Transformational Trucking Beyond the Great Recession

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Real Coordination and Collaboration are Key to Innovation

Hiroko Kawai, PrincipalTransportation Practice

www.nacfe.orgwww.rmi.org

Truck Drivers Carry Almost Everything You Need In Your Life

http://www.youtube.com/watch?v=ncz3vK9MZEU&feature=related

High Points

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1. Trucking Industry Is Finally Getting Good, Long Overdue Attention:

2. Identify Real Opportunities to Work with Policy Makers and Regulatory Bodies--Push the Boundaries of Traditional Collaborations and Move Forward with Unconventional Collaboration and Collaboratory

3. Continue to Support and Fund Both Technology R&D (e.g. SuperTruck) and Market Incentives

4. Use the Industry’s Conservatism to Its Advantage and Make Calculated, Well-planned out Transformation

Trucking is the backbone of our economy. But do we really embrace that?

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Life of a Trucker

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... yes, it is the backbone of the economy, and the sector consumed nearly 44B gallons of diesel in 2008!

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Light-Duty Vehicles

61%

Freight Trucks16%

Air9.8%

Shipping 3.0%

Military Use 2.4%

Pipeline Fuel 2.1%Lubricants 0.5%

Recreational Boats 0.7%

Rail 2.0%

Bus 0.9%

Comm

ercial Light Trucks 2.2%

Transportation67 %

Electrical Power2 %

Residential and Commercial

6 %

Industrial25 %

Source: EIA. Annual Energy Outlook 2007 with Projections to 2030. Tables 2 and 7. Report #:DOE/EIA-0383(2007). http://www.eia.doe.gov 8/6/07

U.S. Petroleum Consumption by Sector

What Is Going to Happen to Long Haul Trucking in 2035?

What happened [or what has NOT happened]?

8Source: www.hankstruckpictures.com/whitetrks.htm, http://myconstructionphotos.smugmug.com, US DoT Transportation Energy Book, www1.eere.energy.gov/ba/pba/intensityindicators/index.html

2007

0

20

40

60

80

100

120

truc

ks in

use

(tho

usan

ds)

1970 1980 1990 2000 2010Year

1975 1985 1995 20050

2

4

6

8

10

1

3

5

7

9

average fuel eco

nom

y (mp

g)

Designed in 1936 with 135 HP and a top speed of

50 mph

500 HPLess than 6 miles

to the gallon

1965

pro

duc

tivi

ty (t

on-

mi/

gal

)

$2.50 $3.00 $3.50 $4.00 $4.50

Budget Advantages in Fuel Cost

cost

/ m

ilediesel price ($/gal)

However, fuel efficiency is recognized as a major driver of competitive advantage for carriers

9Source: RMI Analysis, NPTC, 2008 Benchmarking Survey

75%

ROBUST ADVANTAGE

Efficient Carrier

Average Carrier

Transport system optimization is a 3-axis minimization.

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Distance Travelled

Num

ber o

f

Vehicle

s

Vehicle Fuel Consumption

Source: Woodrooffe, John; UMTRI, 2009

RMI studied highlighted proven boundaries of efficiency/productivity, towards 2x ton-mile/gal

Nuclear Power11

8.7 mpg335 ton-mile/gal

12.5 mpg275 ton-mile/gal

6.5 mpg130 ton-mile/gal

Reduce energy consumption of the vehicle

Maximum delivered cargo per vehicle and trip

1. Cargo: Volume 5%, Weight 7%2. Aerodynamic Drag: 50%3. Rolling Resistance: 30%4. Engine Thermal Efficiency: 6%

• Permit “turnpike doubles” on highways (63% of U.S. ton-miles)• Increase weight from 80,000lb on 5 axles, to 120,000lb, 9 axles• Better safety than todayʼs doubles: C-dollies + Active Safety

Source: RMI Analysis

LCVs offer overall business advantages.

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FACTOR BENEFIT

Truck VMT reduction 44%

Cost saving to shipper 29%

Reduction in fuel, CO2 and NOX emissions 32%

Reduction in road consumption 40%

Exposure crash reduction 44%

Policy-affected crash rate reduction (excluding VMT exposure reduction benefits) 500%

Source: Alberta LCV Safety Study, Woodrooffe & Associates, 2009

Regulations and policies play an important role in the heavy trucking industry, whether by mandates, or its absence

13Source: RMI Analysis, recovery.gov, 3/6/09

Compounded by the bleak economic outlook, market pressures threaten to bankrupt this struggling industry

14Source: RMI Analysis, above sources as presented

More than 2,500 owner/operator trucking

companies went bankrupt in 2008

While there are some key players that we can collaborate with, it is important to involve most of the value chain given its fragmentation

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Engineering Firms, Innovation Start-ups

and Design Firms

Service End-Users

External Ind

ustry Influencers

Governm

ent Regulators, N

on-profit

Organizations, and

Industry A

ssociations

Tractor OEMs

Truck LeasorsPrivate Haulers

Owner-Operators

Small-Medium Fleets

Third-partyLogistics

Services

End-User Engagement

Weak Relationship

Strong Relationship

Mega Fleets

Trailer OEMs

Source: RMI Analysis

LEV

EL

OF

INFL

UE

NC

E

Engine OEMsComponent

Suppliers

Equipment

1. Bring scattered value chain together2. Work with either Tractor OEM or Engineering Firms (with Federal money) + Mega fleets

.

Collaboration is the key to change:

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Equal representation and communication of freight efficiency technologies and practices...

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VISION

A rapidly evolving, more profitable, efficient, and safe freight industry that ensures the environmental sustainability of North American goods movement.

MISSION

The NACFE will drive the development and adoption of efficiency-enhancing, environmentally beneficial, and cost-effective technologies, services, and methodologies in the North American freight industry by establishing and communicating independent and performance-based benefits.

PROJECT START SCOPE STAKEHOLDERS

Logistics Management,

Inc.2004

President of this bulk carrier redesigned a Class-8 tractor-trailer with major OEM for 25% more payload (25% fewer trips), better safety/ergonomics, state-of-the-art aerodynamic technology

Logistics management, confidential OEMs, confidential delivery client

Cascade Sierra

Solutions2004 Finance and lease energy efficiency devices (APU, aerodynamic add-ons, tires,

etc.) to truck owner-operators and fleets. 2000 trucks upgraded already.Freight Wing, Department of Energy, All SmartWay product suppliers

EPA SmartWay Partnership

2004“...a voluntary public-private initiative designed to improve the environmental performance of the freight delivery system in the United States through money saving, market-based approaches.”

EPA, Carriers, Logistics Companies, Dealers, Service Centers, Shippers, and Original Equipment Manufacturers across the country.

Wal-Mart Fleets 2005

State-of-the-art equipment for 25%+ fleetwide efficiency increase.Fifteen reclaimed grease fuel trucks that will run on cooking greaseNine Peterbilt Model 386: 5 heavy-duty hybrids, 4 running on liquid natural gas

Wal-Mart, Peterbuilt, Eaton, Arvin Meritor, other component suppliers

DOE-Navistar 2006 Aerodynamics and tire advancement implications on OEM integrated design

International, Frito Lay, Kentucky Trailer, Freight Wing and Michelin

21st Century Trucking

Partnership2007 Advanced technologies, hybridzation, safety measures, reliability of technology

adoption

Departments of Energy, Transportation, and Defense; the Environmental Protection Agency; and 15 industrial partners

Solid Oxide Fuel Cell APU Development

2008 Successful demo of SOFC units installed on Peterbuilt tractors generating electricity for hotel loads from a variety of fuels without combustion.

Delphi, Peterbuilt, US DoE

SuperTruck 2010 Create integrated class 8 tractor/trailer with 50% fuel efficiency by 2015. Fuel consumption reduction will be 30%

Cummins, Navistar, Daimler, US DoE

Several organizations are already working towards some of the solution RMI highlighted in its research

18Source: GreenCarCongress.com, www.epa.gov/smartway, Sharon Banks, RMI Analysis

But these initiatives are more incremental than transformative

What’s possible in theory often has market challenge...

19Source: RMI Analysis

8.7 mpg335 ton-mile/gal

12.5 mpg275 ton-mile/gal

6.5 mpg130 ton-mile/gal

Reduce energy consumption of the vehicle

Maximum delivered cargo per vehicle and trip

1. Cargo: Volume 5%, Weight 7%2. Aerodynamic Drag: 50%3. Rolling Resistance: 30%4. Engine Thermal Efficiency: 6%

• Permit “turnpike doubles” on highways (63% of U.S. ton-miles)• Increase weight from 80,000lb on 5 axles, to 120,000lb, 9 axles• Better safety than todayʼs doubles: C-dollies + Active Safety

Truck Drivers: Real Issues of Efficiency Technology Market Adoption

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“If any one of the stakeholders fails to see value in the implementation, it will not prevail.” - Greg Skjodal, Ward N.A.

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Volvo clip

“The Promise Is Evident, the Course Unamibiguous, and the Need Unmistakable.” (IBM Trucking 2020)

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Call for an Aggressive Private-Public-Academia Transformative Strategy

Vehicle Technologies

Funding for R&D and Market Adoption Incentives

Funding for Infrastructure--not just expanding and repairing of our highways, but embed traffic controlling technologies and efficiency enabling technologies (ITS, freight security enhancement, intermodal)

Collaborations among vehicle manufacturers, trucking industry stakeholders including shippers/retailers, Governments, and utilities

Leverage the Industry’s Traditional Conservatism to its Future Advantage: We can make a calculated, coordinated, yet transformative change

To See a Vastly Different Trucking by 2020:

How do we educate others about the impact of our industry?

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“The Promise Is Evident, the Course Unamibiguous, and the Need Unmistakable.” (IBM Trucking 2020)

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Call for an Aggressive Private-Public-Academia Transformative Collaboration Strategy

Vehicle Technologies

Funding for R&D and Market Adoption Incentives

Funding for Infrastructure--not just expanding and repairing of our highways, but embed traffic controlling technologies and efficiency enabling technologies (ITS, freight security enhancement, intermodal)

Collaborations among vehicle manufacturers, trucking industry stakeholders including shippers/retailers, Governments, and utilities

Leverage the Industry’s Traditional Conservatism to its Future Advantage: We can make a calculated, coordinated, yet transformative change

To See a Vastly Different Trucking by 2020:

Thank you very much

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Hiroko Kawai, PrincipalTransportation Practicehkawai@rmi.org

www.nacfe.orgwww.rmi.org