IMUA Annual Meeting 2017

• Industry update

• Proactive safety management

• Pharmaceutical transportation methodology

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Trucking’s role in the economy

4Source: Stiefel research

Trucking dominates freight market

5Source: NPR, 2014 Census Bureau

Most common job by state

“Truck driver” 29 states!

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Truckload loads

6.2%

0.9%

2.6%

1.1%

0.1%

1.7%

0%

1%

2%

3%

4%

5%

6%

7%

8%

Avg 1995-1999 Avg 2000 - 2007 Avg 2010 - 2014 2015 2016 2017

Source: ATA

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Likely Optimal Range

1.15

1.20

1.25

1.30

1.35

1.40

1.45

1.50

1.55

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Total business inventory-to-sales ratio

Source: Census Bureau (Data adjusted for seasonal, holiday, and trading-day differences, but not price changes)

• Interest rates rising• Leaner inventories = tighter

transportation market

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40%

50%

60%

70%

196

0

196

2

196

4

196

6

196

8

197

0

197

2

197

4

197

6

197

8

198

0

198

2

198

4

198

6

198

8

199

0

199

2

199

4

199

6

199

8

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

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Services as share of personal consumption expenditures

Sources: Census & ATA

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6.2%

0.9%

2.6%

1.1%

0.1%

1.7%

4.3%

2.6%2.1%

2.6%

1.6%2.3%

0%

1%

2%

3%

4%

5%

6%

7%

8%

Avg 1995-1999 Avg 2000 - 2007 Avg 2010 - 2014 2015 2016 2017

TL Loads Real GDP

Growth in truckload loadsvs. real GDP

Source: ATA

It is now difficult for loads to grow as fast as GDP:• Miniaturization of freight (products and packaging)• Services are a growing part of our economy, and we

don’t put services in trailers• We are buying more “experiences”, which generate

less freight

10Source: ATA

Dry Van average length of haulis down

0

100

200

300

400

500

600

700

800

900

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

• Shipper/3PL network density• Carrier regional operations796 miles

533 miles

-33%

Electronic logging device mandate• Deadline December 2017

• Display engine hours, GPS location

• Changes are viewable

• Manager manipulation to extend hours = “driver harassment”, $11k company fine

Source: ATA, public company information11

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1. Truckstop.com survey of 1,300 carriers, with vast majority operating fewer than 6 trucks, 84% had no ELDs on any trucks. Likely fewer than 40% of trucks have ELDs.

2. TL fleets that have already adopted are generally larger and more sophisticated than most of those that haven’t. So, productivity impact could be larger than fleets have seen so far.

3. What if just 1% to 3% of drivers leave the market for a host of reasons, including cheaters, anti-technology, anti-big government, or just don’t want to change?

4. Some carriers are likely to exit the industry.

5. Enforcement comes from law enforcement, insurance carriers, shippers, & brokers

Impact of ELDs

How should we fund infrastructure?

Source: ATA, TRB

• Public Private Partnership as panacea?

− Toll road bankruptcies

− Chicago’s 75 year, $1.2B parking meter deal was spent in 2 years

− Terms are critical

• Tolls: 33% administration costs

• Route diversion, $ diversion (NYST)

• Fuel tax: 1% administration costs

• Last federal tax increase 1993

• Fuel efficiency, millennial habits

• Vehicle Miles Traveled?

• Political implications

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Taxes & Fees Tractor Trailer

Federal Excise Tax $16,488 $5,895

State Sales Tax $10,000 $3,406

State Excise Tax $3,625 $1,362

Registration fees IRP $1,496 $300

Title Fee $75 $75

Federal 2290 $550

UCR Federal $41

Federal Diesel Fuel Tax Annual $6,100

State Diesel Fuel Tax Annual $6,000

Total Yr 1 Taxes & Fees for a Tractor-Trailer $55,413

(assumes 150,000 miles)

Truckers – doing our part First year ownership taxes & fees

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“Nuclear verdicts” have caused trucking insurance market upheaval

Source: WSJ

• AIG’s Lexington unit, Zurich stopped underwriting for-hire fleets

• Premiums up 44% in 2 years

• Mandated insurance same as 1983

• Tort reform, anyone?

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• Industry update

• Proactive safety management

• Pharmaceutical transportation methodology

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Behavioral economics –are incentives aligned?

Virtuous Circle

Employer

15% turnover vs. industry average 100% Superior safety & security Greater reliability & expertise “Patriotic Employer” award from DoD

Strict qualifications & training Guaranteed wages & benefits Actively recruit military veterans Align incentives with customer

Results

Practices

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Radar systemAutomating emergency brakingAdaptive cruise

Sensors help prevent rollovers

Video camera enhances visibility and eliminates “blind spot”

Lane readers alert driver of drifting

Ensure hours of service compliance and stay ahead of regulatory mandates

Safety technology – increased integration / adoptionCollision avoidance system

Roll stabilitycontrol

Side-angle camera

Lane departure warning

Electronic logs

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• Events trigger wireless transmission

• Continuous improvement, coaching

• Exoneration from fraudulent claims

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Video-based safety management

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Autonomous Systems ≠ “Driverless”

Source: SAE International, Videantis

SAE levels of driving automation

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Trucking automation – job killer or creator?

2025AD, ATA

Creator

Killer

• Assumes SAE level 3/4• Technology will assist drivers, not replace them• Attract millennials• Analogy to auto-pilot (still have pilots)• “Driverless” in limited applications (private property, ports)

• Assumes SAE level 5• Economic case too compelling• 3.5 million truck drivers displaced to low wage service jobs• Derivative effects on diners, motels, gear, insurance, etc. • See: manufacturing• Ready the pitchforks

Top behaviors reported in fatal auto & motorcycle crashes

Behavior Share of crashes in which behavior was reported

Driving too fast for conditions, speeding, or racing

Under the influence of alcohol, drugs, or medication

Failure to keep in proper lane

Failure to yield right of way

Distracted (phone, talking, eating, etc.)

Driving in a careless manner

Overcorrecting / over-steering

Failure to obey traffic signs, signals, or officers

Driving in an erratic, reckless, or negligent manner

Swerving or avoiding*

2014 data. No more than one behavior may be present for the same driver/operatorNational Highway Traffic Safety Administration via The Insurance Information Institute

Note:Source:

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Human behavior accounts for most crash risk . . .

18.8%

12.3%

8.5%

6.9%

6.7%

4.8%

4.1%

4.0%

3.5%

3.4%

Private passenger auto33.8%

Commercial auto5.3%

Homeowners/farm owners15.8%

Various business insurance and specialty coverage45.1%

$199.95 billion

. . . therefore, human behavior likely accounts for much insurance industry premium

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U.S. property-casualty insurance premium, 2015

National Association of Insurance Commissioners; S&P Global Market Intelligence; Insurance Information Institute

Source:

Source: WSJ29

…will underwriters be insuring drivers or computer code?How does reduced risk affect total industry premium?

So when technology reduces human error . . .

• Industry update

• Proactive safety management

• Pharmaceutical transportation methodology

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Supply chain participants should ensure

“Supply chain integrity”and

“Good Distribution Practices”

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Regulatory guidance

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Carrier obligations• Quality management system

• Root cause analyses, corrective action

• Investigate temperature excursions

• Extensive documentation of protocols

• Annual audits by shippers

Supply chain integrity Real assets

In-transitvisibility

Personnel

On-roadprotocols

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• Company fleet and professional drivers teams• No brokering or independent contractors

• 5 minute GPS updates (most carriers → hourly)• Tractor & trailer tracking with door sensors• Wired & wireless emergency buttons• Company-issued smart phones• Geo-fenced route monitoring• 24/7 Ops Center support

• Extensive background checks• Security awareness training• Closed loop of those who “need to know”

• Constant surveillance & attendance• Expedited, exclusive use service• Robust locks & seals• Limited stops/layovers

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Calibrate sensors regularly

Reference thermometer

Interior sensors

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• 30 data loggers placed in trailer

• Temp unit run for 24 hr period

• Data downloaded, analyzed

• 30 page study & report

• Proves thermal efficiency is equally distributed

Thermometer locations

15 13 14

11 12

8 109

4

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1

2 ft

16 ft

16 ft

16 ft

16 17 18

Thermal mapping, validation

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• Paper receipt• Passive recorder• Retention depends on

dockworker• Paper jams

• Downloadable by consignee• Passive recorder• Must be programmed• Excursion info too late• Complicated handling

Onboard Printer Data Logger Real Time Monitoring

• Redundant monitoring (in-cab & 24/7 Ops Center)

• Real time excursion alerts• Instantly viewable on web by

authorized parties• Downloadable to PDF

In-transit temperature monitoring

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24/7 staffing and exception management

• Late ETA

• Route geo-fence

• Temp out of range

• Temp not reporting

• Position not updating

• Trailer doors open

• Trailer disconnect

Proactive alerts

Customer access to information

See your shipments move in real time and run reports!Convert reports to Excel and PDF.

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Shipment temperature history

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• Tracking redundancy• Scheduling• Image capture BOL• Increased

automation

GPS-enabled smartphones & proprietary APP

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Thank you