME 2010 REV ($M)

COVERAGE

1 FedEx Freight $ 4,421 Nationwide, Canada, Mexico Non-Union

2 Con-Way Freight $ 3,026 Nationwide, Canada, Mexico Non-Union

3 YRC National $ 2,642 Nationwide, Canada, Mexico Union

4 UPS Freight $ 2,002 Nationwide, Canada, Mexico Union

5 ABF Freight Systems $ 1,395 Nationwide, Canada Union

6 Old Dominion Freight $ 1,377 Nationwide, Canada Non-Union

7 Estes Express Lines $ 1,352 Nationwide Non-Union

8 YRC Regional $ 1,257 Nationwide Union

9 R+L Carriers $ 1,077 Nationwide Non-Union

10 Saia Motor Freight $ 836 Midwest, Southeast Non-Union

11 Southeastern Freight Lines $ 723 Southeast, Southwest Non-Union

Less-Than-Truckload (LTL) Freight Less-Than-Truckload (LTL) Freight


Less-Than-Truckload (LTL) Freight Less-Than-Truckload (LTL) Freight

Market Challenges: • stricter driver regulations / aging workforce• highway conditions • fuel costs• investments in technology with questionable ROI • hub terminal locations and operating costs

Specific Customer Selection / Performance Criteria

?

Transportation Strategy SCMN 4780 Mode / Carrier Profile.

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