This document summarizes a presentation on analyzing pricing in the LTL industry. It discusses the current economic conditions including GDP growth, industrial growth, and a driver shortage. It reviews inflation trends and how trucking rates have changed in relation to inflation and GDP since 1993. The Six Sigma project aims to define problems around leveraging a company's total LTL spend across business units to improve service, shareholder value, and cost savings. It lists dependencies that need to be addressed to complete the project.

1. LTL Industry
Pricing Analysis
Presented to
By Tim Lerchbacker

2. Presentations Purpose
 Three Fold:
 Macro view of current industry
and economic condition –
Capacity, Inflation,
 Historical review of rate
adjustment activity since 1993
 Six Sigma Project – Define

3. Capacity
 2006 GDP Range from 2.7% to 3.9%,
3.3% likely.
 Industrials projected to grow 7.6%.
 Inventories being rebuilt from start of
the year lean levels.
 More product chasing few trucks.
 Current driver shortage - 20,000, by
2015 from 111,000 to 114,000 short.

4. Inflation Pressures
 Impacted by 9/11, War, Cost of
Fuel,
 Insurance deductibles escalation,
1999 = $443,000 per incident,
2004 = $2.7 million,
2005 = $3.2 million,

5. Inflation Trends
Since 1914

6. Cyclical Inflation

7. Moore Inflation Predictor

8. Industry Rate Increases
Trucking Industry Rate Increases
1993 - 2006
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
70
80
90
100
110
120
130
% rate chg Index (2001 = 100)

9. Truck Rates vs. Inflation
vs. GDP
Trucking Rates vs. Inflation vs. GDP
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
% Rate Chg. Inflation GDP % chg Prev. Year

10. Six Sigma - Define
Problem Statement:
23 People making buying or routing decision,
 Potential impact to customers,
 Potential impact to shareholder value.
 Potential impact in inflating GE’s transportation spend,
 Combined B/U LTL spend not leveraged,

11. Project Objective
To leverage the Companies total
LTL spend across all BU’s to drive:
 Service Improvements – KPI’s,
 Improved SHV – increased
Profitability,
 Cost savings – XX% across all
customers and BU’s.

12. Dependencies
• Determine what the external and internal customers want,
• Verify the ability of the TSS to meet with, interview, or request
information from internal customers (sales, shipping, critical
stakeholders etc.,) and potentially external customers,
• Verify the internal requirements to get copies of contracts and
rate data back to 2001 or the most current,
• Establish what the mechanism is to review shipping data as
to:
• Origin locations,
• Terms (FOB point,)
• Destination locations,
• Carriers used on a prepaid basis,
• Carriers used on a collect basis,
• Payment terms with the carriers,
• Systems capabilities to route when a sales order is created,
• Sales order mapping from order to shipped / delivered,
• Are sales / shipping orders routed to a carrier’s automated
shipping system electronically,
• Which carriers have automated data entry systems on site,
• Analyze claims history,
• Document shipping hours of operation at the shipping
locations,
• Verify when GE considers a sales order complete for revenue
recognition,
• Ascertain how partial orders are handled,
• Review of shipping dock(s), number of doors, forklifts / pallet
jacks, how non-palletized material is handled (carts, hit the
floor, belt, etc.),
• If managed by a 3PL or contracted provider, review their SOP
document(s) as approved by GE,
• Determine by carrier if GE is a daily stop,
• Determine which carriers GE must call for a pick up,
• Determine how GE measures service provided by its carriers
(current KPI’s),
• Determine what “ready to ship” product characteristics exist
between shipping locations / business units, i.e., density,
average shipment size, average number of pieces, any
insured or declared valuation, etc.,
• Establish if the contracted rates are FAK or class rates, Verify
the expiration date for all existing contracts,
• Determine who, by location, is enabled to route shipments,
• Determine how proof of delivery is feed back to GE and if the
POD is matched with the sales order,
• Determine the frequency with which GE formally meets with
its carriers,
• Determine proximity of carrier to shipping locations,
• Visit carriers local terminals to ascertain probability for
service interruptions due to congestion at the local terminal,
• Review carriers routings to determine how often shipments
are likely to be routed through a break bulk terminal, and
when a shipment is routed through a break-bulk terminal
where the break bulk terminal is, then determine the
likelihood that it will be loaded direct to the destination
terminal or possibly transfer through another break bulk
terminal,
• Determine in contracted carriers provide dedicated customer
service for GE
– Is it local or via a 1-800 number?
– If so, how is this function handled during vacations
and illness?
– Is it 24/7?
• Determine if contracted carriers have provided escalation
charts with contact information beyond the local terminal,
• Determine internally, how customer shipping status inquiries
are handled,