2014 FMI/GMA Supply Chain Conference Transportation Panel Discussion

“Current and Future Trends Impacting Transportation”

February 19, 2014

Why Are We Here Today?

Our Intent Is Simple….

• To present a forum for industry wide Transportation leaders to discuss current and long term trends, impacting the transportation of products between FMI & GMA partners.

What did we say we want to hear about?

• Alternative Fuels

• Carrier Capacity

• Cost Management

• Driver Retention

• Driver Safety

• Regulatory and Compliance Impact

• Technology in Transportation

• Transportation Infrastructure

Collaboration

"Individually, we are one drop. Together, we are an

ocean." Ryunosuke Satoro

Transportation - State of The Industry Panel Members

Craig D. McPhee Senior Director Distribution

WinCo Foods

Vendors Thomas M. Gravelle

Director, Logistics, Transportation & Customer Service Hormel Foods

Doug Miller Director,

PepsiCo HQ

Transportation

Carriers/Service Providers

Ed Garner Director, National Accounts Old Dominion Freight Line

Mike Meehan Vice President of Sales & Marketing Fleet Advantage

Kevin Zweier Vice President, Transportation Practice Chainalytics

Retailers

Glen Keysaw Executive Director of Logistics Associated Food Stores, Inc.

Tom Nartker Vice President of Transportation and Global Logistics Safeway

Session Agenda

• Panel Discussion on Topics

• Parting Shot comments from each panelist

• Q & A

Let’s Ask The Panel!

Cost Management and Revenue

• How is your organization utilizing backhauls to generate efficiencies?

• What technology tools are you utilizing to support this activity?

• Doug Miller

• Tom Nartker

• Glen Keysaw

Driver Safety?

• What successes are you currently seeing in encouraging Safe Driving Behaviors?

• Ed Garner

• Tom Nartker

• Glen Keysaw

Initiatives

• Safety Awareness Process

• Fleet Maintenance

• Safety Bonus

• CSA and Technology

• Active Oversight

Driver Safety Compliance – AFS

• GOOD Training! Driver maintains control and his lane.

Driver Safety Compliance – AFS

• BAD Behavior! Driver Following too close.

Driver Retention

• What practices, policies, and efforts are you currently employing to address driver retention and to reduce driver turnover?

• Tom Nartker

• Glen Keysaw

• Ed Garner

Old Dominion Best Practices for Driver Retention

• Provide a modern and well maintained fleet

• Provide very predictable schedules – with a focus on time at home.

• Provide On Board technology

• Provide an excellent wage and benefit package

• Engage our Drivers as part of the sales team

• Encourage community involvement activities

Sharing Transportation Capacity

• The Consumer Goods Forum and the FMI / GMA Supply Chain Committees have an ongoing and active initiative underway to share transportation capacity

Sharing Transportation Capacity

• What strategies are you currently utilizing to increase backhaul and freight sharing with vendors and carriers?

• What trends are you currently seeing employed between Manufacturers and Retailers?

• Kevin Zweier

• Doug Miller

• Tom Gravelle

Sharing Transportation Capacity

Participating Companies

Summary of Findings

• Back-haul opportunities exist, but remain incremental

• Less than expected geographic proximity in current origin – destination pairings

• Still, Forward-haul opportunities exist, and approaches have been developed

• Significant density in the destination markets suggests opportunities for co-located warehousing or consolidation

• Next comes the hard part: A deep dive into the operational considerations of the participants to find true opportunities, and map out the execution

Regulatory and Compliance

• What impact will the recent legislative activity have on carrier capacity?

• Tom Gravelle

• Ed Garner

• Mike Meehan

Class 8 Population Shows Capacity

11% Below Peak Levels

Regulatory and Compliance

• Impact of FMCSA

• Use of technology to impact Basic Scores

• Opportunities to improve scoring system

Government Mandates Emissions and Fuel Economy

Lowered Exhaust Emissions But Reduced Fuel Economy

2003 -2010 MY

6.30 6.06

5.83 6.05 6.10 6.21 6.23 6.21

5.00

5.50

6.00

6.50

7.00

2003 2004 2005 2006 2007 2008 2009 2010

MP

G

Model Year

Lowers CO2 Emissions Which Increases Fuel Economy

6.41 6.57 6.73 6.90 7.08 7.25 7.43 7.62

5.00

5.50

6.00

6.50

7.00

7.50

8.00

2011 2012 2013 2014 2015 2016 2017 2018

MP

G

Model Year

-0.21% C.A.G.R.

Link to

Emissions

Link to

Fuel

2011 -2018 MY

23

Alternative Fuels?

• What experiences can you share with the group regarding the impact and potential of Alternative Fuel Vehicles?

• Glen Keysaw

• Tom Nartker

• Kevin Zweier

Alternative Fuels?

• What experiences can you share with the group regarding the impact and potential of Alternative Fuel Vehicles?

• Tom Nartker

Alternative Fuels?

• What experiences can you share with the group regarding the impact and potential of Alternative Fuel Vehicles?

• Kevin Zweier

Parting Comments

• Doug Miller

• What technology tools or performance measures are you currently utilizing to ensure that costs are being controlled to meet business objectives?

• Tom Gravelle

• What strategies are you employing to leveraging in transportation to ensure freshness

Parting Comments

• Tom Nartker

• Glen Keysaw

• What experience or insight can you share with the group regarding Future Technology trends?

Parting Comments

• Kevin Zweier

Any final comments regarding the practice of joint shipping by several manufacturers to retailers?

• Mike Meehan

• Ed Garner

Any final thoughts regarding the impact of the transportation legislative onslaught?

30

Fuel

Depreciation &

Interest

Maintenance (M&R)

30

9%

21%

70%

Tractor Operating Costs

31 31

Non-driver operating costs at $4.00 per gallon

• Fleet ownership costs are comprised of fuel + maintenance & repair (M&R) +

depreciation & interest costs

• Fuel is by far the most significant component of ownership cost

• At $4 per gallon, a 10% improvement in fuel economy is equivalent to a 33% reduction in depreciation or a 78% reduction in M&R

Parting Comments

• Kevin Zweier

Any final comments regarding the practice of joint shipping by several manufacturers to retailers?

• Mike Meehan

• Ed Garner

Any final thoughts regarding the impact of the transportation legislative onslaught?

Impact of the Transportation Legislative Onslaught

• Possible impact to shippers

• Sleep apnea

• Vicarious liability

Questions from the Audience

• Thank You!

• Enjoy the rest of your conference

• Make a few new contacts from across the table!