1 JUMP INTO THE CHASSIS POOL RETAIL SUPPLY CHAIN CONFERENCE 2015
2 Jump into the Chassis Pool: A Carrier s Perspective William F. Payne President NYK Line (North America), Inc. RETAIL SUPPLY CHAIN CONFERENCE 2015
3 Quick Agenda Chassis evolution Pooling is not new Facilitation of pooling through OCEMA and CCM Landscape today Major Ports to enlarge the pooling efforts
4 Chassis Evolution in last 40 years Chassis had been used as stevedoring equipment in one to one terminal Required wasteful assets in land and chassis
5 Multi Modal Early MLB mode was predominantly Trailer on Flat Car (TOFC) where container placed on TOFC railcar hitch Chassis stayed with container Carriers forced to balance the empties with carloading of international or domestic cargo
6 Stack cars and Grounded terminal operations by the 80 s By the 80 s stack trains had developed and removed need for TOFC Terminals began delivering cargo from the ground to become more dense and asset efficient
7 Chassis Rationalization continued Alliances advanced chassis sharing, with business rules and often third party software and management OCEMA (Ocean Carriers Equipment Management Association), an FMC filed discussion agreement facilitated the movement through operating arm CCM Carriers then began monetizing the assets through sales and if necessary leaseback on certain moves such as carrier haulage
8 Today s CCM (OCEMA) Pools
10 Asset Distribution Chassis Fleet Levels by CCM Pool Southeast Lower Midwest Mid-South Gulf Rocky Mountain Chicago & Ohio Valley 0 10,000 20,000 30,000 40,000 50,000 60,000 Chicago & Ohio Valley Rocky Mountain Gulf Mid-South Lower Midwest Southeast Chassis 39,091 2,165 24,724 14,599 9,690 50,399
11 Carriers no longer building chassis assets Carriers are not acquiring chassis assets Asset financing is concentrated on ocean going assets, such as ships and containers, and marine terminals LA LB and NY are very near major pools supported by stakeholders such as the Port Authorities and the leasing companies With the proper business rules, data exchanges and support, pooling is more efficient than prior practices.
12 Keith E. Lovetro President & CEO TRAC Intermodal February 25, 2015 RETAIL SUPPLY CHAIN CONFERENCE 2015
13 Outline TRAC Intermodal An Introduction The North American Chassis Market Marine and Domestic Evolution of the Marine Chassis Market Where are we TODAY Chassis Pools Emerging Chassis Options For BCOs 2
14 Who is TRAC Intermodal TRAC is the nation s leading Intermodal chassis pool manager and equipment provider for domestic and international shippers 3
15 TRAC Intermodal Company Overview Largest provider of chassis in North America with over 311,000 units under management - 187,000 are in the Marine Segment - 77,000 are in the Domestic Segment - 47,000 chassis/axels in storage Broad distribution network which includes 630 Marine, 167 Domestic and 59 Depot locations Largest pool operator - 10 Neutral Marine Pools and only National Domestic Pool operator Seattle Geographic Footprint Spokane Tacoma Montreal Portland Springfield Chippewa Falls Worcester Grand RapidsTorontoSyracuse St. Paul Boston Detroit Chicago Buffalo S. Kearny Little Ferry ClevelandChambersburgN. Bergen Stockton Salt Lake City Omaha Indianapolis Marysville Philadelphia Oakland Columbus Baltimore Denver Kansan City St. Louis Cincinnati Portsmouth Los Angeles EvansvilleHuntsville Long Beach San Bernardino Memphis Nashville Charlotte Phoenix Birmingham Atlanta Charleston Dallas Jackson El Paso Savannah Houston Mobile Jacksonville San Antonio Orlando New Orleans Ft. Pierce Laredo Tampa Ft. Lauderdale Monterrey Miami Domestic 24% 4 TRAC Fleet Size Storage 12% Marine 64%
16 North American Chassis Market Total Estimated Market Size = 723,000 Active Chassis - Marine - 565,000 (78%) - Domestic - 158,000 (22%) TRAC has an estimated 38% of the total active chassis market share in North America - 35% in the Marine market and 49% in the Domestic market Truckers Shipping Lines/ 5% Marine Terminals 13% DCLI 20% TAL/ Others 3% 35% Flexi-Van 24% Total Chassis Market: 723,000 Marine Market: 565,000 Domestic Market: 158,000 Railroads 7% Shipping Lines/ 10% Marine Terminals DCLI 15% Truckers 6% TAL/Other Lessors 3% Flexi-Van 21% 38% Railroad/ Logistic Companies 33% Others 18% 49% 5
17 Evolution of the Marine Market Prior to 2009, Steamship Lines (SSL s) had private fleets to service their land side container needs In 2009, Maersk declared that they planned to exit chassis provisioning and most SSL s followed In 2012 SSL s began selling their owned chassis fleets and migrating to the Motor Carrier billing model 6
18 Evolution of the Marine Market 15 primary Steamship Lines have sold over 73% of their owned chassis to date 2 of these lines still have significantly large fleets (10,000+ each) The Steamship line divestiture trend is expected to continue beyond 2016 TRAC has acquired over 50% of the chassis that have traded 180, ,000 Steamship Line Divesture of Chassis Top 15 SSLs 158, , , ,000 80,000 60,000 40,000 41,982 20,000 - Beginning of 2012 End of
19 Evolution of the Marine Market SSL s began deploying bigger ships (EEE vessels) to lower slot costs Alliances needed to be formed to fill the big ships & realize cost savings SSL s began slow steaming Alliances created the need for chassis interoperability and coordinated Marine Terminal operations The growth of alliance vessel sharing requires a different chassis pool model and different approach to Marine Terminal operations 8
20 Where Are We Today - Chassis Pools Marine Ports are congested for numerous reasons - Ship bunching creates tremendous import spikes and waiting exports consume limited resource - Land side handling equipment can be constrained - Marine Terminal Operating practices are not harmonized - Chassis migration puts needed repair labor out of position with the chassis supply - Chassis repair labor is controlled by the Port Terminals and can be diverted away from chassis repairs Motor Carrier billing model is evolving slowly which negatively impacts chassis utilization efficiency Pools are being re-structured to support chassis interoperability - Market Pools - NY/NJ, PNW - Pool of Pools - LA/LB 9
21 Emerging Options for BCO s Select a UPC and use the evolving chassis pools that support interoperability Establish a Private Pool with specific start/stop locations and a dedicated chassis fleet Lease chassis as a Dedicated Fleet that is domiciled at an IEP s facility(s) or a Motor Carriers facility(s) Lease chassis with maintenance & repair included as a Dedicated Fleet that is domiciled at an IEP s facilities or a Motor Carriers facilities 10
22 Douglas W. Langston AVP Automotive & Intermodal Equipment BNSF Railway Company RETAIL SUPPLY CHAIN CONFERENCE 2015
23 BNSF is a Leading U.S. Railroad A Berkshire Hathaway company 32,500 route miles in 28 states and three Canadian provinces 46,000 employees Approximately 7,600 locomotives 12,900 bridges and 91 tunnels Moves one-fourth of the nation s rail freight Operates over 1,800 freight trains per day Serves over 40 ports Leads rail industry in technological innovation Unlike other forms of transportation, BNSF trains operate on an infrastructure financed almost entirely by the railroad
24 We Deliver the World to America BNSF is a global leader in intermodal transportation Through partnerships with ocean carriers and trucking companies, we connect manufacturers and retailers to their markets
25 Chassis Where We ve Been Ocean carriers sold inland transportation to BCOs & supplied Chassis. Each ocean carrier owned, maintained, provided their own chassis. Domestic Motor Carriers were primarily TOFC
26 Chassis Where We Are Ocean carriers exiting chassis. Leasing companies now agents for Ocean carriers. Domestic MC s shifting to COFC. Uncertainty in marketplace Move toward gray model. Simplifying ramp/de-ramp operations. Chassis stored at Rail Hubs
27 Where We re Going Leverage Technology (e.g. GIER /Pool ID s, Manage Inventory, provide IEP s more controls). Inventory Controls for too few, too many and Bad Ordered Chassis. Supporting Roadability (e.g. Quick Stops and Kiosks).
28 Where We re Going Ocean carriers will sell inland transportation to BCO s with multiple chassis supply models. Chassis will likely continue to move to a gray model. Transition will be gradual.
29 Art Zimmerly President/CEO AV Logistics RETAIL SUPPLY CHAIN CONFERENCE 2015
30 CORPORATE STRUCTURE CKT Properties, LLC C&K Holdings and Acquisitions Chicago Ridge Leasing AV Logistics, LLC Skyline Express, LLC C&K Trucking, LLC
31 AV Logistics an information management company that provides nationwide drayage for all types of customers Transportation & Logistics Container Management Domestic Transportation Specialized Services 3PL Rail Contracts International Diversions Ocean & Inland Ports Trucking & Cargo Security Industry Vessel Management Drayage Management Container Yard Management Port Demurrage Management Per Diem Management Event Measurement & Management Scope of Services Door to Door Intermodal Ramp to Ramp Management Rail Equipment Availability Tracking/Tracing Crosstown Management Cross Dock CY Services & Storage Warehousing Heavy Load Management Flatbed
32 SUPPLY CHAIN VISIBILITY DRAYAGE MANAGEMENT PROGRAM AV LOGISTICS AV LOGISTICS OTW TRACING DEMURRAGE MANAGEMENT DC ETA UPDATES DRAYAGE CUSTOMER REPORTING SINGLE POINT OF CONTACT CHASSIS MANAGEMENT CUSTOMER AVAILABILITY PROBLEM RESOLUTION Partner Carrier Partner Carrier REAL TIME UPDATES & MAPPING YARD MANAGEMENT DC SCHEDULING PER DIEM MANAGEMENT
33 C&K TERMINAL LOCATIONS Atlanta, GA Baltimore, MD Charlotte, NC Chicago, IL Dallas, TX Front Royal, VA Indianapolis, IN Jacksonville, FL Memphis, TN Norfolk, VA North Charleston, SC Savannah, GA South Kearny, NJ C&K currently has 600 drivers and is continuing to grow!
34 SUPPLY CHAIN VISIBILITY D-2 LINK TURNPIKE GPS 80% FLEET IMPLEMENTED Moving Stopped Off Duty
35 CHASSIS POOLS The Drayage Provider s Challenges FINANCIAL ADMINISTRATION OPERATIONS
36 The Drayage Provider s Challenges FINANCIAL Margins are minimal. In most cases drayage providers have been forced to accept the cost of chassis splits, terminations, and incremental rental days Cost of carrying the receivable with little or no mark up Drayage companies in general do not have the ability to finance chassis purchases Drayage companies in general have mostly been nonasset based
37 The Drayage Provider s Challenges ADMINISTRATION Labor intensive: Increase in headcount Tracking, Tracing, Billing, Paying, Reconciliation Multiple billing requirements by SSL Reduces focus on core business = DRAYAGE
38 The Drayage Provider s Challenges OPERATIONAL Major shift from old model to pools has required new systems, processes, and skill sets Fragmented rules Different guidelines within the same market
39 The Drayage Provider s Challenges OPERATIONAL Driver impact In many markets driver utilization has been reduced as much as 30% (Delivering loads) Drivers are required to fully understand a new model which is extremely fragmented
40 IS THERE A PERFECT MODEL? Nationwide / Regional / Local? One model may or may not work in every area True Gray Pool One chassis / any container IEP s should be transparent Competitive rates including repairs
41 IS THERE A PERFECT MODEL? BCO/Drayage provider dedicated fleets Partnership with IEP s Chassis shortage liability is reduced Reduced pool rates for guaranteed annual chassis days Supplement from pools for peaks
42 THANK YOU!!!
43 Bob Fredman Director, Global Logistics Big Lots Stores, Inc RETAIL SUPPLY CHAIN CONFERENCE 2015
44 Big Lots is Evaluating Alternatives, Planning For an Inevitable Transition Change will occur, better to be out in front of it Challenge to recoup cost through reduction in current door rates Alternatives do not show positive cost/benefit
45 Lease Type Must Fit the BCO s Operating Model 2 DC s +1 served by Port dray 3 DC s served by Rail dray 1. Dedicated Fleet/Net Lease: Optimal number? Retail weekly/monthly variability 2. Usage Agreement: Variable Higher cost/unit 3. Hybrid lease model 4. Trucker vs. BCO program or account 5. Operating environment DC vs. Transload operation Port vs. Rail Do you want your DC yard looking like this?
46 Forces of Change: What s Driving the Timing of the Shift Carriers have fled chassis ownership, many now desire to exit door deliveries Gray Pools will improve availability: does this lessen benefit of BCO/trucker chassis? M&R uncertainty and risk with terminal inspections and repair: courts to resolve? Rail is a critical link: how will wheeled intermodal yards accommodate BCO/trucker chassis?
47 Conclusions No cost or operational advantage to adopting in 2015 Retail importers looking to establish programs and pilots Beware hidden costs Trucker-managed chassis programs will result in higher cost, but will lessen exposure Our solution will vary by location Phased implementation: start with a pilot A container does no good to us without a chassis... a chassis does no good to us without a container