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April 9, 2019
David ArsenaultChief Strategy Officer
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Company Overviews
Intermodal Equipment Provider (IEP) Founded 2009 Headquarters in Charlotte, NC Largest Chassis Owner & Management Co
• 235,000+ Chassis • Marine & Domestic• Specialty Equipment• Daily Use & Lease Options
Nationwide Coverage in all Major Markets Upgraded Equipment Fleet Team of Leading Industry Experts World Class Digital Technology
Disclaimer: This presentation material and accompanying comments are those of the presenter and not necessarily indicative of the views of either employer.
Technology Company Founded in 1994
• Formerly REZ-1 – Domestic• Formerly IAS – International
Headquarters in Pleasanton, CA Digital Supply Chain Platform
• 100 Countries • 21 Languages • 53’ US Domestic Rail Assets• 7000+ Motor Carriers• 1100+ Terminals & Depots
Order to Settlement Applications (Asset, Logistics, Visibility, Optimization, Finance)
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2019 Key Industry Challenges
US PRC - Trade Negotiations 25% PRC Tariff Threat 1/1/19 Inventory Pull Forward – Altered Trade Flows 34 Extra Loaders in Q4 2018 Global Trade Growth Slowing vs. Trade Deals YoY Figures Distorted Future Hedges of Trade Deal?
US Mexico - Trade Negotiations Tightening Border Inspections Inventory Pull Forward – Border Delays Volatility & Uncertainty
Emerging Trends Weak Q1 2019 Volumes => TPS EB Contracts Unfavorable Environment for Ocean Carriers Irrational Supply Chain Behavior How to Forecast & Prepare?
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2019 Key Industry Challenges
Emerging Trends Alliance vs. Niche Players – Recover Lost Share Full Service Logistics vs. Basic Ocean Service Larger Vessels – Hub & Spoke Deployments On Time Performance Degradation – Slow Steaming Further Consolidation – Next Hanjin?
Source: AlphalinerOcean Carrier Financials Capacity
Rank Ocean Carrier 2018 Results
Net Profit# of Operated
Vessels Operated
Capacity (TEUs) 1 MAERSK N/A 713 4,090,2062 MSC N/A 533 3,358,4323 COSCO $251 M 467 2,804,8824 CMA CGM $34 M 511 2,658,5025 HAPAG-LLOYD $52 M 236 1,671,2346 ONE ($600 M) 217 1,533,2397 EVERGREEN $10 M 201 1,236,6868 YANG MING ($219 M) 101 682,3189 HMM ($451 M) 75 436,768
10 PIL N/A 123 417,79311 ZIM ($126 M) 64 315,48012 WAN HAI $3 M 95 248,890
Consistent Unhealthy Financial Results 2010 & 2017 Only Good Years this Decade
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2019 Key Industry ChallengesIMO 2020 Low Sulphur Fuel Regulations
1/1/2020 Effective – 2019 Cost Impact Begins How to Comply? (LSF, Scrubbers, LNG)
LSF - Doubles the Cost of Fuel (Est. $15 Bil/yr Impact) Scrubbers – Capital Cost, Wait List (Est. $4-$10 Mil/vsl)
No Industry Standard (TSA) or Fleet Standard Ability to Negotiate Cost Recovery in Contracts? Service Impacts if Unable to Recover Costs? Secondary Impact on Diesel Fuel – Truck Costs? Availability of LSF => Spike in Demand?
Scrubbers – Open & Closed Loop(CAPEX & Disposal)
Est. 15% Fleet Solution
Est. 500K MT Consumed / Day3.5 Mil Barrels / DayCost of $215 M / Day
$430 / MT
$615 / MT+43%
Cost ? Availability?
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2019 Key Industry Challenges
Emerging Trends Larger Vessel Cargo Density - Positive Impact On-Dock Rail - Increased Complexity Alliance Partner Rail Contracts => Limit Co-Load Inland Schedule/Transit Variability=> Transload Supply Chain Uncertainty => Dwell (not transit)
Precision Scheduled Railroading (PSR) Longer Trains/Increased Density/Less Frequency Point to Point Schedules – Less Hub & Spoke Higher Speeds – Improved Asset Utilization Success with Canadian Railroads-Hunter Harrison Jury Still out with Customers in the U.S. Market
CSX Implemented in ’17 – Bumpy Start UP/NS/KCS – Recently Started Weather Impacts in Q1 ‘19 – Too early to tell
Precision Railroading–Pos & Neg Service Impacts
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2019 Key Industry Challenges
Motor Carrier Shortages Persist 2018 ELD Mandate & HoS Enforcement Resulted in Driver Shortages & Delays Sellers Market Driving Cost Increases Storage Costs Escalating – Rail & Terminal PierPASS 2.0 Impact on Cargo Flows?
Emerging Trends MC Market Tight – New Normal How to Become a Preferred Customer to MC? 1/1/2020 National Drug & Alcohol Driver Database
Becomes Part of Drivers Permanent Record Potential Further Driver Shortages
Potential Flexibility with HoS Rules – DOT Review IMO LSF Mandate Impact on Diesel Prices
Increased Fuel Surcharges & Volatility
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2019 Key Industry Challenges
Environmental Stewardship CAAP 3.0 – Approved (LA/LB) Zero & Near Zero Emissions Technology ($) Maintain Growth & Competitiveness?
Intermodal Equipment Providers (IEP) Increased Strategic Role & Importance Smart Chassis – Value Proposition 1st & Last Mile Innovation - Predictive Analytics – Forecasting Increased Dwell & Chassis Dislocation Impact
Human Capital Carrier Consolidation - Displacement of Talent Challenges Attracting New Talent to Industry Developing Higher Tech Skill Sets-Automation Waterfront Labor – Automation Accelerates
• ILWU – Contract Extension thru 7/1/2022– Pier 400 Automation Challenges
• ILA – Contract Extension thru 9/30/2024
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2019 Key Industry Challenges
Digitization & Technology - Innovation Amazon Effect - Changing Customer Expectations
• B to C Initial Focus => B to B Next Level Opportunity Stakeholders Unable to Meet Service Requirements
• Earnings Pressure vs. Customer Demand• Build vs. Buy - Limited Internal Resources• Technology Moving Faster than Able to Keep up
AI / ML / RPA / Big Data & Predictive Analytics• Transforming Supply Chain Planning & Execution• Improving Data Quality • Reducing Data Latency
Market Noise vs. Reality • Many New Unproven Niche Players with Partial Solutions• Few Established with full Order to Settlement Functionality • Increased Upstream Integration = Downstream Benefits
Increased Transparency • Optimize Each Link in the Supply Chain • Improve End to End Supply Chain Efficiency
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Q & A
Thank You
April 9, 2019
David ArsenaultChief Strategy Officer