The Cost/Value of Perfect Information

1. The Cost/Value of Perfect Information A Technology Case for the Rail Industry

2. Shipper’s Issues • Need more efficient use of shipper/carrier infrastructure & assets • Inventory/working capital costs • Incur unnecessarily high costs for use of cars (private car owners) • Staff to make sure supply chain continues to move effectively • Back office inefficiencies • Lack of ability to resolve accounts payable transactions • Inability to accrue & book expenses in proper period • Information delivery from railroads (i.e. paper)

3. Shipper’s Goals Clean, easily accessible data which allows: • Supply chain improvements • Efficient electronic transactions • Closer management of assets • Quicker resolution & payment of obligations • Data standards …where both parties benefit So what’s the problem?

4. Rail Technology Advantages • E-billing • Electronic scheduling • Rail Car Tracking (CLM)

5. Rail Technology Disadvantages • E-billing • Inaccurate billings • Excess charges in conflict with the CLM data (below) • Electronic scheduling • Inconsistent availability • Inconsistent car flow (both RR-owned and shipper-owned) • Rail Car Tracking (CLM) • Inaccurate car locator messages • Incomplete tracking data • High cost/value multiple

6. Age of Information Sharing • Technology has allowed the railroads to reap mostly one-sided benefits • While offering some tracking in the public eye (see the websites of the Big 4) the back office is inconsistent or non-existent • Partnership between shipper and shipping mode can work to the benefit of both—technology can make it happen • Shippers need a common solution across carriers that fosters true logistics visibility

7. Car Locations—The Info Key • Tracking technology has improved • RFID • Advanced Bar Code • Satellite/GPS • Little of this technology is implemented outside of the railroad tracking its own assets

8. Demand Better Data • Shippers should be able to demand better information on car location • If shippers don’t demand it now, the Department of Homeland Security may demand it later at a much higher price • Accurate tracking is the key to better billing, better asset tracking, and better scheduling

9. Improving Car Location Tracking • Satellite • Highest cost, most accurate, most detailed, on-demand • RFID • Middle-tier cost, very accurate, relies on infrastructure improvements and standards, fixed demand, active or passive • Bar Code • Lower-tier cost, fairly accurate, relies on infrastructure improvements and standards, fixed demand, passive

10. Better CLM Data Improves… • E-Billing • More accurate locations and times for freight bills & location-based accessorial charges • More timely information for accurate accrual accounting • Electronic Scheduling • More accurate ETA information for scheduling car delivery/pickup • Improved track utilization through location analysis trends

11. Rumor Mill • Is CLM Data really that bad? If so, why? • Only about 30% of CLM data comes from the AEI tags—the rest comes from train constructs • Inconsistent location identification—abbreviations, old names, misspellings • Time delay—hours to days as data weaves its way to/from RAILINC

12. The CLM Technologies • Satellite/GPS • PRO: Cost has come down in the past 5 –7 years as increased satellite sharing and utilization has become important • PRO: Partnerships with ground-based systems for communication (e.g. cell towers) • CON: Still not cost-effective for all assets—even the railroads typically use it only for high value assets

13. The CLM Technologies • RFID • PRO: Cost has come down drastically over the past 3 years—thanks to Wal-Mart and the DoD • PRO: Increased utilization on toll roads and other modes of freight transports has worked out most of the “bugs” • PRO/CON: Requires better standards to gain “economies of scale” • CON: Current value of data from AEI tags affected significantly by maintenance of readers

14. The CLM Technologies • Advanced Barcode • PRO: Since the last attempt (ACI in the 60’s and 70’s) technology has improved • PRO: Cost of implementation, repair, and redundancy has come down significantly over last 10 years • CON: Dirt and Frost/Ice on both readers and code plates • CON: Passive only system (ID only)

15. Debunking the Myths • The Railroad Industry spent $250 Million in the early 90s for AEI and it hasn’t helped • Did they get the ROI expected? Ask BNSF, whose internal use has contributed directly to the bottom line and drives their R&D budget • Sharing information dilutes the competitive advantage of technology • By sharing the information with customers, they get better tracking • By sharing the information with competitors, better track utilization and more accurate cross-system billings occur

16. Everybody Wins • Who is everybody? • Railroads • Get their money quicker • Make customers (shippers) happy • Shippers • Get better data on assets • Get better data on liabilities • Get better data on product location • Other stakeholders (DOT, DHS, etc.) • Get info that has not been available previously • Better information for negotiations (ROW, Security, etc.)

17. Speakers • Phil Marlino, Director of Transportation Processes and Data Management, ConocoPhillips • Phil.marlino@conocophillips.com • Rob Roberts, Managing Director, EnterSys Group • Robroberts@entersysgroup.com

18. Questions?