Total Car Management “TCM” 2008

TCM is an automatic freight car distribution system –Developed internally, starting in January 2004 –Transitioned one car type at a time, starting with centerbeam flatcars and plain boxcars in 2005 –Uses an optimizer engine to solve for a network solution –Uses a rank and target paradigm in the customer profiles to allocate equipment during shortages Total Car Management What is it?

TCM flows cars based on ‘known’ demand and applies cars to orders prior to serving yard –Generates demand-based car flows –Groups cars by similar characteristics –Dynamically assigns cars to customer orders –Monitors empty equipment enroute to shippers –Identifies failures and takes corrective action –Provides ‘Alerts’ and Reports for managing fleets Total Car Management

TCM is used to manage the market based fleet segmentation and allocation logic for premium equipment –Redefine fleet using market-based product definitions in GENESIS –our rating system –More generic car type products allow for a greater supply of suitable equipment –More generic car type products improves utilization and enhances optimization –Marketing authorizes products for customer orders –Limited special orders prevent customers from “cherry picking” cars Total Car Management

Product Catalog Lookup

Considers empty return costs in determining use of foreign cars to meet demand or be returned home Determines expected transit times in moving cars from supply points to demand points Reserves loaded cars and future interchanges as possible car supply Re-evaluates ETA changes Receive real time updates on demand, as orders are created, modified, or cancelled Receive real time updates on supply, as empty cars are released and interchanged Functional Features Total Car Management

Cars defined by physical characteristics in GENESIS Only specific car characteristics can be included/excluded Shippers are ‘authorized’ for specific products Customer order patterns based on authorized equipment Only authorized equipment will be supplied Allows car substitution that supports marketing strategy Ranks and weekly allocation Targets (RATS) Functional Features Total Car Management

Backpressure logic (customer) –Linked to Customer Inventory Management System (CIMS) –Prevents congestion by reducing flow to customer locations –Reduces orders when imbalances occur between orders and loadings Re-think (network) –Ability to re-think decisions based on better supply alternatives –Quick Disposition on empty releases that schedules cars to serving yard Emergency Re-positioning (geo area) –Cut off flow to troubled areas – weather, congestion –Audit trail for preventative actions –Restore demand and flow What’s new? Total Car Management

Shippers can create own product definitions Shippers capture value & increase UP’s cost’s by customized orders No M&S ability to extract value from fleet Customer prioritization by “squeaky wheel” No allocation planning for shortage - “share the pain” Car flows are “pushed” to where we think demand will be. Cars are manually matched with orders in specific territories No proactive correction of car supply failures “Catalog” of standardized products Ability to charge for what customers value & offer price/value trade-off’s Customers prioritized by value to UP Car’s allocated to maximize re- investability Demand “pulls” cars Automatic assignment with lowest cost solution System proactively corrects for failures PastTCM Tactical/Transaction Focused Strategic/Value Focused

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