Jim Reeb Business Consulting Partner Pete Quinn GSCS Senior Managing Director

1. Trends in Truckload Shipping and Workforce Issues:Real Impacts, Real Responses,Real Estate Implications Jim Reeb Business Consulting Partner Pete Quinn GSCS Senior Managing Director

2. A Recent Survey Of Fortune 500 Executives Asked Each “What Are Your Company’s Biggest Supply Chain Issues?” WHAT ARE THE BIGGEST SUPPLY CHAIN ISSUES? Source: Eyefortransport.com

3. Major Macroeconomic Trends Impacting The Trucking Industry • Increased demand for shipping capacity. Continued strong growth in global and domestic market economies has continued to put pressure on the transportation industry • Higher fuel costs. Fuel costs represent as much as 25% of total operating costs; a one cent increase in fuel costs has a significant impact on slim profit margins • Emphasis on quality of life. Drivers are opting for a better quality of life. Drivers’ lifestyle issues have made this profession seem less appealing. The average age of a driver is now approaching 55 years, and fewer new drivers are entering the workforce. • Globalization. The rising levels of global sourcing and increased import customer demand are putting significant new strains on the trucking business • Environmental and Regulatory Changes. • Environmental: Over the last 10-15 years, the level of investment in the U.S. transportation infrastructure, in our roads and bridges, has not kept pace with commercial growth. In addition, more recently, the weather has wreaked havoc • Regulatory: Hours of Service regulations. Driver productivity has been affected by a minimum of 2 to 4%. Class 8 truck production has risen in advance of 2007 emissions requirements.

4. Impact On The Trucking Industry • Higher Rates • Deteriorating Service • Not Enough Drivers • Capacity Shortfall Overall

5. Interstate Highway System • 50 years of growth and expansion. Major metro areas are critically congested

6. Congestion Tripled in 20 Years • The nation’s road system has been experiencing steady growth in congestion levels in recent decades, particularly in urban areas. Plans for the expansion of existing road networks often attract accelerated residential and commercial land development in the areas to be serviced by the roads. • As a result, the capacity of the new roads are heavily taxed as soon as they come on line. In a distribution environment marked by increasingly tight delivery schedules and a relatively tight market for truckers, road congestion is highly disruptive and costly

7. The Impact on Shippers and Transportation Management • Increased Emphasis on Private Fleets and/or Tailored Dedicated Services • Investments in Technology • More Transportation Management Outsourcing • Increased focus on inbound • Focus on OAE – Driver/Truck • Focus on OAE: Network Productivity • Focus on Security

8. Potential Real Estate Market Impacts • Facilities need to be able to ship 24/7. Hours of operations for industrial real estate need to be optimized to increase driver productivity. Going forward, site selection work for new facilities should always consider any constraints on hours of operation. • Ease of access is more important than ever. You simply can’t afford to have drivers wasting time lost or in traffic, or driving 15 minutes from the interstate to your location. Also, facility layout, space, hours of operation and design need to support increased trailer drops and hooks. • Driver amenities may be a facility feature. Becoming a driver-friendly shipper may mean more than just a restroom. Vending, receiving, upgraded facilities and even a dedicated lounge for drivers at your warehouse could make a surprising impact on the desirability of your freight. • The labor market dynamics of a facility are important. When working on a site selection initiative, labor resourcing is always critical. Particularly if you plan on contracting dedicated services or running a private fleet, facilities near larger pools of driver labor may be more valuable in the long run. • Look more carefully at total miles during your next network design or rationalization project. Make certain you are properly evaluating network structure to assess tradeoffs between reducing total network miles and adding/relocating facilities. • Facilities with access to multiple/alternative modes (e.g. intermodal, boxcar) need to be fully leveraged. Facilities may have “rail access” even if rail access is not nearby. A short haul truckload move to an intermodal ramp 60 miles away which facilitates a cross country intermodal shipment, instead of a 2,000 mile dryvan over-the-road haul, may now be more beneficial than 5 years ago. • Greater customer pick up (CPU) availability is a facility feature. • Demand for larger buildings where more freight can be consolidated and controlled is rising. DCs are getting larger. We are seeing a proliferation of consolidated Regional DCs for retailers with scale of 1.5 million SF plus. • Location strategies are changing, in many of the ways discussed, but in general there is quite a debate around the wisdom of locating distribution centers in more remote areas. Yes, congestion is a major issue, but so is total miles hauled. More development has been moving out of congested areas, to the suburbs of Tier 1,2 cities, and to Tier 3 and 4 cities. There is no easy answer to what works here, but the point is your approach to answering this question must be an integrated analysis of total labor costs, total freight costs (including those embedded in delivered pricing)

9. Market Update NOTES: • TL prices did go down last quarter, by 0.1%, but remain on the rise year-over-year • Increases are expected to remain in the 3-4% range through 2007 • There was a modest decline in the pace of demand increase in the middle of 2006, but no change to supply; fundamental market imbalances are expected to remain into 2009 or 2010 Actual Forecast Source: Logistics Management

10. The Poor Getting Poorer NOTES: • Freight Management classifications set from metrics of The Aberdeen Group, 2006 • Freight Spend as a % of sales • “Best in Class” has a predictable 69% advantage in freight spend vs. “Laggards”

11. Comparing Freight Savings Opportunities Easier to Execute 1 2 3 5 6 4 7 10 8 9 Percent Savings Higher Bubble Size = Expected Absolute Dollar Savings Source: CH Robinson

12. GSCS Custom Solutions Are Often The Most Appropriate Choice For Highly Complex Categories Such As Transportation 5% – 9% 6% – 12% 5% – 10%

13. Logistics Network Modeling Introduction Successfully designing and implementing a high performance network of facilities requires a combination of data driven engineering solutions, operations knowledge and breakthrough thinking capability. Facilitating contribution from all functional areas within an organization is also integral to designing a network of facilities that will service the entire supply chain. Building upon a “hands-on” operations base, we have established a highly respected consulting capability in supply chain strategy and logistics. Logistics Network Modelingis the cornerstone of our supply chain strategy and logistics practice. Benefits include: • Typical savings between 5% to 15% of logistics costs including: • Transportation savings • Fixed facility cost savings • Labor savings • Inventory savings • Potential service improvements including: • Reduced order lead time • Improved order and line item fill rates • Ability to quickly test alternative operating scenarios • Reusable tool to model future business changes • Itemized costing within the supply chain • Catalyst for communication across the organization What is Logistics Network Modeling? • Logistics Network Modeling is a strategic study capable of evaluating millions • of variables within different supply chain echelons including: • Product sourcing costs • Inventory carrying costs • Fixed and variable facility costs • Inbound, transfer, and outbound transportation costs Our network modeling technology of choice is a true optimizer ensuring that the generated solution represents the least cost solution. All costs and constraints including opening or closing facilities, throughput capacities, customer service limitations and product eligibility are utilized. Although the project, network and strategic objective differs for each client, we utilize network modeling technology to answer the following: • Number of plants and distribution centers • Location of plants and distribution centers • Product mix by plant and distribution center • Sourcing decisions for distribution center replenishment • Customer assignment to distribution centers • Evaluation of alternative transportation schemes • Evaluation of alternative distribution philosophies • Evaluation of customer service levels

14. Our Approach Looks At Recent Regulatory, Economic, Security And Other Impact Areas To Understand Core Issues Driving Industry Volatility Competition Recession Capacity Constraints TransportationIndustry Technology Regulations Security While these factors create tension in the market place, they have also created opportunities for improvement. Many companies are now looking for help in transportation sourcing

15. Try Using This To See Where You Stand

16. Human Resource Strategy

17. Workforce Shortage • The EPF (Employment Policy Foundation) projects a shortage of several million workers the decade • 10 Million by 2015 • 35 Million by 2030

18. Diagnosis Step 1. Current Workforce Profile Current Work Processes Value chain map of client’s work floor and/or order-to-cash process. What happens at each step, type of work and work skill at each step. Worker’s job title at each step. How value is added or how risk is involved in each step. Source: Full-day seminar with client operations team, white-board sessions, workplace/work floor walk-through, observing, questioning. Current Worker Characteristics For each worker in the current facility, the job title (should link with the job titles in the work process diagnosis), date of hire, age and sex, wage, extra compensation, etc. Worker address. etc. Source: C&W Consulting Employee Data Request form. • Current Workforce Profile • Work Processes • Worker Characteristics Geocode employee addresses Map the addresses and compute commuting times. Obtain the 30+ “extended variables” for each worker at block group and ZIP Plus4 levels, from Claritas. Draft the work flow in a flow chart. Show bottlenecks, etc., Show where (work process or station) client is at risk if something goes wrong, and where client can add value and/or gain efficiencies. Go back to client operations team and get reality check and plan new work process design.

19. Design Template Step 2. New Design Workforce Profile New Design Work Processes From the New Design Value chain map that the client wants to achieve at the new location, what is type of work, and work skill set at each step. Worker’s new job title at each step. Source: The second seminar with client operations team. New Design Worker Characteristics For the new jobs and skill sets, determine with the client whether they want to (a) grow a workforce (hire inexperienced workers and train them) or (b) capture a workforce (hire workers already employed in same or similar jobs in other companies.) Determine the likely life-cycle and life-style characteristics of workers with those skills and level of pay. Source: C&W Consulting Proprietary Work Style –Life Style models. New Design Workforce Profile • New Work Processes • New Worker Characteristics Translate the new job titles and skill sets to Standard Occupations. Identify the industries that hire the majority of these occupations. Sources: US DOL BLS Standard Occupation Classification; Occupation Employment Statistics (BLS) crosswalk to Industries (NAICS)

20. Triage Step 3. Classify Occupations in the Workforce Profile Career Occupations (30%) Long training period. Graduate Education (2-7 yrs), Certification Often Translate the new job titles and skill sets to Standard Occupations. Classify the occupations into the three Career Classes. Sources: US DOL BLS Standard Occupation Classification; C&W GBC Occupation Career Class Table Quasi - Career Occupations (39%) Basic Education, + Specialized training (Often OJT) (1-2 yrs) Non - Career Occupations (31%) No special education, on job training (few weeks)

21. We Start With The Full Standard Occupational Classification

22. Next Steps • Develop strategies for targeting, recruiting and retaining employees • Use of psycho-demographic profiling within the HR function to improve organizational productivity

23. HR Strategies Based On Segmentation C&W locates the rooftops of your target profile employees “Marketable Intelligence” reaches into the home of your target profile employees Media Preferences Collateral Creative Target Profiles Neighborhoods in Which the Targets Live Target Profile Employed Direct Mail Lists of Households Collateral Printing Collateral Delivery to Households Product and Lifestyle Preferences Target Profile Validation • Who are your existing employees • Who are your target profiles • Where are they located • How can you enhance retention/engagement Prizm Household Segmentation System

24. Employee Retention • Further understanding what the workforce values culturally and with respect to recognition can enhance employee engagement. • PRIZM data can be linked with purchasing behavior preferences to target recognition programs.

25. Employee Recruitment Human Resource Media Campaign Decision Model • How do you reach the target profile? • Implement strategic targeted recruitment programs to attract employees of the target profiles. Strategic Use of Marketable Intelligence Saturation Direct Marketing Targets National Media Targets Local Media Targets

26. Target Profile Thematic Mapping • Where are the targeted employees? • Target Profile Thematic Mapping identifies neighborhoods in which and the concentration of the target profile classes • Expansion Cities Example • Minneapolis

27. Minneapolis Thematic Map – Professionals

28. Minneapolis Thematic Map – Steady Strivers

29. Minneapolis Thematic Map – Augmenters

30. Minneapolis Thematic Map – Stabilizers

31. Minneapolis Thematic Map – Interluders

32. National Media Targets • The preference data includes media preferences and purchasing behavior. • This information can be used to inform a client where to place its advertising and how to shape the content, to most appeal the employees (who) are typically profiled within their productive workforce. • Additional media planning consultation can assist with the timing (when) of ad placement.

33. “The Active Way to Recruit” • Develops a list of specific households based on target profile • Based on PRIZM codes and a variety of other data sources are obtained. • Recommends a media campaign to target those potential employees. • Coordinates and Implements: • “Creative” collateral development based on target • The mailing of the material • Ad placement in media, on internet and other forms

34. Additional Reading • Workforce Crisis by Ken Dychtwald