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Transportation Solutions: Now and for the Future

Transportation Solutions: Now and for the Future. (The Perfect Storm). TCI Annual Congress September, 2006. Arkema Inc. (U.S. & Canada) Transportation Expense. Variable Freight: $97M Fixed Logistics Expense: $23M Equipment: $11M 1,200 Railcars. Transportation Capacity/Cost Pressures.

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Transportation Solutions: Now and for the Future

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  1. Transportation Solutions: Now and for the Future (The Perfect Storm) TCI Annual Congress September, 2006

  2. Arkema Inc.(U.S. & Canada)Transportation Expense Variable Freight: $97M Fixed Logistics Expense: $23M Equipment: $11M 1,200 Railcars

  3. Transportation Capacity/Cost Pressures Rail Industry 1990’s to 2004 • Prior to Late 1990’s the U.S. had 13 Class I Railroads • In mid-1990’s through early 2000 Rail Industry Consolidated to 7 Class I Railroads • Late 90’s to 2004 Railroad Capacity • Bottlenecked/Approached Capacity

  4. A Chemical Manufacturer’s View - Capacity Rail Industry 2005 & Beyond • Railroad’s Beyond Capacity/Business at Record Levels • Expanding U.S. Economy • Intermodal Growth (OTR Truck & Imports) • Volumes Overwhelmed Promised Efficiencies • Railroad Reinvestment (Capital Projects) at Historic Levels • Class I Railroads - $8 Billion for Capital 2006

  5. Transportation Capacity/Cost Pressures – Equipment Crunch • 15,000 tank cars built per year. • Major car builders ARI, Union Tank Car and Trinity • “Almost” sold ours through 2008 • Used car inventories are in short supply and moving fast. • Steel prices have leveled off recently but remain high. • Rolled Steel is in short supply. • Rail Car components are in short supply and subject to escalation at delivery.

  6. Transportation Capacity/Cost Pressures Motor Carriers • Driver Shortage *Today - 38,000 short 2014 - 111,000 short • Demographics • Few new entrants/no capacity being added • Owner operators exiting the market place • Expanding Economy • Regulatory/Security Demands • *Source Global Insight ATA • Costs continue to increase • Wages • Equipment • Fuel • Hours of Service Charges – 8% Reduction in Productivity

  7. Transportation Solutions: What Arkema has Done: • Core Carrier Program with Motor Carriers • Leverage purchasing power • Capacity • Modal Shifts where possible • Intermodal • Rail → Truck Transfers • Shorten the supply chain • More full truckloads direct to customers • Transportation Management System • Visability • Load Consolidations • Business Warehouse Database • Cost-to-Service • Lane Analysis • Variance vs. Plan

  8. Arkema Inc. – Transportation Strategy • Transportation Challenges = Opportunity • Connectivity will be critical between Arkema’s Business Units Teams, Logistics and Customers – Leverage our Talent!! • We must Execute the Fundamentals Well. • Be open to new ideas or approaches. • Future Trans. Decisions will require Balance Capacity – Cost Equation • Know cost to serve and cover costs • Leverage safety and service

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