A2: Site Selection and Freight Logistics

Tim Feemster- Foremost Quality Logistics

John Greuling- Will County Center for ED

J. Vann Cunningham- BNSF Railroad

Let’s Work Together on This

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Agenda

• Introductions- Tim Feemster & Panel

• Trends in Transportation, Logistics & Supply Chain Impacting Site Selection- Tim Feemster, FQL

• Infrastructure and the Local Economic Development Organization, Trucking, Water, & Air-John Greuling, Will County Illinois Center for Economic Development

• Infrastructure and the Railroads- Vann Cunningham, BNSF

• Questions

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ALAN provides information and educational resources before, during and

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Makes People Safer

Questions for the Audience

• How many of you work for– Student or Professor

– Economic Development or Governmental Agency

– Manufacturer

– 3PL Provider/Corporate Logistician/Transportation Provider

– Consultant

– Industrial Brokers or Developer

– Press

– Don’t know?

• How many of you live within 150 miles of a Port city?

• Who has visited a Port or Intermodal Hub?

• What are the major challenges to Global Trade today and in the future?

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The End-to-End International Supply Chain

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Manufacturer

{

Inland Transportation

Ocean Goods terminal

Vendor warehouse /

import center

Store

Retail

Distribution

Center

Store

Head office

Physical Movement

Data Movement

Order processingPhysical movement

Track & trace

Source: Tim Feemster, Foremost Quality Logistics

Relative Cost for Goods Movement

Less thanTruckload$$$$/LB

Ship$/Box/Ton

Air $$$$$$/LB

Rail$$/Box/Ton

Truckload$$$/Truck

Parcel$$$$$/LB

International Supply Chain

Source: Tim Feemster, Foremost Quality Logistics

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0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Transportation Inventory WarehouseLabor est

WarehouseNon Labor est

Administration Other

62.8%

22.9%

5.9%3.9% 3.8% 0.8%P

erc

en

t o

f L

og

isti

cs C

ost

Cost Category

Source: CSCMP & Tim Feemster, Foremost Quality Logistics

Logistics Cost Breakdown- 2012

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14.4%

Freight, Freight, and Freight,

then Labor and Love

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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

High Tech RegionalRetailer

ConsumerFulfillment

LightManufacturing

CPGManufacturer

NationalRetailer

Food &Beverage

41% 42%

24%12%

62%

34%

19% 21%

72%

50%65%

23%

54%5% 4%

5%5% 5%

2%6%

29%19%

9% 8% 3%

9%2%5%

14% 14% 12% 16%4% 4%

Inbound Trans Outbound Trans DC Fixed Inventory DC Variable

Source: CHAINalytics

% o

f Su

pp

ly C

hai

n C

ost

s

60%63%

72% 74% 77%

85%88%

Critical Trend Components

SiteSelectionCriteria

STRATEGIC FINANCIAL

INTANGIBLES

Sustainability Ecommerce Foreign Trade Zones Vertical Market Clusters Real Estate Strategy -

Own/Lease/Build

Transportation & Drayage Labor & Healthcare Costs Incentives Deal Structure Lease Renewals Lease Accounting Rules NPV Total Cost Analysis

Brand Reputation Unionization Paid Benefits Quality of Life Business Climate

Rising Fuel Costs Driver Hours of Service Labor Demographics,

Aging Workforce, etc. Energy Costs Trucking Capacity Intermodal Access- Int & Dom

OPERATIONAL

Source: Foremost Quality Logistics

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Innovation in Trucking

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Foreign Trade Zone

-Foreign Status Goods

-Customs Cleared Goods

Warehouse – Without FTZ

US Customs

Warehouse – Using FTZ

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US CustomsSource: Hillwood & Foremost Quality Logistics

Duty Reduction

Mfg Plant – Without FTZ

US CBP

$306 $306

$300 $300

Mfg Plant – WITH FTZ

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US CBPSource: Hillwood & Foremost Quality Logistics

Pre Foreign-Trade Zone

Shipments into Site

3,000 receipts inboundper yr. MPF $1,455,000

Shipments into commerce with weekly entry.

One entry filed at End of week. MPF $485or $25,220 per yr.

In a single year an FTZ importer can save

$ 1,429,780 MPF Fees

FTZ Example

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Assumptions:

1. 3,000 international containers a year into the facility per year

2 Container value $150,000

3 1 BOL per container; $150,000 value per BOL

Post Foreign-Trade Zone

Source: Tim Feemster, Foremost Quality Logistics

Source: Foremost Quality Logistics

FTZ CONCLUSIONS!

• FTZ’s offer superior Velocity now

• FTZ’s offer superior Security now

• FTZ’s offer superior cost reduction vs. standard importing.

BOTTOM LINE:

• This Economy is REQUIRING CUTS in Supply Chain Costs

• FTZs are much easier to administer now with ASF

• If you qualify, you can’t afford NOT to participate!

• FTZ Website Link:http://enforcement.trade.gov/ftzpage/index.html

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John Greuling- CEO Will County Center for ED

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The Will County Center for Economic Development

• A Private Non-Profit Economic Development Corporation

• Formed in 1981 to diversify the economic base of Will County

• Comprised of business and government leaders

• Serves all of Will County

• Partner with the Will County Economic Development Foundation

• The One-Stop Shop for Business Assistance in Will County

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Population: 700,000

No. of Businesses: 18,000

Employment: 250,000

Key Business Sectors:• Transportation & Logistics• Manufacturing• Energy Production• Food Processing• Life Sciences

Will County Illinois

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Will County Infrastructure

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The Will County Inland Port

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A Global Transportation Center

U.S. Intermodal Traffic Flows -Density

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RidgePort Logistics Center Illiana Expressway

Chicago Land's Intermodal Growth Corridor

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Inland Port

Chicago

Will County Inland Port

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26

27

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CenterPoint Footprint

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CenterPoint Intermodal Center Elwood

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Wal-Mart Import DC

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CenterPoint Intermodal Center Joliet

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RidgePort Logistics Center

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CenterPoint Port of Will County

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New Arsenal Road Interchange @ I-55

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Local/Regional Economic Development Approach

1. Development plan that recognizes logistics as a targeted industry sector, not just another piece of infrastructure.

2. Research that supports and validates your position in global and domestic supply chains.

3. Know who your customer is. 4. Develop strong connections with partners in the

freight industry: railroads, shippers, 3PL’s, trucking firms, DC owners, developers, etc.

5. Be honest about infrastructure deficiencies and your solutions.

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Local/Regional Economic Development Approach

6. Strong government relations program at local, regional, state and federal levels.

7. Workforce development and education/training services a must.

8. Promote collaborative solutions to multi-jurisdictional challenges, e.g. designated freight/truck routes, overweight permitting and enforcement, zoning and design standards, users fees, etc.

9. Provide a single point of contact regarding development opportunities, incentives, major developments and other information points key to the industry.

10. Secure adequate resources to accomplish the above.

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Vann Cunningham- AVP BNSF Railroad

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U.S. Supply Chain

Rail delivers everything Americans consume daily

– Cars and Combines

– Clothes and Shoes

– Stereos and TVs

– Food and Water

– Lumber and Steel

– Energy and Fuel

– … many others, such as bread & cereal

70% of America's GDP is Consumer Driven

$1.4 trillion in goods and economic activity 8 million jobs

Key to global competitiveness

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Leading Edge Site Location Strategies

Cost-Focused, Network Consolidation, Optimization

Shared Services from Infrastructure to Distribution

Location Strategy Linked to Business Drivers & Operational Strategy

A Seamless Network of Manufacturers, Suppliers, Storage Facilities, Distributors,

Transporters, & Retailers

Supply Chain Optimization

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Modal Optimization

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Best be defined as a shipping mode or mix of shipping modes that best fits a company’s shipping strategy.

Supply Chain Intermodal Transportation

Inter-changeable Movement

Standard-size containers inter-changeable among all surface transport modes:

• water • highway• rail

Seamless movement with speed and reliability.

Lower Cargo Transport Costs Reduced Cargo Damage.

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Assumptions:

• Average Dock-to-Dock Truck Rate = $1,950

• Convert 100% of Inbound FTL to IM Container

• 10,000 Truckloads Results in $19.5 Million in Total Freight Charges

• 1:1 Conversion Ratio

• Intermodal = $17.6 Million in Total Freight Cost

SAVINGS $1.9 Million per Facility

• 1 Trailer to 1 Domestic Container

• 2 Containers Double Stacked

• Dock-to-Dock COFC Rates Save Up To 15% off Dock-To-Dock Full Truckload Rates

DC Intermodal Savings 10,000 Full Truck Loads/Year

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Intermodal Benefits

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Up to 280 Trucks off our Highways

500 – 800 Miles per Day60 % Reduction in Emissions400 % Increased Fuel EfficiencyNo Public Infrastructure Costs

BNSFHub

Two Potential DC Sites Under Consideration:

Site A -- 5 miles from BNSF hub

Site B -- 150 miles from BNSF hub

Annual inbound units 10,000

x Drayage cost differential (A-B): $600

Annual Co-Location Savings $6,000,000

Intermodal Zones of Savings Example

•A

•B

Copyright BNSF Railway Co. 2014

Distribution Center Co-Location Benefits

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Intermodal Truck/Rail Comparison

Truck Intermodal Train

Unit of Shipment 1 truckload 1 train (250 truckloads)

Labor (2000 mile trip) 1 person 26 people (1 train)

Frequency of Service Daily / HourlyDaily (if volume warrants)

Often less than daily

Annual Volume Required for Daily Service

365 91,250

Transit

Mile/day: 500

Average MPH: 50

Operates: 10 hrs/day

Mile/day: 500

Average MPH: 21

Operates: 24 hrs/day

Route InfrastructureUnlimited use of Federal and State road system

Privately owned rail network-limited use of alternate networks

Route OptionsVirtually unlimited: many route options between origin and destination

Normally just one viable route between origin and destination

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Important Characteristics of Inland Intermodal Rail Facilities

Freight density

Proximity

Market coverage

Facility design

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Intermodal Route Characteristics Impacting IM Facility Feasibility

Connect major markets

Connect to major ports

High capacity

Signaling

Sidings

Singe, double, triple main track

Minimize route options (more density, less complex)

Minimize gateways (more density, less complex)

Chicago

Los Angeles

Assumptions:

• Average Dock-to-Dock Truck Rate = $1,950

• Convert 25% of Inbound Freight to Boxcar

• 2,500 Truckloads Results in $4.9 Million in Total Freight Charges

• 3.6:1 Conversion Ratio to Boxcar = 700 Boxcars

• Boxcar = $3.5 Million in Total Freight Cost

SAVINGS $1.4 Million per Facility

• 3 to 4 Trailers Can Be Loaded into 1 Boxcar

• Dock-to-Dock Boxcar Rates Save Up To 30% off Dock-To-Dock Full Truckload Rates

DC Carload Savings 10,000 Full Truck Loads/Year

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$750.00

vs.

Transloadingcaptures some boxcar efficiencies

Direct rail -served DCs completely capture boxcar efficiencies

Carload Savings

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Transcontinental Rail

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Rail Super Highways

You can’t put a curb cut in an Interstate Highway every 50 feet and expect it to work!

Carload Project Requirements Power switch Signalized Capacity to clear mainline at speed Double ended sidings 8,000 – 10,000 feet long

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Consequences of Poor Facility Location and Design

Complicates train make-up and dismantling process

Complicates train operation with set-outs and pick-ups

Adds time to overall transit

Increases volatility of service (less reliable)

Increases costs of providing service

– Facility operating costs

– Train operating costs

More difficult to justify infrastructure investment

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Economic Development Services

Confidential full service site location & facility development assistance.

Site location studies.

Design & infrastructure requirements assistance.

State & local permitting assistance.

One-stop service & coordination with the railway.

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Conclusion

Freight density is critical to a rail network

Intermodal facilities (inland & port) are key to driving freight density

Routes should be high capacity and options should be limited

Effective development of a rail network drives:

Reduction in service complexity

Reliability of service

Profitability

Soon, we are going to be up to our necks in ALLIGATORS

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What Questions do You Have?

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Tim Feemster- Foremost Quality Logistics

John Greuling- Will County Center for ED

J. Vann Cunningham- BNSF Railroad

Questions for the Panel

1. Which types of facilities will locate where? And which regions are likely to see the benefits?

2. How do you see the role of transportation changing in the future and impacting site selection?

3. Will boxcar freight make a comeback? Where?4. How much public funding was used in these projects? What were/are

the sources?5. How does a community assess its potential as a transportation hub?6. What about incentives? If you have all of the right transportation assets

do you need them?7. What are the biggest community impacts both good and bad of large

scale multi-modal facilities?8.9.

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