Translinked Regional Freight Study

Translinked Freight Study December 2011 Prepared for: Detroit Regional Chamber

Translinked Freight StudyTable of Contents1 EXECUTIVE SUMMARY ................................................................................................................................... 1 1.1 TRANSLINKED ................................................................................................................................................... 1 1.2 RECOMMENDATIONS ......................................................................................................................................... 2 1.3 REGIONAL FREIGHT FLOWS ................................................................................................................................. 5 1.4 INDUSTRY TRENDS AND LOCATION COMPARISON .................................................................................................... 92 DETROIT BEA FREIGHT FLOWS ..................................................................................................................... 11 2.1 INTRODUCTION ............................................................................................................................................... 11 2.2 DETROIT BEA TOTAL CARGO............................................................................................................................. 12 2.3 DETROIT BEA TRUCK CARGO ............................................................................................................................ 16 2.3.1 Total ....................................................................................................................................................... 16 2.3.2 Domestic Inbound and Outbound .......................................................................................................... 18 2.3.3 Domestic Internal and Through Cargo ................................................................................................... 22 2.3.4 Imports and Exports ............................................................................................................................... 22 2.3.5 Canada ................................................................................................................................................... 23 2.3.6 Mexico ................................................................................................................................................... 24 2.4 DETROIT BEA RAIL CARGO ............................................................................................................................... 25 2.4.1 Total ....................................................................................................................................................... 25 2.4.2 Domestic Inbound and Outbound .......................................................................................................... 27 2.4.3 Domestic Internal and Through ............................................................................................................. 31 2.4.4 Imports and Exports (excl. NAFTA) ........................................................................................................ 31 2.4.5 Canada ................................................................................................................................................... 32 2.4.6 Mexico ................................................................................................................................................... 33 2.5 OTHER TRANSPORT MODES .............................................................................................................................. 33 2.6 CORRIDOR SPECIFIC FLOWS............................................................................................................................... 33 2.6.1 Halifax Freight Flows ............................................................................................................................. 33 2.6.2 Montreal Freight Flows .......................................................................................................................... 34 2.6.3 U.S. Intermodal Rail Corridors ............................................................................................................... 353 TOLEDO AND WINDSOR FREIGHT FLOWS .................................................................................................... 37 3.1 TOLEDO, OHIO ............................................................................................................................................... 37 3.2 WINDSOR, ONTARIO ....................................................................................................................................... 384 INDUSTRY TREND ANALYSIS ........................................................................................................................ 40 4.1 EXISTING TRANSPORTATION INFRASTRUCTURE AND LOCATION SELECTION FACTORS ..................................................... 40 4.1.1 Logistics and Transportation Infrastructure Summary .......................................................................... 40 4.1.2 Rail ......................................................................................................................................................... 41 4.1.3 Highways ............................................................................................................................................... 43 4.1.4 Ocean Gateways .................................................................................................................................... 44 4.1.5 Airports .................................................................................................................................................. 45 4.1.6 Toledo, OH ............................................................................................................................................. 46 4.1.7 Windsor, ON .......................................................................................................................................... 47 4.2 INLAND STRATEGIES AND NETWORK OPTIMIZATION............................................................................................... 48 4.3 REAL ESTATE INFRASTRUCTURE .......................................................................................................................... 51 4.4 LABOR AND DEMOGRAPHIC PROFILE ................................................................................................................... 52 4.5 BUSINESS AND TAX ENVIRONMENT..................................................................................................................... 53 4.6 FOREIGN TRADE ZONES .................................................................................................................................... 53 4.7 TRENDS IN TRANSPORTATION AND THE NEAR-TERM OUTLOOK ................................................................................ 54 i | TranSystems

Translinked Freight Study 4.7.1 Trucking Industry ................................................................................................................................... 54 4.7.2 Trends in U.S. Containerized Trade ........................................................................................................ 57 4.7.3 Trends in Intermodal Rail ....................................................................................................................... 62 4.8 REPRESENTATIVE SERVICE PROVIDERS AND SHIPPERS ............................................................................................. 675 DETROIT BEA FREIGHT FORECAST ................................................................................................................ 70 5.1 INTRODUCTION ............................................................................................................................................... 70 5.2 METHODOLOGY .............................................................................................................................................. 70 5.3 ECONOMIC REVIEW AND OUTLOOK .................................................................................................................... 71 5.4 FREIGHT FLOW FORECAST................................................................................................................................. 736 COMPARATIVE LOCATION ANALYSIS ........................................................................................................... 77 6.1 INTRODUCTION ............................................................................................................................................... 77 6.2 REGIONAL TRUCK/RAIL LOGISTICS COMPARISON................................................................................................... 77 6.2.1 Transit Time Hurdle ............................................................................................................................... 78 6.2.2 Total Landed Cost Comparison .............................................................................................................. 78 6.2.3 Rail Transits ........................................................................................................................................... 79 6.2.4 Transportation Cost Indication by Gateway .......................................................................................... 79 6.2.5 Trucking Transits and Market Coverage ................................................................................................ 80 6.3 LOCATION PROFILES – COLUMBUS AND CHICAGO.................................................................................................. 85 6.3.1 Columbus, OH ........................................................................................................................................ 85 6.3.2 Chicago, IL.............................................................................................................................................. 86 6.4 REGIONAL COMPARISON SUMMARY ................................................................................................................... 88List of TablesTable 1-1: Selected Regional Freight Flows in 2009 .................................................................................................................................................5Table 1-2: Inbound and Outbound Freight Forecast for 2020 – Base, Low and High ....................................................................................8Table 2-1: Warehouse-able Commodities ............................................................................................................................................................... 14Table 4-1: Detroit Logistics Summary....................................................................................................................................................................... 40Table 4-2: West Coast Transit Time Comparison (Transit Days): Shanghai to Detroit .......................................................................... 45Table 4-3: East Coast Transit Time Comparison (Transit Days): Hong Kong and Rotterdam to Detroit .......................................... 45Table 4-4: Detroit MSA Warehouse Vacancy and Lease Rates, Third Quarter 2011 ................................................................................ 51Table 4-5: Detroit-Warren-Livonia, MI Employment by Industry Percent Changes between 2001 and 2011 .................................... 52Table 4-6: Tax Foundation Business Tax Climate Rank for Selected States ................................................................................................. 53Table 4-7: Sample of Logistics Providers in the Study Region – Located in Michigan ................................................................................. 67Table 4-8: Sample of Logistics Providers in the Study Region – Located in Ohio and Ontario ............................................................... 68Table 4-9: Sample of Major Shippers in the Study Region ................................................................................................................................... 69Table 5-1: Real Gross Domestic Product by MSA within the Detroit BEA ................................................................................................... 71Table 5-2: Economic and Industry Factors Related to Goods Movement in the East North Central Region and the Detroit BEA:Ten-Year Annual Growth Rates, 2010-2020 .......................................................................................................................................................... 72Table 5-3: Forecast of Inbound and Outbound Freight Flows ........................................................................................................................... 74Table 5-4: Macro Forecast Growth Rates by Transport Mode ......................................................................................................................... 75Table 5-5: Inbound and Outbound Freight Forecast for 2020 – Base, Low and High ................................................................................. 76Table 6-1: Estimated Rail Transits in Hours from Key Port Gateways to Selected Midwest Points ...................................................... 79Table 6-2: Translinked Study Area Cost* Evaluation by North American Port Gateway ......................................................................... 80Table 6-3: U.S. and Canada Population within 10-Hour Truck Drive-Time of Detroit and Selected Cities ........................................ 81Table 6-4: Truck Transit Time from Detroit and Selected U.S. Distribution Hubs to Major Cities ...................................................... 83Table 6-5: Estimated Truckload Costs from Detroit and Selected U.S. Distribution Hubs to Major Cities ........................................ 84Table 6-6: Columbus Regional Logistics Summary ............................................................................................................................................... 85Table 6-7: Chicago Regional Logistics Summary ................................................................................................................................................... 86Table 6-8: Detroit, Chicago and Columbus Summary Table............................................................................................................................. 88List of FiguresFigure 1-1: Map of Translinked Region ........................................................................................................................................................................1 ii | TranSystems

Translinked Freight StudyFigure 1-2: Detroit BEA Cargo in 2009 by Transport Mode.................................................................................................................................6Figure 1-3: Detroit BEA Cargo in 2009 by Trade Flow ..........................................................................................................................................7Figure 1-4: Detroit BEA Cargo Tons in 2009, Total and Warehouse-able .......................................................................................................7Figure 1-5: 10-Hour Truck Drive-Time Area Comparison: Detroit, MI, Chicago, IL, Columbus, OH, and Harrisburg, PA ........... 10Figure 2-1: Map of Detroit BEA .................................................................................................................................................................................. 11Figure 2-2: Detroit BEA Cargo in 2009 by Transport Mode.............................................................................................................................. 12Figure 2-3: Detroit BEA Cargo in 2009 by Trade Flow ....................................................................................................................................... 13Figure 2-4: Value per Cargo Tons .............................................................................................................................................................................. 14Figure 2-5: Detroit BEA Cargo Tons in 2009, Total and Warehouse-able .................................................................................................... 15Figure 2-6: Detroit BEA Truck Cargo by Trade Flow in 2009........................................................................................................................... 16Figure 2-7: Detroit BEA Truck Cargo in 2009 – Top Ten Commodity Groups .......................................................................................... 17Figure 2-8: Detroit BEA Inbound and Outbound Truck Cargo in 2009 – Top 20 Commodity Groups ............................................... 18Figure 2-9: Detroit BEA Inbound and Outbound Truck Cargo in 2009 – Top 20 Freight Lanes ............................................................ 19Figure 2-10: Domestic Inbound Truck Freight ....................................................................................................................................................... 20Figure 2-11: Domestic Outbound Truck Freight ................................................................................................................................................... 21Figure 2-12: Detroit BEA Import Truck Cargo in 2009....................................................................................................................................... 22Figure 2-13: Detroit BEA Export Truck Cargo in 2009....................................................................................................................................... 23Figure 2-14: Detroit BEA - Canada Truck Cargo in 2009 ................................................................................................................................... 23Figure 2-15: Detroit BEA - Mexico Truck Cargo in 2009 ................................................................................................................................... 24Figure 2-16: Detroit BEA Rail Cargo by Trade Flow in 2009............................................................................................................................. 25Figure 2-17: Detroit BEA Rail Cargo in 2009 – Top Ten Commodity Groups ............................................................................................ 26Figure 2-18: Detroit BEA Inbound and Outbound Rail Cargo in 2009 – Top 15 Commodity Groups ................................................. 27Figure 2-19: Detroit BEA Inbound and Outbound Rail Cargo in 2009 – Top Freight Lanes .................................................................... 28Figure 2-20: Domestic Inbound Rail Freight ............................................................................................................................................................ 29Figure 2-21: Domestic Outbound Rail Freight........................................................................................................................................................ 30Figure 2-22: Detroit BEA Import Rail Cargo in 2009 ........................................................................................................................................... 31Figure 2-23: Detroit BEA Export Rail Cargo in 2009 ........................................................................................................................................... 31Figure 2-24: Detroit BEA - Canada Rail Cargo in 2009 ....................................................................................................................................... 32Figure 2-25: Detroit BEA - Mexico Rail Cargo in 2009 ....................................................................................................................................... 33Figure 2-26: Detroit BEA – Cargo Flows from the Halifax Area in 2009 ....................................................................................................... 34Figure 2-27: Detroit BEA – Cargo Flows with the Montreal CMA in 2009................................................................................................... 35Figure 2-28: Detroit BEA - Top-10 U.S. Intermodal Rail Lanes by Cargo Tons in 2009 ............................................................................ 36Figure 3-1: Port of Toledo Cargo ............................................................................................................................................................................... 37Figure 3-2: Port of Toledo Commodity Mix ........................................................................................................................................................... 37Figure 3-3: Detroit BEA Domestic Freight Flows with Toledo BEA, 2009 .................................................................................................... 38Figure 3-4: Windsor, Ontario CMA Freight Flows in 2009 ................................................................................................................................ 39Figure 3-5: London, Ontario CMA Freight Flows in 2009 .................................................................................................................................. 39Figure 4-1: Class I Railroad Map with Container Ports........................................................................................................................................ 42Figure 4-2: Regional Highway Map ............................................................................................................................................................................. 43Figure 4-3: Detroit Truck Border Crossings .......................................................................................................................................................... 44Figure 4-4: Current Rail System in Windsor ........................................................................................................................................................... 47Figure 4-5: Comparison of Container Sizes............................................................................................................................................................. 48Figure 4-6: Example of Distribution Center Network ......................................................................................................................................... 49Figure 4-7: Example of Distribution Center and Cross-Dock Network......................................................................................................... 50Figure 4-8: Detroit-Warren-Livonia, MI Number of Employees by Industry, August Year over Year, 2001 – 2011 (000) ............ 52Figure 4-9: Indexes of Trucking Volume (TL and LTL), U.S. Industrial Production and Real GDP: 1995-2010 (1995=100) ........... 54Figure 4-10: Indexes of Real Revenue per Load for Truckload Freight versus Real Diesel Fuel Prices: 1995-2010 (1995=100) ... 55Figure 4-11: Indexes of Truckload Loads by Length-of-Haul Segment: 1996-2010 (1996=100) .............................................................. 56Figure 4-12: Growth of U.S. Containerized Import and Export Loads, 1995-2010 ..................................................................................... 58Figure 4-13: Far East as a Share of U.S. Containerized Imports and Exports, 1995-2010 ......................................................................... 59Figure 4-14: Trends in the Composition of U.S. Containerized Imports and Exports, 1995-2010 ......................................................... 60Figure 4-15: Annual North America Intermodal Rail Volume, 2000 to 2010 ................................................................................................ 62Figure 4-16: Growth of North America Intermodal Service by Equipment Type, 2000 to 2010 ............................................................ 63Figure 4-17: Quarterly Average Intermodal Train Speeds for North American Class I Railroads, 2000-2010 ................................... 63Figure 4-18: Midwest Inbound Intermodal Volume from West Coast and Share, 2000 to 2010 ............................................................ 65Figure 4-19: Detroit BEA - Top-10 U.S. Intermodal Rail Lanes by Cargo Tons in 2009 ............................................................................ 66Figure 5-1: Forecast of Detroit BEA Inbound and Outbound Freight Flows – Warehouse-able Commodities ................................. 73Figure 6-1: 10-Hour Truck Drive-Time Area Comparison: Detroit, MI, Chicago, IL, Columbus, OH, and Harrisburg, PA ........... 82 iii | TranSystems

Translinked Freight Study Executive Summary1 EXECUTIVE SUMMARY1.1 TranslinkedThe Detroit Regional Chamber is one of the largest chambers of commerce in the country. The Chamberseeks to power the economy of southeast Michigan through economic development programs, advocacy,strategic partnerships and valuable member benefits. One key initiative of the Detroit Regional Chamber’sEconomic Development activities is Translinked.The goal of Translinked is to create an industry cluster of excellence around transportation, distribution andlogistics in the region comprising southeast Michigan, northwest Ohio and southwest Ontario. TheTranslinked strategy envisions the mobilization of public, private and academic resources around aconsensus on the physical, financial and institutional infrastructure necessary to create this cluster. Thisinitiative seeks to attract more freight, perform value-added service and become a key intermodal supplyhub. The overall goal of Translinked is to create an efficient and cost-effective first-tier multimodaltransportation and logistics hub in southeast Michigan, northwest Ohio and southwest Ontario. Translinkedis supported by the Michigan Economic Development Corporation (MEDC), the New Economy Initiative(NEI), and the Detroit Regional Chamber.The Translinked region (Figure 1-1) includes major freight centers, including Detroit, Ann Arbor, Lansing,Flint and Port Huron in Michigan, Toledo in Ohio and Windsor and Sarnia in Ontario, Canada. The regionencompasses major manufacturingactivity (e.g. the automotive industry)and is situated on the principal border Figure 1-1: Map of Translinked Regioncrossings for overland trade betweenthe United States and Canada. Acomprehensive set of freightinfrastructure supports regionaleconomic activity, including rail androad border crossings, airports, marineports, rail yards, and interstate highwaysand rail corridors. The region is alsoconnected by rail and highway to majorU.S. and Canadian international seaports, including New York/New Jersey,Halifax, Montreal and Norfolk on theEast Coast.The Translinked Freight Study provides,subject to the availability of data onregional freight movements, a data-driven analysis of existing regionalfreight movements, an assessment ofkey freight industry trends, and makesrecommendations on how to furtherdevelop the Translinked region. Source: Detroit Regional Chamber 1 | TranSystems

Translinked Freight Study Executive Summary1.2 RecommendationsThe evaluation of freight flows and industry trends drive the following recommendations for futuredevelopment of the Translinked initiative: Establish a Translinked Commercial Marketing Initiative Involve the Private Sector, Remove Barriers that Slow Down Decision Making Remove Variability from the Border Crossing Process Include Rail Facilities and Third Party Logistics Providers (3PLs) that Reduce Transportation Costs, and Increase Flexibility Marketing Initiative and Freight CorridorsThe recommendations and next steps are discussed below.Establish a Translinked Commercial Marketing InitiativeTranslinked opportunities are with companies that have specific distribution needs, such as a highconcentration of customers in Northern Michigan, over to Toronto, and including the US Midwest.Companies that require fastest ocean transits from China or Europe, especially for high value goods, ormanufacturers that receive materials used in production from nearby sources are potential candidates. Next Steps: Develop Translinked Marketing Plan TranSystems recommends a detailed, company by company analysis to identify opportunities based on the specific advantages of the Translinked region. Develop a list of potential Translinked customers. Identifying and selling value will require detailed knowledge of the customer’s business, particularly its supply chain; and facts about the customer’s inventory and supply chain strategy. Carefully identify (segment) beneficial cargo owners (BCO) with high costs, complicated supply chains, or poor inventory performance. Conduct private sector outreach to gather input. Develop supply chain straw-men using various distribution strategies and present them to shippers to assess the viability of Translinked as a supply chain hub. Demonstrate how a Translinked location reduces lowest landed costs. Present regional advantages, such as the CSX intermodal facility in North Baltimore, OH to private sector logistics managers. Once strategies are validated, market regional advantages in industry publications, such as DC Velocity, Inbound Logistics, Journal of Commerce, and American Shipper. The KC (Kansas City) Smartport initiative is an excellent model for marketing strategies that may be applicable to the Translinked initiative.Involve the Private Sector, Remove Barriers that Slow Down Decision MakingTime is of the essence. Comments made during interviews as part of this study suggest there is a perceptionthat the overall direction and ownership of Translinked is unclear, and the initiative lacks sufficientinvolvement from commercial interests. Commercial participation will be necessary to lend support and 2 | TranSystems

Translinked Freight Study Executive Summarycredibility to the project. It should be noted that recent improvements in Ohio, such as CSX’s NorthwestOhio Intermodal Terminal at North Baltimore, Norfolk Sothern’s Heartland Corridor Initiative servingColumbus, and BNSF’s Chicago rail terminal adjacent to the CenterPoint Intermodal Park have been noticedin the industry. Successes in the Translinked region itself, such as improvements at the Port of Toledo, havebeen attributed to public/private cooperation and agreed priorities. Barriers impeding Translinked progressshould be identified, and addressed. Slow-moving initiatives will lose out to locations that are established,and proven, and that have active engagement with the private sector. Next Steps: Identify and Remove Barriers to Progress Focus and prioritize opportunities based on strengths identified in the Marketing Plan, and gather private sector support as quickly as possible. Solicit active and ongoing participation on the Translinked committee from companies such as railroads and third party logistics companies to provide a sense of what is commercially viable. The CN Railroad for example actively participated in the design, and invested $25 million in the new West Coast ocean terminal at Prince Rupert, BC - private investment will signal commercial viability. The Detroit Intermodal Freight Terminal (DIFT) may be another example of a successful transportation related public/private development. Public sector involvement and coordination is crucial, but all parties should adhere to commercially based priorities. A failure to agree on priorities may signal an inability to move the project forward, and a review of Translinked overall goals and makeup is advised.Remove Variability from the Border Crossing ProcessSupply chain managers work to eliminate events that introduce variability into supply chains. The Translinkedregion opportunities will be aided by addressing perceptions about the unpredictability of border crossings.The inclusion of the Toronto area population of 5 million within a distribution range served by theTranslinked region will elevate the effectiveness of the region as a transportation hub. Therefore, addressingperceptions about unpredictable crossing delays is critical. Next Steps: Assess and Manage Border Crossing Perception As part of the development of the Translinked Sales/Marketing plan, gather border crossing information, including an assessment of perceived vs. real barriers, expected delays, and suggestions for improvement. Based on this input, develop strategies to correct misconceptions about crossing delays, or work with US and Canadian customs agencies to develop programs that reduce variability in border wait times. An evaluation of the effectiveness of the Fast Past program, which allows truckers to us the “FAST” lane, and reduces the amount of paperwork, should be included in the analysis. 3 | TranSystems

Translinked Freight Study Executive SummaryInclude Rail Facilities and Third Party Logistics Providers (3PLs) that ReduceTransportation Costs, and Increase FlexibilityDistribution centers (DC) on-site at rail terminals, including multiple rail carriers, will reduce truck drayagecosts. Include railroads and shippers in terminal location and design discussions. The presence of 3PLservices, such as warehouse and distribution services, will enable shippers to introduce flexibility to theirsupply chains and will provide distribution options in the Translinked region without requiring shippers tocommit capital to an owned facility. Next Steps: Confirm importance of the Detroit Intermodal Freight Terminal (DIFT) during the development of the Translinked Marketing and Sales Plan. Revitalize and develop a sense of urgency around the DIFT rail project if potential users are attracted to this kind of facility. Explore willingness of large DCs, trucking companies; 3PL’s to locate near new DIFT facility, and zone appropriately if needed to support logistics facilities.Marketing Initiative and Freight CorridorsThe Translinked region is strategically located on several major trade corridors, notably cross-border withCanada. In addition, the region’s consumers and industry are served by several important port gateways inthe U.S. (e.g. ports of New York/New Jersey, Norfolk and Los Angeles/Long Beach) and Canada (the portsof Halifax, Montreal and Prince Rupert). In developing the Translinked marketing initiative discussed above,focus should be placed on companies that could benefit from the following freight corridors: International trade via: − Canadian ports of Halifax, Montreal and Prince Rupert. − U.S. Northeast ports, notably New York/New Jersey, Norfolk, and Baltimore. Investments in rail infrastructure by CSX and NS are making these gateways even more accessible for the Translinked region. − U.S. West Coast ports, which are the principal gateways for U.S. trade with the Far East. Highway and rail corridors serving major consumption markets in the U.S. Cross-border highway and rail corridors with major consumption markets in Canada, notably markets in Ontario.The marketing initiative should also incorporate testing the perceived value of the different North AmericanGateways, such as the Prince Rupert Gateway, with the fastest transit from China, or the Halifax Gateway,and evaluate shipper preferences of North American gateways into the study area. The market strategyinitiative should include shippers who transport the fastest growing commodities. For example, Machineryand Parts Manufacturing, and Electronics Manufacturing have projected ten-year annual growth rates of 4.4percent and 5.0 percent respectively. Keep in mind that these growth rates may reflect a recovery fromsteep declines experienced during the economic downturn; however, logistics service opportunities mayemerge as the recovery continues. 4 | TranSystems

Translinked Freight Study Executive Summary1.3 Regional Freight FlowsRegional economic activity generates inbound, outbound and internal freight flows. The Translinked regionalso sees freight moving through the region between Canada and the rest of the U.S. An overview ofselected regional freight flows in 2009, the latest year for Transearch Freight Data1, is presented in Table1-1. The main characteristics of freight flows are discussed below. Table 1-1: Selected Regional Freight Flows in 2009 Tons by Tons by Tons by Tons by Other Total Total Tons Truck Rail Water Modes Value Detroit BEA Freight Flows in 2009 (Million Tons and Billion $) Total 286.60 206.07 52.81 26.60 1.12 $413.5 1 Domestic 212.00 160.42 30.85 20.69 0.04 $248.8 Inbound 107.54 66.10 22.44 18.99 0.02 $107.1 Outbound 51.30 42.00 8.20 1.07 0.02 $101.7 Internal 47.07 46.22 0.21 0.63 0.00 $26.1 Through 6.09 6.09 0.00 0.00 0.00 $13.9 Canada 54.02 34.09 18.85 0.00 1.08 $129.7 Inbound 5.97 3.37 1.95 0.00 0.65 $18.3 Outbound 3.16 2.40 0.39 0.00 0.37 $10.7 Through 44.89 28.32 16.51 0.00 0.06 $100.7 Mexico 2.64 1.12 1.52 0.00 0.00 $14.0 Inbound 1.63 0.56 1.07 0.00 0.00 $10.1 Outbound 0.94 0.49 0.45 0.00 0.00 $3.6 Through 0.08 0.07 0.01 0.00 0.00 $0.2 Import & Export 2 17.93 10.44 1.59 5.91 0.00 $21.1 Detroit BEA – Toledo BEA Freight Flows in 2009 (Million Tons and Billion $) Total 3 15.81 14.57 0.35 0.89 0.00 $6.95 Inbound 10.84 9.82 0.14 0.88 0.00 $4.47 Outbound 4.97 4.74 0.21 0.01 0.00 $2.47 Detroit BEA – Windsor CMA Freight Flows in 2009 (Million Tons and Billion $) 4 Total 1.42 1.16 0.19 0.00 0.07 $4.75 Inbound 0.25 0.19 0.06 0.00 0.00 $1.28 Outbound 0.18 0.13 0.00 0.00 0.05 $0.39 Through 0.99 0.83 0.13 0.00 0.02 $3.08 (1) Domestic flows include some international cargo that moves as “domestic” freight – e.g. overseas imports moving in domestic 53-foot containers from the U.S. discharge port to the Detroit BEA. (2) Overseas import and export cargo that moves intact between U.S. ports and the Detroit BEA. (3) Freight moving between the Detroit BEA and the Toledo BEA. (4) Freight moving between the Detroit BEA and the Windsor CMA, and freight moving through the Detroit BEA between the Windsor CMA and the rest of the U.S. Source: IHS Global Insight Transearch Data1 This Study includes content supplied by IHS Global Insight (USA), Inc; Copyright 2011 IHS Global Insight (USA), Inc. 5 | TranSystems

Translinked Freight Study Executive SummaryDetroit BEA Freight FlowsThe Detroit-Warren-Flint Business Economic Area Figure 1-2: Detroit BEA Cargo in 2009 by(Detroit BEA) covers the cities of Detroit, Flint and Transport ModeWarren, and surrounding areas. The Detroit BEAhad total estimated cargo flows amounting to 287million tons in 2009 with an estimated value of$414 billion. Total cargo comprises severaldifferent transport modes – truck, rail, water (viathe Great Lakes), air and other – and includes alltrade flows, domestic and international, inbound,outbound, internal (movements within the DetroitBEA) and through (not stopping in the DetroitBEA).Truck is the dominant mode with 72 percent ofcargo volume and 81 percent of cargo value, thelarger share of value reflecting the higher-valuecommodities that move via truck. Rail handles bothlower-value and higher-value commodities, and itaccounts for 18 percent of both volume and value.The water mode accounts for 9 percent of tons butless than one percent of value due to the low-value Note: Includes domestic and international, and all directionsbulk commodities shipped by water. The highest – inbound, outbound, internal and throughvalue freight is shipped by air. Source: Derived from IHS Global Insight Transearch DataTotal cargo is spread across different directionsand trades (Figure 1-3). Domestic cargo accounts for 74 percent of total tons and 60 percent of value.Domestic cargo includes some international cargo that moves as domestic freight to or from U.S. ports (e.g.New York/New Jersey). International trade related to Canada accounted for 19 percent of tons and 31percent of value, while international trade with Mexico was one percent of tons and 3 percent of value.Import and Export trade that moves intact to and from U.S. ports accounted for 6 percent of tons and 5percent of value.Inbound and outbound cargo amounted to 183 million tons in 2009 with an estimated value of $270 billion.These flows are driven by industry and consumption, and generate the principal demand for warehousingand logistics facilities. The largest directional flow is inbound to the Detroit BEA.The region also has a large volume of internal cargo movement (18 percent of total tons and 7 percent ofvalue), a significant share of which is truck shipments to and from warehouses within the region and drayageof containers to and from intermodal rail yards. A large amount of cargo also moves through the DetroitBEA, notably between Canada and other regions of the U.S., and is handled by the border crossing points inthe Detroit BEA. 6 | TranSystems

Translinked Freight Study Executive Summary Figure 1-3: Detroit BEA Cargo in 2009 by Trade Flow Source: Derived from IHS Global Insight Transearch DataWhen evaluating the region’s cargo, it is helpful tofocus on commodities that are more suited to Figure 1-4: Detroit BEA Cargo Tons in 2009,added-value logistics services or undergo some form Total and Warehouse-ableof manufacturing process. Such commodities will beof primary interest to the development of industryand logistics services. The broadly defined“warehouse-able” commodities are those with arelatively high value per metric ton and/orcommodities that are processed (e.g. food products)as opposed to raw materials (e.g. grain). Thesecommodities are more likely to require added-valuelogistics services.Warehouse-able cargo was an estimated 141 milliontons in 2009, 49 percent of total Detroit BEA cargo.Warehouse-able cargo accounted for an estimated90 percent of total cargo value, which reflects thehigher value nature of warehouse-able commodities(e.g. consumer products). These commoditiesaccounted for 42 percent of inbound tons, and their Source: Derived from IHS Global Insight Transearch Datashare was highest in the cross-border inbound trade– 64 percent of tons from Canada and 99 percent oftons from Mexico – and compared to 41 percent of domestic inbound tons. Warehouse-able commoditiesaccounted for 66 percent of total outbound tons. Penetration by trade was – domestic outbound 68 percentof domestic tons, shipments to Canada 48 percent and shipments to Mexico 87 percent. 7 | TranSystems

Translinked Freight Study Executive SummaryDetroit BEA Freight Flow ForecastThe forecast of inbound and outbound freight (warehouse-able) commodities is presented in Table 1-2. TheBase projections of cargo flows driven by assumptions related to regional, national and internationaleconomic activity, and relationships between industry inputs and outputs. Total inbound and outboundfreight is projected to have increased from 89.9 million tons in 2009 to 97.8 million tons in 2010, driven byrecovery from the recession and growth of industries in the region. Total inbound and outbound freight isprojected to increase to 126.0 million tons in 2020, based on domestic economic growth and the expansionof cross-border trade with Mexico and Canada, and growth of trade with overseas markets. The projected10-year (2010 to 2020) compound annual growth rate (CAGR) is 2.6 percent. Table 1-2: Inbound and Outbound Freight Forecast for 2020 – Base, Low and High Inbound Freight (Warehouse-able Commodities) 2020 Tons CAGR 2010 to 2020 Trade 2009 Tons 2010 Tons Base Low High Base Low High Domestic 44,334,660 47,678,414 59,970,374 57,318,605 63,775,639 2.3% 1.9% 3.0% Canada 3,835,424 4,232,502 5,513,774 5,127,613 5,798,233 2.7% 1.9% 3.2% Mexico 1,613,233 1,761,005 2,981,832 2,708,501 3,145,764 5.4% 4.4% 6.0% Import 1,205,197 1,343,248 2,028,841 1,859,298 2,273,105 4.2% 3.3% 5.4% Grand Total 50,988,514 55,015,169 70,494,821 67,014,016 74,992,742 2.5% 2.0% 3.1% Outbound Freight (Warehouse-able Commodities) 2020 Tons CAGR 2010 to 2020 Trade 2009 Tons 2010 Tons Base Low High Base Low High Domestic 34,989,373 38,422,157 49,083,371 44,989,601 51,752,543 2.5% 1.6% 3.0% Canada 1,512,627 1,665,247 2,218,630 2,059,365 2,308,990 2.9% 2.1% 3.3% Mexico 812,665 927,945 1,451,046 1,369,738 1,658,503 4.6% 4.0% 6.0% Export 1,581,080 1,796,395 2,756,368 2,495,304 3,036,918 4.4% 3.3% 5.4% Grand Total 38,895,745 42,811,744 55,509,415 50,914,008 58,756,955 2.6% 1.7% 3.2% Inbound & Outbound Freight (Warehouse-able Commodities) 2020 Tons CAGR 2010 to 2020 Trade 2009 Tons 2010 Tons Base Low High Base Low High Domestic 79,324,033 86,100,571 109,053,745 102,308,206 115,528,183 2.4% 1.7% 3.0% Canada 5,348,051 5,897,749 7,732,404 7,186,977 8,107,223 2.7% 2.0% 3.2% Mexico 2,425,898 2,688,950 4,432,877 4,078,239 4,804,267 5.1% 4.3% 6.0% Import & Export 2,786,277 3,139,643 4,785,209 4,354,602 5,310,023 4.3% 3.3% 5.4% Grand Total 89,884,258 97,826,912 126,004,235 117,928,024 133,749,697 2.6% 1.9% 3.2% Source: TranSystems Forecasts and IHS Global Insight 2009 data.Low and high case projections are also presented in Table 1-2. The basis for these alternative projections isthat the principal driver of freight flows is economic activity, represented by indicators such as disposableincome and industrial production. In addition, housing-sensitive commodities are subject to moreuncertainties going forward due to uncertainty as to the timing of recovery in regional housing markets. Ingeneral, the sensitivities for non-housing related commodities (e.g. transportation equipment) are -0.5to+0.5 percent per year. Secondary traffic is assumed to be 25 percent housing-related and the sensitivities are 8 | TranSystems

Translinked Freight Study Executive Summary-0.2 to +1.5 percent per year. The growth sensitivities for international flows are -1.5 to +1.5 percent peryear. A stronger recovery in regional, national and international economic activity would be expected todrive a healthy growth of international trade. Total inbound and outbound shipments of warehouse-ablecommodities are projected to have 10-year compound annual growth rates of 1.9 percent under the LowCase and 3.2 percent under the High Case.The projections indicate that truck shipments will grow at a slightly faster rate than shipments by rail. Thisresult is driven by several factors – (1) the macro nature of the forecast models, with their underlyingassumptions on industry input and output relationships, and fixed modal shares for individual commodities,(2) the large amount of freight moving between the region and truck friendly origins and destinations in theEast North Central region, and (3) the current transportation mode distribution. However, the macroforecast models do not take into account significant transportation industry factors that are expected toaccelerate the growth of rail usage. The trucking industry is faced with several challenges that areencouraging shippers to expand the use of rail in their supply chains. These factors include fuel priceincreases, favoring rail over highway transport, the cost of recruiting and maintaining truck drivers,investments by railroads in intermodal rail hubs tied to logistics parks, and increased marketing andattractive pricing by railroads of shorter haul intermodal rail services. For these reasons, it is likely that theuse of rail in the supply chain strategies of shippers will expand in the future.Detroit BEA – Toledo BEAIn 2009, 15.0 million tons of domestic freight moved between the Detroit BEA and the Toledo BEA, 10.4million tons inbound from the Detroit BEA and 4.6 million tons outbound from the Detroit BEA. Truck isthe dominant mode accounting for 92 percent of inbound freight and 96 percent of outbound freight.Detroit BEA – Windsor CMAThe Windsor area has a diversified economy with a strong presence in the automotive sector, agriculture,and food products, and emerging sectors that include high tech manufacturing. A total of 1.4 million tons offreight moves to and from the Detroit BEA, and to and from other regions of the U.S through the DetroitBEA. Truck is the dominant mode of transport, accounting for 88 percent of freight shipped to the WindsorCMA and 72 percent of the tons shipped from the Windsor CMA. The respective shares for rail were 5percent and 28 percent.1.4 Industry Trends and Location ComparisonLogistics managers are continuously evaluating their logistics networks to squeeze excess transportationexpenses and other costs out of their supply chains. The availability of all transportation modes is essentialin order to enable logistics managers to have the flexibility to choose the mode that best suits shipmentneeds. Lowest-cost transportation options, such as rail, are selected provided that service is available, andtransit time and reliability meet service level requirements. Trucking costs are the largest portion of thesupply chain expense. Locating DCs in high-density customer/supplier areas reduces trucking expensesenough to more than compensate for lower ocean and rail costs to competing regions. Because of this,supply chain strategies that reduce trucking as much as possible have been a major goal of supply chainmanagers. Warehouse locations are chosen based on the cost of the facility, and their proximity tocustomers and suppliers, thereby reducing trucking costs. Labor, green initiatives, government incentives,etc. are considered after transportation service and rate level requirements are met, and theseconsiderations typically influence a specific site location among competing sites that meet transportationrequirements. 9 | TranSystems

Translinked Freight Study Executive SummaryThe Translinked region performs well under a variety of criteria used by shippers and manufacturers toselect locations, including transportation infrastructure (rail and highway and airports), access to oceangateways for international trade, and the availability of warehousing and distribution facilities.The Translinked region must compete against two regional hubs – Columbus, OH, and Chicago, IL – thatare well established and in a strong position to compete for DC operations in the Midwest. Columbus has ahigher U.S. and Canadian population reach, and Chicago has superior rail and air cargo services, as well as alarge Midwest distribution reach. Both of these locations have competitive labor and industrial real estatecosts as well. Translinked region opportunities are with companies with specific distribution needs, such as ahigh concentration of customers in Northern Michigan, over to Toronto, and including parts of the U.S.Midwest. Companies that require fastest ocean transits from China or Europe, or manufacturers thatreceive materials used in production from nearby sources are other potential candidates. Figure 1-5: 10-Hour Truck Drive-Time Area Comparison: Detroit, MI, Chicago, IL, Columbus, OH, and Harrisburg, PA Source: TranSystems 10 | TranSystems

Translinked Freight Study Existing Freight Flows2 DETROIT BEA FREIGHT FLOWS2.1 IntroductionThe first step in the evaluation of freight flows is to address the Detroit BEA2, which encompasses the mainTranslinked centers of Detroit, Flint, Ann Arbor, Lansing and Port Huron. As shown in Figure 2-1, theDetroit BEA covers the eastern portion Michigan and the major freight corridors through SoutheastMichigan. Figure 2-1: Map of Detroit BEA Source: TranSystemsThe primary source for freight flows related to the Detroit BEA is the Transearch Database from IHSGlobal Insight3. This database provides statistics on domestic freight flows, and cross-border freight flowswith Canada and Mexico. The latest year available for this study was 2009, which was a depressed year for2 BEAs are designated by the Department of Commerce and each Economic Area represents a major economic center3 This Study includes content supplied by IHS Global Insight (USA), Inc; Copyright 2011 IHS Global Insight (USA), Inc. 11 | TranSystems

Translinked Freight Study Existing Freight Flowseconomic activity and freight activity. However, the database is still appropriate for providing a profile offreight flows related to the Detroit BEA. This database is supplemented by statistics on U.S. containerizedtrade from JOC Piers and data on cross-border flows from the Bureau of Transportation Statistics.2.2 Detroit BEA Total CargoThe Detroit-Warren-Flint Business Economic Area (Detroit BEA) covers the cities of Detroit, Flint andWarren, and surrounding areas. It had a population of 6.9 million in 2009, with Total Personal Income (TPI)of $247 billion, and per capita income of $35,713.4 The Detroit BEA ranked 10th by population, 12th by TPIand 75th by per capita income out of the country’s 179 BEAs tracked by the Bureau of Economic Analysis.The Detroit BEA borders five other BEAs5 that had a combined population of 4.2 million in 2009, generatingTPI of $134 billion, and per capita income of $31,738.The Detroit BEA had total estimated cargo flows Figure 2-2: Detroit BEA Cargo in 2009 byamounting to 287 million tons in 2009 with an Transport Modeestimated value of $414 billion. Total cargocomprises several different transport modes(Figure 2-2) – truck, rail, water (via the GreatLakes), air and other – and includes all trade flows,domestic and international, inbound, outbound,internal (movements within the Detroit BEA) andthrough (not stopping in the Detroit BEA).Truck is the dominant mode with 72 percent ofcargo volume and 81 percent of cargo value, thelarger share of value reflecting the higher-valuecommodities that move via truck. Rail handles bothlower-value and higher-value commodities, and itaccounts for 18 percent of both volume and value.The water mode accounts for 9 percent of tons butless than one percent of value due to the low-valuebulk commodities (e.g. iron ore) shipped by water.The highest value freight is shipped by air, but aironly handles 0.03 percent of total tons and 0.35 Note: Includes domestic and international, and all directionspercent of total value. In 2009, the values per cargo – inbound, outbound, internal and throughton by transport mode were $1,616 for truck, Source: Derived from IHS Global Insight Transearch Data$1,456 for rail, $63 for water, and $17,445 for air.As shown in Figure 2-3, total cargo is spread across different directions and trades. Domestic cargoaccounts for 74 percent of total tons and 60 percent of value. Domestic cargo includes some internationalcargo that moves as domestic freight to or from U.S. ports (e.g. New York/New Jersey). For example, animport will be “converted” to domestic freight when it, for example, enters an import distribution center(IDC) and then departs the IDC in domestic equipment for the Detroit BEA.International trade related to Canada accounted for 19 percent of tons and 31 percent of value, whileinternational trade with Mexico was 1 percent of tons and 3 percent of value. Import and Export trade that4 Data is for 2009 from the Bureau of Economic Analysis5 Alpena, Traverses City, Grand Rapids-Muskegon-Holland, Fort Wayne-Huntington-Auburn, and Toledo-Fremont 12 | TranSystems

Translinked Freight Study Existing Freight Flowsmoves intact to and from U.S. ports accounted for 6 percent of tons and 5 percent of value. For example,this trade flow includes imports and exports moving in international marine containers by intermodal railservice between the Detroit BEA and U.S. ports.The main cargo flows of interest in this Study are inbound and outbound, which together amounted to 183million tons in 2009 with an estimated value of $270 billion, 64 percent of total tons and 65 percent of totalcargo value. These flows are driven by industry and consumption, and generate the principal demand forwarehousing and logistics facilities, within the Detroit BEA. The largest directional flow is inbound to theDetroit BEA, 43 percent of tons and 36 percent of value. Outbound flows account for 21 percent of tonsand 29 percent of value, the higher share of value driven by the presence of higher value manufacturedgoods in the outbound trade from the Detroit BEA.The region also has a large volume of internal cargo movement, 18 percent of total tons and 7 percent ofvalue. Nearly 70 percent of internal traffic is truck shipments to and from warehouses within the region (forexample, deliveries from warehouses to stores), drayage of containers to and from intermodal rail yards,and movements of petroleum refining products. The internal cargo category includes an element of doublecounting of the inbound and outbound flows. For example, an inbound shipment enters a warehouse in theDetroit BEA and then departs the warehouse as a local delivery to a store or manufacturing plant. There isalso a large amount of cargo moving through the Detroit BEA, notably between Canada and other regions ofthe U.S., and handled by the border crossing points in the Detroit BEA. Through freight is generated byeconomic activity unrelated to the Detroit BEA. Figure 2-3: Detroit BEA Cargo in 2009 by Trade Flow Source: Derived from IHS Global Insight Transearch DataThe cargo flows identified above have considerable variation in terms of value per cargo ton. Whiledomestic inbound is the largest cargo flow it has one of the lowest values per cargo ton due to the presenceof a large volume of lower-value commodities. By contrast, higher-value commodities dominate theinternational cargo flows. As shown in Figure 2-4, the highest values per cargo ton are present in the cross- 13 | TranSystems

Translinked Freight Study Existing Freight Flowsborder trade with Mexico and Canada, due to thelarge presence movement of manufactured goods in Figure 2-4: Value per Cargo Tonsthese lanes.When evaluating the region’s cargo, it is helpful tofocus on commodities that are more suited toadded-value logistics services or undergo someform of manufacturing process. Such commoditieswill be of primary interest to the development ofindustry and logistics services in the Detroit BEA.The broadly defined “warehouse-able”commodities are those with a relatively high valueper metric ton and/or commodities that areprocessed (e.g. food products) as opposed to rawmaterials (e.g. grain). These commodities are morelikely to require added-value logistics servicesincluding warehousing and distribution services.Commodity groups are identified as warehouse-able (Table 2-1) based on value per ton data, Source: Derived from IHS Global Insight Transearch Datacommodity characteristics and judgment usingexperience from prior projects. Given the broadcommodity groups in the source data, a commoditygroup may contain a mixture of higher value and lower value components. Table 2-1: Warehouse-able Commodities Warehouse-able Commodity Groups Other Commodity Groups (Higher Value / Distribution Potential) (Lower Value / Distribution Potential) Alcoholic Beverages Pharmaceutical Products Agricultural Products Petroleum Products All Other Machinery Plastics And Rubber Base Metal Rocks Stone And Sand Base Metal Articles Printed Materials Cereals Wood Products Food Products Textiles And Articles Chemical Products Waste And Scrap Electronics Tobacco Products Coal Furniture Transportation Equipment Fertilizer Live Animals And Fish Vehicles And Parts Logs And Rough Lumber Misc Manufactured Prod Mineral Products Source: TranSystemsWarehouse-able cargo was an estimated 141 million tons in 2009, 49 percent of total Detroit BEA cargo.Warehouse-able cargo accounted for an estimated 90 percent of total cargo value, which reflects the highervalue nature of warehouse-able commodities (e.g. consumer products). 14 | TranSystems

Translinked Freight Study Existing Freight FlowsThe distribution of warehouse-able commodities by Figure 2-5: Detroit BEA Cargo Tons in 2009,direction is shown in Figure 2-5. Looking at the Total and Warehouse-ableinbound flow, these commodities accounted for 42percent of inbound tons. Their share was highest inthe cross-border inbound trade – 64 percent of tonsfrom Canada and 99 percent of tons from Mexico –and compared to 41 percent of domestic inboundtons.Warehouse-able commodities accounted for 66percent of total outbound tons. Penetration by tradewas – domestic outbound 68 percent of domestictons, shipments to Canada 48 percent and shipmentsto Mexico 87 percent.Warehouse-able commodities are also a prominentpart of through cargo, with a 71 percent share.Through cargo is mostly freight moving betweenCanada and other parts of the U.S. More detaileddiscussion of cargo flows, with an emphasis on Source: Derived from IHS Global Insight Transearch Datainbound and outbound flows, is provided in Section2.3 (truck cargo), Section 2.4 (rail cargo), andSection 2.5 (other modes). 15 | TranSystems

Translinked Freight Study Existing Freight Flows2.3 Detroit BEA Truck Cargo2.3.1 TotalTruck is the dominant transportation mode for freight moving in, out, within and through the Detroit BEA,accounting for 72 percent of tons and 81 percent of cargo value in 2009. This truck freight is generated bylocal consumption and industrial production, local and regional distribution, and freight movements throughthe Detroit BEA between other regions (e.g. Canada to other parts of the U.S.). Total truck freightamounted to 206 million tons with a total value of $333 billion.Truck cargo comprises a variety of flows and truck modes as shown in Figure 2-6. The largest segment bytonnage is domestic inbound freight, which accounted for 32 percent of tons in 2009 and 29 percent of totalvalue. This segment is followed by domestic internal6 (22 percent and 8 percent), and domestic outbound(22 percent and 8 percent). Truck freight related to Canada (inbound, outbound and through) is alsosignificant with 17 percent of tons and 30 percent of value; Canada’s larger share of value is due to theshipment of manufactured goods, notably finished motor vehicles and motor vehicle parts and accessories. Figure 2-6: Detroit BEA Truck Cargo by Trade Flow in 2009 Note: Canada and Mexico is classified as Truck, which captures both truckload and LTL service. Source: Derived from IHS Global Insight Transearch DataTruck cargo moves by several different truck modes – truckload, less-than-truckload (LTL), private fleet, andtruck (freight moving to and from Mexico and Canada). Private fleet involves freight handled by private in-house truck fleets, such as those operated by retailers, as opposed to commercial common carriertruckload services. LTL is a relatively specialist sector involving the transport of higher value and/or timesensitive and/or small volume freight. Trade with Canada and Mexico is classified under a general “Truck”category and this cargo is largely moved by commercial truckload service. Truckload freight is the principal6 Freight with its origin and destination within the Detroit BEA 16 | TranSystems

Translinked Freight Study Existing Freight Flowstruck mode with 44 percent of both cargo tons and value. Private Fleet truck shipments are the secondlargest truck mode measured by tons (38 percent) and the third largest by value (23 percent), which reflectsthe lower value basic materials (e.g. gravel and sand) that are a significant amount of this truck mode.A profile of regional truck cargo (domestic and international, all directions) by commodity group is providedin Figure 2-7. The largest commodity group is Nonmetallic Minerals, which amounted to 31 million tons in2009 and 15 percent of the region’s truck cargo, and involves shipments of low value materials includingsand and gravel. The second largest commodity group is Secondary Traffic (28 million tons and 14 percent),which is largely made up of Warehouse and Distribution Center traffic (for example, deliveries of consumerproducts from warehouses to stores) but also includes some freight drayage related to intermodal rail yardsand airports. Farm Products (28 million tons and 14 percent) includes grains, livestock, fruits and vegetables,and other agricultural products. Food or Kindred Products (11 percent) includes a blend of intermediaryproducts for further processing and final products, and examples are animal by-products, pet food,fresh/chilled/frozen meat, soft drinks and mineral water, and canned fruits and vegetables. The top fourcommodity groups are then followed by a mixture of industrial inputs and outputs – chemicals, petroleumand coal, primary metal products, etc. Transportation Equipment (ranked eighth with 4 percent of trucktons) captures the shipment of Motor Vehicles and Motor Vehicle Parts or Accessories by truck.The commodity ranking shifts when a filter is applied to identify the warehouse-able commodities, thosesuited to warehousing and logistics services (see background discussion in Section 2.XX). Secondary Trafficbecomes the top commodity group and bulk-focused commodities fall down the rankings (e.g. FarmProducts and Nonmetallic Minerals). The second and third ranked commodity groups are Food or KindredProducts and Chemicals or Allied Products. Further analysis of commodities, with a focus on thewarehouse-able commodities, is provided in the discussion of domestic and international truck flows bydirection (inbound, outbound, etc.) presented below. Figure 2-7: Detroit BEA Truck Cargo in 2009 – Top Ten Commodity Groups Source: Derived from IHS Global Insight Transearch Data 17 | TranSystems

Translinked Freight Study Existing Freight Flows2.3.2 Domestic Inbound and OutboundDomestic inbound and outbound flows together account for 52 percent of truck cargo tons related to theDetroit BEA. This cargo is generated by industry and consumption within the Detroit BEA, and demand inthe rest of the country.In 2009, the Detroit BEA had inbound truck cargo of 66 million tons with an estimated value of $95 billion.Approximately 41 million tons (62 percent) with a value of $87 billion (92 percent) is classified aswarehouse-able cargo. As shown in Figure 2-8, nearly all the top commodity groups shipped inbound to theDetroit BEA fall into the warehouse-able category. Some of the more significant individual warehouse-ablecommodities are Warehouse and Distribution Center freight, a variety of dry food products (e.g. soft drinksand canned goods), Motor Vehicle Parts and Accessories, and Forest Products. The lower-value and definedas non-warehouse-able commodities include Grains, Broken Stone and Riprap and Petroleum RefiningProducts.The Detroit BEA generated 42 million tons of outbound cargo with a value of $76 billion in 2009. Anestimated 31 million tons (74 percent) with a value of $73 billion (95 percent) was defined as warehouse-able cargo. The top outbound commodity group (Figure 2-8) was Secondary Traffic, nearly all falling into theWarehouse and Distribution Center category. Other individual outbound warehouse-able commoditiesinclude Grain Mill Products, Motor Vehicles, and Motor Vehicle Parts and Accessories. Figure 2-8: Detroit BEA Inbound and Outbound Truck Cargo in 2009 – Top 20 Commodity Groups Source: Derived from IHS Global Insight Transearch Data 18 | TranSystems

Translinked Freight Study Existing Freight FlowsDomestic inbound and outbound truck freight is heavily concentrated in short-haul lanes with regionssurrounding the Detroit BEA. Figure 2-9 shows the top partner BEAs measured by tons. Based on 2009data, the top-ten partner BEAs accounted for 70 percent of inbound and outbound truck tonnage, and allthese BEAs were in the states of Michigan, Ohio, Illinois and Indiana. The next ten BEAs accounted for 12percent of inbound and outbound freight, and four of these BEAs were in Ohio and Wisconsin. More distantBEAs ranked in the top-twenty were New York, Buffalo, Pittsburg, Los Angeles, Rochester and Minneapolis.The distribution by lane is little changed when focusing on the warehouse-able commodity segment. As alsoshown in Figure 2-9, the top ten part BEAs are all in Michigan, Ohio, Indiana and Illinois, and they accountedfor 68 percent of warehouse-able cargo tons. Prominent among the partner BEAs are important logisticshubs, including Chicago, IL. Figure 2-9: Detroit BEA Inbound and Outbound Truck Cargo in 2009 – Top 20 Freight Lanes Source: Derived from IHS Global Insight Transearch Data 19 | TranSystems

Translinked Freight Study Existing Freight FlowsFigure 2-10: Domestic Inbound Truck Freight 20 | TranSystems

Translinked Freight Study Existing Freight FlowsFigure 2-11: Domestic Outbound Truck Freight 21 | TranSystems

Translinked Freight Study Existing Freight Flows2.3.3 Domestic Internal and Through CargoThe Detroit BEA had internal7 truck cargo of 46 million tons with an estimated value of $26 billion. Much ofthis traffic is of lower value commodities and the largest commodity is Nonmetallic Minerals (17.1 milliontons). Other main commodity groups are Secondary Traffic (7.1 million tons), Farm Products (6.5 milliontons), Petroleum or Coal Products (6.4 million tons), Clay, Concrete, Glass or Stone (4.1 million tons),Chemicals or Allied Products (1.5 million tons), Lumber or Wood Products (1.3 million tons), and Waste orScrap Materials (1.0 million tons).Higher-value warehouse-able cargo was an estimated 13 million tons (28 percent) and accounted for 75percent of the value of internal cargo. The largest component of the warehouse-able cargo is SecondaryTraffic, which is made up of Warehouse and Distribution Center traffic (5.6 million tons), drayage of railintermodal cargo to and from ramps (1.5 million tons), and a small amount of air freight drayage.A large volume of domestic cargo flows through the Detroit BEA without stopping. In 2009, this domesticthrough cargo amounted to 6.1 million tons with an estimated value of $14 billion. A majority of this cargo,4.7 million tons or 76 percent, originates in and is destined for the Grand Rapids BEA, west of the DetroitBEA. Approximately, 5.4 million tons or 89 percent with a value of $13.7 billion is classified as warehouse-able. The two main warehouse-able commodities were Secondary Traffic and Food or Kindred Products,which together accounted for 51 percent of warehouse-able commodity tons.2.3.4 Imports and ExportsThe IHS Global Insight database provides estimates of import and export shipments that move intactbetween the international ocean port (e.g. Port of New York/New Jersey) and the Detroit BEA. Theseestimates do not capture all international freight moving in these corridors, much of which moves indomestic equipment as domestic freight. For example, a containerized import will be “converted” todomestic freight when it, for example, enters an import distribution center (IDC) near the Port of LosAngeles and then departs the IDC in domestic equipment for the Detroit BEA. Similarly, export cargo canbe shipped in domestic equipment to the international gateway port and then transloaded for shipmentoverseas. These types of moves are captured asdomestic shipments and thus are included in thedomestic inbound and outbound data presented earlier. Figure 2-12: Detroit BEA Import TruckAdditionally, the import and export data do not include Cargo in 2009trade with Canada and Mexico, which are reviewedseparately in Sections 2.3.5 and 2.3.6 respectively.The Detroit BEA had import cargo, excluding cross-border trade with Canada and Mexico, of 5.0 milliontons in 2009 with a value of $12 billion. As shown inFigure 2-12, this cargo is broken down into severalflows. The inbound flow of 1.4 million tons representsimports, mainly of warehouse-able commodities, viainternational cargo gateways to the Detroit BEA. Thetop two gateways are New York (19 percent of tons)and Los Angeles (16 percent of tons). Source: Derived from IHS Global Insight Transearch Data7 Internal refers to freight with its origin and destination within the Detroit BEA. 22 | TranSystems

Translinked Freight Study Existing Freight FlowsThe outbound flow of 1.0 million tons is import cargo arriving in the Detroit area from overseas and thenshipped to a final destination outside the Detroit BEA. The largest two commodities are Primary MetalProducts (53 percent of tons) and Clay, Concrete, Glass or Stone (29 percent). Final destinations areprimarily the regions surrounding the Detroit BEA. The internal flow, at 2.5 million tons, is cargo identifiedas imports arriving in the Detroit BEA (for example, via the Great Lakes) that remain in the Detroit BEA.The largest commodity in this segment is Nonmetallic Minerals (1.8 million tons).Figure 2-13 shows the breakdown of export cargo by Figure 2-13: Detroit BEA Export Truckdirection. The Detroit BEA had total export cargo of Cargo in 20095.4 million tons in 2009. The outbound flow of 2.2million tons represents exports via internationalgateways outside the Detroit BEA. The largest gatewaywas Los Angeles (37 percent of tons) followed byToledo, OH (11 percent) and Houston, TX (8 percent).The top three commodity groups were Chemicals orAllied Products, Waste or Scrap Materials, and FarmProducts.The inbound flow of 0.5 million tons captures exportsshipped from other parts of the country to the DetroitBEA, and then exported overseas. Origins areprincipally the areas around Detroit. Finally, the internal Source: Derived from IHS Global Insight Transearch Dataflow captures exports originating within the DetroitBEA and shipped overseas via the Detroit BEA. Thisflow amounted to 2.5 million tons.2.3.5 CanadaAs a major border crossing point, the Detroit BEA has a significant volume of truck freight generated bylocal and U.S. trade with Canada. In 2009, total volume was 34 million tons with a value of $98 billion.As shown in Figure 2-14, the largest part this freight, 28 Figure 2-14: Detroit BEA - Canada Truckmillion tons or 83 percent, moved through the Detroit Cargo in 2009BEA to and from other parts of the U.S. This throughfreight is dominated by warehouse-able cargo, includingshipments of Food or Kindred Products, Chemicals orAllied Products, Transportation Equipment, Pulp, Paperor Allied Products, Farm Products and Rubber or MiscPlastics.The inbound truck trade from Canada to the DetroitBEA amounted to 3.4 million tons with a value of $9.4billion. Locations in Ontario are the source for 89percent of the inbound truck freight from Canada. Thetop three commodity groups are TransportationEquipment (32 percent of tons), Primary Metal Products Source: Derived from IHS Global Insight Transearch Data(19 percent), and Food or Kindred Products (7percent). 23 | TranSystems

Translinked Freight Study Existing Freight FlowsThe outbound truck trade to Canada from the Detroit BEA was 2.4 million tons with a value of $7.9 billion.Ontario dominates the outbound trade and was the destination for 95 percent of outbound tons. Majorcommodity groups were Primary Metal Products (25 percent of tons), Transportation Equipment (25percent), Farm Products (11 percent), and Chemicals or Allied Products (9 percent).Finally, the source database provides estimates of freight flows by truck (and rail) between the Detroit BEAand Canadian port hinterlands, including Halifax. These data are reviewed in Section 2.6 in a discussion offreight flows along specific corridors.2.3.6 MexicoTruck trade with Mexico amounted to only 1.1 million tons with a value of $5.4 billion. This small amount oftruck freight, 42 percent of total trade volume with Mexico, reflects the preference for rail in the long-distance corridor between the Detroit BEA and Mexicoand the likelihood that some Mexican trade flowsthrough import distribution centers in other parts of the Figure 2-15: Detroit BEA - Mexico TruckU.S. prior to arrival in the Detroit area, thus arriving in Cargo in 2009Detroit as a domestic shipment.As shown in Figure 2-15, inbound truck freight fromMexico amounted to 0.56 million tons. This freight isprimarily higher-value commodities and the largestcommodity groups were Transportation Equipment (38percent), Machinery (13 percent), and ElectricalEquipment (12 percent).The outbound trade to Mexico was 0.49 million tonsand is dominated by Chemicals or Allied Products (50percent), which includes plastics and synthetic fibers. Source: Derived from IHS Global Insight Transearch Data 24 | TranSystems

Translinked Freight Study Existing Freight Flows2.4 Detroit BEA Rail Cargo2.4.1 TotalRail is predominant over longer distances and it was the transport mode for 18 percent of tons and 19percent of cargo value moving in, out, within and through the Detroit BEA in 2009. This rail freight isgenerated by local consumption and industrial production, and freight movements through the Detroit BEAbetween other regions (e.g. Canada to other parts of the U.S.). Total rail freight amounted to 53 milliontons with a total value of $77 billion.Rail involves a variety of trade flows and modes as shown in Figure 2-16. The largest segment by tonnage isdomestic inbound freight, which accounted for 42 percent of tons in 2009 but only 14 percent of total value,due to the presence of low-value coal shipments, which account for 67 percent of the domestic inboundtonnage. Canada rail shipments (by carload and intermodal) account for 17 percent of tons and 30 percentof value, due to the presence of higher-value manufactured goods in this trade. Rail shipments through theDetroit BEA between Canada and other U.S. regions dominate the Canada rail flows, accounting for 88percent of tonnage. The third largest trade flow is domestic outbound shipments from the Detroit BEA,accounting for 16 percent of tons and 33 percent of value, the larger share of value due to outboundshipments of higher value commodities (e.g. Transportation Equipment). Rail shipments with Mexico areanother high value commodity trade, accounting for 3 percent of rail tons and 11 percent of rail cargo value.Rail cargo involves different types of rail modes – carload, intermodal (that is, container or trailer on flatcar),and rail (freight moving to and from Canada and Mexico). Lower value commodities dominate movementsby carload, which accounted for 57 percent of tons and 36 percent of value. Intermodal rail, with 4 percentof tons and 14 percent of value, handles higher value commodities. Trade with Canada and Mexico isclassified under a generic rail mode. Intermodal rail has a presence in these trades due to the many highervalue commodities shipped. Figure 2-16: Detroit BEA Rail Cargo by Trade Flow in 2009 Source: Derived from IHS Global Insight Transearch Data 25 | TranSystems

Translinked Freight Study Existing Freight FlowsA profile of regional rail cargo (domestic and international, all directions) by commodity group is provided inFigure 2-17. The largest commodity group is inbound shipments of Coal, which amounted to 15 million tonsin 2009 and 28 percent of the region’s rail cargo. The other top commodities are Chemicals and AlliedProducts (13 percent of tons), Transportation Equipment (12 percent), Petroleum and Coal Products (8percent), and Primary Metal Products (8 percent). Transportation Equipment is primarily Motor Vehiclesand Motor Vehicle Parts or Accessories. Agricultural and consumer related commodities, Food Products (5percent) and Food or Kindred Products (4 percent) also appear in the top ten commodity groups.The commodity ranking shifts when a filter is applied to identify the warehouse-able commodities, thosesuited to warehousing and logistics services (see background discussion in Section 2.2). The total amount ofwarehouse-able rail cargo is estimated at 21 million tons, dominated by Chemicals and Allied Products (32percent of warehouse-able tons) and Transportation Equipment (30 percent). Examples of commodities inthe Chemicals and Allied Products group are Plastic Materials and Synthetic Fibers, Soap or OtherDetergents, and Dyes.Further analysis of commodities, with a focus on the warehouse-able segment, is provided in the discussionof domestic and international rail flows by direction (inbound, outbound, etc.) presented below. A review ofintermodal rail corridors is provided in Section 2.6.3. Figure 2-17: Detroit BEA Rail Cargo in 2009 – Top Ten Commodity Groups Source: Derived from IHS Global Insight Transearch Data 26 | TranSystems

Translinked Freight Study Existing Freight Flows2.4.2 Domestic Inbound and OutboundDomestic inbound and outbound flows together account for 58 percent of rail cargo tons related to theDetroit BEA. This cargo is generated by industry and consumption within the Detroit BEA, and demand inthe rest of the country.In 2009, the Detroit BEA had inbound rail cargo of 22 million tons with an estimated value of $11 billion.Approximately 15 million tons (65 percent) with a value of $486 million (5 percent) was inbound shipmentsof coal. Warehouse-able rail cargo amounted to 3.2 million tons with a value of $8 billion (77 percent). Asshown in Figure 2-18, the top-15 rail commodities shipped inbound to the Detroit BEA are a mixture ofwarehouse-able and other commodities. Four of the five top commodities are lower value and bulk-focusedcommodities, and these are nearly all shipped by carload service. Carload service moved 78 percent of thewarehouse-able commodities, including shipments of transportation equipment (e.g., Motor Vehicles inspecialized auto railcars). The remaining 22 percent of the warehouse-able commodities (e.g. Motor VehicleParts or Accessories) move by intermodal service (that is, container or trailer on flatcar).The Detroit BEA generated 8 million tons of outbound cargo with a value of $25 billion in 2009. Anestimated 3.8 million tons (46 percent) with a value of $23.7 billion (94 percent) was defined as warehouse-able cargo. The top outbound commodity group was Transportation Equipment (58 percent of outboundtons), which moved by carload service and intermodal rail service. The two other main warehouse-ablecommodities were Miscellaneous Mixed Shipments by intermodal rail and Food or Kindred Products, nearlyall shipped by carload service. Figure 2-18: Detroit BEA Inbound and Outbound Rail Cargo in 2009 – Top 15 Commodity Groups * The chart excludes coal shipments, which amount to 14.6 million tons. Source: Derived from IHS Global Insight Transearch Data 27 | TranSystems

Translinked Freight Study Existing Freight FlowsApart from coal and iron ore related shipments, rail freight is widely dispersed across origin and destinationregions (Figure 2-19). The top four lanes involve inbound coal shipments from Wyoming, West Virginia andKentucky and mainly inbound iron ore shipments from the Cincinnati, OH BEA. Outside of these top fourlanes, rail freight is widely dispersed by origin and destination. Some of the larger lanes include BEAscentered on ports and distribution hubs – for example, Chicago, New York, and Kansas City.The distribution by lane shifts when focusing on the warehouse-able commodity segment, with port andlogistics hub related BEAs, as well as large population centers, more prominent. The mix of origins reflectsinbound shipments related to local industry, notably the automotive sector, and for local consumption.Similarly, the outbound destinations are partly driven by shipments by the automotive sector, both offinished vehicles and components. Figure 2-19: Detroit BEA Inbound and Outbound Rail Cargo in 2009 – Top Freight Lanes Source: Derived from IHS Global Insight Transearch Data 28 | TranSystems

Translinked Freight Study Existing Freight FlowsFigure 2-20: Domestic Inbound Rail Freight 29 | TranSystems

Translinked Freight Study Existing Freight FlowsFigure 2-21: Domestic Outbound Rail Freight 30 | TranSystems

Translinked Freight Study Existing Freight Flows2.4.3 Domestic Internal and ThroughOnly a small volume of rail cargo is reported as moving internally within the Detroit BEA. The total volumewas 215,000 tons, including Petroleum or Coal Products (45 percent of tons), Transportation Equipment(13 percent), Chemicals or Allied Products (13 percent), and Clay, Concrete, Glass or Stone (11 percent).There was no domestic through rail cargo reported in the database.2.4.4 Imports and Exports (excl. NAFTA)Rail import cargo (excluding cross-border from Canadaand Mexico) amounted to 0.7 million tons in 2009 witha value of $1.3 billion. As presented in Figure 2-22, the Figure 2-22: Detroit BEA Import Rail Cargo in 2009cargo is reasonably balanced between inbound andoutbound flows. The principal difference is in thecommodity mix, with the inbound direction largelymade up of warehouse-able cargo. The top inboundorigins for this warehouse-able freight are coastal BEAs,including Los Angeles (22 percent), New York (15percent), Norfolk (13 percent), Seattle (11 percent),and Houston (8 percent).The outbound flow represents import cargo arriving inthe Detroit BEA from overseas (e.g. via the GreatLakes) and then railed to other markets in the U.S. Thethree main commodity groups are NonmetallicMinerals, Clay, Concrete, Glass or Stone, and Primary Source: Derived from IHS Global Insight Transearch DataMetal Products. Destination BEAs are mainly inneighboring states, including Chicago (35 percent),Columbus (14 percent) and Dayton (7 percent).Overseas rail export cargo (excluding cross-border with Figure 2-23: Detroit BEA Export RailCanada and Mexico) amounted to 0.9 million tons with Cargo in 2009a value of $1.3 billion. As shown in Figure 2-23, themajority of export rail cargo involves other thanwarehouse-able commodities. The outbound flow,exports from the Detroit BEA, mainly moves to port-related BEAs, including Norfolk (18 percent), NewOrleans (17 percent), New York (14 percent), LosAngeles (11 percent) and Jacksonville (8 percent). Themain commodity groups are Farm Products, Waste orScrap Materials, Misc Mixed Shipments, andTransportation Equipment.The inbound direction is export cargo from other BEAstransported by rail to the Detroit BEA and then shippedoverseas. The main commodity groups are Coal, Source: Derived from IHS Global Insight Transearch DataPetroleum or Coal Products, and Chemicals or AlliedProducts. The main origin BEAs are Pittsburgh,Wheeling, and Columbus. 31 | TranSystems

Translinked Freight Study Existing Freight Flows2.4.5 CanadaCanada rail cargo amounted to 19 million tons with a value of $30 billion, Similar to Canada truck freight,the principal rail flow is freight moving through the Detroit BEA between Canada and other regions of theU.S.Through rail cargo was 17 million tons (Figure 2-24) and61 percent of this volume was moving southbound from Figure 2-24: Detroit BEA - Canada RailCanada and 39 percent northbound to Canada. Nearly Cargo in 200990 percent of cargo originated in or was destination forOntario and Quebec. Major U.S. origin BEAs fornorthbound through cargo were Houston, Chicago, DesMoines, St. Louis, and Macon; while top U.S. destinationBEAs for southbound through cargo were Chicago, LosAngeles, Houston, Grand Rapids, and Memphis. Majorcommodities moving northbound are Chemicals orAllied Products, Food or Kindred Products, Petroleumor Coal Products, Farm Products, Clay, Concrete, Glassor Stone, and Transportation Equipment. In thesouthbound direction from Canada, the maincommodities are Chemicals or Allied Products, PrimaryMetal Products, Pulp, Paper or Allied Products,Petroleum or Coal Products, and Transportation Source: Derived from IHS Global Insight Transearch DataEquipment.The inbound rail trade from Canada to the Detroit BEA was 2 million tons with a value of $8.1 billion. Thethree main Canadian origins were Ontario (63 percent), Quebec (13 percent) and British Columbia (8percent). Nova Scotia, which includes the Port of Halifax, was the origin for one percent of the inbound railcargo. Leading commodity groups were Transportation Equipment (50 percent), Primary Metal Products (15percent), Lumber or Wood Products (12 percent) and Chemicals or Allied Products (10 percent).Outbound rail freight to Canada from the Detroit BEA was 0.4 million tons with a value of $1.6 billion.Nearly 84 percent of the tons were shipped to Ontario and Quebec, and the main commodities wereTransportation Equipment (45 percent), Farm Products (15 percent), Chemicals or Allied Products (14percent), and Petroleum or Coal Products (10 percent). 32 | TranSystems

Translinked Freight Study Existing Freight Flows2.4.6 MexicoRail freight with Mexico amounted to 1.5 million tonswith a value of $8.5 billion. The inbound direction from Figure 2-25: Detroit BEA - Mexico RailMexico is the largest flow (Figure 2-25), with 1.07 Cargo in 2009million tons, and nearly all this cargo is classified aswarehouse-able. The inbound trade is driven by theautomotive industry and the major commodity groupsare Transportation Equipment (91 percent), Machinery(2 percent) and Fabricated Metal Products (2 percent).Outbound freight shipments by rail amounted to 0.45million tons and, similar to the inbound, has a significantcomponent driven by the automotive industry. Themain commodity groups are Chemicals or AlliedProducts (55 percent), Transportation Equipment (23percent), and Farm Products (7 percent). Source: Derived from IHS Global Insight Transearch Data2.5 Other Transport ModesThe Detroit BEA also handles freight by air and water. Total air freight was 83,000 tons in 2009 and valuedat $1.45 billion. The largest flow was outbound, accounting for 74 percent of cargo tons.Freight moving by water amounted to 26.6 million tons with a total value of $1.68 billion tons. Its value perton was only $63 compared to $17,445 for air freight, $1,616 for truck and $1,456 for rail, due to the muchlower value bulk commodities shipped by water. The largest flow was inbound with 24.5 million tons andthe three main inbound commodities were Iron Ore (44 percent), Coal (34 percent) and Broken Stones orRiprap (19 percent). The outbound flow was 1.1 million tons and involves a variety of mainly bulkcommodities. Finally, there was an additional 0.9 million tons of internal waterborne cargo.2.6 Corridor Specific FlowsThe discussion of Detroit BEA cargo flows presented above primarily focused on the composition of freightby trade, direction, commodity type and mode of transport. The freight flow data also allows a review ofspecific freight corridors to understand characteristics specific to those lanes. Section 2.6 addresses severalcorridors of interest to the evaluation of logistics opportunities in the Detroit region.2.6.1 Halifax Freight FlowsThe Port of Halifax is the first deep-water container port on the Eastern seaboard of North America forships arriving from Europe and the Mediterranean, and from Asia via the Suez Canal. With a smallpopulation in its hinterland, the port specifically targets containerized cargo moving to and from inlandregions of Canada and the U.S. Midwest, including the Detroit area. The Port is connected by CN railservice to these markets. The Port had total throughput of 425,461 TEU in 2010 compared to the recessionimpacted 344,811 TEU of 2009, but still below the high of 550,462 TEU seen in 2005. The followingdiscussion provides a profile of freight flows moving between the Halifax area and the Detroit BEA thatwere identified in the IHS Global insight database. 33 | TranSystems

Translinked Freight Study Existing Freight FlowsA total of 386,000 tons were identified as originating in Figure 2-26: Detroit BEA – Cargo Flowsthe Halifax area (defined as the Halifax CMA8 and non- from the Halifax Area in 2009CMA Nova Scotia), of which 356,000 tons passedthrough the Detroit BEA to other regions and only32,000 tons was inbound to the Detroit BEA (Figure2-26. This broad regional view is assumed to captureNova Scotia origin freight shipped to the Detroit areaand other parts of the U.S., and imports through thePort of Halifax.Close to 100 percent of the cargo is defined aswarehouse-able, while 60 percent of the freight movedby rail and 40 percent by truck. The largest commoditygroups are Pulp, Paper or Allied Products (55 percent oftotal tons), Rubber or Misc Plastics (24 percent),Lumber or Wood Products (7 percent), and Chemicalsor Allied Products (5 percent). Source: Derived from IHS Global Insight Transearch DataForest products are most likely sourced from NovaScotia. The most likely containerized import commodities are: Rubber or Misc Plastics, Chemicals or AlliedProducts; Food or Kindred Products; Transportation Equipment, Machinery, Furniture or Fixtures, TextileMill Products, Apparel and Related Products, and Electrical Equipment. The total volume of thesecommodities in 2009 was 125,000 tons or 32 percent of the total. Assuming 10 tons per TEU, thesecommodities generated the equivalent of 12,500 TEU of containerized import cargo bound for or throughthe Detroit BEA from Halifax. Of this total, an estimated 15,800 tons or 1,580 TEU was inbound freight intothe Detroit BEA, and the balance through freight to other parts of the U.S. Ten U.S. states were thedestinations for 80 percent of freight from the Halifax area flowing through the Detroit BEA: Wisconsin,Illinois, Kentucky, South Carolina, Tennessee, Ohio, Indiana, Texas, Mississippi, and Missouri. The aboveanalysis is based on 2009 data and volumes will have grown in 2010 based on the 26 percent growth of totalcontainer throughput at Halifax in 2010.Only 20,000 tons of cargo was identified as flowing through or from the Detroit BEA to the Halifax area,and 99 percent of this freight was through cargo. Rail was the dominant mode with an 88 percent share and76 percent of the freight was classified as warehouse-able. The three largest commodity groups wereChemicals or Allied Products (47 percent), Food or Kindred Products (18 percent), and Primary MetalProducts (12 percent). The four largest origins in the U.S. were Chicago, Huntsville, AL, Cleveland, andMinneapolis, which together accounted for 46 percent of the cargo tons.2.6.2 Montreal Freight FlowsThe Port of Montreal is an important gateway for containerized trade, notably with North Europe and theMediterranean, and the Port is connected by CN and CP rail service to U.S. markets. Montreal had totalthroughput of 1.33 million TEU in 2010 compared to 1.25 million TEU in 2009, and 1.47 million TEU in2008. The following discussion provides a profile of freight flows moving between the Montreal CMA andthe Detroit BEA that were identified in the IHS Global insight database.8 CMA – Census Metropolitan Area 34 | TranSystems

Translinked Freight Study Existing Freight FlowsA total of 1.67 million tons of cargo flowed to and from Figure 2-27: Detroit BEA – Cargo Flowsthe Montreal CMA in 2009, the principal flows with the Montreal CMA in 2009southbound and northbound through the Detroit BEA(Figure 2-27). Rail is the principal transport mode with a61 percent share of the total volume. A portion of thefreight is believed to be international containerizedimport and export trade handled by the Port ofMontreal.A total 1.2 million tons were identified as originatingfrom the Montreal CMA, of which 1.1 million tonspassed through the Detroit BEA and only 87,000 tonswas destined for the Detroit BEA. Warehouse-ablecargo accounted for 63 percent of the through cargoand 72 percent of the inbound cargo. The commoditymix in the trade from Montreal through the DetroitBEA is focused on Primary Metal Products, Pulp, Paper Source: Derived from IHS Global Insight Transearch Dataor Allied Products (23 percent), Chemicals or AlliedProducts (21 percent), Waste or Scrap Materials (17percent), and Food or Kindred Products (8 percent). Trade inbound to the Detroit BEA is dominated byPrimary Metal Products (28 percent), Pulp, Paper or Allied Products (24 percent), and Food or KindredProducts (11 percent).The northbound flows were smaller than the southbound, amounting to 0.5 million tons. Total cargo flowingthrough the Detroit BEA to the Montreal CMA was 0.47 million tons, while only 26,000 tons originated inthe Detroit BEA. Warehouse-able cargo made up 57 percent of the through cargo and only 17 percent ofthe outbound cargo. The major commodities in northbound trade through the Detroit BEA to the Montrealarea were Food or Kindred Products (24 percent), Farm Products (16 percent), Clay, Concrete, Glass orStone (10 percent), Petroleum or Coal Products (9 percent), and Chemicals or Allied Products (9 percent).Commodities flowing outbound from the Detroit BEA to the Montreal CMA were Farm Products (67percent), Waste or Scrap Materials (11 percent), and Chemicals or Allied Products (11 percent).2.6.3 U.S. Intermodal Rail CorridorsNearly 2.0 million tons of cargo was identified as moving in intermodal rail corridors to and from theDetroit BEA. The top-10 intermodal lanes by origin and destination are shown in Figure 2-28. The data isbroken into domestic freight and international freight, which moves intact between coastal ports andDetroit. However, the domestic freight also includes some international cargo, which has been transloadedat the import or export port, into or from domestic equipment. In particular, a substantial portion of theintermodal freight labeled as domestic from Los Angeles and other port BEAs (e.g. New York, VA) iscontainerized imports that are transloaded from marine containers at import distribution centers (IDCs)into domestic 48- and 53-foot containers.Turning to the inbound flows, the top three origins are the port BEAs of Los Angeles, New York andSeattle. The largest commodity group flowing in these lanes is Miscellaneous Mixed Shipments, whichcaptures import merchandise moving in domestic equipment. This commodity group accounted for 98percent of the intermodal freight from Los Angeles, 74 percent from New York and 99 percent fromSeattle. Other port BEAs are Norfolk and Jacksonville, and Miscellaneous Mixed Shipments accounted for 94percent and 84 percent of cargo tons respectively. Transportation Equipment is the principal commodity 35 | TranSystems

Translinked Freight Study Existing Freight Flowsflowing in other inbound intermodal lanes – 90 percent from Kansas City, 91 percent from San Antonio, 64percent from Dallas, 45 percent from Atlanta, and 52 percent from St. Louis.The top outbound lanes are also dominated by coastal BEAs – New York, Los Angeles, Norfolk andJacksonville. Miscellaneous Mixed Shipments is the dominant commodity flowing in these lanes – 84 percentNew York, 77 percent Los Angeles, 83 percent Norfolk, and Jacksonville 95 percent. The outbounddomestic lane to Kansas City is nearly all Transportation Equipment (94 percent). Other lanes have amixture of Transportation Equipment and Miscellaneous Mixed Shipments. Figure 2-28: Detroit BEA - Top-10 U.S. Intermodal Rail Lanes by Cargo Tons in 2009 Source: Derived from IHS Global Insight Transearch Data 36 | TranSystems

Translinked Freight Study Existing Freight Flows3 TOLEDO AND WINDSOR FREIGHT FLOWS3.1 Toledo, OhioToledo is located in northwest Ohio on the Maumee Figure 3-1: Port of Toledo CargoRiver, at the southern end of Maumee Bay. The primaryfreight flows are related to activity at the Port ofToledo, which handles domestic and internationalfreight moving by vessel, and is linked to overseasmarkets by the Great Lakes and St. Lawrence SeawaySystem.The Port’s total throughput was 10.0 million tons in2009 and 10.9 million tons in 2010 (Figure 3-1), bothyears lower than the 12.3 million tons achieved in 2007.The largest flows are shipments with other U.S. ports(36 percent of tons in 2010) and shipments with Canada(58 percent of tons). International cargo accounted for6 percent of total tons in 2010.The commodity mix is focused on lower value dry bulk Source: Port of Toledocommodities – coal, iron ore, grain and other dry bulkcommodities – which accounted for 99 percent of totaltons in 2010. The principal outbound commodities are Figure 3-2: Port of Toledo Commodity Mixcoal and grain (mainly corn and soybeans), and the maininbound commodities are iron ore, crude materials (e.g.limestone) and grain (mainly wheat and oats).9 Generalcargo accounted for 0.3 percent of total tons in 2010.The Port handles project cargo for the surroundingregion. For example, in mid-2010, the Port handled fivenew wide-span cranes on route to the new CSXNorthwest Ohio Intermodal Terminal at NorthBaltimore, Ohio, 40 miles south of Toledo.As a primarily bulk cargo port, transportation activityhas a significant rail component. For example, inboundiron ore is railed from the port to steel mills, while coalfor export is railed into the port.The Port of Toledo handles freight for the Detroit BEA Source: Port of Toledoreviewed in Section 3. In 2009, based on the IHS GlobalInsight data, 4.9 million tons of cargo was shipped fromthe Detroit BEA to the Toledo BEA, and this total included 0.25 million tons of identified export cargo,which would have been shipped via the Port of Toledo. In the same year, 10.8 million tons were shipped9 Major commodities by direction based on Waterborne Commerce Statistics from the U.S. Army Corps of Engineers. 37 | TranSystems

Translinked Freight Study Existing Freight Flowsfrom the Toledo BEA to the Detroit BEA, including 0.17 million tons of identified import cargo. Both exportand import cargo comprised lower value bulk commodities.The Port has looked to the container market for possible future growth, as a load and discharge point forfuture feeder services connecting to Canada’s East Coast container ports. However, there are manychallenges related to providing container feeder service to and from the Great Lakes, lock navigation andtotal transit time, a constrained shipping season, and competition from intermodal rail service. In early 2010,the Port took delivery of two new mobile harbor cranes capable of handling a variety of cargo types,including containers if a short sea service develops in the future. Funding for the purchase of the cranescame from American Recovery and Reinvestment Act resources, administered by the Ohio Department ofTransportation.In 2009, 15.0 million tons of domestic freight moved Figure 3-3: Detroit BEA Domestic Freightbetween the Detroit BEA and the Toledo BEA, 10.4 Flows with Toledo BEA, 2009million tons inbound from the Detroit BEA and 4.6million tons outbound from the Detroit BEA. Truckis the dominant mode accounting for 92 percent ofinbound freight and 96 percent of outbound freight.The top five inbound commodities from the ToledoBEA are Nonmetallic Minerals (40 percent),Petroleum or Coal Products (14 percent), FarmProducts (12 percent), Clay, Concrete, Glass orStone (10 percent), and Food or Kindred Products(6 percent). The top five outbound commoditiesshipped to the Toledo BEA are Nonmetallic MineralsFarm Products (44 percent), Petroleum or CoalProducts (17 percent), Chemicals or Allied Products(6 percent), and Food or Kindred Products (6 Source: Derived from IHS Global Insight Transearch Datapercent).3.2 Windsor, OntarioThe Windsor area has a diversified economy with a strong presence in the automotive sector, agriculture,and food products, and emerging sectors that include high tech manufacturing. Evaluation of Windsor freightflows focuses on the Windsor Census Metropolitan Area (CMA), identified in the IHS Global Insightdatabase. The Windsor CMA is made up of the Canadian census subdivisions of Windsor, LaSalle,Tecumseh, Amherstburg, and Lakeshore, and it had a total estimated population of 331,000 in 2010.10A total of 1.4 million tons of freight was identified as related to the Windsor CMA (Figure 3-4). This totalcovers freight to and from the Detroit BEA, and between the Windsor CMA and other regions of the U.S. Itexcludes freight to and from other regions of Canada, and cross-border freight passing through the WindsorCMA.Truck is the dominant mode of transport, accounting for 88 percent of freight shipped to the Windsor CMAand 72 percent of the tons shipped from the Windsor CMA. The respective shares for rail were 5 percentand 28 percent.10 Annual Demographic Estimates: Subprovincial Areas 2005 to 2010, Statistics Canada 38 | TranSystems

Translinked Freight Study Existing Freight FlowsThe freight flows from the Windsor BEA to theDetroit BEA and other parts of the U.S. are primarily Figure 3-4: Windsor, Ontario CMA Freightwarehouse-able commodities related to the Flows in 2009automotive sector. Transportation Equipmentaccounted for 91 percent of freight shipped to theDetroit BEA and 72 percent of freight shipped to therest of the U.S.Warehouse-able commodities accounted for asmaller share of freight flowing to the Windsor BEA,26 percent of tons from the Detroit BEA and 59percent of tons from the rest of the U.S.Some additional perspective on freight activity in thesouthwest region of Ontario is provided by data forthe London CMA, which is located approximately116 miles northeast of Windsor and 67 miles east ofthe Port Huron/Sarnia border crossing. The London Source: Derived from IHS Global Insight Transearch DataCMA had an estimated population of 492,000 in2010, nearly 50 percent more than the WindsorCMA, and has a similar industry profile with a strong presence in the automotive industry and agriculturerelated food and food processing.A total of 0.4 million tons of freight was identified as Figure 3-5: London, Ontario CMA Freightrelated to the London CMA (Figure 3-5). This total Flows in 2009covers freight to and from the Detroit BEA, and toand from other regions of the U.S. It excludes freightto and from other regions of Canada, and cross-border freight passing through the London CMA.Truck is the dominant mode of transport, accountingfor 87 percent of freight shipped to the LondonCMA and 70 percent of the tons shipped from theLondon CMA. The respective shares for rail are 13percent and 30 percent.The freight flows are primarily warehouse-ablecommodities. Transportation equipment accountsfor 49 percent of tons shipped to the Detroit BEAand 17 percent of freight shipped to the rest of theU.S. Food or Kindred Products is the largest Source: Derived from IHS Global Insight Transearch Datacommodity shipped to the rest of the U.S.,accounting for 29 percent of freight. Other majorcommodities in freight flows between London CMA and the U.S. are Primary Metal Products, Chemicals orAllied Products, and Farm Products. 39 | TranSystems

Translinked Freight Study Industry Trend Analysis4 INDUSTRY TREND ANALYSIS4.1 Existing Transportation Infrastructure and Location Selection FactorsLogistics managers are continuously evaluating their logistics networks to squeeze excess transportationexpenses and other costs out of their supply chains. The availability of all transportation modes is essentialin order to enable logistics managers to have the flexibility to choose the mode that best suits shipmentneeds. Lowest-cost transportation options, such as rail, are selected provided that service is available, andtransit time and reliability meet service level requirements. Trucking costs are the largest portion of thesupply chain expense. Because of this, supply chain strategies that reduce trucking as much as possible havebeen a major goal of supply chain managers. Warehouse locations are chosen based on the cost of thefacility, and their proximity to customers and suppliers, thereby reducing trucking costs. Labor, greeninitiatives, government incentives, etc. are considered after transportation service and rate levelrequirements are met, and these considerations typically influence a specific site location among competingsites that meet transportation requirements. The following sections evaluate how the Translinked region(represented by Detroit) meets these selection factors.4.1.1 Logistics and Transportation Infrastructure SummaryTransportation infrastructure serving the region features advantageous access to the Michigan Peninsula, theCanadian border, and access to U.S. Midwest markets. Air, rail, truck, and warehousing services and access,which are key factors for flexible and responsive supply chains, are well established as a result of theirsupport of the automotive industry. Table 4-1 summarizes logistics features, which will be discussed furtherin this section. Table 4-1: Detroit Logistics Summary Infrastructure Description CSX – U.S. East, Midwest, main Western States Access Rail NS – U.S. East, Midwest access CN and CP - Canada Rail Markets, US Central Plain States, Gulf US-69 to Blue Water Bridge to CA-402, US 75, Highways US 375/CA-401 via Ambassador Bridge US-96, US-94, US-275 (to US-80) Key Ocean Gateways Halifax, Montreal, Other Canadian and U.S. ports U.S. Rank 27th Airport Total Cargo 193,344 metric tons Total Space (sq. ft.) 366.8 - 524.0 million Vacancy Rate 13.5% - 14.9% Distribution Facilities Average Lease Rate ($/sq. ft./yr) $3.87 – $3.93 Detroit Transportation and Materials Moving Occupation (Hourly) $17.24 US Transportation and Materials Moving Occupation (Hourly) $15.70 Distribution Area Advantage Ontario, Canada, Michigan Peninsula, OH, IN, WI, IL Source: TranSystems, CB Richard Ellis, Grubb and Ellis, Colliers, Bureau of Labor Statistics 40 | TranSystems

Translinked Freight Study Industry Trend Analysis4.1.2 RailNorth America Class 1 railroads have been investing in programs to improve the speed and reliability of therailroads, including rail infrastructure, and rail personnel staffing issues since the mid-1990s. The result hasbeen improved rail service. Rail rates are on the rise, but remain the lower cost option as compared totrucking. Improved rail reliability and speed, mixed with uncertainty about truck rates and truck capacityavailability, have caused North American logistics managers to develop strategies to divert as much truckvolume as possible to rail.There are currently seven Class I railroads operating in the U.S. U.S. railroads are generally divided intoWestern and Eastern rail service areas, that connect to provide trans-continental service at key locations,such as North Baltimore, OH, Columbus, OH, Chicago, IL, Kansas City, MO, St. Louis, MO, Memphis, TN,and New Orleans, LA. The two Western railroads, The Union Pacific (UP) and Burlington Northern SantaFe (BNSF) serve states west of the Mississippi River. The CSX and Norfolk Southern (NS) railroads operatein the eastern half of the U.S. The two Canadian railroads, the Canadian National (CN) and the CanadianPacific (CP), have rail networks extending across Canada, and down through the U.S. Midwest, as far southas New Orleans. The Kansas City Southern Railroad (KCS) operates primarily in the U.S. Central PlainsStates and Mexico. Interchanges between the railroads add a degree of complexity in terms of adding transittime or negotiating rates; however, railroads do make efforts to streamline connections, especially in highvolume corridors, such as Los Angeles/Long Beach to New York. No single railroad has the ability to railfreight from one US coast to the other without handing-off to another railroad.Both NS and CSX have recently improved rail service to and from the Midwest, and Western Markets.CSX’s National Gateway Project includes a new terminal in North Baltimore, OH, and is aimed at improvingtheir connection to West Coast markets. NS’s Crescent Corridor improves rail service from the South tothe Northeast. Another NS network enhancement, the Heartland Corridor, improves service from the portof Norfolk, VA to Columbus, OH. Figure 4-1 maps the Class 1 Railroad network in North America. 41 | TranSystems

Translinked Freight Study Industry Trend AnalysisFigure 4-1: Class I Railroad Map with Container Ports 42 | TranSystems

Translinked Freight Study Industry Trend AnalysisFour Class 1 Railroads, CSX, NS, CP and CN, provide container-on-rail service, called intermodal serve theTranslinked region. Intermodal service availability in Detroit (the main intermodal hub in the region) isessential if international freight opportunities are to be considered, as virtually all international retail trade istransported in cargo containers. Detroit cargo does not have to interchange railroads to Canadian, or U.S.Eastern or Southern locations. Freight from the East Coast to Detroit would switch to northbound tracks interminals in Ohio, but does not require a transfer to another railroad. Rail freight between Detroit andWestern states does require a transfer to a connecting railroad. Cargo originating in Detroit and destinedfor Los Angeles for example might load at Detroit on the CSX railroad, transfer at North Baltimore, OH tothe UP Railroad for the journey to Los Angeles. Rail access in Detroit is desirable, because it supportslogistics mangers’ strategies to use the rail mode whenever possible.4.1.3 HighwaysRegional highway access is similar to major US areas of similar size, with additional advantages of borderaccess to Canada via CA-401 and CA-403. North/South access is provided by US-75, with East/Westtranscontinental truck traffic accommodated by US-69, and US-80 to the south. A key feature of the region’shighway network is the Canadian border crossing, where Michigan ranked first as the leading US truckborder crossing in 2010. Figure 4-2 maps major highways serving the Translinked region. Figure 4-2: Regional Highway Map Source: TranSystems 43 | TranSystems

Translinked Freight Study Industry Trend AnalysisFigure 4-3 displays annual truck traffic (inbound andoutbound) for the three Detroit border crossings from Figure 4-3: Detroit Truck Border2006 through 2010. After a sharp rise in truck traffic Crossingsstarting in 2006, truck crossings peaked in 2008, at 4.5million truck crossings. Truck traffic fell in 2009, tounder 3.5 million transits, but climbed to nearly 4.0million trips in 2010. The Ambassador Bridge handlednearly half of all truck traffic crossing the U.S. Border atDetroit.Additional U.S. security measures put in place over thepast decade have created extra steps for truckingproviders and shippers, resulting in delays in bordercrossing times. Recent improvements in border waittimes have been attributed to the economic downturn,but are expected to lengthen as the economy improves.As of October, 2011, adding capacity to the existingAmbassador Bridge is planned to address future trafficconcerns.4.1.4 Ocean GatewaysFor purposes of this report, an ocean gateway is defined Source: Public Border Operators Associationas a major port area handling containerized cargovolume. The top three ocean gateways in NorthAmerica are Los Angeles/Long Beach, CA, New York, NY, and Savannah, GA. The gateway used isimportant, because it affects the overall transit time or cost of a shipment. Ideally, the gateway that balancestransit time requirement and lowest overall transportation costs, called “total landed costs”11 is preferred.Another gateway consideration is port diversification. In response to disruptions that began on the U.S.West Coast starting in the late 1990’s, such as West Coast port congestion, labor lock outs and inland railcongestion, logistics managers allocated shipments over several gateways, including East Coast gateways,using Panama Canal “all water” services. This practice reduced the dependence on a single port. Prior to2000, shipments from Asia to the region typically entered the U.S. via Los Angeles/Long Beach, and werethen transported inland. Today, this shipment might just as likely enter the U.S. via another gateway (e.g.New York) and either railed or trucked to the region.The trade-off between lowest total landed cost and transit time is most influenced by the value of the cargobeing carried. Sophisticated supply chain managers consider the inventory carrying cost component of totallanded costs of gateways that add days to the overall transit. High value cargo’s inventory carrying costs aremore sensitive to additional transit days, and therefore require the fastest transits, while lower value goodsare able to tolerate slower transits at generally lower rates. High value cargoes are goods such aselectronics or auto parts, while lower value goods are items such as forest products.11 Total Landed Cost is the total of all expenses associated with the shipment from the point of origin to its finaldestination. Expenses included in the total landed cost calculation include, but are not limited to the productpurchasing price, ocean freight rates, rail and trucking costs, customs duties, and inventory carrying costs. 44 | TranSystems

Translinked Freight Study Industry Trend AnalysisThe Translinked region has access to all of theNorth America gateways, but two are Table 4-2: West Coast Transit Time Comparisonimportant as they provide a transit time (Transit Days): Shanghai to Detroitadvantage over other key North American Port Gateway Ocean Inland Total Princeports. The Canadian ports of Prince Rupert and Rail Transit* RupertHalifax are situated in geographically Deltaadvantageous positions that shorten ocean and Prince Rupert 11.0 5.6 16.6 -inland transits. Table 4-2 and Table 4-3 Seattle 12.0 5.8 17.8 1.2compare total transit times from key origins toDetroit (representing the Translinked region) Los Angeles 13.3 6.0 19.3 2.7by selected North American West and East * Based on website schedules, actual transits may varyCoast gateways. Shipments over Prince Rupert Source: CN, BNSF and NS Railroad Websitesfrom Shanghai beat competing West Coastports by 1 to 2 days, and the Halifax gateway Table 4-3: East Coast Transit Time Comparisontransit to Detroit is faster from Rotterdam by (Transit Days): Hong Kong and Rotterdam toan estimated 3.1 days over its regional Detroitcompetitor, Montreal. According to the Port of Prince Inland TotalHalifax, more congested ports, such as New Port Gateway Ocean Rupert Rail TransitYork and Montreal add time to the overall Deltatransit due to additional container “dwell time”, From Hong Kongwhich is the time containers sit idle in port Halifax 25 5.2 30.2 -awaiting an interchange to truck or rail services.In addition to having the fastest transits, service New York 25 7.0 32.0 -1.8from Prince Rupert is entirely on the CN Montreal* 28 4.3 32.3 -2.1Railroad, while service to Detroit from other From RotterdamU.S. West Coast ports requires a railroadinterchange. A single service rail provider is Halifax 7 5.2 12.2 -considered to be less cumbersome to use, but New York 11 7.0 18.0 -5.8does raise concerns from some shippers who Montreal 11 4.3 15.3 -3.1require redundancy in their supply chains. From * Montreal transits based on Halifax transit plus 3 daysthe lowest total landed cost perspective, high Source: Halifax Port Authorityvalue commodities that are suited to rail inparticular may favor the Canadian gateways.4.1.5 AirportsA leading regional intermodal cargo hub must have air cargo services to accommodate time sensitiveshipments as part of an overall supply chain strategy. Detroit Metro Airport, handling 193,344 metric tonsof cargo in 2010, ranked 27th in a list of North America’s busiest cargo airports12. UPS and FedEx are theonly two regularly scheduled cargo airlines servicing the Detroit airport. International cargo services arealso provided by “belly cargo” carriers, which are combination cargo and passenger airlines, such as AirCanada, Air France, American Airlines, Continental, Delta, Lufthansa, KLM and others. These airlines serveas direct links to the International air freight network.The Willow Run Airport, in Ypsilanti, MI handled 92,484 metric tons in 2010, making it the 42nd busiestcargo airport in North America. Cargo airlines serving the airport are Kalitta Air, Active Aero, and NationalAirlines.12 Airports Council International 45 | TranSystems

Translinked Freight Study Industry Trend Analysis4.1.6 Toledo, OHThe region around Toledo, OH is making significant improvements in transportation Key projects in theToledo area are terminal improvements at the Port of Toledo, and the CSX National Gateway NorthBaltimore intermodal terminal.Port of ToledoThe port of Toledo is the largest Great Lakes Port in terms of area, and second largest in terms of cargovolume. Development focuses mainly on the port’s main commodities, which are coal, iron, grain, projectcargo (wind towers, construction projects), petroleum products, and cement. The port also has tworefineries that generate petroleum based cargo. Notable progress is evident both in terms of terminalfacilities and capabilities, as well as - and perhaps more importantly - the cooperation and coordinationbetween public and private entities that drive development in the area. The Toledo-Lucas County PortAuthority is partnering with Metropolitan Planning Organizations (MPO), such as the Toledo MetropolitanArea Council of Governments (TMACOG) and the Southeast Michigan Council of Governments(SEMCOG), and importantly, private industry, such as Midwest Terminals, CSX and Norfolk SouthernRailways, to develop and fund transportation planning throughout the region. Recent U.S. Stimulus Fundingwas applied to local transportation projects because regional agencies were able to quickly identify projectsbased on mutually agreed upon priorities. This regional, public/private partnership approach totransportation planning considers port, rail and roadway requirements to accommodate and complementmultimodal needs. Intermodal rail access that takes trucks off the highway, or port infrastructure thatpromotes Saint Lawrence Seaway traffic over other more costly truck to rail routes are examples ofregional coordination. Other developments are: • Toledo Port Authority o Purchased and developed defunct Chevron and JEEP plants o Port crane purchases provide additional cargo handling capabilities • Norfolk Southern o Norfolk Southern extend rail siding in Toledo yard to accommodate length of container unit trains • CSX Railroad o North Baltimore Intermodal Terminal (discussed below) • ODOT o Widening of I-75 between Toledo and North Baltimore o State Route 18 access improvement to North Baltimore • MiDOT o Approved routes for overweight trucksThe Port of Toledo has experienced additional business as a direct result of improvements to port facilitiesand equipment; however, key reasons are shippers understand the advantages of shipping over the Port ofToledo, and a Port Authority and MPOs that agree, and act on regional priorities.CSX National Gateway Initiative: North Baltimore Intermodal TerminalThe CSX National Gateway Initiative is a key railroad improvement project that will positively impact theNorthwest Ohio region. This public private partnership will create a more efficient CSX rail route linkingkey U.S. Mid Atlantic ports with Midwestern and Western markets for double stack containers. Theterminal in North Baltimore, OH opened in February of this year, and is considered the cornerstone of the 46 | TranSystems

Translinked Freight Study Industry Trend Analysisentire project. It comprises 500 acres total, with 280 acres being used by CSX initially. High speed cranesinstalled at North Baltimore enable containers to be off-loaded from incoming trains, and re-loaded on re-directed outbound trains so quickly, that the resulting overall transit reductions of containers from origin,through North Baltimore, to final destination has opened new markets. Service from New York, throughNorth Baltimore to Detroit, for example, was cited by CSX as becoming more attractive due to overallnetwork improvements, and improved switching capabilities. To capitalize on on-site and near-site DCopportunities, two thousand acres adjacent to the North Baltimore site have been re-zoned for industrialuse, in anticipation of a future need for logistical services in the area, given improved intermodal rail and airaccess.4.1.7 Windsor, ONWindsor is strategically located at the border between Canada and Michigan, and on the rail networks ofthe CN and CP, with several other railroads having user rights on CN and CP tracks through Windsor. Therail network provides links to the two major container ports in Eastern Canada – Montreal and Halifax –and other Canadian ports, and to the major Canadian population and production centers. The rail networkprovides transportation options for the major industries in and around Windsor, notably the automotiveindustry. In addition, Windsor is connected by highway to major population and industrial centers inOntario and Michigan. Short-haul rail service is provided in the Windsor area by the Essex TerminalRailway, with track running from Windsor to Amherstburg, ON that connects with all the major railroads inthe region. ETR services a variety of industries – automotive, forest products, agricultural, and foodproducts, chemicals and others. Figure 4-4: Current Rail System in Windsor 47 | TranSystems

Translinked Freight Study Industry Trend Analysis Source: City of Windsor “Community Based Strategic Rail Study, Final Report”For international trade moving by rail, the key piece of infrastructure in Windsor is the rail tunnel under theDetroit River. This tunnel was enlarged in 1994 but cannot accommodate double-stack high-cubecontainers13 and auto-max railcars14. The number of high-cube containers has increased over time asshippers take advantage of their larger capacity, and this traffic cannot move via the tunnel. Similarly, use oflarger auto railcars by the automotive industry has increased but this equipment cannot be routed throughthe Windsor rail crossing. Construction of a new larger tunnel alongside the existing one has been proposedand this would improve the freight capacity of the Windsor-Detroit border crossing.4.2 Inland Strategies and Network OptimizationIn addition to gateway and modal choices, shippers also consider inland transportation strategies to delivergoods effectively. In general, rail deliveries are considered to be the lowest cost transpiration mode, butother factors are considered. Cost, transit time, and inventory stock requirements drive the decision overthe strategy used. The following import inland strategies are well suited to the Translinked region: • Direct Rail to Inland DC Due to rising fuel prices, and potential future driver shortages, shippers have developed strategies to utilize the lower cost rail mode versus truck over the last few years. Containers are diverted to rail from truck, directly from the port to the inland DCs that are near to inland intermodal rail terminals. This strategy requires longer transit lead times due to slower rail transits as compared to trucking. • Transload Operations Truck costs can be lowered by consolidating Figure 4-5: Comparison of Container Sizes cargo at the port before it moves inland. Useable Capacity Container Size This is achieved by transloading three (cubic feet) international 40-foot containers into two domestic 53-foot containers or trailers at a transload facility. Two, instead of three Standard: 1,169 container loads move to inland DCs, where the cargo is then re-distributed to its final destination, or is trucked directly to retail Standard: 2,395 stores. In most cases, only very large High-Cube: 2,714 retailers, such as big box stores take delivery directly from the transload facility. High-Cube: 3,830 • Inventory Hold/Cross-Dock This strategy is designed for shippers who import goods, and warehouse them in DCs Source: TranSystems derived from The Hub Group on the coasts. Their customers, usually footwear or garment retailers, place Just-In- Time (JIT) orders as needed, where they take delivery of the goods at the coastal DC. Retailers benefit from this arrangement because they avoid inventory carrying costs. Trucking is the preferred mode for this strategy due to the need for fast and flexible transit.13 The high-cube container had a height of 9 feet 6 inches compared to 8 feet 6 inches for a standard container.14 The auto-max railcar has a height of up to 20 feet 2 inches. 48 | TranSystems

Translinked Freight Study Industry Trend AnalysisThese strategies are used to deliver shipments to strategically placed DCs. As mentioned, the highest costportion of an international supply chain is the trucking to the final destination, or so-called “last-mile”transportation. To illustrate this, consider a typical grocery store model. A single truckload delivers items tothe DC, but many trucks deliver goods from the DC to grocery stores in a given area, resulting in higher“last mile” trucking expenses. To keep these expenses low, logistics managers consider the location ofcustomers and clients, and select DC’s that produce the lowest last mile trucking costs.Figure 4-6 shows an example of a DC network optimization that calculates transportation costs, andidentifies lowest cost locations for DCs. This analysis estimates locations based on customer density areas,using nine DCs. In this example, a distribution center in Detroit is responsible for cargo distribution tomuch of the U.S. Midwest, while a distribution center in Toronto is responsible for deliveries to Windsor,ON, which is just across the border from Detroit. Figure 4-6: Example of Distribution Center Network Source: TranSystemsAn alternative approach for the incorporation of the Translinked region into a distribution strategy isillustrated in Figure 4-7. In this case, the shipper reduces overall network costs by establishing cross-dockoperations in markets previously served directly by the regional distribution centers. The cross-dockstrategy facilitates more efficient local distribution. 49 | TranSystems

Translinked Freight Study Industry Trend Analysis Figure 4-7: Example of Distribution Center and Cross-Dock Network Existing DC Network Is Looking for Ways to Reduce Transportation CostsNew Network Incorporates DCs and Cross-Docks; Translinked Region Served via Cross-Dock Source: TranSystems 50 | TranSystems

Translinked Freight Study Industry Trend Analysis4.3 Real Estate InfrastructureLogistics managers choose warehouses and distribution center (DC) locations based on how they fit intothe overall supply chain operating cost and product lead time standards. DCs that are located close to railhubs, or that are located near to customers or suppliers, are desirable because they reduce trucking costs.Competing sites that satisfy transportation cost and service level considerations are evaluated based on thecost of the warehouse itself, labor costs, and increasingly, “green” considerations such as a having a smallenergy footprint, to select the final site location.Table 4-4 displays summary statistics on Table 4-4: Detroit MSA Warehouse Vacancy andindustrial real estate, and the average hourly Lease Rates, Third Quarter 2011wage for Transportation and MaterialsMoving Occupation workers for the Detroit Detroit MSAMetropolitan Statistical Area (MSA) 15. Over Total Space (million sq. ft.) 524.0five hundred million square feet of Vacancy Rate (percent) 13.6% - 14.6%warehouse space reside within the DetroitMSA, and up to 14.6% of warehouse space Average Lease Rate $/sq. ft./yr) * $3.87 - $3.93was available as of the end of September Transportation and Materials Moving Occupation2011. The average wage for Transportation Mean Hourly Wageand Materials workers is higher than the U.S. Detroit-Warren-Livonia MI MSA $17.24average, by $1.54 per hour, which may be ofconcern to supply chain managers evaluating U.S. Total $15.70competing DC location options at the * Asking lease rate for Warehouse and Distribution Use Facilities >national level. 10,000 sq. ft Source: TranSystems, US Bureau of Labor Statistics, CBRE, Grubb and Ellis, and Colliers15 The Detroit MSA includes Lapeer, Livingston, Macomb, Oakland and St. Clair counties. 51 | TranSystems

Translinked Freight Study Industry Trend Analysis4.4 Labor and Demographic ProfileFigure 4-8 shows the number of employees by industryfor the Detroit-Warren-Livonia District by Industry, Table 4-5: Detroit-Warren-Livonia, MIand the unemployment rate for the District between Employment by Industry Percent Changes between 2001 and 20112001 and August 2011. The Detroit-Warren-Livoniaregion unemployment rate rose sharply, particularly 10 Year Ten Year Sector CAGR Changebetween the years of 2008 and 2010, whereunemployment reached 15.8 percent, and then fell back Trade and Transportation -2.2% -20.0%to 12.9 by August, 2011. The National Unemployment Professional Services -1.9% -17.3%Rate stood at 9.1 percent in August of 2011. Industries Manufacturing -5.6% -43.9%hit particularly hard by the downturn were the three Health and Education 1.7% 18.8%largest sectors in 2001. During the next 10 years,Trade and Transportation, Professional Services, and Government -1.1% -10.1%Manufacturing jobs fell by 20.0 percent, 17.3 percent, Hospitality Services -0.4% -3.9%and 43.9 percent respectively. Only Healthcare and Financial Services -1.8% -17.0%Education shows a positive trend over this time period,growing by 1.7 percent per year, and 18.8 percent over Mining and Construction -4.4% -36.4%ten years. While most segments improved, or halted Information Services -2.7% -23.6%their declines in 2010, only the Government and Source: TranSystems and US Bureau of Labor StatisticsHospitality sectors continue downward; althoughneither of these sectors experienced sharp declinessimilar to the Transportation, Professional Services orcertainly the Manufacturing sectors. Table 4-5 displays changes in growth for industries shown in Figure 4-8. Figure 4-8: Detroit-Warren-Livonia, MI Number of Employees by Industry, August Year over Year, 2001 – 2011 (000) Source: US Bureau of Labor Statistics 52 | TranSystems

Translinked Freight Study Industry Trend Analysis4.5 Business and Tax EnvironmentIn 2007, the State of Michigan changed its business tax code, replacing a modified Value Added Tax (VAT)with the Michigan Business Tax (MBT). The MBT was considered to be difficult to administer, especially forsmaller firms that did not typically have dedicated tax accounting personnel. The MBT will itself be replacedin the 2012 tax year with a Corporate Income Tax (CIT), which will assess business tax at a simple rate of 6percent. CIT compliance requirements are far less cumbersome than the MBT, and the new taxationapproach is viewed as a positive development, especially for medium to small sized business.A component of the MBT that remains as a stand-alone taxin 2012 is a Personal Property Tax (PPT). Under the MBT, Table 4-6: Tax Foundation Businesscredits for machinery and equipment are allowed. The PPT Tax Climate Rank for Selected Stateseffective in 2012 eliminates credits for machinery and U.S. Rankequipment. This tax disproportionately affectsmanufacturing companies with large equipment inventories; 2006 2011however, there is an effort underway to repeal the PPT in Indiana 12 10its entirety. Michigan 28 17Under the new CIT, almost all tax incentives have been Illinois 26 23eliminated, and the focus is to grow existing Michigan Wisconsin 37 40business, while de-emphasizing attempts to attract business Ohio 47 46from outside of Michigan. Source: Tax FoundationThe effects of the Michigan tax changes are unknown at thistime; however, The Tax Foundation, which is anorganization that ranks States by their “Business Tax Climate”, moved Michigan up 11 places, to 17th place in2011 from 28th place in 2006. Table 4-6 provides ranking for Michigan and its top interstate trading partners.Of the East North Central States, only Indiana provides a better tax climate than Michigan, according to theTax Foundation.4.6 Foreign Trade ZonesOne trend for companies involved in international trade that has been growing globally, is the use of foreigntrade zones (FTZ) for certain types of activities where these zones can provide economic benefits to clients.Customs duties are deferred, or even reduced for items that are stored or handled in a FTZ. For importedcargo simply stored in a FTZ, payment of customs duties are deferred for the length of time the cargoremains within the FTZ. This can be especially useful for warehoused goods that are awaiting sale, wheresellers do not have to carry the import duty costs until after the sale of merchandise is actually transacted.Manufacturers or product assemblers also benefit from the use of a FTZ because in many cases, individualimported components of an item carry higher import duties than does the assembled item itself. A featureof a FTZ is that all components used in the manufacturing or assembly of an item are assessed at the rate ofthe assembled item, at a lower duty rate. Domestic items can also be used in FTZ product assembly.Products exported from a FTZ are free of duty and tax.Import cargo from Asia and Europe may benefit from FTZ tax and import duty reduction programs.Canadian goods, which are not assessed import duties under NAFTA, gain no particular advantage of FTZprocessing, unless they are co-mingled with cargoes that are subject to import duties. 53 | TranSystems

Translinked Freight Study Industry Trend AnalysisWhen considering the overall suitability of the Translinked region as a logistics hub, FTZs are a requiredfeature, but do not necessarily provide a logistical advantage because they can be established almostanywhere in the country. The region has gained much experience in the set-up and operation of FTZs,mainly due to the automotive industry’s participation in the 1980’s and 1990’s, and assistance to companiesinterested in setting up FTZ status in the Translinked area is readily available. Finally, having a FTZ is not anadvantage, but not having one is a distinct disadvantage for firms that require FTZ services.4.7 Trends in Transportation and the Near-Term Outlook4.7.1 Trucking IndustryThe near-term outlook for the U.S. trucking industry is for rising costs due to rising diesel fuel prices andsteadily increasing constraints on labor supply. There is likely to be a continued modal shift away from over-the-road to rail intermodal for highway truckload shipments, and a corresponding need for shippers to bemore aligned with intermodal as their distribution networks evolve. Shippers are expected to face increasesof 9 to 18 percent in trucking rates by 2012, due to rising truck fuel and labor costs, and will step up effortsto explore opportunities for network changes to substitute intermodal for truck.Trends in the Trucking Industry: 1995 to 2010• The volume of trucking activity in the United States, both for-hire and private, is about 8.5 billion tons of freight, accounting for about 70 percent of U.S. freight tons and 40 percent of ton-miles (U.S. Bureau of Transportation Statistics, Commodity Flow Survey).• Truck shipments, measured by number of Truckloads Figure 4-9: Indexes of Trucking Volume (TL and LTL), U.S. (TL), Less-Than-Truckload Industrial Production and Real GDP: 1995-2010 (1995=100) (LTL) tons, etc., have tended to move in tandem with the growth of the U.S. economy and U.S. industrial production, represented by Real GDP and the Industrial Production Index (IP), respectively. Figure 4-9shows these relationships on an annual basis from 1995 to 2010, highlighting the most recent years of recession and recovery, 2008-2010. As shown in Figure 4-9, TL volume tended to grow at a somewhat faster rate relative Source: American Trucking Associations; TranSystems’ estimates to the economy (GDP and IP) from 1995 to 2002, and then at a slower rate from 2002 to 2010. The slower growth relative to GDP reflects the growing importance of services relative to goods in the U.S. economy. However, there is even a clear decline in truck volume relative to Industrial Production, which indicates both modal substitution (e.g., rail for truck) and changing logistics networks. 54 | TranSystems

Translinked Freight Study Industry Trend Analysis• The falloff in truckload volume relative to the economy was particularly severe in the recession year of 2009. By contrast, the growth of LTL tonnage tended to lag the overall economy for the entire period. Also, as shown in the highlighted section of Figure 4-9, both TL and LTL volume significantly lagged the recovery in 2010. Finally, Figure 4-9 shows that the growth of both TL and LTL volume was far more variable over time than the overall economy.• Trucking pricing and revenue have tended to lag the overall economy as well. Exhibit II shows annual indexes of TL revenue per load and LTL revenue per ton, adjusted for inflation, from 1995 through 2010. As shown in Figure 4-10, the TL index fell significantly from 1995 to 2003, recovered strongly from 2003 to 2006, then fell again from 2006 to 2009, particularly in the recession year of 2009, and recovered slightly during 2010. By contrast, the LTL index increased through 2006, and then flattened in 2007-2008 before declining sharply in 2009. Even in the recovery period of 2010, real LTL revenue per ton continued to decline.• Figure 4-10 also shows that Figure 4-10: Indexes of Real Revenue per Load for Truckload this overall fall in real revenue Freight versus Real Diesel Fuel Prices: 1995-2010 (1995=100) per load occurred during a period of rapidly rising real fuel prices. For example, by 2008, inflation-adjusted prices of diesel fuel were, on average, 2.5 times the level in 1995. Although fuel prices fell sharply after mid-2008, by 2010, they were still more than double the level of 1995 and continued to rise into 2011. The inability of truckers to raise rates in the face of rising fuel prices is largely due to competitive forces. In the case of TL freight, rail Source: American Trucking Associations; U.S. Dept. of Energy, EIA; intermodal shipments have TranSystems’ estimates increased their share of longer-haul segments, and LTL shipments have been displaced by competition from small package operators. This severe cost-price squeeze has led to sharp deterioration in finances for many trucking companies and owner-operators.• In addition to rapidly rising fuel prices, many trucking companies and owner-operators have faced increased difficulty in obtaining financing and in recruiting drivers. This has particularly affected the relatively long-haul segment of the industry (length of haul over 1,000 miles), as shown in Figure 4-11, which presents annual TL volume for 1996-2010 in three broad categories of length-of-haul. TL volume in the long-haul segment fell 25 percent from the peak in 1999 to 2010. The long-haul segment is where the difficulties of recruiting drivers have been most acute. 55 | TranSystems

Translinked Freight Study Industry Trend Analysis• Meanwhile, Figure 4-11 also shows that both the medium-haul (500-1,000 miles) and short-haul (less than 500 miles) segments grew significantly over the period. The medium-haul segment grew the fastest, especially through 2007, but has since declined sharply. Indeed, the medium-haul segment showed the most rapid decline in the recent recession and also the slowest recovery. In the case of both the medium-haul and long-haul segments, there has been major competition from rail intermodal service. Intermodal has long been making inroads on the long- haul traffic lanes, driven by Figure 4-11: Indexes of Truckload Loads by Length-of-Haul rapid growth in international Segment: 1996-2010 (1996=100) container volumes, particularly for those very long length-of-haul lanes (1,500-3,000 miles) between the West Coast and the Midwest, Gulf and Eastern Seaboard. However, more recently, with heavy investment in rail infrastructure, and as rail service performance and operating cost have steadily improved relative to highway shipments, rail intermodal has gained share in the medium- haul traffic lanes as well, Source: American Trucking Associations and TranSystems’ estimates particularly in rail-eligible lanes east of the Mississippi River.Trucking Industry Outlook for 2011-2012• Looking forward, as the U.S. economy continues to gradually recover from the recession; the trucking industry will be faced with continued and even more intense constraints on growth and upward cost pressure. The supply of truck drivers has been the major constraint over the last several years, and this constraint will be exacerbated by three major developments on the regulatory front: o Compliance, Safety and Accountability (CSA) initiative – The U.S. Department of Transportation (DOT) has placed increased emphasis on tracking of large over-the-road vehicles—buses and trucks—to identify and address safety issues. Truck drivers with less-than-perfect safety performance will be more rapidly removed from the pool of eligible drivers. o Hours-of-Service Regulations – Further limits on driving hours per week or per day and stricter enforcement of those limits will increase the number of drivers required for a given amount of freight movement. DOT will implement further restrictions beginning in late 2011 or early 2012. o Increased scrutiny on illegal aliens – as truck drivers’ licenses come up for renewal, those unable to provide documentation of U.S. citizenship will be denied a license. Ultimately, this might affect up to 10 percent of drivers. 56 | TranSystems

Translinked Freight Study Industry Trend Analysis• An offsetting effect on the supply of driver labor is the potential for allowing Mexican truck drivers to enter the U.S. However, this is not a certainty, and, in any case, only applies to cross-border shipments, as Mexican drivers would still not be permitted to move freight on traffic lanes within the U.S. o A constraint on Mexican truck transportation is being caused by increasing violence in the northern Mexican states, which is prompting shippers to consider the more secure rail option when possible.• In addition to driver constraints, the industry will encounter equipment shortages due to increasingly stringent financial requirements placed on borrowers, which are particularly constraining for poorly- financed firms and owner-operators in the long-haul segments of the market. At the same time, there is a strong possibility (although it is far from certain) that diesel fuel prices will continue to climb toward previous peak levels in 2008.• The effects of these regulatory and economic factors will generally be to reduce supply and raise prices in over-the-road trucking. The effect on shippers will vary by traffic lane and will depend on the lengths- of-haul and presence of viable competition from rail in a particular lane. In cases where rail intermodal competition exists, over-the-road service will continue to rapidly lose share to rail, especially as railroads continue to invest heavily in the infrastructure for intermodal—both terminals and right-of- way. As fuel prices increase, the prices of both rail and truck will increase, but overall, truck prices will rise relative to rail. In addition, shortages of drivers and over-the-road equipment will put highway trucking at an increased disadvantage, particularly for longer length-of-haul traffic lanes and during periods of peak seasonal demand. Rail competition will limit price increases in these lanes. For traffic lanes not well-served by rail, however, truckers will have significant pricing power and rates will rise sharply. On average, supply constraints due to labor and equipment will increase truckload rates by 5 to 10 percent by 2012 over 2010 levels, with larger increases occurring in lanes that face no intermodal competition. In addition, increases in diesel fuel prices could add up to 10 percent in additional truckload rate increases by 2012.• In view of these factors, the outlook for the next two years, 2011-2012, is for a continued steady decline of the highway share of Medium-to-Long-Haul shipments. In fact, with the increased constraints on the supply of drivers, there may even be a decline in the amount of longer-haul over-the-road TL shipments, even with a continued recovery of the U.S. economy.• Therefore, shippers are advised to be alert to impending truck shortages and rate hikes, particularly during periods of peak seasonal freight movement. Longer term, shippers should consider orienting their distribution networks, to the extent possible to take maximum advantage of rail intermodal, where there are no comparable constraints on supply.4.7.2 Trends in U.S. Containerized TradeThe international container trade, particularly imports, is by far the fastest-growing driver of freighttransportation activity in the U.S. In terms of tonnage, the international container trade (there is amoderate-size domestic container trade, mainly between the mainland U.S. and Alaska, Hawaii and U.S.territories) accounts for approximately 3 percent of the U.S. freight market. However, when measured inton-miles, it is nearly 12 percent. Moreover, a substantial portion of the freight traffic moving in the U.S.classified as “domestic” is actually imports moving from import distribution centers in the vicinity of theinbound ocean ports to second-tier warehouses or to final destinations. Similarly, a significant portion of 57 | TranSystems

Translinked Freight Study Industry Trend Analysisexport freight moves as “domestic” from interior U.S. origins to ports for loading into containers to beshipped to overseas destinations.The growth of the international container trades to and from the U.S. averaged 5.3 percent per year overthe past 15 years, with imports growing at a faster annual rate, 6.4 percent, and exports growing at 3.8percent. The growth of the total international container trade was 6 to 7 times the annual growth rate ofabout 0.8 percent per year for domestic freight over the same period. Although growth of the containertrade is likely to slow considerably over the next several decades, it will still be significantly faster thandomestic, and developments in international trade will continue to play an increasing role in shaping thepattern of freight flows and logistics networks in the U.S.The following sections describe the container trade, its size, geographic distribution, commoditycomposition and growth; the major trends in the trade and their effects on transportation and distributionpatterns in the U.S.; and the impact on the Midwest and the Translinked area.Growth of Containerized Imports and Exports In 2010, the most recent full year for which data are available, containerized imports into the U.S. fromforeign overseas ports totaled 16.9 million twenty-foot equivalent units (TEU) and exports from the U.S. toforeign destinations totaled 11.0 million TEU. Domestic shipments between the U.S. Mainland and Alaska,Hawaii and U.S. territories totaled an estimated 2.9 million TEU. Figure 4-12 shows the fifteen-year Figure 4-12: Growth of U.S. Containerized Import and Export trend in containerized imports Loads, 1995-2010 and exports, 1995 to 2010. As shown, the growth of imports over this period, 6.4 percent annually, far outpaced the growth of exports, 3.8 percent. Due to the disparity in growth, the ratio of import to export TEU increased sharply, from 1.07 in 1995 to a high of 2.14 in 2006 and 1.54 in 2010. This import/export imbalance has had major implications for the routing of both domestic and international loads in the U.S., as explained below. Source: JOC Piers and TranSystems’ estimates The relatively rapid growth of imports over this period is mainly due to an unprecedented growthin goods consumption in the U.S. and an acceleration of the trend toward off-shoring of production of bothconsumer goods and related capital goods. After falling almost continuously from the end of World War II,the share of goods in total U.S. consumption began to rise in the early 1990s and continued a gradualincrease up to 2007. The rapid growth in goods consumption was further boosted by the housing marketboom of 2002-2007, which increased the demand for such goods as Building Materials and Furniture, whichwere being increasingly sourced from overseas, and produced a “wealth effect” on consumption from rising 58 | TranSystems

Translinked Freight Study Industry Trend Analysishome values. However, when the housing boom turned to bust, containerized imports reversed course. In2007, imports declined slightly, and then in 2008, by 7.9 percent, the first significant yearly decline ever. Thiswas followed by a further 14.9 percent in 2009. Even with a 13.1 percent increase in 2010, imports were still11.3 percent below the peak annual volume reached in 2006.Exports grew at a rate substantially less than imports over the past 15 years, but overall have had a morerobust performance than imports since 2006, as shown in Exhibit I. The key reasons for the recent surge inexports are a sharp decline in the U.S. Dollar relative to most major overseas currencies and continuedstrong growth of production and incomes in overseas economies.The sourcing of U.S. importedmerchandise has been increasingly Figure 4-13: Far East as a Share of U.S. Containerized Importsdominated by Far East countries, and Exports, 1995-2010particularly China. Figure 4-13shows that for imports, the share ofthe Far East increased from 59.9percent in 1995 to 69.7 percent in2010. By contrast, the Far Eastshare of U.S. exports was essentiallythe same, 50.1 percent, in both1995 and 2010. But with importsstill the “heavy leg” in U.S. containertrades, the steady shift to sourcingfrom the Far East tended toincrease the role of West Coastport gateways.Impact of Container Trade on Source: JOC Piers and TranSystems’ estimatesthe U.S. Supply ChainThe effect of the container trade ontransportation and logistics in the continental U.S. depends on the particular commodities moved. Importsare mainly relatively high-value, light-density consumer goods and related capital or semi-finished goods,which are mainly sensitive to trends in U.S. real disposable income, industrial production and wealth. Bycontrast, exports tend to be lower-value raw or semi-finished products, sensitive to the value of the U.S.Dollar relative to other currencies and growth of overseas economies. Trends in commodity compositionare shown for containerized imports and exports in Figure 4-14.For imports, those commodities most closely related to housing led the surge over the period 1995 to2006, increasing their share of total imports from 14.8 percent to 24.1 percent over this period. However,these same commodities fell most rapidly in the 2007-2009 downturn, and stayed well below their peakshare during the 2010 recovery. The share of the highest-value imports—Electronics, Apparel, IndustrialMachinery, etc.—remained remarkably constant over the entire 1995-2010 period, falling only slightly from37.8 percent in 1995 to 36.9 percent in 2010.Trends in exports show an increasing share of the lowest-value commodities—Forest Products, RecycledMaterial, etc.—although certain higher-value commodities such as Vehicles & Parts showed significantgrowth. The lowest-value export commodities increased their share from 33.5 percent in 1995 to 41.0percent in 2010, and this was largely due to increased demand from China. 59 | TranSystems

Translinked Freight Study Industry Trend AnalysisSince containerized imports are oriented toward consumer goods, the geographic distribution of thesegoods by their ultimate destination in the U.S. tends to resemble the distribution of the population. Bycontrast, exports tend to originate in the coastal areas near container ports. The mismatch between theorigin of exports and the destination of imports leads shippers to use domestic freight to reposition back tothe port of entry those containers carrying imported merchandise to inland destinations. Figure 4-14: Trends in the Composition of U.S. Containerized Imports and Exports, 1995-2010 Source: JOC PIERS and TranSystems estimatesInterior destinations such as in the Midwest are primarily served by intermodal rail service from the port ofdischarge. Destinations near the coasts are served either by truck from a nearby ocean port, or, in the caseof many imports from the Far East, by intermodal service from West Coast ports. However, increasingly forlong-distance inland movements—by rail or truck— international containers, 20-foot and 40-foot, are beingunloaded at locations close to the discharge ports and their merchandise is reloaded into higher-cubedomestic containers, normally 53-foot units. This transfer is done either at special-purpose transloadingfacilities or, more often, at Import Distribution Centers (IDCs) near the discharge ports. The capacity oftwo 53-foot domestic containers can typically absorb the contents of three 40-foot international containers,and this produces significant savings on inland linehaul costs. In addition, the “round-trip” economics of theinland shipment are improved with the 53-footer, which can be more easily repositioned back to the portarea loaded with domestic freight. By 2010, the major California ports handling containerized imports—LosAngeles, Long Beach and Oakland—were shipping an estimated 55 percent of imported merchandise toinland destinations via high-cube domestic containers. The trend to transferring imported merchandise from 60 | TranSystems

Translinked Freight Study Industry Trend Analysis20- and 40-footers into 53-foot units also increases the importance of IDCs in areas near majorcontainership ports.It is also important to note that the transfer of the imported merchandise from an international container toa domestic unit, whether in a straight transload or via an IDC, changes the designation of the shipment from“international” to ‘domestic,” even though, in most cases, the merchandise hasn’t changed in any significantway. This is seen in a high percentage of so-called domestic freight coming in from a coastal origin to aninland metro area such as Detroit that is labeled “Warehouse and Distribution” freight. Most of this isessentially imported merchandise.All-Water versus Intermodal Service for Far East ImportsDespite the proximity of West Coast ports to Far East markets and the widespread availability ofintermodal rail service from West Coast ports to destinations in the interior as well as the East Coast andGulf Coast, the West Coast has lost share of the Far East trade over the past 10-15 years. The West Coastshare of Far East containerized imports went from a high of 85.1 percent in 1997 down to 71.4 percent in2009. Geographically, the main destination areas affected by this shift were points along the U.S. EasternSeaboard. Starting around 1997, rapid growth of Far East imports produced a series of intermodal servicefailures on the West Coast, particularly at the largest port complex, L.A./Long Beach. These failuresaccelerated the shift, already underway, of major retailers such as Walmart, Target and Home Depot todiversify their import distribution away from too much reliance on West Coast port gateways. Oceancarriers accommodated these shifts by expanding capacity and improving service to East Coast and GulfCoast ports. The share of Far East imports moving in “all-water” service (AWS) through the Panama Canaland Suez Canal to East Coast ports (and, beginning in 2004, Gulf Coast ports) was the mirror image of thefall in the West Coast share. Most of the AWS traffic is “eastbound” from the Far East via the PanamaCanal, but more recently, since 2007, vessel deployments from the Far East are moving “westbound” via theSuez Canal, particularly where vessels are too large to fit through the Panama Canal. Such westbounddeployments also include not only U.S. East Coast ports, but also ports in Eastern Canada such as Halifax,and several U.S. and Canadian ports can provide reverse intermodal rail service for Far East imports toinland destinations such as Detroit.The trend toward increased share of AWS was halted in 2010, however, as the West Coast share of the FarEast increased slightly to 72.1 percent versus a low of 71.4 percent in 2009. Moreover, there is a significantlikelihood that AWS share of the Far East may stop increasing and even decline going forward. There areseveral reasons for this, and international distribution to the Midwest and other interior locations is a keydeterminant. • In the first place, the major gains in AWS share of Far East imports have already been achieved. For example, in 2000, about 60 percent of Far East imports to destinations in the Northeastern U.S. were shipped via intermodal service over the West Coast, but by 2010, that share had fallen to less than 6 percent, meaning that over 94 percent of these shipments were entering the U.S. via East Coast ports. Similar conditions prevail in the Southeast. • Secondly, the Eastern Seaboard region, which has the highest potential for AWS, is growing relatively slowly as U.S. population and industry gradually move in a southwesterly direction. • Finally, the railroads have sharply improved the performance of their intermodal services off the West Coast, and, at the same time, AWS ocean carriers have shifted to so-called “slow steaming” in order to reduce fuel costs and mitigate air pollution. These developments have led to an 61 | TranSystems

Translinked Freight Study Industry Trend Analysis improvement in the overall service performance of West Coast intermodal over East Coast services, especially for high-value, time-sensitive cargo. • Even if AWS maintains its very high share of the Eastern Seaboard destinations, it is unlikely that AWS could be substituted for intermodal service from the Far East to the interior of the U.S., particularly the Midwest. The routings via the Panama Canal to the interior are too circuitous to make sense and for either Canal, the transit time differential between AWS and intermodal service off the West Coast would be even greater than for shipments to the Eastern Seaboard. The only significant potential for shipments from the Far East to Midwest destinations via East Coast ports is for westbound traffic using the Suez Canal. However, the potential for these routings appears to be minimal.4.7.3 Trends in Intermodal RailIntermodal rail volumes in the U.S. andCanada have grown at an annual rate of2.6 percent over the last decade, as Figure 4-15: Annual North America Intermodal Rail Volume, 2000 to 2010shown in Figure 4-15. Like mostsegments of the U.S. freight market,intermodal rail volume in the mostrecent full year, 2010, is still well belowits peak. In the case of intermodal,2010 volume, at 13.4 million loads, isstill 5.9 percent below the peak volumeof 14.2 million loads in 2006. Exhibit Ialso shows that growth of intermodalhas been volatile over this period,particularly from 2007 to 2010, aperiod of deep recession followed bypartial recovery.Intermodal growth has also varied by Source: IANAtype of equipment. As shown in Figure4-16, use of standard truck trailers inintermodal service declined sharply over the period 2000-2010, at an annual rate of -5.0 percent, while theshare of container loads, both international and domestic, increased at a rate of 5.0 percent per year. ExhibitII also shows that among the containers, the fastest-growing are the 48- and 53-foot high-cube units,growing at a rate of 7.4 percent annually. With the percentage of high-cube domestic containers growingrapidly (and 53-footers rapidly replacing 48-footers), the merchandise moving in containers is growing at aneven faster rate. When adjusted for container size, it is estimated that the growth of merchandise movingvia intermodal service in containers is growing at a rate of 5.6 percent per year from 2000-2010, which isabout twice the rate of growth of the U.S. and Canadian economies (Real GDP) over this period. Thefastest-growing intermodal markets are long length-of-haul (1500+ miles) east-west traffic lanes, particularlythose associated with containerized imports moving through ports on the West Coast to points east of theRockies. Container volumes on these lanes have been growing at a rate two to three times as fast as thereal growth of the U.S./Canadian economies, particularly with a growing dominant share of the Far East as asource of merchandise imports. In addition, since 2008, domestic intermodal volumes have gained anincreased share of medium-haul (500-1,500 mile) traffic lanes at the expense of over-the-road truck service. 62 | TranSystems

Translinked Freight Study Industry Trend AnalysisThe growth of international containervolume is the principal driver of rail Figure 4-16: Growth of North America Intermodal Serviceintermodal growth, and loads arising by Equipment Type, 2000 to 2010from international imports or exports(mostly imports) account for about 60percent of total intermodal loads. Theshare of international in totalintermodal volume is even greaterwhen expressed in terms of container-miles or ton-miles, because, as notedabove, international loads are typicallymoving in the long length-of-haul trafficlanes. In terms of container (or trailer)-miles, international accounts for about75 percent of total intermodal volume.However, as noted above, morerecently intermodal has madesignificant gains in the domestic freight Source: IANAmarket, as • Operating costs of over-the-road truck service have risen rapidly relative to rail and are expected to increase further, due to substantial increases in the price of diesel fuel and intensifying shortages of truck driver labor. The threat of a labor shortage is particularly prevalent in medium- and long-haul traffic lanes, and could create spot shortages of truck service, particularly in peak months. • Rail service (e.g., transit speed and reliability, terminal dwell Figure 4-17: Quarterly Average Intermodal Train Speeds times, service frequency and for North American Class I Railroads, 2000-2010 coverage of origin-destination pairs) continues to improve due to major rail investments in infrastructure, such as expanded terminal facilities and improved right-of-way.As an example of improved rail service,Figure 4-17 presents quarterly data onthe average intermodal linehaul speeds,in miles-per-hour (mph), for the twomajor U.S. western railroads, the BNSFand the UP, from the first quarter of2000 to the fourth quarter of 2010.BNSF’s average intermodal train speed Source: IANAincreased from a low of 30.5 mph inthird quarter 2004 to a high of 39.3mph in second quarter 2009. The latter quarter was near the trough of the recent recession and waspositively affected by light traffic volume, but even by fourth quarter 2010 after a substantial recovery intraffic, BNSF average speed was 36.3 mph or 19 percent faster than the low point. Similarly, the UP’s 63 | TranSystems

Translinked Freight Study Industry Trend Analysisaverage speed increased from a low of 24.3 mph in fourth quarter 2005 to a high of 33.6 mph in thirdquarter 2009 and most recently at 32.4 mph in fourth quarter 2010, or a 33 percent improvement over theworst quarter. Also, the improvements in transit speed for both BNSF and UP by fourth quarter 2010 wereachieved with substantially greater traffic volumes than in their periods of slowest intermodal train speeds.Containers and TransloadingAs shown in Figure 4-16, the container is rapidly becoming the dominant unit for intermodal transport in theU.S. and Canada, and higher-capacity containers are increasing their share of both international anddomestic intermodal shipments. In 2000, the first year for which data are available, intact highway trailersaccounted for 27.2 percent of total intermodal moves, and detached containers, both international (20-, 40-and 45-foot) and domestic (48- and 53-foot), the other 72.8 percent. By 2010, the share of intact highwaytrailers had fallen by more than half to 12.6 percent of total intermodal moves. Since 2000, use of containershas grown dramatically with the relatively rapid growth of international and the increasing dominance ofdouble-stack service (DSS). The use of higher-cube domestic containers, particularly the 53-foot units, hasgrown most rapidly. Use of domestic 53-foot containers has been spurred by their role in transloading ofinbound international containers at locations close to the inbound container port for movement inland. Thistransloading is performed at special-purpose trans-load facilities or, more often, at Import DistributionCenters (IDCs) for inland movement. Typically, the contents of three 40-foot international containers can fitinside two 53-foot units, and this conversion • Saves on rail linehaul and destination drayage costs • Provides for more efficient repositioning of units with loads back to container port areas • Allows importers to re-allocate merchandise by destination at a point in time only 5 to 10 days before scheduled delivery, providing a better match between supply and consumer demand.By 2010, containers accounted for 87.4 percent of intermodal loads (and an even higher share of intermodalton-miles). The share of 53-foot containers was about 31 percent in 2010, up from 8 percent in 2000.Moreover, as noted earlier, 53-foot containers have significantly larger cubic capacity and account for anestimated 38 percent of the merchandise moved in intermodal transit.West Coast Intermodal versus All-Water and East Coast IntermodalAs noted in an earlier section on the international container trade, the growth of the internationalcomponent of intermodal volume has been affected by the change in share of West Coast discharge versusEast Coast or Gulf Coast discharge of containerized import cargo. • The West Coast share of imports has tended to increase, due to the growing dominance of Asia, particularly China, as the source of containerized merchandise. Approximately 60 percent of Asia- origin cargo discharged at West Coast ports makes its way (either as intact international containers or trans-loaded domestic containers) to destinations east of the Rocky Mountains, and nearly all of this traffic moves via intermodal. • However, the extraordinarily rapid year-in/year-out growth of the Asia trade beginning in the late 1990s led to a deterioration of intermodal service off the West Coast, and a steady shift to alternative routes from Asia via the Panama and Suez Canals to East and Gulf Coast locations. The share of such all-water service (AWS) from Asia increased from a low of 14.8 percent in 1997 to a 64 | TranSystems

Translinked Freight Study Industry Trend Analysis high of 26.7 percent in 2009. Destinations on the Eastern Seaboard within 200 miles from the East Coast shifted almost entirely to AWS. • At the same time, import cargo via East Coast ports from Europe or via the Suez Canal to destinations in the Midwest shifted from highway truck to intermodal. This service was enhanced due to major initiatives by Eastern railroads like CSX’s National Gateway and Norfolk Southern’s Heartland Corridor. • Beginning in mid-2009, the share of Asia-origin import cargo discharging on the West Coast began to rise again. For the full year 2010, the West Coast share increased to 73.1 percent, up from 71.8 percent in 2009. The main reasons for this shift appear to be (1) the exhaustion of opportunities for expansion of AWS to destinations on the Eastern Seaboard, and (2) the improvement in intermodal service relative to AWS—including the steady improvement in intermodal transit speeds referenced above, and the advent of “slow steaming” in AWS vessel deployments. • The re-emergence of the West Coast advantage appears to have significant staying power. The AWS share is not likely to exceed the peak in 2009 even after the expansion of the Panama Canal in 2014-15 increases the capacity and potentially lowers unit costs of AWS.Implications for the MidwestThe Midwest share of total North America intermodal traffic has generally increased over the last decade,and the main driver of this increase in share has been inbound loads with imported merchandise. As shownin Figure 4-18, Midwest inbound volume increased from 2.55 million loads in 2000 to 3.53 million in 2010, acompound annual growth rate of 3.3percent, well above the overall NorthAmerica intermodal growth rate for Figure 4-18: Midwest Inbound Intermodal Volume from2000-2010 of 2.6 percent. For West Coast and Share, 2000 to 2010shipments originating on the WestCoast, most of which are importedmerchandise, Midwest destinationvolume increased at a still faster annualrate of 4.5 percent, and the Midwestshare of intermodal shipmentsoriginating on the West Coastincreased from 38.7 percent in 2000 to45.8 percent in 2010.The composition of intermodal loadsinto the Midwest has been shiftingmore towards high-cube 53-footdomestic containers and a lowerpercentage of 20-, 40- and 45-footinternational containers. For example, Source: IANAin the West Coast-to-Midwestintermodal market, the share of 48-and 53-foot container loads increased from a low of 18.6 percent in 2005 to 30.0 percent in 2010. Theincreased share of the high-cube domestic container suggests that import containers moving through WestCoast ports with merchandise ultimately bound for the Midwest are increasingly being unloaded on the 65 | TranSystems

Translinked Freight Study Industry Trend AnalysisWest Coast with their contents transferred to high-cube domestic containers. Therefore, an increasingpercentage of this import merchandise has already been through one “tier” of import distribution by thetime it reaches a Midwest destination. Accounting for the higher cube of the domestic container,approximately 40 percent of the import merchandise coming through the West Coast to the Midwest hasalready been through one tier of distribution. This tends to reduce the share of total import distributionactivity in the Midwest. The remainder of inbound intermodal volume into the Midwest is domestic loadsplus a relatively small amount of import loads via East Coast and Gulf Coast ports. These loads grew at anaverage annual rate of 1.9 percent from 2000 to 2010, well below the overall average North Americaintermodal growth of 2.6 percent. Among the import loads via East and Gulf ports, an increasing percentageof the first-tier import distribution is handled in the area of the ports.The flow of intermodal freight to and from the Detroit BEA is similar to that of the total Midwest area.Figure 4-19 presents estimates for 2009 of total intermodal tonnage inbound to and outbound from theDetroit BEA for 2009 (see analysis Section 2.6.3). As shown, most of the largest intermodal lanes areinbound from and outbound to port related BEAs – Los Angeles, New York, Seattle, Norfolk andJacksonville. In the case of these port-related BEAs, the “import” designation represents only those importsthat are moving “intact” in international containers destined for plants or first-tier distribution warehousesin the Detroit area. As noted previously in Section 2.6.3, a substantial portion of what is labeled “domestic”actually represents freight that is essentially still import merchandise that has moved through an IDC or atransload facility and will be part of second-tier distribution in the Detroit BEA. For exports, a portion offreight that is labeled as “domestic” moving from the Detroit BEA is actually export cargo, to be transferredto export containers at the port. Figure 4-19: Detroit BEA - Top-10 U.S. Intermodal Rail Lanes by Cargo Tons in 2009 Source: Derived from IHS Global Insight Transearch DataIn summary, growth of Midwest and Translinked region distribution activity has been increasingly driven bythe relatively rapid growth of import merchandise, but the Midwest role in the distribution of much of that 66 | TranSystems

Translinked Freight Study Industry Trend Analysismerchandise is shifting to second-tier. This is not to say that the Midwest role in first-tier importdistribution is disappearing—indeed, in 2010 an estimated 60 percent of import merchandise to the Midwestvia the West Coast is either going to a manufacturing facility or first-tier distribution. However, thepercentage appears to be declining.4.8 Representative Service Providers and ShippersA sample of major logistics service providers within the study region is presented in Table 4-7 and Table4-8. The value added services provided by such companies, such as trucking, warehousing and distribution,enable shippers to service population and industries within the Translinked region and in surrounding areas.The companies and services support the various supply chain strategies and freight flows discussed in thisstudy. Table 4-7: Sample of Logistics Providers in the Study Region – Located in Michigan Provider Value Added Services Offered Location Michigan All American Warehouse and Cold Storage Refrigerated warehouse services Detroit APL Logistics Warehousing, 3PL transportation contractor Farmington Bay Logistics Inc. Warehousing, 3PL transportation contractor Various Detroit Machinery Center Inc. Warehousing, transportation services for Detroit machinery and parts Expeditors Intl. Air freight, ocean freight, customs Romulus brokerage, trucking, warehousing, logistics FedEx and FedEx SmartPost Small package, truckload and LTL trucking, Detroit logistics, ocean and air freight management, supply chain management Freezer Services of Michigan Refrigerated storage, import/export Detroit inspection, blast freezing, rail access Furniture Turn LLC Furniture manufacturing and distribution Detroit Hollingsworth Logistics Management, L.L.C. Hollingsworth Logistics Management, L.L.C. Dearborn JB Hunt Warehousing, 3PL transportation contractor Detroit Kuehne & Nagel Air freight, ocean freight, customs Romulus brokerage, trucking, warehousing, logistics Nippon Express Air freight, ocean freight, customs Romulus brokerage, trucking, warehousing, logistics NorthGate Warehousing and distribution of automotive Flint parts UPS Small package, truckload and LTL trucking, Livonia, Grand logistics, ocean and air freight management, Rapids, Taylor, supply chain management Madison Heights Source: Hoovers and TranSystems 67 | TranSystems

Translinked Freight Study Industry Trend Analysis Table 4-8: Sample of Logistics Providers in the Study Region – Located in Ohio and OntarioProvider Value Added Services Offered Location OhioCauffiel Technologies Corp. General warehousing, manufacturing and Toledo distribution services for the steel industryCSX Intermodal Yard Intermodal rail terminal North BaltimoreMidwest Terminals Port terminal, warehousing ToledoToledo Harbor Warehousing Corp. Freight consolidation, trucking warehousing, Toledo cross-docking, trans-load services OntarioCargill Grain Warehousing SarniaCole International Freight forwarding, 3PL warehousing and Windsor transportation,Con-Way Freight Trucking, and Less then Truckload (LTL) Windsor servicesHarbour Warehousing All purpose warehousing complex with rail Sarnia accessLaser Transport, Inc. Trucking warehousing, distribution WindsorVersaCold Canada Corp. Warehousing and processing of refrigerated Chatham-Kent and frozen food productsWolverine Freight Systems Trucking, warehousing and distribution Windsor Source: Hoovers and TranSystems 68 | TranSystems

Translinked Freight Study Industry Trend AnalysisA representative sample of major shippers within the Translinked region is shown in Table 4-9, based on thepresence of large warehouse facilities in the area and major commodity groups. It should be noted Logisticsproviders listed above are also major shippers in their own right, in light of the large amount of freight thatthey control and manage on behalf of multiple shippers. Small to medium-sized shippers in particular favorthe use of 3PLs to manage their supply chains. Table 4-9: Sample of Major Shippers in the Study Region 2010 Revenue Company Commodity Segment (Billions) Federal-Mogul Corporation $6.84 Transportation Equipment Ford Motor Company $134.12 Transportation Equipment General Motors LLC $149.17 Transportation Equipment The Chrysler Group LLC $41.90 Transportation Equipment TRW Automotive, Inc. $15.97 Transportation Equipment Alticore, Inc. (Amway) $92.00 Secondary Traffic CVS, Inc. $104.01 Secondary Traffic KMart Corporation $16.03 Secondary Traffic Steelcase $2.64 Secondary Traffic Target Corporation $69.24 Secondary Traffic Whirlpool $18.80 Secondary Traffic Dominos Inc $1.60 Food or Kindred Products Meijer Companies, Ltd $0.02 Food or Kindred Products Spartan Stores $2.58 Food or Kindred Products Dow Chemical Corporation $59.66 Chemicals or Allied Products Kelloggs $13.04 Farm Products Source: Hoovers and TranSystems 69 | TranSystems

Translinked Freight Study Freight Forecast5 DETROIT BEA FREIGHT FORECAST5.1 IntroductionSection 5 sets out a 10-year forecast of domestic and international, inbound and outbound, freight flows ofwarehouse-able commodities. The forecasts are used to identify growth sectors, and potential target sectorsfor development. The forecast methodology is described below followed by the forecast results and findings.5.2 MethodologyThe approach to forecasting freight flows uses, for domestic flows, input-output data for the Detroit BEAand for combinations of U.S. regions external to the Detroit BEA. The international flows—overlandfrom/to Mexico and Canada, and from/to overseas origins and destinations—are forecast based oncommodity-specific econometric models, where freight flows are a function of macro-economic variablessuch as Disposable Income, Wealth, Exchange Rates and Industrial Production. Forecasts of industry-specificvariables (growth of real output and employment) and macro-economic variables used in this analysis areprovided by Moody’s Economic.com and The International Monetary Fund. Each of the forecastingtechniques is described below.Input-Output ForecastingInter-industry Input-Output tables are prepared periodically by the U.S. Department of Commerce. Thetables specify, for each of 60 industries (mining, agriculture, manufacturing, services, transportation,education, health care, government) the estimated full input requirements for each unit of output of these60 industries. The input requirements encompass primary, secondary, tertiary, etc. requirements for theoutput of various industries. For example, a unit of output from the Construction Industry may requiredirect input of a certain amount of output from the Building Materials industry, which may, in turn, requireinput from Mining, which may, in turn, require input from Construction and Building Materials, and so on.The input-output “coefficients” incorporate all of these effects. To forecast the inbound freight into theDetroit BEA, the growth rates for all goods-using industries are estimated (using industry data specific toDetroit from Economy.com), and the input-output table for Detroit is used to estimate the growth ofgoods-input requirements, which help estimate the forecast growth of inbound goods flow into Detroit.These industry-specific growth rates are then applied to the Base Year 2009 commodity- and origin-specificfreight flows into the Detroit BEA (described in Section 2) to get annual forecasts of these Detroit inboundcommodity-specific freight flows to 2020. To forecast outbound freight flows for the Detroit BEA, input-output tables and Economy.com industry-specific growth rates are applied to industry output for the EastNorth Central Region (Indiana, Illinois, Wisconsin, Michigan, Ohio), which is the destination for most ofDetroit’s outbound freight, and the remainder of the U.S. states. These forecasts of Detroit inbound andoutbound domestic freight flows derived from input-output analysis are then adjusted as necessary toaccount for changes in the nature of the goods shipped (e.g., value per ton).Econometric ForecastingFor foreign origins and destinations, where input-output data are not readily available, forecasts of inboundand outbound freight flows can be derived from econometric (statistical) models, relating time-series dataon freight flows (quarterly or annual) to macro-economic variables related to Detroit, the U.S. or overseascountries. These econometric models are commodity-specific, and, like forecasts of domestic freight flows,forecast growth rates for each commodity by country origin or destination are applied to Base Year 2009freight flows between Detroit and other countries (based on the data from IHS Global Insight) to forecastthe commodity-specific freight flows. 70 | TranSystems

Translinked Freight Study Freight Forecast5.3 Economic Review and OutlookThe Detroit BEA includes seven metropolitan statistical areas (MSA) that generate the vast majority of theregion’s economic activity. They are Detroit-Warren-Livonia, Ann Arbor, Flint, Lansing-East Lansing,Saginaw-Saginaw Township North, Monroe, and Bay City. In turn, the Detroit-Warren-Livonia MSA is thelargest economy in the region, accounting for 76 percent of the Gross Product generated by the sevenMSAs. As shown in Table 5-1, the combined Gross Product of the seven MSAs expanded by 3.7 percent in2010 after contracting in 2008 and 2009. In 2010, the combined MSAs expanded at a faster rate than theoverall U.S. economy, which was partly driven by a recovery in manufacturing activity in the MSAs. Table 5-1: Real Gross Domestic Product by MSA within the Detroit BEA Real GDP (Billions of 2005 2010 Share of 2006 2007 2008 2009 2010 Dollars) Growth 2010 GDP Detroit-Warren-Livonia 194 195 186 174 179 2.8% 75.9% Ann Arbor 17 18 17 17 18 4.4% 7.4% Flint 17 17 17 16 17 2.6% 7.1% Lansing-East Lansing 12 12 11 10 11 1.7% 4.5% Saginaw-Saginaw Township North 7 6 6 6 6 3.8% 2.6% Monroe 4 4 3 3 3 3.1% 1.4% Bay City 3 3 3 3 3 2.0% 1.1% Total Above MSAs 254 255 243 229 236 2.9% 100.0% Michigan 368 368 352 335 345 2.9% - Toledo MSA 25 25 24 23 24 1.6% - Total USA 12,896 13,144 13,100 12,774 13,100 2.6% - Source: Bureau of Economic AnalysisThe “Gross Product” of the Detroit BEA16 is forecast to grow at an annual rate of 1.3 percent between2010 and 2020, as shown in Table 5-2. This is significantly slower than the 2.4 percent growth rate forecastover the same period for the East North Central Region, which accounts for about 70 percent of theinbound and outbound flows of warehouse-able freight to/from the Detroit BEA.Projections for the components of Gross Product that pertain to goods movement and storage are alsopresented in Table 5-2. Among these components, the largest as a percentage of Gross Product areMachinery & Parts manufacturing at 5.7 percent and Transportation Equipment & Parts manufacturing, 5.4percent. The fastest growth is expected from Electronics manufacturing with a forecast CAGR of 5.0percent between 2010 and 2020, and Machinery & Parts with a CAGR of 4.4 percent. Food & RelatedProducts manufacturing accounted for an estimated 2.4 percent of the Detroit BEA’s Gross Product in2010, but is forecast to grow at only a 0.3 percent annual rate from 2010 to 2020.The data in Table 5-2 also indicate that the Detroit BEA’s industries related to goods movement—manufacturing, transportation and warehousing—are forecast to grow faster than overall Gross Product.The weighted-average annual growth rate for these industries in the Detroit BEA is 3.1 percent. However,16 Projections for the Detroit BEA are based on a review of economic data from the Bureau of Economic Analysis forthe MSAs within the Detroit BEA and forecast data from Moody’s Economy.com. 71 | TranSystems

Translinked Freight Study Freight Forecastfor Transportation & Warehousing, projected annual growth in the Detroit BEA, at 2.5 percent, issignificantly less than the corresponding growth in the East North Central Region, at 3.7 percent. Table 5-2: Economic and Industry Factors Related to Goods Movement in the East North Central Region and the Detroit BEA: Ten-Year Annual Growth Rates, 2010-2020 Percent of Forecast Detroit BEA Economic Variable Growth Rate Gross Product in (%), 2010-2020 2010 East North Central Region Gross Product - 2.4 East North Central Transportation and Warehousing - 1.3 Detroit BEA Gross Product - 3.7 Detroit BEA Machinery & Parts Manufacturing 5.7 4.4 Detroit BEA Transport Equipment & Parts Manufacturing 5.4 3.0 Detroit BEA Electronics Manufacturing 2.8 5.0 Detroit BEA Food & Related Products Manufacturing 2.4 0.3 Detroit BEA Textile & Related Products Manufacturing 2.2 2.4 Detroit BEA Transportation and Warehousing 2.0 2.5 Detroit BEA Miscellaneous Products Manufacturing 1.8 1.6 Detroit BEA Chemical and Plastics Products Manufacturing 0.4 4.2 U.S. Gross Product - 2.7 U.S. Transportation and Warehousing - 4.7 Source: Based on MSA data from Bureau of Economic Analysis and Economy.com 72 | TranSystems

Translinked Freight Study Freight Forecast5.4 Freight Flow ForecastThe results of the forecast of inbound and outbound freight flows of warehouse-able commodities aresummarized in Table 5-3. Total freight is projected to have increased from 89.9 million tons in 2009 to 97.8million tons in 2010, driven by recovery from therecession and growth of industries in the Detroitregion. Total inbound and outbound freight is projected Figure 5-1: Forecast of Detroit BEAto increase to 112.4 million tons in 2015 and 126.0 Inbound and Outbound Freight Flows –million tons in 2020 (Figure 5-1), based on domestic Warehouse-able Commoditieseconomic growth and the expansion of cross-bordertrade with Mexico and Canada, and growth of tradewith overseas markets. The projected 10-year (2010 to2020) compound annual growth rate (CAGR) is 2.6percent.Domestic inbound and outbound trade is projected togrow at a 10-year CAGR of 2.4 percent, this relativelyslow growth a reflection of the projected growthpattern of the Detroit BEA and U.S. economies, and therelative maturity of some of the larger commodities(e.g. Food Products) that comprise domestic freightflows. Domestic outbound freight is projected to growat a faster rate than domestic inbound (10-year CAGRof 2.5 percent versus 2.3 percent) due to strongereconomic growth in other regions of the U.S., whichgenerates demand for commodities shipped from the Source: TranSystems Forecast for 2010, 2015 and 2020, andDetroit BEA, notably in the manufacturing sector. IHS Global Insight Transearch data for 2009Cross-border inbound and outbound freight flows withCanada are projected to grow at a marginally faster rate (10-year CAGR of 2.7 percent) than domesticflows. However, the growth of trade with Canada is lower than that projected for cross-border trade withMexico (10-year CAGR of 5.1 percent). This reflects the relative maturity of economic integration betweenCanada and the Detroit region, slower projected economic growth in Canada than in Mexico, and thepresence of some relatively mature commodities (e.g. Food Products and Forest Products) in Canada trade.Cross-border inbound and outbound trade with Mexico is projected to be the fastest growing componentof freight; with a 10-year CAGR of 5.1 percent, 5.4 percent for inbound from Mexico and 4.6 percent foroutbound to Mexico. The stronger performance of Mexico trade relative to the other freight sectors isdriven by the composition of Mexican trade and several trends that are expected to influence trade withMexico in the future. Regional trade with Mexico is centered on higher-value and faster-growth commoditysectors – inbound and outbound shipments of Transportation Equipment and outbound shipments ofChemicals or Allied Products, which includes plastics and synthetic fibers. Economic integration between theU.S. and Mexico continues, including the expansion of manufacturing in Mexico for the U.S. market.Relatively stronger economic growth in Mexico will also support demand for U.S. exports.Overseas Import and Export freight, which is clearly identifiable international cargo moving between theDetroit BEA and U.S. port gateways (e.g. Port of New York/New Jersey), is projected to register a 10-yearCAGR of 4.3 percent, with Exports (4.4 percent) growing at a slightly faster rate than Imports (4.2 percent). 73 | TranSystems

Translinked Freight Study Freight ForecastThe slightly stronger performance by Exports reflects the projected favorable market environment for U.S.exporters, international economic growth and a favorable U.S. dollar exchange rate. It is important to notethat the identified Import and Export flows understate the actual volume of overseas freight flows due tothe conversion of international cargo to a domestic cargo move. For example, a large amount ofcontainerized imports arriving at Los Angeles/Long Beach is transloaded from 40-foot marine containers to53-foot domestic containers, and then shipped inland. This is captured in freight flow databases as domesticfreight. Table 5-3: Forecast of Inbound and Outbound Freight Flows Inbound Freight (Warehouse-able Commodities) CACR 2010 Trade 2009 Tons 2010 Tons 2015 Tons 2020 Tons to 2020 Domestic 44,334,660 47,678,414 54,438,636 59,970,374 2.3% Canada 3,835,424 4,232,502 4,778,201 5,513,774 2.7% Mexico 1,613,233 1,761,005 2,278,608 2,981,832 5.4% Import 1,205,197 1,343,248 1,638,317 2,028,841 4.2% Grand Total 50,988,514 55,015,169 63,133,762 70,494,821 2.5% Outbound Freight (Warehouse-able Commodities) CACR 2010 Trade 2009 Tons 2010 Tons 2015 Tons 2020 Tons to 2020 Domestic 34,989,373 38,422,157 43,783,939 49,083,371 2.5% Canada 1,512,627 1,665,247 1,962,443 2,218,630 2.9% Mexico 812,665 927,945 1,209,384 1,451,046 4.6% Export 1,581,080 1,796,395 2,316,588 2,756,368 4.4% Grand Total 38,895,745 42,811,744 49,272,353 55,509,415 2.6% Inbound & Outbound Freight (Warehouse-able Commodities) CACR 2010 Trade 2009 Tons 2010 Tons 2015 Tons 2020 Tons to 2020 Domestic 79,324,033 86,100,571 98,222,574 109,053,745 2.4% Canada 5,348,051 5,897,749 6,740,644 7,732,404 2.7% Mexico 2,425,898 2,688,950 3,487,992 4,432,877 5.1% Import & Export 2,786,277 3,139,643 3,954,905 4,785,209 4.3% Grand Total 89,884,258 97,826,912 112,406,115 126,004,235 2.6% Source: TranSystems Forecasts for 2010, 2015 and 2020, and IHS Global Insight 2009 data.The Baseline projections indicate that truck shipments will grow at a slightly faster rate than shipments byrail. This result is driven by several factors – (1) the macro nature of the forecast models, with theirunderlying assumptions on industry input and output relationships, and fixed modal shares for individualcommodities, (2) the large amount of freight moving between Detroit and truck friendly origins anddestinations in the East North Central region, and (3) the current transportation mode distribution.However, the macro forecast models do not take into account significant transportation industry factorsthat are expected to accelerate the growth of rail usage. As discussed in Section 3.8, the trucking industry isfaced with several challenges that are encouraging shippers to expand the use of rail in their supply chains.These factors include fuel price increases, favoring rail over highway transport, the cost of recruiting and 74 | TranSystems

Translinked Freight Study Freight Forecastmaintaining truck drivers, investments by railroads in intermodal rail hubs tied to logistics parks, andincreased marketing and attractive pricing by railroads of shorter haul intermodal rail services. For thesereasons, it is likely that rail freight will grow at a faster rate than projected under the macro forecast growthrates summarized in Table 5-4. Table 5-4: Macro Forecast Growth Rates by Transport Mode Inbound & Outbound Freight (Warehouse-able Commodities) Rail Truck Rail Truck Trade Share Share 10-Year 10-Year Comment 2010 2010 CAGR CAGR Domestic 8.8% 91.0% 2.2% 2.4% Rail freight is likely to grow faster than projected here due to truck and rail industry Canada 34.3% 65.0% 2.8% 2.7% trends – driver recruitment, fuel costs, etc., Mexico 60.1% 39.8% 5.0% 5.3% shipper interest in using more rail, investments by railroads in intermodal hubs, and railroad Import & Export 16.0% 84.0% 4.2% 4.3% expansion into shorter distance corridors. Source: TranSystems Forecasts for 2010, 2015 and 2020The Base projections of cargo flows shown in Table 5-3 are driven by assumptions related to regional,national and international economic activity, and relationships between industry inputs and outputs. Low andhigh case projections are presented in Table 5-5. The basis for these alternative projections is that theprincipal driver of freight flows is economic activity, represented by indicators such as disposable incomeand industrial production. In addition, housing-sensitive commodities are subject to more uncertainties goingforward due to uncertainty as to the timing of recovery in regional housing markets. In general, thesensitivities for non-housing related commodities (e.g. transportation equipment) are -0.5to +0.5 percentper year. Secondary traffic is assumed to be 25 percent housing-related and the sensitivities are -0.2 to +1.5percent per year. The growth sensitivities for international flows are -1.5 to +1.5 percent per year. Astronger recovery in regional, national and international economic activity would be expected to drive ahealthy growth of international trade.As shown in Table 5-5, total inbound and outbound shipments of warehouse-able commodities areprojected to have a 10-year compound annual growth rate of 2.6 percent under the Base Case, 1.9 percentunder the Low Case, and 3.2 percent under the High Case. 75 | TranSystems

Translinked Freight Study Freight Forecast Table 5-5: Inbound and Outbound Freight Forecast for 2020 – Base, Low and High Inbound Freight (Warehouse-able Commodities) 2020 Tons CAGR 2010 to 2020Trade 2009 Tons 2010 Tons Base Low High Base Low HighDomestic 44,334,660 47,678,414 59,970,374 57,318,605 63,775,639 2.3% 1.9% 3.0%Canada 3,835,424 4,232,502 5,513,774 5,127,613 5,798,233 2.7% 1.9% 3.2%Mexico 1,613,233 1,761,005 2,981,832 2,708,501 3,145,764 5.4% 4.4% 6.0%Import 1,205,197 1,343,248 2,028,841 1,859,298 2,273,105 4.2% 3.3% 5.4%Grand Total 50,988,514 55,015,169 70,494,821 67,014,016 74,992,742 2.5% 2.0% 3.1% Outbound Freight (Warehouse-able Commodities) 2020 Tons CAGR 2010 to 2020Trade 2009 Tons 2010 Tons Base Low High Base Low HighDomestic 34,989,373 38,422,157 49,083,371 44,989,601 51,752,543 2.5% 1.6% 3.0%Canada 1,512,627 1,665,247 2,218,630 2,059,365 2,308,990 2.9% 2.1% 3.3%Mexico 812,665 927,945 1,451,046 1,369,738 1,658,503 4.6% 4.0% 6.0%Export 1,581,080 1,796,395 2,756,368 2,495,304 3,036,918 4.4% 3.3% 5.4%Grand Total 38,895,745 42,811,744 55,509,415 50,914,008 58,756,955 2.6% 1.7% 3.2% Inbound & Outbound Freight (Warehouse-able Commodities) 2020 Tons CAGR 2010 to 2020Trade 2009 Tons 2010 Tons Base Low High Base Low HighDomestic 79,324,033 86,100,571 109,053,745 102,308,206 115,528,183 2.4% 1.7% 3.0%Canada 5,348,051 5,897,749 7,732,404 7,186,977 8,107,223 2.7% 2.0% 3.2%Mexico 2,425,898 2,688,950 4,432,877 4,078,239 4,804,267 5.1% 4.3% 6.0%Import & Export 2,786,277 3,139,643 4,785,209 4,354,602 5,310,023 4.3% 3.3% 5.4%Grand Total 89,884,258 97,826,912 126,004,235 117,928,024 133,749,697 2.6% 1.9% 3.2% Source: TranSystems Forecasts and IHS Global Insight 2009 data. 76 | TranSystems

Translinked Freight Study Comparative Location Analysis6 COMPARATIVE LOCATION ANALYSIS6.1 IntroductionWith the exception of air cargo, “last mile” delivery trucking costs make up the highest portion oftransportation expense in a typical supply chain. As such, the location of a regional hub is heavily influencedby the trucking cost to distribute goods “the last mile”, to local area DCs, retail stores, or to localmanufacturers. Locating DCs in high concentration customer/supplier areas reduces trucking expensesenough to more than compensate for lower ocean and rail costs to competing regions. The Translinkedregion must overcome two regional hubs that are well established and in a strong position to compete forDC operations in the Midwest; Columbus, OH, and Chicago, IL. Columbus has the highest U.S. andCanadian population reach of Detroit (representing the Translinked region) or Chicago, and Chicago hassuperior rail and air cargo services, as well as a large Midwest distribution reach. Both of these areas havecompetitive labor and industrial real-estate costs as well. Translinked region opportunities lay withcompanies with specific distribution needs, such as a high concentration of customers in Northern Michigan,over to Toronto, and including parts of the U.S. Midwest. Companies that require fastest ocean transitsfrom China or Europe, or manufacturers that receive materials used in production from nearby sources areother potential candidates. TranSystems recommends a detailed, company by company analysis to identifyopportunities based on the Translinked region’s specific advantages.Translinked area opportunities will be aided by addressing perceptions about the unpredictability of U.S.-Canada border crossings, or presenting the region in a “can do”, business friendly light. A short window ofopportunity may be open due to concerns over truck driver and rail crew shortages, and volatile fuel prices.Logistics managers are currently open to considering location solutions that drive costs out of theirnetworks, or that build flexibility into their supply-chains. Improved rail facilities that incorporate features ofsuccessful rail projects, such as on-site DC facilities, will also elevate the Translinked area as a competitivedistribution hub. Importantly, private sector investment is critical to the success of logistics transportationinfrastructure projects; therefore, we strongly urge more private industry involvement and representation inthe Translinked initiative.Time is of the essence. It should be noted that recent improvements in Ohio, such as CSX’s NorthwestOhio Intermodal Terminal at North Baltimore, Norfolk Sothern’s Heartland Corridor serving Columbus,and BNSF’s Chicago rail terminal at Elwood combined with the CenterPoint Intermodal Center have beennoticed in the industry. Other recent success within the Translinked region itself, such as portimprovements in Toledo, have been attributed to public/private cooperation, and agreed upon priorities.Barriers impeding Translinked progress should be identified, and addressed. Slow moving initiatives will loseout to locations that are established, and proven. Creating a Translinked Marketing Organization, similar inconcept to the successful KC (Kansas City) Smartport initiative, dedicated to identifying companies thatwould likely benefit from locating in the study area, is recommended as the first step that will identifyrealistic transportation opportunities.6.2 Regional Truck/Rail Logistics ComparisonLogistics managers evaluate the use of truck and rail within the context of cost savings on an ongoing basis.Improved reliability and transit speeds of railroads, and uncertainty caused by volatile fuel prices, orexpected driver shortages have caused supply chain managers to consider the rail option whenever possible;however, the flexibility and transit speed capabilities of the trucking mode is often the only option, especially 77 | TranSystems

Translinked Freight Study Comparative Location Analysisfor time sensitive shipments. The choice of truck versus rail is decided based on delivery time and costconsiderations.6.2.1 Transit Time HurdleWhen considering a move to rail from truck, the first hurdle that must be cleared is the transit timerequirement. Just-In-Time (JIT) cargo needed for manufacturing purposes, for example, often has a veryshort lead time, and requires a high degree of on-time reliability. A late shipment can cause missedproduction schedules, thereby quickly erasing savings gained by using lower cost transportation options.Retail sales items that have to arrive in stores on-time, or perishable items are examples of goods thatrequire fast, reliable transit. This cargo is more suitable for truck transportation, given that trucks tend tohave faster transits than rail, and provide more scheduling flexibility. Shippers also consider trucks to havegreater resiliency to service failures, due to easier access to trucks on highways, as compared to railcars ona rail network. This access enables shippers to change plans “mid-stream”. The lower cost rail option ispreferred over trucking, if transit time requirements are acceptable, and rail service is available.6.2.2 Total Landed Cost ComparisonThe motivation to use rail is to save money. Once transit time considerations are met, logistics mangerscalculate the Total Landed Cost, which is the total of product, transportation, storage, inventory carryingcosts, customs duties, transloading and any other costs that are incurred as a result of moving a productfrom point A to point B. This analysis allows shippers to evaluate modes on an “all inclusive” basis.Transportation costs examples include rail, trucking, barging, ocean or air.A particularly important component of Total Landed Cost is Inventory Carrying Cost, because transit timehas a direct impact on Inventory Carrying Cost elements, as explained below: • Cost of Money – the longer products stay in inventory, the longer money is tied up, incurring interest expense, and opportunity costs. Cargo in-transit is considered as inventory. • Obsolescence – sales items, or items with a short shelf life, such as high fashion items carry a high inventory carrying cost, as the products become severely devalued after a short period of time. • Safety Stock – the additional amount of inventory that must be kept on-hand to prevent stock-outs. Longer lead and transit time increases safety stock requirements, Cost of Money, Obsolescence…Trucking may be more expensive than rail, but trucking’s faster transit may result in lower inventorycarrying costs, and no transloading17 costs. Rail may be less expensive than trucking, but rail may incuradditional inventory carrying costs, and may also result in truck transload costs. The transportation modethat results in the lowest Total Landed Cost is preferred. One outcome of this approach is that high-value18goods are often moved by truck, because additional inventory carrying costs caused by longer transits ofeven a few days, or the threat of lost sales due to late train arrivals, overshadow cost savings gained by usingrail. Strategies to carry low inventory in retail outlets and distribution centers factor into the landed costcalculation, and this strategy also favors faster transit trucking in order to reduce the risk of stock-outs, andmissed sales opportunities. Even for time sensitive and high-value cargo; however, rail is evaluated. Improvedrail reliability and transit capabilities are causing logistics managers to re-consider the rail option.17 Transloading occurs during an intermodal move, such as from a rail boxcar to a truck.18 High-value cargo is generally processed or semi-processed goods, and often retail items. 78 | TranSystems

Translinked Freight Study Comparative Location Analysis6.2.3 Rail TransitsRailroad transit times, measured in hours, from major port gateways are shown in Table 6-1. They are basedon information from railroad websites; however, TranSystems’ experience is that actual rail transits can varywidely from published schedules based on port and rail corridor congestion, container dwell times atterminals, priority given to various shippers and other factors. The Port of Halifax, for example estimatesthat actual rail transits to Detroit from Halifax, Montreal, and New York are closer to 125, 103, and 168hours respectively, if container “dwell time” is included in the transit. Railroad websites suggest a muchshorter transit, at 89, 40, and 68 hours from Halifax, Montreal, and New York respectively.The most important characteristic of the Table 6-1: Estimated Rail Transits in Hours from Keyinland rail move is reliability. Lead times for Port Gateways to Selected Midwest Pointsrail shipments have already been built intodelivery requirements, so logistics managers Origin Port Gateway Detroit Chicago Columbusin many cases can tolerate a day or two Halifax 89 73 97 aextra rail transit if arrival times can be relied Montreal 48 b 96 64 cupon. A separate market survey oftransportation practices undertaken by New York/New Jersey 68 51 65TranSystems, included an interview with a Norfolk 63 47 39U.S. retailer who used the fastest rail transit Savannah 81 d 65 57 dlane available. When the rail operator raised Prince Rupert 127 97 124 erates in that corridor, the retailer switchedto a lower cost rail route because a transit Seattle/Tacoma 162 132 162saving of two or three days did not justify Los Angeles/Long Beach 145 78 113the higher rate, as long as the shipments a) Estimated based on Columbus versus Detroit transit differencearrived on-time. It is important to note that from NY/NJfor some shippers of high-value or time- b) Montreal to Toronto + 24 hourssensitive cargo, a two or three day shorter c) 24 hours from Detroittransit IS valued, and they would likely d) Based on Norfolk Chicago to Columbus and Detroit spreads e) 24 hours from Chicagoconsider premium rates for faster, reliableservice. Note: Rail transit times are based on published schedules and do not take account of other factors including congestion, container dwell time, priority shipments, etc. In practice, transit times may be longerOther influences on the use of a rail than indicated in the Table.corridor are the ocean carrier used to Source: TranSystems, Railroad Websitesimport goods, or the type of North Americadistribution strategy. For example, PrinceRupert advertises the fastest ocean/rail transit from Shanghai to Detroit; however, if a shipper does notcontract with one of the two ocean carriers that have vessels calling Prince Rupert, or on carriers that havespace sharing agreements with those carriers, fast transit to Prince Rupert is not an option. An inland U.S.transportation strategy might employ a coastal facility that combines shipments from several origins, andredistributes cargo to North American destinations. The location of the coastal facility drives the railcorridor used, which may or may not result in the lowest rail transit in a particular corridor. The overallcontrolling considerations are service reliability, required transit time, and lowest total landed costs,including ocean, costal distribution, rail, and truck costs.6.2.4 Transportation Cost Indication by GatewayWhen a shipper is considering gateway costs, ocean and rail costs are combined to arrive at the total costper gateway. Transit time, cargo volume, cargo types, and number of services offered in a given gateway allaffect total gateway costs. Table 6-2 provides a comparison by port gateway serving the U.S. Upper Midwest 79 | TranSystems

Translinked Freight Study Comparative Location Analysisregion, categorized by Market or Blow Market cost (ocean plus inland) for imports from Asia or Europe. Ingeneral, the shortest transits have the highest rates (e.g. Shanghai to Los Angeles/Long Beach), while longertransit routes have the lower rates (e.g. Shanghai to Ney York via the Panama Canal). A notable exceptionto this rule is Shanghai to Prince Rupert, where ocean carriers have increased capacity, and havecompetitively priced the service to attract new business.As a result of severe railroad delays starting in the late 1990’s, and a dock worker labor lockout on the USWest Coast in 2002, logistics managers began to diversify the number of gateways used to avoid reliance ona single port. All-Water Service (AWS) from Asia that bypassed the West Coast via the Panama Canal toaccess Eastern and Midwestern markets became more popular. Prior to this trend, AWS pricing wasdiscounted due to the longer transit time required to sail vessels through the Panama Canal; however, theprice gap between West CoastGateways and AWS East CoastGateways narrowed, as this route Table 6-2: Translinked Study Area Cost* Evaluation by Northbecame more popular. American Port Gateway Port Gateway Cargo Origin Asia Cargo Origin EuropeThe difference between the highestand lowest rate for the same origin Halifax/Montreal Below Market Marketand destination, but using different Prince Rupert Below Market No Servicegateways might be comparable, U.S. Northeast Ports Below Market Marketwhen the total of ocean and U.S. Southeast Ports Below Market Marketrail/trucking costs are considered. U.S. Pacific Northwest Market Below MarketThe cost evaluations appearing inTable 6-2 are intended to provide a California Ports Market Below Marketgeneral illustration of port gateway * Cost refers to ocean plus inland costs. Each port gateway is categorized as Atcosts. Actual rates are negotiated Market or Below Marketwith ocean carriers and railroad Note: Based on interviews.operators on a case-by-case basis, Source: TranSystemsand will vary by shipper.6.2.5 Trucking Transits and Market CoverageAs mentioned earlier, trucking costs make up the highest portion of transportation expenses; therefore,supply chain managers develop strategies that balance truck transit time requirements and trucking costs.Moving distribution centers as close as possible to end customers is a frequent goal. One method supplychain analysts use to determine the suitability of a proposed logistics hub is to calculate the U.S. Populationthat can be reached within a 10-hour truck drive-time extending outward from a proposed location. Tenhours is generally used as the trucking drive-time threshold due to US Federal Motor Carrier SafetyAdministration (FMCSA) safety regulations that limit the amount of time that drivers are allowed to spendbehind the wheel. “Team driver” arrangements are allowable to extend driver hours, but typical distributionmodels use single drivers.Figure 6-1 illustrates the 10-hour truck drive-time areas covered by distribution hubs in Detroit(representing the Translinked region), Columbus, Chicago, and Harrisburg, PA. Harrisburg was included toillustrate the market role of more easterly distribution hubs. Table 6-3 displays the U.S. and Canadianpopulations falling within the 10-hour truck distribution areas of each city. The 10-hour truck drive-timeareas were calculated by assuming free-flow traffic conditions and so do not take into consideration trafficcongestion on particular routes, which can have a negative impact on truck service areas. 80 | TranSystems

Translinked Freight Study Comparative Location AnalysisDetroit, while covering the secondsmallest population range (88.2 million Table 6-3: U.S. and Canada Population within 10-Hourpeople), reaches further north into Truck Drive-Time of Detroit and Selected CitiesOntario and Quebec than do other cities Populationincluded in Figure 6-1. The advantages of U.S. Canada Total MillionsColumbus is that it include the highest Detroit 74.9 13.4 88.2population coverage of the four citieslisted, encompassing 118.4 million people. Columbus 109.6 8.7 118.4The coverage offered by Columbus Harrisburg 102.6 14.7 117.3reaches from Midwest markets to the Chicago 75.7 8.2 83.9Central Atlantic States of Pennsylvania,New Jersey, Delaware, Maryland, Virginia, Source: TranSystems derived from Census dataand extends south to points in NorthernAlabama, Georgia and South Carolina.Harrisburg provides coverage of 117.3 million people and it has distribution advantages in Eastern Quebec,New Brunswick, the U.S. Northeast US and the U.S. Eastern Seaboard States of Virginia North Carolina.Western markets from South-central Minnesota, down to Eastern Nebraska, and across to the Northeastcorner of Arkansas are best serviced from a DC in Chicago, as compared to the other selected cities. Atotal of 83.9 million people can be reached within a 10-hour truck drive of Chicago. Of the cities studied,Harrisburg (14.7 million) and Detroit (13.4 million) have the highest Canadian population reach. Harrisburgwould be favored for target customers heavily concentrated in the East, Chicago for Midwestern markets,Detroit for Midwestern plus Canadian markets, and Columbus for population in both Midwest and Easternmarkets. The challenge for the Translinked region, as a distribution hub, is its proximity to some of thesemore favorably located cities – for example, a company with a DC in Columbus can access the largestpopulation of the four locations considered here and provide coverage of the Translinked regional market. 81 | TranSystems

Translinked Freight Study Comparative Location AnalysisFigure 6-1: 10-Hour Truck Drive-Time Area Comparison: Detroit, MI, Chicago, IL, Columbus, OH, and Harrisburg, PA Source: TranSystems 82 | TranSystems

Translinked Freight Study Comparative Location AnalysisTable 6-4 provides estimated truck transittimes from selected cities to major Table 6-4: Truck Transit Time from Detroit andpopulation centers. Transit times shown in Selected U.S. Distribution Hubs to Major Citiesred denote corridors that are beyond the Origin (Truck Transit Hours, > 10 Hours)10-hour delivery radius of most DCs. For Destination Detroit Columbus Chicago Harrisburgexample, none of the DCs would likely Chicago 5.4 6.7 - 12.2service Dallas. Chicago is within range of Cincinnati 5 2.1 5.6 8.8most of the largest Midwest Cities, and Cleveland 3.2 2.7 6.2 6.4Harrisburg is the only DC within 10-hour Columbus 3.9 - 6.7 7range of New York City. Dallas 22.4 19.1 17.8 25.4 Detroit - 3.9 5.4 9.2To illustrate how truck volume to Indianapolis 5.9 3.5 3.5 10.3destination cities affects overall trucking Kansas City 14.5 12.1 9.9 19costs, Table 6-5 displays the populations by Milwaukee 7.4 8.6 2.1 14U.S. Census Bureau Metropolitan Statistical Minneapolis 12.9 14.1 7.7 19.7Area (MSA) for the largest Midwest Nashville 10.2 7.1 8.8 13.3Markets, and the population of Toronto, New York 11.8 10.3 14.8 3.6ON and truckload rates to each of these Pittsburgh 5.7 3.7 8.7 4.1cities from Detroit, Chicago, Columbus and Saint Louis 10.3 8.1 5.8 14.9Harrisburg. Table 6-5 should be viewed as Toronto 4.6* 8.2* 9.7* 7.3*a basic example of a regional DC analysis of * Subject to customs inspections, may extend transit beyond 10 hourstrucking costs, where large regional DCs Source: TranSystems and Truckloadrates.comcovering several states feed smaller DCsthat service a metropolitan area.If truckload volumes to each destination are proportional to destination city populations, Detroit andChicago have the lowest average total trucking costs. Chicago is aided by having local trucking rates to thethird largest MSA in the cities listed, while other markets would have to pay long distance trucking rates toserve those same Chicago area customers. A regional DC located in Detroit benefits from local truck ratesto 4.3 million people in Detroit, as well as the lowest long distance trucking cost to the large populationcenter of Toronto. If Toronto is removed from the analysis, Chicago becomes the lowest cost hub, whileDetroit falls to the third place position behind Columbus.It should be noted that, per Table 6-4, Detroit cannot serve Kansas City, Minneapolis, Nashville or St. Louiswithin a 10-hour truck drive, which may not meet service level requirements of some shippers. Service toToronto may be affected by inspection and other delays at the border, which could disqualify Toronto froma Detroit DC service area. Interviews with logistics managers suggest that the existence of a bordercrossing within the distribution area of a warehouse is workable, but not desirable. This emphasizes theimportance of addressing concerns regarding border delays, because access to the Toronto market isimportant if the Translinked region is to be viewed as a leading Midwest distribution location.A common observation of prospective regional hubs is that cargo often passes through their regions, only tobe transported back into the area later. Network optimization may cause truckloads to actually passthrough their eventual destination. Chicago’s lower DC distribution costs may cause containers to passthrough Detroit to Chicago, where cargo might be comingled with other freight, and trucked back toDetroit. In this case, total U.S. network distribution cost savings outweigh rail cost or transit time savings toDetroit, even if containers pass through the Translinked region initially. 83 | TranSystems

Translinked Freight Study Comparative Location Analysis Table 6-5: Estimated Truckload Costs from Detroit and Selected U.S. Distribution Hubs to Major Cities 2010 Origin (Estimated $ per Truckload) MSA Lowest Cost, 2nd Lowest CostDestination MSA Rank Population Detroit Columbus Chicago HarrisburgChicago 9,461,105 3 $555 $474 $150 $645Cincinnati 2,130,151 27 $462 $534 $584 $549Cleveland 2,077,240 28 $456 $443 $670 $448Columbus 1,836,536 32 $456 $150 $678 $446Detroit 4,296,250 12 $150 $553 $606 $563Indianapolis 1,756,241 34 $583 $555 $457 $560Kansas City 2,035,334 29 $1,167 $1,007 $867 $989Milwaukee 1,555,908 39 $618 $608 $541 $828Minneapolis 3,279,833 16 $1,053 $1,085 $664 $1,094Nashville 1,589,934 38 $842 $562 $761 $642Pittsburgh 2,356,285 22 $680 $489 $1,005 $455Saint Louis 2,812,896 18 $823 $577 $577 $783Toronto 5,471,400 - $577 $1,066 $1,150 $956Weighted Average $612 $645 $615 $709 Source: TranSystems, TruckloadRates.com and Census Data 84 | TranSystems

Translinked Freight Study Comparative Location Analysis6.3 Location Profiles – Columbus and Chicago6.3.1 Columbus, OHA DC located in Columbus is considered to have the largest population reach of any U.S. location, due to itsproximity to the largest U.S. population centers in the Midwest and Eastern states. Over 118 million peoplelive within a ten-hour drive of Columbus. Columbus has also benefitted from recent developments, such asthe Rickenbacker Logistics Park, Norfolk Sothern’s Heartland Corridor, with improved transit times fromNorfolk to Columbus, and intermodal terminal improvements as part of CSX’s National Gateway Initiative.Table 6-6 summarizes several key logistical characteristics offered by Columbus. Table 6-6: Columbus Regional Logistics Summary Columbus, OH Railroads and Service Area CSX – U.S. East, Midwest, main Western States Access NS – East, Midwest access Western States and Canadian cargo connects to railroads serving those areas, i.e. UP, BNSF, CP, and CN. Highway Description I-70 and I 80 to the north provide east/west access, I 71 and I 75 to the west provide north/south access Distribution Facilities U.S. and Canada Population Reach 118.4 million within 10-hour truck driving radius Total Warehouse Space (sq. ft.) 205.9 – 213.8 million Vacancy Rate 11.5% – 3.7% Average Lease Rate ($/sq. ft./yr)* $2.70 – $3.32 Transportation and Materials Moving $14.85 Occupation Wage (Hourly) Fastest Ocean Gateways Norfolk, New York Airport US Rank**** 54th Total Cargo (metric tons) **** 69,748 Distribution Area Target US Midwest, Northeast, Mid Atlantic * Asking lease rate for Warehouse and Distribution Use Facilities > 10,000 sq. ft Source: TranSystems, CB Richard Ellis, Grubb and Ellis, Colliers, US Bureau of Labor Statistics, Airport Council International – North America, and Railroad websitesThe Rickenbacker Inland Port is the best example of a multimodal/intermodal logistics park in the area. Keyfeatures of the facility are on-site access to the NS intermodal rail terminal, the Rickenbacker InternationalAirport, and I-270. On-site rail access accommodates logistics strategies to reduce trucking costs, as cargocan be delivered to DCs that are directly adjacent to rail and air facilities. Because of the multimodaladvantages, several Third Part Logistics Providers (3PLs), such as Exel, Kuehne & Nagel, Nippon Express,Expeditors International have locations at Rickenbacker. Regular cargo airline service is offered by UPS andFedEx, with less frequently scheduled cargo services offered by international carriers, such as Evergreen Airand Kalita Air. Attracting dedicated international cargo airlines other than UPS or FedEx is significantbecause the current trend of these carriers is to limit service to very large air hubs, such as Miami, FL,Chicago, IL, or Los Angeles, CA. The lack of daily service from multiple international cargo airlines into 85 | TranSystems

Translinked Freight Study Comparative Location Analysiseither Columbus or Rickenbacker international Airports indicates that the Columbus area is not consideredto be a major air cargo gateway into the Midwest; however, air cargo services are an advantage of theRickenbacker facility. Justification for air cargo services that do call Rickenbacker is based on the needs oftenants, and the large population coverage offered by the location. TranSystems interviews suggest that theRickenbacker air facility does not break-even financially; however, air cargo services support logistics needsof the airfield tenants, such as The Limited Companies and others, and jobs created by the facility areviewed to compensate for losses.6.3.2 Chicago, ILChicago has the third largest U.S. metropolitan population with over 9 million people, and is served by six ofthe seven Class 1 Railroads that operate in North America. In addition to the local population, over 75million people can be reached within a 10-hour truck drive from Chicago. Chicago is also North America’sfifth largest cargo airport, with regularly scheduled service from over twenty cargo airlines from around theworld, in addition to passenger airlines, such as Air China, Air France, Singapore Airlines and others thattransport air cargo on passenger jets. The combination of population mass, ample rail intermodal service,and nearby access to one of the key Midwest air cargo hubs provide compelling reasons to locate Midwestregional DCs in the Chicago area. Rail congestion is noted as an impetus to establish rail facilities elsewherethat allow trans-continental rail service to bypass Chicago. CSX’s North Baltimore project is an example ofsuch a rail facility. Table 6-7 summarizes several key logistical characteristics offered by Columbus. Table 6-7: Chicago Regional Logistics Summary Chicago, IL Railroads and Service Area CSX US East, Midwest, main Western States Access NS East, Midwest access UP and BNSF, States west of the Mississippi CN, Canada Rail Markets, US Central Plain States, Gulf P, Canada Rail Markets, US Northeast, US Midwest I-94 and I 57 provide north/south access, I 80 Highway Description east/west, and I 90 northwest access Distribution Facilities U.S. and Canada Population Reach 83.9 Million within 10-hour truck driving radius Total Warehouse Space (sq. ft.) 1.0 – 1.3 Billion Vacancy Rate 9.3% – 11.3% Average Lease Rate ($/sq. ft./yr)* $3.90 – $4.39 Transportation and Materials Moving $16.46 Occupation Wage (Hourly) Fastest Ocean Gateways West Coast (Asia origin cargoes) Airport U.S. Rank 5th Total Cargo (metric tons) 1,376,552 Distribution Area Target US Midwest * Asking lease rate for Warehouse and Distribution Use Facilities > 10,000 sq. ft Source: TranSystems, CB Richard Ellis, Grubb and Ellis, Colliers, US Bureau of Labor Statistics, Airport Council International – North America, and Railroad websites 86 | TranSystems

Translinked Freight Study Comparative Location AnalysisAn example of a logistics industrial park in the Chicago Area that combines key elements of a successfulsupply chain cost reduction strategy is CenterPoint’s 2,500-acre industrial complex located in Joliet. Themain attraction to this facility is on-site service provided by the BNSF railway, which reduces trucking coststo DCs located at CenterPoint to an estimated $92 per container. CenterPoint considers this to be such astrong selling point that they included a “Drayage Calculator” on their website that estimates cost savings oflocating at CenterPoint versus five other site locations in the Chicago area. Companies like WalMart agreewith the cost saving potential of the development, and have located at CenterPoint. Separate TranSystemsinterviews of logistics managers in the Chicago area revealed that the single downside of the development isthat BNSF is the only railroad to serve the site. If freight arrives at other railroad terminals, containers haveto be drayed back to the CenterPoint facility.The Chicago logistics market is so large that smaller municipalities within the metropolitan area competewith each other for customers. Local government supports development initiatives by providing taxincentives, such as lower tax rates for “urban blight” areas, or they quickly re-zone roadways toaccommodate over-weight truck loads, or re-direct roadways to facilitate the flow of freight traffic betweenkey logistics hubs and highways. Cooperative government is a key consideration when selecting a logisticshub, after transportation cost and service requirements are met. 87 | TranSystems

Translinked Freight Study Comparative Location Analysis6.4 Regional Comparison SummaryThe Translinked region faces steep competition as a Midwest regional logistics hub. Table 6-8 presents acomparison of key transportation hub considerations for Detroit (representing the Translinked area),Columbus and Chicago. Detroit has distribution advantages if Ontario, Canada is included as part of a DCservice area. Columbus offers the largest population coverage within a 10-hour truck drive, and the lowesttransportation cost, labor rates, and industrial real estate lease rates. Chicago has the edge for railroad, orair cargo service availability. Chicago also has the highest Midwest market distribution reach. Table 6-8: Detroit, Chicago and Columbus Summary Table Detroit, MI Columbus, OH Chicago, ILRail AccessRailroads CSX, NS, CN, CP CSX, NS CSX, NS, UP, BNSF, CP, CN CSX US East, Midwest, main CSX: US East, Midwest, main Western States Access CSX US East, Midwest, main Western States Access NS East, Midwest access Western States Access NS: East, Midwest access UP and BNSF, States west of theService Area NS East, Midwest access Western States and Canadian Mississippi CN, CP Canada Rail Markets, US cargo connects to railroads CN, Canada Rail Markets, US Central Plain States, Gulf serving those areas, i.e. UP, BNSF, Central Plain States, Gulf CP, and CN. CP, Canada Rail Markets, US Northeast, US Midwest US-69 to Blue Water Bridge to I-70 and I 80 to the north provide I-94 and I 57 provide north/south CA-402,US 75, US 375CA-401 via east/west access, I 71 and I 75 toHighway Access access, I 80 east/west, and I 90 Ambassador Bridge, US-96, US- the west provide north/south northwest access 94, US-275 (to US-80), accessDistribution FacilitiesPopulation Reach (10 hour truck 88.2 million 118.4 million 83.9 millionradius, US and Canada)Total Warehouse Space (sq. ft.) 366.8 – 524.0 million 205.9 – 213.8 million 1.0 – 1.3 BillionVacancy Rate 13.5% - 14.9% 11.5% - 13.7% 9.3% – 11.3%Average Lease Rate ($/sq. ft./yr) * $3.87 – $3.91 $2.70 – $3.32 $3.90 - $4.39Transportation and MaterialsMoving Occupation Wage $17.24 $14.85 $16.46(Hourly)Fastest Ocean Gateways Halifax, Prince Rupert Norfolk, New York West Coast (Asia origin cargoes)AirportU.S. Rank 27th 54th 5thTotal Cargo (metric tons) 193,344 69,748 1,376,552 Ontario, Canada, Michigan US Midwest, Northeast, MidDistribution Area Target US Midwest Peninsula, OH, IN, WI, IL Atlantic * Asking lease rate for Warehouse and Distribution Use Facilities > 10,000 sq. ft Source: TranSystems, CB Richard Ellis, Grubb and Ellis, Colliers, US Bureau of Labor Statistics, Airport Council International – North America, and Railroad websites 88 | TranSystems

Translinked Regional Freight Study

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Translinked Regional Freight Study — Document Transcript

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