Transportation notes 8.2.18

1. Transportation – 8.2.18 notes
Rob Achtzehn,Chainalytics
Todd Biscan,CSX
AndrewDafforn,TailoredBrands
NathanJohnson,Werner
Veronica,International Paper
Terry Pohlen,Ph.D., Universityof NorthTexas
Gregg Zody,BNSFRailway
Ryan
AmyThorn, DBM Association
Terry – At the endof the lastconference we discussedthree potentialideasforongoingresearchfromthe
transportationpeergroup. I’dlike tohearfromyou.
Transportationpeergrouptopareas of interest:
 Technologyapplicationsintransportationandlogistics—whatisoutthere andwhois using,particularemphasis
on Blockchain
 Drivershortage andtransportationcapacity—whatare the nearand long-termstrategiesforresolvingthe driver
[andlogistics] laborissue?
 Relationships—howtodeveloplong-term,sustainablerelationshipsbetweentradingpartnerswithinasupply
chain,especiallybetweencarriersandshippers
Amy – We have gottenwonderful insightsfromthe executivesonthe postconference follow upcalls. I’mvery
appreciative of Terry’swillingnesstospearheadthe whitepaperandthe solutionstopresentinthe labin2019. The
otherpart is to developasessionwhere companieswill share bestpractices,whathasworked/hasn’tworked,etc.
Terry – Anyother keyissuesworthpursuingatthe 2019 conference?Thisisjusttobrainstormideasforthe research
portion. Onthe tech side,whatkindsof issuesare youencountering,needmore infoonorotherSCLA memberscould
benefitfrom.
Nathan– On technology –Blockchain – whatto do to getit off the ground.The progressisslow forBlockchainonthe
maritime side.There’samore significantplayonthe Blockchain side –contracts,eliminatingthe middle process –not
justthe currency side.The otherthatwe’re seeingalot of playin is machine learningandanalytics. Manythingsthatare
talkedaboutas AIare justbig data analyticsthatyoucan use topredictthe future.The bestpredictionof the future is
history.The bestuse casesthat people are deploying,patterns, etc.We’re doingalotof R&D onbig data andanalytics,
machine learning,etc.
Amy – Is thatsomethingyoucouldhelptocontribute to? NadaSanders,Ph.D.,withNortheasternUniversityislookingto
presentasessiononbigdata, etc.
Nathan– I thinkwe’dbe opentosharingsome of the thingswe are approaching. I’ll boil itdowntothe carrier/shipper
relationship.The betterashippercanpredictwhat’sgoingtohappenthe betterwe can use those predictionsto
forecast.The numberone problemwe face iscapacity – labor,trucks,infrastructure,freight,rail,movementbetween
modes,etc.The smarterwe get the more dense we can transport/move the betteroff we’llbe totackle the capacity
challenge.We don’tsee itgoingawayinthe nextyear.It will continue tobe achallenge through 2019 andinto2020. It’s
not a short-termcycle asit has beeninthe past.
Terry – I calleditshipper/carrierrelationships.The sharingof informationenablesbetterforecasts,betteruse of labor,
etc. It’s notjust transportationbutdistribution,rail,etc.
Nathan- The informationhastomove fasterthan the actual freight. APIstreamlinesdata,improvesdata,doingit
securelyinBlockchain –these will allow the supplychaintobecome more productivewithoutmore ships,lanes,etc.We
can’t growas fast as the economy wantsto shift. Freightisgettinglighterbecause it’sbecominglessdense. It’sashiftin
howcapacity istransported. I’ve beenonthe shippersideaswell.

2. Rob – I can speaktothat as well – the trendswe are seeing.We are seeinganuptick inthe designworkwe’re doing,the
networks.Customersare focusedonhowtodistribute goods.Onthe transportside –we’re lookingatprivate fleetsto
capture capacity.The challenge isthatit’sreactive. That’dbe goodto lookat overall.
Veronica– Some rail carriersare betterintermsof visibilityandseeingwhere the carsare.Same withtruck carriers.
Most go througha portal to go throughthingswe needthemtodo – consignee,etc. It’snotautomatic.Someone hasto
be clickingbuttonstoletus knowwhere productis.
Todd – We’re workingwithourchannel partnerstoget betterforecastingforsurges. We’re focusedonpredictability,
visibilityandfluidity. Goingtoa reservationsystemtohelpevenoutthe flowsandmake sure we’re not acceptingmore
freightthanwe can deliver. We’re experiencingapeaknow but needtomake sure we can handle the business
efficientlyforourcustomers.
Terry – What are some of the keytechnologyissuesinsharingbetweenshippersandcarrierstoimprove capacity?
Andrew – We’re seeingthe same things.Reductioninvolume.Forecastshave beenupdated(within3% marginof error),
because of the drivershortage it’snotworkingwell.We’re outsourcingtothirdpartyvendorsthatare notpart of our
contract. What we try to do onthe frontendbefore we reachoutwe try to stage the loadso that it’sfull goingoutand
back. It requiresalotof extralabor on ourend – holdthingslongerthanwe’ve wantedto,etc. Realisticallywe’ve hadto
go to parcel for a lotof thingsthatwe’ve usuallyputona truck.We want themtoget movingratherthansit aroundand
collectdust.
Terry – Let’smove on to the laborissue.We’ve talkedaboutdrivershortage,butgettingtalentisanissue ingeneral
(qualifiedtalent). Islaboran issue? Whatare you doingaboutit?
Nathan- Drivercapacitycontinuestobe a challenge fromacarrierstandpoint. Muchof the rate increase ischanneled
directlytoour drivers inthe formof payincreases.We’re workingdirectlywith alotof our dedicatedpartnerstobuild
theircapacityand increase rates. We are one of the largestsupportersof drivingschools. We have anon the jobtraining
where theydrive withatrainerforthe firstfewmonthsso theyunderstandhow tooperate safely.There’safairamount
of workinDC for apprentice programs.Youcan drive a large truck withinastate as longas you staywithinborders.How
to buildan apprentice componentintointerstate transportation. Havingsome kindof agraduationtoattract the
youngerdriversandgrowingintoaqualitydriverissomethingwe’re doingalotof workon currentlythrough legislation.
Terry – How abouton the rail side?
Gregg – We continue toofferbonuses (signing)forconductor,engineeringjobsandinsupportivegroups like the
mechanical teams. We are canvasingand tryingtoattract financiallytothe railroad.
Terry – What challengesare youfacingintryingto attract talent?
Andrew - A lotof people applyingaren’tnecessarilylookingforjustpay. Whenyouadd inthingslike 401k we started
gettingmore hits – millennialsandgenZ.theywantto be a part of somethingbiggerthanjustmoney.We’re startingto
see itbut it iscomingintoplayand has been growinginthe lastsix months.
Nathan– The overall driverexperience iswhatwe’re tryingtotackle.We’veseenasignificantgrowthindedicatedwhich
isa wayfor shippertoengage andhave bettercontrol overcapacitywhichcorrelatestoa betterdriverexperience.The
overthe road one way truckingisa challenginglifeexperience.It’snotaboutjustmakingmore moneybuta better
overall life experience –worklife balance. It’snotjustdrivers.It’shardtofinddevelopersandITsupportpeople.Theyall
wantto work fora .comand live inCA and make $200k annuallylike theydoatGoogle.
Amy – Labor challengeshave beenapointof discussioninmostpeergroups.Culture isanothertrend.I’mhearingthings
I haven’theardina longtime.Howdo youattract and retainpeople once you’ve made thatinvestment?

3. Terry – Are there any otherissues,challengesthatyou’dlike tosee addressedand/orsharedatthe upcoming
conference?
Gregg – From the beneficialcargoowner(shipper) perspective, receiveasignificantamountof ourfreightin the
intermodal worldWedsthroughFri.We’re rollingfreightonthose daysbecause we have more freightthantrain
capacity.There’sextracapacityon the weekendandatthe beginning of the week.How canwe move thatintoa
conversation withourcustomers?Customers,please think aboutthat.
Amy – We’re takingnotesonthe call and have capturedthe inputfrom the group. I’dlove to see these challenges and
whatyou’re doingaboutthemsharedina white paperand/orthroughthe app.
Terry – With the turbulence intrade agreementsare youexperiencingdifferencesinyour transportations networks?A
companyI’mworkingwithisexperiencinga25% hike onsteel.Thoughtsabouthow youwouldmitigate it?
Andrew – We have not yetbeenaffectedbutwe’re anticipatingitwillcome atus.We are importingfinishedgoods
rather thansupplies(yardsof fabric). Inanefforttorealign we’re lookingatfactoriesinotherlocationsthatdonothave
the spike intariffsand are preparingforthat inevitability.Youcan’tput all of your eggsinone basket.You needtobe
able to activate/deactivateasneeded.
Amy – I wason the phone withsomeone yesterdaywhoisexperiencinga40% hike insteel.It’sbrutal andcreatinga lot
of uncertaintywhichmakespeopleworry. Will thisslow the economy?
Terry – If otherthingscome to mindplease shootme anemail.We’ll continue tofollow-upwiththe peergroupaswe
move alongthe linesof thisdiscussion.
Amy – Let’sschedule ournextcall.We needsome time tosynthesize the ideasandwill presentthemonthe nextcall.
Nextconference call:Thursday, September20th
at 11:00 AM Eastern (8:00 AM Pacific)