Routing and Scheduling Section Five

Load Planning u Mode of Transportation u Cargo Characteristics u Facility Constraints u Business Strategy u Security and Safety Considerations

CARGO CHARACTERISTICS u SIZE u WEIGHT u STOWABILITY u HANDLING u LIABILITY u HAZARDOUS CARGO u SPECIAL SERVICE REQUIREMENTS

Collaborative Transportation: The “Missing Link” of CPFR Collaborative Transportation: The “Missing Link” of CPFR Joel Sutherland Senior Vice President, Transplace VICS CPFR ® Meeting February 7, 2003

$571 B Transportation by Mode Truck Transportation = $462 B ( Truck Transportation = $462 B (81%) Source: Bear Stearns, The Whole Trucking Story, Cass/ProLogis, 14 th Annual State of Logistics Report 6% 25% 2% 5% 6% 7% 21% 28% For-Hire TL In-House TL LTL Local Trucking Ground Parcel Parcel Express Rail Other © Copyright 2003 Transplace, LP. All rights reserved.

Shipper/Carrier Challenges Shipper  No single shipper has critical mass  Logistics technology not a core competency  Business is still managed in silos  Lack of pipeline visibility  Total logistics costs are too high  No single shipper has critical mass  Logistics technology not a core competency  Business is still managed in silos  Lack of pipeline visibility  Total logistics costs are too high Carrier  No single carrier has critical mass  High driver turnover  Costly deadhead miles  Excessive dwell time  No single carrier has critical mass  High driver turnover  Costly deadhead miles  Excessive dwell time

There are nearly 600,000 active interstate motor carriers Fragmented Industry Source: CC 592,909 Less than 5% Source: Bear Stearns, The Whole Trucking Story Out of more than 10,000 publicly traded truckload carriers

Driver Turnover ModeTurnoverConditions TL100%Away from home for long periods of time LTL10%Home more often Local5%Home every day Source: Dr. G.D. Taylor, University of Louisville © Copyright 2003 Transplace, LP. All rights reserved.

Costly Deadhead Miles Empty miles in Europe run 25% to 40% 15-20%

Waiting (Dwell) Time Abuse The average waiting time for (dry van carrier) drivers was 33.5 hours per week. The average waiting time for (dry van carrier) drivers was 33.5 hours per week. Source: TCA, Dry Van Drivers Survey, 1999 © Copyright 2003 Transplace, LP. All rights reserved.

Trends in U.S. Trucking Industry u Shippers using fewer, larger (core) carriers u In-House TL shrinking; For-Hire TL growing u Consolidation within TL segment is increasing u LTL declining; TL increasing (mode conversion) u Connectivity and visibility enabling collaboration Source: Bear Stearns, The Whole Trucking Story © Copyright 2003 Transplace, LP. All rights reserved.

Source: VICS Association Source: VICS CPFR Consumer Micro-Marketing Joint Business Planning New Item/Promotion Management Detailed Demand Forecasting Supply Chain Process and Systems Integration Supply Chain Optimization Product Planning and Scheduling Demand Supply A business process for value chain partners to coordinate plans in order to reduce the variance between supply and demand and share the benefits of a more efficient and effective supply chain. CPFR ® is all about Integrating Demand with Supply © Copyright 2003 Transplace, LP. All rights reserved.

Source: VICS Association The Penalty of Working Alone Supplier 30 days Supplier 30 days Manufacturer 30 days raw materials 30 days finished product Manufacturer 30 days raw materials 30 days finished product Customer 30 days whse 21 days store Customer 30 days whse 21 days store 141 days Supplier 15 days Supplier 15 days Manufacturer 15 days raw materials 15 days finished goods Manufacturer 15 days raw materials 15 days finished goods Customer 15 days whse 6 days store Customer 15 days whse 6 days store 66 days © Copyright 2003 Transplace, LP. All rights reserved.

u An independent yet concurrent process with CPFR u Begins at order confirmation, continues through shipment delivery, and includes carrier payment u Requires reengineering the whole process so the carrier is part of the larger, more focused, buyer/seller team u An independent yet concurrent process with CPFR u Begins at order confirmation, continues through shipment delivery, and includes carrier payment u Requires reengineering the whole process so the carrier is part of the larger, more focused, buyer/seller team Source: VICS Association What is CTM? Strategic Planning SuppliersCustomersCarriers SuppliersCustomersCarriers CTM CTM CPFRCPFR Time in Business Cycle © Copyright 2003 Transplace, LP. All rights reserved. Source: CPFR/CTM

Two ways to Achieve CTM Benefits 1.Direct communication between carriers and trading partners Source: Williams and Esper, University of Arkansas, 2002 John Karolefsky, Collaborating Across the Supply Chain, 2001 BuyerSeller Carrier 3PL 2. 3PL facilitation of the communication and execution process © Copyright 2003 Transplace, LP. All rights reserved.

The Planning Process Execution Value is greater when the time buckets are larger Shipment and Carrier Management Transportation Modeling Supply Chain Strategy/ Network Design Transportation Procurement Fleet Routing & Scheduling ROA Impact Years Quarters…….Months Days Strategic Tactical Operational Source: CPFR/CTM

Level of Collaboration Traditional Vendor  Transactional  No visibility Trading Partner Collaboration  Shared Forecast by Lane of Traffic  Automated transactions Partnership Collaboration  Shipper, Consignee, and Carrier  Shared Forecast  Committed capacity Visibility Consortium Collaboration  Multiple Shippers, Carriers  Third Party Information Hub  Collaboration Services  Relationship Management Value CTM Continuum Source: CPFR/CTM

MetricExample Reduced transportation costsEliminate excessive empty backhauls and dwell time Increased asset utilizationReduced empty miles that are unpaid to the carrier Improved service levelsHigher on-time performance Increased visibilityIdentifying location of freight in the supply chain Improved end-customer satisfactionIncreased number of “perfect orders” Increased revenuesImproved fully load miles; better on shelf performance; increased order quantity Potential CTM Benefits Source: John Karolefsky, Collaborating Across the Supply Chain, 2001 © Copyright 2003 Transplace, LP. All rights reserved.

Before Reengineering After Reengineering © Copyright 2003 Transplace, LP. All rights reserved.

Results Before Reengineering Vendors Controlled Freight 77% of Vendors Converted to Collect 85% LTL Inbound Shipments <2% LTL Inbound Shipments 1 Week Average Transit Time 1.5 days Average Transit Time No Pipeline Visibility Complete Pipeline Visibility Excessive Freight Damage Freight Damage Nearly Eliminated High Transportation Cost >20% Transportation Cost Reduction Growth ConstrainedSignificant Inventory Reduction Poor On-Time Performance99%+ On-Time Performance Poor Utilization of Private Fleet 25% Increase in Private Fleet Utilization After Reengineering © Copyright 2003 Transplace, LP. All rights reserved.