. USDA Farm Resource Regions of the US Highest crop diversity is found in the Fruitful Rim and the Northern Crescent regions Aguilar J, Gramig GG, Hendrickson JR, Archer DW, Forcella F, et al. (2015) Crop Species Diversity Changes in the United States: 1978–2012. PLoS ONE 10(8): e0136580. doi:10.1371/journal.pone.0136580 http://journals.plos.org/plosone/article?id=info:doi/10.1371/journal.pone.0136580

VOLUME MOVEMENT BY MODE 2007 OF ALL U.S. FREIGHT ORIGINATES, TERMINATES OR PASSES THROUGH THE CHICAGO REGION Source: CMAP OVER 1/4 RAIL BARGE TRUCK OF FREIGHT IS MOVED BY TRUCK IN THE CHICAGO REGION Source: CMAP 67% 232 BILLION ANNUAL VALUE OF FOOD TRUCK FREIGHT THAT ORIGINATES, TERMINATES OR PASSES THROUGH THE CHICAGO REGION Source: FAF, 2007

Chicago metro region has the largest concentration of food warehouse square footage in North America.

Concentration in the Chicago Grocery Industry Aldi-148 total Sav-a-Lot 20 total 405/506 2014: Dominick’s closes 72 stores Mariano’s buys 11 locations (32 total) Whole Foods buys 7 locations (25 total) Jewel-Osco buys 9 locations (180 total) 28 vacant Dominick’s locations 2015: Kroger buys Roundy’s (Mariano’s parent company)

Key Question How can we optimize freight movements for individual regional shippers to access the Chicago market? After we met with Michelle the first time, this is what we came up with.

Freight Market Dynamics 106 Empty Miles 147 Loaded Miles 93 Empty Miles 145 Loaded Miles

Freight Market Dynamics Lower price for shipper Improved Asset Utilization Load Consistency and/or Communication

CRE: Colton Drop Yard for LA region Keys to Success Freight market dynamics Close relationship between customer and carrier Operational efficiency Initial Operational Structure Decoupled short-haul (within LA congestion zone) and long-haul (>100 miles) fleet Initially little coordination between fleets Struggling utilization on line-haul fleet New Operational Structure Regional drop yard 55mi outside LA Line fleet continuously moving, local fleet could wait at the docks Local LA Market

Close Shipper/Carrier Relationship 15+ years of doing business CRE had visibility to load data before any other carrier Allowed CRE to prioritize capacity by selecting the best loads and delivery times Pricing saved shipper hundreds of dollars per load off the market rate

Freight Market Dynamics Contracted rate structure allowed for efficiencies gained in using drop yard Communication between short-haul and long-haul fleets made it possible to know when to deliver loads and how to plan capacity Ability to match demand for loads with capacity available in the market was possible with support from other business units Rural leg savings greater than urban costs so carrier could pass the difference to shipper Market Rate $2.35 LA  Central Cal Carrier Price Structure Contracted rate per mile Market Rate $1.84 Central Cal  LA Carrier Price Structure Contracted rate per asset (e.g. fixed cost/truck/week) Local LA Market

Operational Efficiency Communication between short-haul and long-haul fleets to know when to deliver loads and how to plan capacity Ability to match demand for loads with capacity available in the market through support from other business units

Regional Drop Yard: Chicago Solves fragmented deliveries and congestion issues shippers and carriers face moving products into the Chicago marketplace; Issues which affect implementation include multiple carriers and scale issues that may increase cost barriers Assumptions: $600 base revenue/day $2k Fixed cost per truck 10 trucks/wk, 260 pallets No back haul – spot market rate No amenities at drop yard Different companies running urban & rural legs No incentives to offset fixed asset costs Fuel costs at current rates Total Cost/Pallet with Regional Drop Yard: $60 Total Cost/Pallet without Regional Drop Yard: $45.50 Aggregation Point Cost/Pallet: $22.70 147 Loaded Miles Transportation Cost/Pallet: $22.80 Regional Drop Yard Cost/Pallet: $0.27 Metro Mile Delivery Cost/Pallet: $14.23 Regional Wheeling Drop Yard Final Delivery Point

Alternative Fuel: LNG & CNG Fuel costs represent one part of the transportation expense equation but accounts for the most of the variable cost Alternative fuel is attractive when diesel fuel prices are high

LNG & CNG: Current State

LNG & CNG: Future State