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Carrier direct 2h14 outlook for the transport and logistics market

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Freight and 3PL Trends 2014

Freight and 3PL Trends 2014

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  • 1. All rights reserved by CarrierDirect, LLC, 2014 Outlook for the Domestic Transport and Logistics Market in 2H14 and Beyond July 2014 @CarrierDirect CarrierDirect Listen To Recording
  • 2. Legal Disclaimer 2All rights reserved by CarrierDirect, LLC, 2014 CarrierDirect and its affiliates are in the business of providing, among other things, consulting and marketing services to carriers and third-party logistics companies. In their role they are entrusted with information, some of which may be confidential and proprietary, regarding market strategies and operations, technology and route-to-market tactics. All information provided herein is based upon public information shared in publicly disclosed documents, industry events and company-sponsored presentations. CarrierDirect may be currently, may have in the past or may in the future provide services to certain of the companies referenced in this presentation. For more information, contact us at www.carrierdirect.co.
  • 3. What We’re About At CarrierDirect 3All rights reserved by CarrierDirect, LLC, 2014 Bringing fresh perspectives to the transportation and logistics industry.
  • 4. The 2014 Freight Market Outlook 4 What The Industry Looks Like Halfway Through 2014 Key Trends On The Horizon For 2H14 and Beyond Strategic Priorities Leadership Should Have On Their Agendas All rights reserved by CarrierDirect, LLC, 2014
  • 5. How The Industry Looks From A Few Different Angles 5All rights reserved by CarrierDirect, LLC, 2014 Truckload Asset-Light Less-than- Truckload Third-Party Logistics US Economy
  • 6. Q1 Was A Frozen Nightmare, But Prospects Of Life For The Rest of The Year 6All rights reserved by CarrierDirect, LLC, 2014 Seasonally Adjusted US GDP from Q2 2010 – 2014 Source: Bureau of Economic Analysis, 6/25/14 Q1 14 Revised Estimate ATA Monthly Truck Tonnage Index (2007 – Present) %ChangeinRealGDP(SeasonallyAdjusted) 3.9 2.8 2.8 -1.3 3.2 1.4 4.9 3.7 1.2 2.8 0.1 1.1 2.5 4.1 2.6 -2.9 3.5 2.7 3 -4 -3 -2 -1 0 1 2 3 4 5 6 Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011 Q3-2011 Q4-2011 Q1-2012 Q2-2012 Q3-2012 Q4-2012 Q1-2013 Q2-2013 Q3-2013 Q4-2013 Q1-2014 Q2-2014(Est) Q3-2014(Est) Q4-2014(Est) The aftermath of one of the most brutal winters in recent memory Moderate estimates for remainder of 2014 TL Asset- Light LTL 3PLEconomy 95 100 105 110 115 120 125 130 135 Source: American Trucking Associations, Transport Topics 2007 2008 2009 2010 2011 2012 2013 2014 TruckTonnageIndex(2000=100) Continued strong freight levels keeping trucking companies busy 2009 starting to seem like just a bad dream
  • 7. Freight Stocks Continued To Be A Mixed Bag Of Investment Quality 7All rights reserved by CarrierDirect, LLC, 2014 Source: Yahoo Finance ODFL (LTL) ABFS (LTL) SAIA (LTL) HTLD (TL) SWFT (TL) ECHO (3PL) XPO (3PL) RRTS (AL) YRCW (LTL) CHRW (3PL) CGI (TL) WERN (TL) S&P 0 50 100 150 200 250 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 StockIndex(7/1/2013=100) TL Asset- Light LTL 3PLEconomy
  • 8. Key Themes On Everyone’s Minds In The Truckload Market 8All rights reserved by CarrierDirect, LLC, 2014 TL Asset- Light LTL 3PLEconomy Driver recruitment and retention is still the biggest issue, as thousands of seats go unfilled due to prospective drivers being kept out of the industry by new government regulation, increased company scrutiny and the allure of comparable “blue collar” jobs with better lifestyles 1 High levels of uncertainty around how FMCSA changes will affect the “day-to-day” of trucking operations, leaving many small trucking companies worried if they’ll still be able to compete as more regulation rolls out 2 Trucking companies (and LTL guys, too) making decision to allocate assets to dedicated lanes as they’re able to grab more revenue per mile from long-term commitments with customers 3 A lot of opportunity to convert loads to intermodal, but not able to do as much as there should be due to rail line congestion, not having enough equipment and allocating assets towards bulk markets 4
  • 9. It’s So Glamorous, Why Don’t More People Want To Drive Trucks? 9All rights reserved by CarrierDirect, LLC, 2014 TL Asset- Light LTL 3PLEconomy Sleeping in their cab at night, often having to go for days without showering Driving for hours in a cramped cab, many get a dog for companionship Truck stops are a source for fuel, showering and relaxing after long hauls And a spot to meet with other people who live on the road (where they talk about which Brokers or Shippers they like or hate to work with) State Of the Driver: By The Numbers Source: Bureau of Labor Statistics, YRCW, The National Transportation Institute, Transport Topics, HealtheSignals *Note: For Heavy and Tractor-Trailer Drivers in the US  Number of Drivers* +1.7M  Drivers That Are Male 94.6%  Average Pay (Dry Van) $48K  Over The Age of 45 56%  Suffers From Pre-Hyper 87% Tension or Hypertension  Obese / Morbidly Obese 75%  Driver Life Expectancy Early 60’s  Drivers Needed Over 96,178 Next 10 Years
  • 10. With Huge Fragmentation, Widespread Changes In TL Takes Years To Realize 10All rights reserved by CarrierDirect, LLC, 2014 Carrier 2013 Revenue* Share of Market  $3,052M  $2,320M  $1,642M  1,622M  $1,606M 0.99% 0.75% 0.53% 0.53% 0.52% Source: Journal of Commerce, Company 10K Reports, Internal Estimates Change from 2012 +1.5% +1.3% (2.46%) +3.8% (4.4%) Carrier 2013 Revenue* Share of Market  $1,480M  $1,478M  $1,152M  $1,071M  $1,008M 0.48% 0.48% 0.37% 0.35% 0.33% Change from 2012 (9.2%) 7.7% 7.6% 0.8% 0.9% $291,186M 94.67%Every Other TL Carrier  *Includes non-Truckload revenue in figures (approximate total) TL Asset- Light LTL 3PLEconomy
  • 11. Linehaul Rates In the Truckload Market Continue On A Steady Incline 11All rights reserved by CarrierDirect, LLC, 2014 TL Asset- Light LTL 3PLEconomy Nationwide Broker Spot Linehaul TL Rates (July 2013 – July 2014) Source: DAT, DW Nationwide Shipper Contract Linehaul TL Rates (June 2013 – June 2014) Source: DAT, DW Van FB Reefer Intermodal $0.65 $0.85 $1.05 $1.25 $1.45 $1.65 $1.85 $2.05 $2.25 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 2013 2014 $0.65 $0.85 $1.05 $1.25 $1.45 $1.65 $1.85 $2.05 $2.25 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Van FB Reefer 2013 2014 Steady increases in rates as capacity continues to be tight Truckers continuing to go back to shippers / 3PLs multiple times per year to renegotiate rate agreements
  • 12. LTL Carriers Feeling Good With More Freight In Networks and Pricing Power 12All rights reserved by CarrierDirect, LLC, 2014 TL Asset- Light LTL 3PLEconomy The new challenge: how to deal with the problem of having too much freight in their networks and the right way to “purge” the bad freight strategically that won’t backfire when freight levels ease 1 LTL carriers being affected by the good and bad spillover from the truckload market: huge challenge in finding Linehaul drivers (P&D not so much a problem), but also getting the potential benefit from the freight spillage that moves from truckload to LTL (but again, see trend #1) 2 Tech is the next big initiative for LTL carriers who see the writing on the wall that the better they know their network the better they’ll be able to generate profit (if management makes the right decisions with it) 3
  • 13. New Leaders In Market And Consolidation May Pave Way For Change in LTL 13All rights reserved by CarrierDirect, LLC, 2014 Carrier 2013 Revenue* Share of Market  $5,095M  $3,466M  $3,127M  2,502M  $2,126M 14.47% 9.85% 8.88% 7.11% 6.04% Source: Journal of Commerce, Company 10K Reports, Internal Estimates Change from 2012 +1.7% +2.2% (1.9%) +5.2% +9.5% Carrier 2013 Revenue* Share of Market  $1,835M  $1,730M  $1,721M  $1,298M  $1,139M 5.21% 4.91% 4.89% 3.69% 3.24% Change from 2012 +4.8% +5.4% +3.1% +3.8% +3.7% $11,161M 31.71%Every Other LTL Carrier  *Includes ancillary business unit revenue in some cases TL Asset- Light LTL 3PLEconomy
  • 14. LTL Carriers Getting Good Freight From Third-Party Logistics Companies 14All rights reserved by CarrierDirect, LLC, 2014 Source: CD LTL Benchmarking For 3PLs – 2014 Inbound % of Total TX 15.36% CA 14.49% FL 4.89% IL 4.73% OH 4.20% IN 3.39% PA 3.37% NY 3.30% MI 3.12% AZ 3.06% 6.2% 14.3% 23.8% 4.0% 16.9% 6.8% 7.2% 5.7% 4.0% 0.8% 3.3% 3.3% 0.0% 0.3% 0.4% 2.4% 0.5% 0.1% 0.0% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% CL 50 CL 55 CL 60 CL 65 CL 70 CL 77.5 CL 85 CL 92.5 CL 100 CL 110 CL 125 CL 150 CL 160 CL 175 CL 200 CL 250 CL 300 CL 400 CL 500 37.95% 20.38% 17.13% 16.47% 8.07% 0.00% 10.00% 20.00% 30.00% 40.00% 0 - 499 lbs. 500 - 999 lbs. 1,000 - 1,999 lbs. 2,000 - 4,999 lbs. 5,000 - 9,999 lbs. 41.43% 22.92% 14.72% 8.94% 11.99% < 500 Miles 501 - 1,000 Miles 1,001 - 1,500 Miles 1,501 Miles - 2,000 Miles +2,001 Miles TL Asset- Light LTL 3PLEconomy Outbound % of Total CA 19.91% TX 12.54% IL 6.44% MI 5.01% OH 4.79% NJ 4.58% IN 3.89% PA 3.64% GA 3.59% TN 3.19% Top 10 OB / IB States % of Total Weight By Weight Break 33.4% 22.8% 20.1% 16.3% 4.5% 1.6% 1.3% 0% 5% 10% 15% 20% 25% 30% 35% 40% Revenue To Carrier (Includes FSC) Length of Haul Average $209.26 Average 944 mi. Average 1,529 lbs. Median CL 70 Class Allocation of 3PL Freight (Actual Class – No FAKs) Shipments to LTL Carriers From 3PLs (<10K lbs., Actual Class, 60 Days)
  • 15. Asset-Light Continues To Be A Market Many Want To Get Into 15All rights reserved by CarrierDirect, LLC, 2014 TL Asset- Light LTL 3PLEconomy More asset-light carriers entering the market each quarter, bringing a new level of competition to the marketplace for carriers that rely on contractual partnerships / interline agreements to haul freight 1 The asset-light carriers who disregard service and play on price alone are being abandoned by shippers and brokerages as frustration grows from unreliable transit times and congestion because of opting for slower intermodal linehaul (e.g. not using expedited rail options or OTR) 2 Established asset-light carriers (e.g. RRTS) putting their efforts into diversifying their solutions and branching into full-fledged logistics solutions vs. standard consolidation networks 3
  • 16. Roadrunner Remains An Interesting Case Study In Asset-Light Evolution 16All rights reserved by CarrierDirect, LLC, 2014 TL Asset- Light LTL 3PLEconomy Brands Under the RRTS Umbrella as of July 2014 Source: RRTS 2013 Annual Report, www.rrts.com Company Snapshot As of FY13 End  Total Revenue: $1.36B − Truckload: $658M − LTL: $559M − TMS: $154M  EBITDA: $101.7M  Net Income: $49M  Employees: 2,756  LTL Delivery Agents: 200  LTL Service Centers: 45  Truckload Fleet: 3,500  TL Terminals: 27  Linehaul Cost per Mile (No FSC): $1.24  Brokerage Agents: 96
  • 17. 3PLs Entrench Themselves Deeper In Industry, Get Bigger and Better 17All rights reserved by CarrierDirect, LLC, 2014 TL Asset- Light LTL 3PLEconomy M&A has continued in the logistics space as small, mid-sized and large logistics companies are gobbled up by market-share-hungry 3PLs looking to scale quickly by organic / inorganic means 1 Interesting mix of events where “strategic” 3PLs work to become more like brokerages and “transactional” 3PLs look to tackle more complex supply chain problems for shippers 2 The brokerage market is getting much more difficult to get into (not because of the bond increase), but because of Truckload and LTL carriers reducing the number of 3PLs they do business with 3
  • 18. M&A Continues At A Rapid Pace In The Logistics Sector 18All rights reserved by CarrierDirect, LLC, 2014 Source: Company Filings, Internal CD Analysis, CapIQ Date Target Announced Buyer Transaction Notes 5/13/2014 One Stop Logistics Echo Global Logistics acquires One Stop Logistics, a leading LTL brokerage based in California for Echo Global $37.3 million, representing an 8.7x EBITDAmultiple 3/31/2014 Access America Transport Coyote and Access America complete their merger for a combined revenue of $2+ billion, helping to Coyote Logistics diversifyCoyote's service offerings and strengthen its presence in the LTL arena 3/14/2014 Unitrans International Corporation Roadrunner acquires Unitrans International, a leading provider of international logistics, for $55 million; Roadrunner Transportation Unitrans generated a TTM total revenue of $84 million at the time of acquisition 2/26/2014 Comcar Logistics Echo Global Logistics acquires Comcar Logistics, a non-asset based truckload brokerage based in Echo Global Jacksonville, FL; Comcar has approximately$15 million in TTM revenue at the time of acquisition 2/24/2014 Rich Logistics / Everett Transportation Roadrunner acquires Rich Logistics and Everett Transportation for a total transaction value of $48 million Roadrunner Transportation to strengthen Roadrunner's truckload capacityto/from Mexico; TTM revenue from Rich was $113 million 1/6/2014 Pacer International Pacer, the 3rd largest intermodal provider in America, agrees to be acquired byXPO for an Enterprise XPO Logistics Value of $296 million; Pacer generated a TTM total revenue of $1.0 billion at the time of announcement 12/10/2013 Landstar SCS XPO Logistics purchased Landstar's SupplyChain Solutions group for $87M at a 7.5X EBITDAmultiple XPO Logistics 7/12/2013 3PD XPO Logistics purchased 3PD, a last mile delivery3PL for $365 million XPO Logistics 3/19/2013 Open Mile Echo Global acquired Open Mile, an East Coast TL brokerage for $2M Echo Global Logistics Echo and Coyote acquisitions increase the already well-established dominance of Chicago’s brokerage market As XPO integrates its numerous acquisitions the industry holds its breath to see what’s next TL Asset- Light LTL 3PLEconomy
  • 19. The Top Brokerages Continue to Get Bigger And Offer More Services 19 Single-Mode Multi-Mode Complex Multi-Mode $250M $1B $500M $10B GrossRevenue(AsReportedasRun-RateEstimates) $750M Solutions Brokerage Can Competitively Offer CustomersSource: Transport Topics, CD Estimates All rights reserved by CarrierDirect, LLC, 2014 TL Asset- Light LTL 3PLEconomy
  • 20. Private Companies Continue to Play Big Roles In The Brokerage Space 20All rights reserved by CarrierDirect, LLC, 2014 Modes They’re Growing Into Sales How They’re Changing the 3PL Market  Parcel (1 of 2 authorized UPS domestic resellers)  Less-than-Truckload  Dry Van / Flatbed  International Air / Ocean  Franchises  Proprietary TMS  Fastest growth trajectory of any 3PL in the LTL reselling space  Expansive, well-trained franchise network  Unique service portfolio  Dry Van Truckload  Reefer Truckload  Intermodal  Heavy Haul / Flatbed  Less-than-Truckload  W2 Employees  Proprietary TMS  Service-oriented commitment to customer is “raising the bar”  Truckload tech years beyond their competition  Perfection of the “buy / sell” model  Less-than-Truckload  Dry Van / Flatbed  Intermodal  W2 Employees  Proprietary TMS  “Systematized” the LTL process better than any other 3PL; will do the same for Truckload  Largely quiet outside of TL, with enormous goals for growth in the mode “Claim to Fame” Brokerage Modes Technology TL Asset- Light LTL 3PLEconomy
  • 21. Brokerages Continue To Favor W2 / Franchises Over Sales Agent Programs 21All rights reserved by CarrierDirect, LLC, 2014 TL Asset- Light LTL 3PLEconomy Brokerage Sales Channels To Reach Market W2 Employees Dedicated sales force calling on small / mid-sized customers over the phone and visiting larger customers in person Franchises Businesses with exclusive, legally bindings agreements to sell the company’s logistics services Sales Agents 1099 group with non-exclusive or (less frequently) exclusive sales agreements with Brokerage to resell their services Sales Channel  Inside Sales - Base Salary or Draw - Share of Gross Profit  Outside Sales - Base Salary or Draw - Share of Gross Profit  Franchise pays royalty to Franchisor each month  Fees for any operational support from Corporate  Share of Gross Profit for each transaction  Penalties or fees for support expenses from Corporate or for bad debt expense on Agent’s Gross Revenue Compensation Structure + Ultimate control over sales, pricing programs and handling channel conflict with carriers + Early investment pays off with higher returns per employee + Franchise responsible for operations and cash collection + Cash infusion from each new franchise in the system + Good economic structure for Franchisor and Franchisee - Brands have “worn out” model (i.e. difficult recruitment) - Difficult to direct agents towards strategic goals and resolve channel conflict with carriers Highlights Of Channel Most Favored Most Favored Least Favored
  • 22. The 2014 Freight Market Outlook 22 What The Industry Looks Like Halfway Through 2014 Key Trends On The Horizon For 2H14 and Beyond Strategic Priorities Leadership Should Have On Their Agendas All rights reserved by CarrierDirect, LLC, 2014
  • 23. Even Bigger and Better Collaboration Between Shippers / 3PLs / Carriers 23All rights reserved by CarrierDirect, LLC, 2014 Strategic Value Curve for 3PL / Carrier Partnerships Source: BG, Menlo Worldwide Logistics What’s Ahead In Carrier / 3PL Collaboration  The 3PLs who treated carriers poorly when the pendulum was in their favor are now getting crushed as it swung back towards carriers  Best-in-class 3PLs understand that carrier services aren’t a commodity and are finding ways to improve collaboration, such as: − Gain share programs on new opportunities − “Open book” agreements with target profitability for carrier and 3PLs − Tackling shipper opportunities with combined sales and technology efforts  The 3PLs who don’t adopt this kind of partnership will fail in the next 3-5 years *Take the 23rd Annual Trends and Issues survey to share your perspectives on the industry With the pendulum swinging back in favor of carriers, there will need to be more strategic conversations and collaboration between 3PLs and carriers to make the relationship work for all parties
  • 24. Technology Will (Eventually) Come To Truckload and LTL Carriers 24All rights reserved by CarrierDirect, LLC, 2014 Technology In Transportation  Outdated systems that are more “reactive” than “proactive”  Poor costing, pricing and tracking technology  Outdated, unintuitive user interfaces that requires too many “super users” to navigate  A lot of data being captured, but lacking analytical tools to use to make proper mgmt decisions Today Truckload Technology  Smart pricing and costing models that can aid in making smarter management decisions on how and where to position assets  More smartphone-enabled technology to provide for dynamic, real-time load information sharing *Driverless trucks in +15 years, but some degree of computer-aided trucking sooner LTL  Stronger data capturing ability (e.g. dimensioners) and costing models to price services more accurately  Improved route-optimization and tracking software to improve P&D density  Dynamic pricing of services based on network and market conditions (more on this to come) What’s Ahead The carriers who don’t invest in these technologies will be pushed all the “bad freight” that they aren’t able to properly price and make the right management decisions on how to handle in their networks The carriers who invest in technology are going to be leagues ahead of those who are slow to adapt to available, cheap technologies which would allow them to provide better services to their customers
  • 25. “Pushed” Into 3PLs and Shipper Systems We’re Standing On The Edge Of Big Pricing Changes For LTL Sector 25All rights reserved by CarrierDirect, LLC, 2014 Web Services Connections Dimensional Pricing Dynamic Pricing Real-Time Information Gathering  Pay for space taken up in trailer vs. confusing class-based system  FedEx/UPS goes first, then the industry  Pricing based on needs of carrier’s network  Ability to set future discounts to guide freight shipments to days that are typically light  Driver / sales rep pricing using handheld “dimensioners”  LH planning before freight hits dock Output From Carriers’ Operating System Getting Paid For What’s Moved vs. Hoping For Best Ability to Standardize / Tier Pricing For Different 3PLs Immediate Change Of Freight Mix vs. Long Tariff Changes Source: CD Internal Perspective It’s been talked about since de-regulation, but we are truly on the cusp of some pretty significant changes in the LTL industry that will let carriers better manage their businesses and run more efficient networks
  • 26. Carriers Will Start Using 3PLs As An Extension Of Their Sales Channel 26All rights reserved by CarrierDirect, LLC, 2014 A smaller handful of 3PLs will start to be considered a legitimate extension of the carrier’s sales force (and not thought of as a competitor) that can be used to extend the reach of the carrier without the sales costs Carrier Head of Sales National Account ManagersRegional Key Account ManagersValue-Added Resellers Carrier 3PL Whose Employee  A small sub-set of 3PLs that meet the carrier’s rules of engagement  Tiered pricing that is well thought out by the carrier to meet goals  Offer business to carriers that is “scaled” and meets needs of carrier’s network  Deployed in local markets across different regions in carrier’s footprint  Tasked with directives to build out local sales presence targeting specific kinds of accounts (of a size or growth potential)  Located at carrier’s headquarters  Works closely with pricing and operations teams to build account and implement new initiatives  Focus on large accounts that span multiple-regions with centralized decision-making
  • 27. The Biggest Carriers May Become The Biggest 3PLs 27All rights reserved by CarrierDirect, LLC, 2014 Asset Non-Asset  Company trucks  Consolidation / Service Centers  Ability To Move Quickly As Needed  Manage KPIs Closely  Sub-Contracted or Brokered Assets  Outsource To Others Are Experts / Do For Less Money  More Services To Offer Shippers Requires next-generation technology and extremely progressive thinking / leadership to make the model work properly Blending the Best of Asset-Based And Non-Asset Models What Carriers Must Do To Become 3PLs  Large, asset-based have barely tapped into the potential of offering true logistics services  Growth has come from having established brands with shipper, not any remarkable logistics services (for the most part)  The next wave of growth from carriers offering 3PL services will be from adopting practices and ideas that have made some 3PLs so successful (technology, brokerage tactics, thinking of the whole vs. the trucks)  Breaking through to the next level of logistics services is going to require extremely progressive thinking and leadership A handful of carriers have made good progress in building out logistics divisions, but their growth has largely been due to being established brands; getting to the next level is going to take a new game plan
  • 28. New Entrants To The Industry Are Coming Who Want To Solve Sexy Problems 28All rights reserved by CarrierDirect, LLC, 2014 Companies Bridging the Physical / Digital World Divide “Uber of Freight” The Web Services Hub For Freight What These Outsiders Are Doing And Why  Enticed by the unique and big problems that are pervasive across the freight industry  Successful entrants partner with people that have been in the industry for a long time (see Cargomatic with Kessler + Parker)  Preferring to focus on technology solutions that bridge asset-based world with digital world vs. doing a “typical” brokerage play  When they do go into brokerage, they are doing some pretty amazing things (see Coyote’s MIT squad or Echo’s team of tech rockstars)  Few tech entrants are focusing on making trucking companies more efficient (hint, hint…tech people looking for a problem to solve) Over-Dimensional Freight Capacity Advanced TL & IM Pricing Freight Exchange The freight industry is getting more attractive to outsiders, and they’re beginning to get their hands dirty on applying new technologies being used in other industries to the challenges of transportation Electronic Log Books / Fleet Management
  • 29. Entrance of Exchanges Could Be Trouble for Low-Value Brokers 29All rights reserved by CarrierDirect, LLC, 2014 Logistics companies who provide little value to shippers are at risk of being replaced by tech startups, though those who establish relationships and provide value-added services are less likely to be affected “Need an armoire moved on a no-name carrier? No problem.” “I don’t know anything about this carrier, but here’s your rate. Good luck!” “Based on your needs, I recommend using CWF. Good? Great. I’ll get this done for you.” “We’ll handle all your freight from our facilities. We’ll take care of everything.” …High Risk …Little Short-Term Risk …Very Little Risk Legend  Future tech startups will take the form of “marketplaces” or “exchanges” who efficiently pair shippers with carriers  Companies who only provide rates to shippers without a “hook” will be replaced by these tech companies  3PLs who offer higher value services are less likely to be affected  Some value-add services to protect a 3PL from obsolescence include: − Multiple service options (e.g. TL, LTL, International, Parcel) − Warehousing services − High-degree of carrier knowledge and ability to meet a customer’s needs on any given shipment Value-Added Transportation Services High-Value Logistics Non-Commercial Freight Moves Transactional Rate Reselling
  • 30. The 2014 Freight Market Outlook 30 What The Industry Looks Like Halfway Through 2014 Key Trends On The Horizon For 2H14 and Beyond Strategic Priorities Leadership Should Have On Their Agendas All rights reserved by CarrierDirect, LLC, 2014
  • 31. Strategic Initiatives That Should Be On Asset and Non-Asset Agendas 31All rights reserved by CarrierDirect, LLC, 2014 Non-AssetAsset-Based
  • 32. Initiatives For Asset-Based Companies In the Years Ahead 32All rights reserved by CarrierDirect, LLC, 2014 Non- Asset Asset- Based Now that the pendulum has swung back to carriers, it’s important that they take this opportunity to invest for what the future holds to prepare for inevitable market shifts Get Your Logistics Division To The Next Level Keep Investing In Technology (Build For The Future) Align With The Right Customers And Build Collaboration Roadmaps 1 2 3  If you’ve launched a logistics division that’s had some success, know that it’s just the beginning  Getting to the next level to compete with incumbents is going to take an entirely new level of thinking and talent to catch up to where industry leaders are today  Always remember to think about the big picture of your company vs. asset utilization metrics  On the trucking and logistics segments, continuously invest into your technology to make it smarter, faster and stronger  Create technology that is ready for the web-enabled world and can share information and service information in a dynamic environment  Look to what’s come before you: learn from e-commerce giants and the technology needed to operate in high shipment laden businesses  Take the opportunity to purge “bad freight” from your system and push to others who aren’t as sophisticated  Align with your customers on what works well for your network, where you can meet them halfway and what is non-negotiable  Build collaboration roadmaps on how your partnership can work well for both companies (remember: you never get anything you don’t ask for)
  • 33. How Non-Asset Companies Can Better Compete In This Environment 33All rights reserved by CarrierDirect, LLC, 2014 Non-Asset companies should be dedicated to build advanced technology platforms, creating high-value services and finding ways to maximize yield on customer business Build For A Multi-Modal Future Focus On Your Core Carrier Relationships Become Better Buyers of Freight 1 2 3  Develop core competencies to be able to do well in environments that require spot market savviness or dedicated/contract pricing relationships  Create a S.W.A.T. team of people (and technology) that knows pricing and are able to develop deep relationships with carriers across various modes  Be brutally understanding of what you can offer carriers, what you can’t and how it compares to others in the marketplace  Develop deep relationships with core carriers where there is mutual trust  Take “scaled” business to carriers vs. making promises of things to come  Realize that being exceptional at one mode is great, but know that your competitors are building the ability to function exceptionally well by offering true multi-modal solutions  Begin laying the groundwork early to build teams of people and technology that will enable for multi-modal sales and operations Points To Focus On Non- Asset Asset- Based
  • 34. CarrierDirect All rights reserved by CarrierDirect, LLC, 2014 34 CarrierDirect, LLC 105 West Adams, Suite 3010 Chicago, IL 60603 @CarrierDirect CarrierDirect Listen to Stifel Call www.carrierdirect.co Joel Clum President (312) 725-6712 joel@carrierdirect.co JoelClum

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