1. MEMPHIS BCO DISCUSSION April 16, 2019
Orange moves you forward
MEMPHIS BCO DISCUSSION April 16, 2019

2. Memphis Bco and NACPC AGENDA FOR DISCUSSION Overall chassis situation
Memphis current situation
Decide strategy for Memphis

3. GENERAL CHASSIS ISSUES
SUPPLY - No single entity is accountable for ensuring adequate supply in a given region
QUALITY - Equipment fleet is aging and needs to be upgraded
CAPTIVE POOLS - Different pools used depending on ocean carrier; time and expense to ‘chase’ the right chassis, and terminals must provide multiple footprints
CHOICE - Low carrier haulage rates subsidized by very high daily rental rates for merchant haulage trucker. Choice stops this.
COMPLICATED - Varying commercial terms and exceptions create inaccurate chassis invoicing and burdensome administrative processes for all involved
FUNDAMENTAL PROBLEM - IEPs and SSL still control the chassis, and their interests are not well aligned with rest of supply chain stakeholders
GENERAL CHASSIS ISSUES

4. MEMPHIS DEVELOPMENTS More Gridlock
Three separate pools have been causing ongoing severe frustration amongst truckers, BCOs and railroads
FMC Commissioner Dye initiated regional supply chain stakeholder team to find solution for Memphis
In December 2018, OCEMA proposed ‘Pool of Pools Plus,’ gray, interoperable with full support of ocean carrier members
IEP’s committed to providing their response by first of the year
TRAC and DCLI rejected the OCEMA proposal

5. WHAT DOES ALL THIS MEAN? Observations
Certain ocean carriers and perhaps one or more IEP’s will apparently strongly resist any changes to status quo
OCEMA members have divergent views and industry cannot speak as single voice right now
Heavily subsidized Carrier Haulage rates distort the market and prevent shift to more Merchant Haulage (in fact it seems to be going in opposite direction); carriers are not getting out of the chassis business and show little sign of pushing to change customer service contract terms
Situation is not sustainable – signs of trouble with the IEPs, e.g. DCLI debt rating lowered, TRAC CEO change
Pending IMO fuel standards forcing intense short-term cost focus and complicates the service contract process

6. REQUIRED ELEMENTS OF A SOLUTION FOR MEMPHIS
Pool management must be cost effective and transparent
Clear and direct authority and accountability for supply, availability and quality
Fair and reasonable commercial terms
All chassis in region must be interoperable
Key Stakeholder involvement in rule-making including BCO’s, RR’s, Ocean Carriers, Ports, Equipment Providers and Motor Carriers

7. POSSIBLE STRATEGY FOR MEMPHIS
BCOs designate a pool to supply their chassis needs and demand your SSL adhere to your request. CCM current pool with tweaks or new NACPC owned and managed pool. More likely successful for MH model.
NACPC manage pool with Key Stakeholder involvement in rule-making including BCO’s, RR’s, Ocean Carriers, Ports, Equipment Providers and Motor Carriers. Pool manager must be neutral, not driven by profit or control motives
All chassis in pool used by BCOs must be interoperable
Chassis “Choice” must be allowed or single provider “at cost” pricing model deployed
Reasonable timeline to upgrade chassis to radial tires, LED lights, and ABS
Adequate quantity of chassis to meet peak needs. Lower the utilization stress trigger and reduce % of out of service chassis

8. ‘AT COST’ MODEL CONCEPT
Main Points
Chassis net leased by providers to pool owner
Large volume users (e.g. largest BCOs) receive ‘At Cost’ pricing (example next slide)
Pool management contracted by pool owner to neutral operator with cost transparency
Rule-making set by Governance Board consisting of key regional stakeholders
Pool owner accountable to Governance Board for performance
Participation is voluntary, but expect competitive advantage

9. ‘AT COST’ HYPOTHETICAL EXAMPLE
Assumptions
-- Total daily cost per use day = $10
-- Low volume user rate = $15
-- Total volume = 1000 moves for some time frame
/20 split between high volume user and low volume user
Calculation
-- Total pool cost
1000 x $10 = $10,000
-- Low volume total revenue
1000 x 20% = 200 moves x $15 = $3000
-- High volume total cost
$10,000 - $3000 = $7000
High volume moves
1000 x 80% = 800 moves
High volume net cost per move
$7000/800 moves = $8.75 per move

10. What is the North American Chassis Pool Cooperative?
An LLC of 12 US motor carriers
US Surface Transportation Board (STB) granted pooling authority in Jan 2013, including antitrust authority
NACPC has over 22,000 intermodal chassis, provided from ocean carriers, chassis leasing companies, and new production
NACPC is now in six pools – Southeast, New York, Gulf, Memphis, Midwest and Chicago/Ohio Valley
NACPC is committed to establishing gray pools, and is currently cooperating with Consolidated Chassis Management (CCM)
Key NACPC objectives
full interoperability
lower acquisition, insurance, M&R and repo costs
quality of assets
transparent operations and costs / ‘at cost’ pricing
What is the North American Chassis Pool Cooperative?

11. AND WHERE DO WE GO FROM HERE?
Next Steps
Today agree upon strategy for Memphis chassis pool
Insure BCO understanding and commitment to the strategy
Appoint a small team to determine tactics needed to achieve strategy
Continue to voice that current model is not working and changes are necessary
Consider NACPC as partner to assist you with accomplishing your strategy
Neutral
Not for profit
Means to trucker management of chassis

12. Thank you