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Talking Freight

Empty Miles Program - Matching Empty Containers with Available Freight

February 17, 2010 Talking Freight Transcript

Presentation

Jennifer Symoun
Good afternoon or good morning to those of you to the West. Welcome to the Talking Freight Seminar Series. My name is Jennifer Symoun and I will moderate today's seminar. Today's topic is the Empty Miles Program - Matching Empty Containers with Available Freight. Please be advised that today's seminar is being recorded.

Today we'll have three presenters - Joe Andraski and Tony Galli of Voluntary Interindustry Commerce Solutions (VICS) Association and Steve Matheys of Schneider National.

Joe Andraski is the President and CEO of VICS (Voluntary Interindustry Commerce Solutions) Association. VICS was established in 1986 to provide a forum for parties to develop supply chain processes and technology that improve supply chain efficiency and effectiveness. Prior to joining VICS, Joe held several positions with Nabisco Foods, Inc. Those positions included Vice President of Supply Chain Management, Vice President of Customer Marketing, and Vice President of National Sales. He is considered to be among the retail industry thought leaders, and his work has been widely recognized.

Tony Galli is affiliated with VICS. He has been a management consultant for over ten years with a proven record of helping clients refine their business processes to improve their supply chains. Prior to his consulting experience, Tony worked for Nabisco, Inc. (now a division of Kraft Foods) where he held senior positions in finance, strategic planning, supply chain management, and sales operations. At Nabisco, Tony was a chief architect of various customer service measurement processes (scorecards), internal and external benchmarking, and highly detailed customer profitability systems.

Steve Matheys is executive vice president, chief administration officer for Schneider National Inc., a premier provider of transportation, logistics and intermodal services. In this position he is responsible for strengthening Schneider's workforce development initiatives, leading the corporate procurement team and delivering the company's Asian business plan. Additionally, Mr. Matheys leads Schneider National's sustainability strategy and efforts. He also serves on the Voluntary Interindustry Commerce Standards (VICS) board of directors

I'd now like to go over a few logistical details prior to starting the seminar. Today's seminar will last 90 minutes, with 60 minutes allocated for the speakers, and the final 30 minutes for audience Question and Answer. If during the presentations you think of a question, you can type it into the chat area. Please make sure you send your question to "Everyone" and indicate which presenter your question is for. Presenters will be unable to answer your questions during their presentations, but I will start off the question and answer session with the questions typed into the chat box. Once we get through all of the questions that have been typed in, the Operator will give you instructions on how to ask a question over the phone. If you think of a question after the seminar, you can send it to the presenters directly, or I encourage you to use the Freight Planning LISTSERV. If you have not already joined the LISTSERV, the web address at which you can register is provided on the slide on your screen.

Finally, I would like to remind you that this session is being recorded. A file containing the audio and the visual portion of this seminar will be posted to the Talking Freight Web site within the next week. We encourage you to direct others in your office that may have not been able to attend this seminar to access the recorded seminar.

The PowerPoint presentations used during the seminar are available for download from the file download box in the lower right corner of your screen. The presentations will also be available online within the next week. I will notify all attendees of the availability of the PowerPoints, the recording, and a transcript of this seminar.

One final note: Talking Freight seminars are now eligible for 1.5 certification maintenance credits for AICP members. In order to obtain credit for today's seminar, you must have logged in with your first and last name or if you are attending with a group of people you must type your first and last name into the chat box. To obtain your credits, visit the AICP Certification Maintenance web site after the seminar, login using your ID# and password, select My CM log, and select add credits. I have included more detailed instructions in the file share box on how to obtain your credits after the seminar. Please also download the evaluation form from the file share box and submit this form to me after you have filled it out.

We're now going to go ahead and get started. Today's topic, for those of you who just joined us, is the Empty Miles Program - Matching Empty Containers with Available Freight. The presentation will be given jointly by Joe Andraski and Tony Galli of Voluntary Interindustry Commerce Solutions (VICS) Association and Steve Matheys of Schneider National.

As a reminder, if you have questions during the presentation please type them into the chat box and they will be answered in the last 30 minutes of the seminar.

Joe Andraski
Thank you very much, Jennifer. Hello, everybody. It is our pleasure today to talk to you about the Empty Miles Initiative, Driving, Savings, and Curbing emissions. This program is about to turn two years old. We were looking to solve the Empty Miles problem, which was really identified to us by a major retailer who had a strategy planning section on transportation. There was up to some 25,000,000 Empty Miles a year being run. Often very expensive and not only to reduce the transportation costs, but as we move more toward the issues around the environment, it was something we identified as a great opportunity to be able to meet during goals and look for differentiation between companies and their competition. Steve is going to give an overview of the case study and provide a Retailer's and Carrier's view of program benefits.

The cost of fuel and truck operations, as you know, are escalating in have been contributing into the increase in supply chain costs and inefficiencies. Steve and I go back a few years ago. I think we stole the perfect storm from something else, but the perfect storm back then was the problems companies were having with drivers. It was a lack of drivers interested in spending a week or more on the road. They were looking for more routes that would keep them home. Consequently, transportation companies were having a difficult time. We could also look down this road at the environment, the cost of fuel, which we sought escalating. That was long before we got to the $150 per barrel cost. The emphasis got to be on how we could better use the transportation resources that we have available to us along with all the EDI Transportation sets being used. We know many companies have established senior executives and the sustainability area. Emission reduction is a key plank in most companies' strategies. We identified and understood that and are looking for ways to be to improve the entire month of environmental practices. VICS is an organization that represents companies. Our members generate somewhere in the $2.3 trillion dollars, that's their annual sales volume. They are able to use the VICS process to be able to build their businesses, and to become more efficient. So, transportation is a key area. Most companies' transportation is in the range of 70 percent of their logistics costs. In some cases, it is even more than that. So, the mission is to take local leadership role and the development of business guidelines and specifications. When that really happens, it puts interest in the retailers and suppliers. We look at measuring benefits and improving supply chain efficiency, increase sales, increase service levels. Companies have a definitely interest in moving product as fast as possible. We find that this Empty Miles program fits well. Our counterpart GS1 US and GS1 Canada promote and maintain standards for location of good. For some of you may recognize this as a uniform co-counsel. About three years ago, the other side of it, EAN was everything outside of the United States, which was the organization which developed and used the bar codes for identification of products within the supply chain.

Let's get back to Empty Miles. The solution is low-cost collaborative solution. Tony, I would like you just to speak about this first point in terms of what we have seen from the companies that have begun to subscribe to Empty Miles. Tony?

Did we lose Tony? Well, while he is getting hooked up, it is a web based service to match carrier ability. It is Empty Miles with transportation demand. It is delivered through a members only internet portal. Members only, meaning, not necessarily a member of VICS, but a member is a company that would subscribe to this service. The idea is to subscribe to this service. You can decide several alternatives. One would be to post Empty Miles that are currently being operated, and there is a potential of finding loads for those Empty Miles. The others that some companies are doing are loading their entire route in guide into the system so it is an opportunity for companies to be able to identify a particular lane that may be attractive. To be clear, this is not a load posting board that you might find in a truck stop. We, certainly, are not encouraging that as a business model at all. We are looking for companies that can establish some where between six months and a year relationship. Once they get together and identify the movement of the product and the various operating guidelines, this is something that would occur on an ongoing basis without having to be constantly renegotiated with every load. The toolset is comprised of a collaborative process use. I cannot underestimate the benefits of the benefits calculator. What that the potential gains you have in the reduction of emissions. Let's go back to the legal agreement templates. Early on there was an awful lot of work that went into developing the legal templates between companies that have engaged in the use of the portal. In that particular case, we had one company that spent maybe two months coming to an agreement of what it was from the legal aspect. What we were able to do was take that information and build into a standard way of going about the development of the legal agreements, which makes it far less complex than what we had seen earlier on. This is information exchange capability for a few miles subscribers delivered through the portal powered by GS1 North America. That is a combination of the work that GS1 Canada and U.S. are doing.

Tony Galli
This is Tony. Apparently, my line was not opened up, so I dialed back in.

Joe Andraski
Great, Tony. I am on page five. Do you have any comments you would like to make about what we have seen or learned as we have been implementing Empty Miles or we have seen companies implement Empty Miles?

Tony Galli
Thank you for the opportunity to speak up on this. What we found was that the system evolved as we brought on members. For example, Joe indicated earlier on in the conversation that Schneider National and a few other companies like Macy's and J.C. Penney were early adopters. As they started to formalize themselves with the system, we realized there would be enhancements that would be required. For instance, to facilitate the input of empty lanes or power lines, as we refer to them in the system. We set up that process where they could be entered in a mass load. That was a wave of the enhancements that helped productivity quite a bit. We're just about to release the second wave of the enhancements that will even further increase the visibility of the lanes. In fact, what we are looking at is setting up visibility of not just the empty lanes but also the shipper product move lanes. Like I said, it is through this evolutionary process and advisory team conference call that we want to do what a routine basis that we have been able to let the system grow with us.

Joe Andraski
Thanks, Tony. I just want to emphasize also that what we have here is the information, experience, and willingness to share on the part of industry experts. Individuals and companies that are experts in the movement of freight understand the transportation network very, very well, understand the value of reducing Empty Miles. Our advisory group, which Steve Matheys plays a big role in, helps us to make the necessary changes so that Empty Miles is able to provide information easily accessible that has value added. We also want to comment that everything you see here has been looked at from the standpoint of adding value. The value in terms of measurable reduction in transportation costs on one end, and the important aspect of being able to reduce the amount of CO2 emissions on the other. The other aspect which we have not talked about, which if we are successful and we continue to see these growth, is that we are successful in taking equipment off the road, take off the contribution toward gridlock congestion. We all know that a highway infrastructure is in need of repair. Going back, it was built by the end of the days of President Eisenhower. We have a lot of work to do to get it up to speed. If we can reduce the amount of miles traveled by trucks that are not full, there is going to be contribution. As this grows, we see great opportunity. I also want to point out that we do not really have a beginning and end point. It is our intention to make this service available to our members and two others for the foreseeable future so it can be built in as a permanent part of doing business. Let me move to my next slide. This just gives you some progress to date. Tony, why don't you take this?

Tony Galli
Sure. Thank you, Joe. As Joe talked about in the beginning, the perfect storm, it was really one of the first meetings. This idea was conceived. That goes back as far as the third or fourth quarter of 2007. Throughout 2008, we started to develop the system. We had a few prototypes along the way. We did a little piloting here and there and looked at it very one-to-one just to get the concept. Can the empty lanes be searched and found by others? What is the best way to make those lanes available so enough information is out there so the link can be identified but yet not so much information is out there that there are security issues? We were very conscious about the fact that anonymity was important to the poster of the lanes. We refer to that party as the owner of the lane. But in the empty mile system, you never know owns the lane until you make contact with that person anonymously in. When a reply back to you, that is when you learn the identity. I think we have accomplished a good bit of what was a concern. It kicked off in earnest in 2009. The first or second quarter or so, we started out with about 17 subscribers. If that for the efforts of those earliest adopters and the continual working the system the Empty Miles portal would never have gotten off the ground. Once some of the initial successes were seen by Schneider and Macy's, they were very aggressive at getting their business partners to take a look at Empty Miles. Fortunately, a number of others followed suit by adjourning. We quickly ramped up to about 25 or 30 subscribers by mid year. We ended the year with about 40 or so subscribers. Still a long way to go, but it has been this grass-roots attention and effort that has helped us get the word across. We are very thankful, actually, for this opportunity to draw attention to the system I touched a little bit earlier on this technical enhancements that will bring about greater visibility to the Empty Miles portal. As a shipper, for example, if they want their entire network or select grouping of lanes to be visible to others in the system, we have set up the capability to do that. It was a function of listening to our subscribers, finding out what they were hoping that the system could grow and do it. We have been able to make a good deal of that happen over the past nine or ten months or so.

Joe Andraski
Thank you, Tony. I would also like to mention for anyone interested, we have a webinars that we have done. We have training that we can help you with. By merely contacting us, we would be more than happy to take you through the webinar or answer your questions to do any training that would be necessary for you to better understand what has been put together and how it could be best used by your company or trading partners. Let me move on. We are really talking about the sustainability movement where we are really taking action. We see Wal-Mart, number three ranked private fleet operator working with suppliers to reduce the one of packaging the use. More goods coming in the same truck, lead fewer shipments and lower fuel usage. I can think back to Christmas where they eliminated something in the range of 30 or 40 containers of a particular product that they have redesigned the finished goods packaging, so they were able to get more finished goods into fewer containers to be able to move products to the United States. Again, it was a very important sustainability activity. Kraft is testing technology to reduce fuel consumption, including replacing 25% of their tractors with cleaner-burning engines and auxiliaries. DuPont is not on this slide, but they are looking strongly into the whole area of how they can do a better job of reducing the amount of CO2 emissions. We see her real are taking action. We have the IBM energy blueprint. We're looking at intelligent systems. Somewhere down the road, and we're not that far away from it, that we are going to have products. And this has also turned up in IBM Research. Products are one to tell us where they are at without being inquired. By the technology, products are going to tell us where they are at, how they got their, and of course the whole subject of sustainability and product safety is high on the list of all companies today. If you look at transportation systems where we have a circle of around transportation usage, reduce transportation congestion, reduce CO2 emissions coming increase mass transit usage, reduce energy uses, and improve the environment. Someone asked me the other day, do I see this as going to have competition let's say with the movement of containers? I really don't see that happening at all. There are certainly plenty of opportunities here. We did some work a couple months ago; found out from a private truck council that they estimate some 25% of trucks on the road are empty. I mentioned early on about the retailer going 25,000,000 miles a year. Their objective was not to fill the 25 million miles. They were looking to take out some ten or 15%, which would give them a substantial opportunity to be able to reduce their costs. In their program and their strategic plan, sustainability plays a key role. They want to go back to their board, go back to their partners and community to explain what they have been able to do to contribute to the environment. I will not go through each of these items. There is a significant amount of interest taken place in each of these areas. We think Empty Miles will play a bigger role. These are six points lie Empty Miles are different. Tony, I will ask you to take over the last three.

Thirty percent of subscribers of VICS Empty Miles were listed in the Top 500 Green Companies. We were pretty interested with that. Seventy five percent of the top 25 prospects are in the top 500. We have Macy's and Schneider case study, which validates the program success. We were proud of the active role that Macy's has taken in the very active role that Schneider has taken. Both of these companies are experts in logistics' management. Because of their expertise, they could see that this program has led. It has magic. They want to get behind it, and they have. Of course, we are very proud of is that we have been endorsed by environmental protection agencies smart ways program where 55% of our Empty Miles subscribers are SmartWay Transport certified. If you're not familiar with SmartWay, I suggest you search for SmartWay. They are completely committed to efficient and effective transportation and management that takes advantage of every opportunity to reduce the amount of CO2 emissions. They have endorsed the work that we have done in Empty Miles. Tony.

Tony Galli
Thank you. Joe eluded a little bit earlier about the fact that our highway system is feeling the crunch, if you will, of the traffic and congestion death of our highways, in particular, that caused by a tractor trailers. It is considerable what the average pounds that the tractor trailer weighs out there. It is an awful burden on highway systems. We look at addressing some of the pending government action. For example, cap and trade. Cap and trade is in the house floor vote. If that makes its way into law, we will be required as business is to thoroughly understand our carbon footprint. We will have a limit assigned to us that if exceeded will cost businesses additional tax dollars. If it can be contained, it will enable businesses to trade a new form of currency. Understanding your footprint is a big piece of it. We believe Empty Miles will offer a great currency, if you will, for delivering savings and reducing your carbon footprint. As we've talked a little bit about GS1 and U.S., GS1 Canada, and VICS, the common thing is they are all not-for-profit. We take nothing from the middle of that and Steve, maybe will cover this, but maybe what we need to talk about is that in every case everybody benefits. The company that has identified the Empty Miles, the transportation company that had been moving trucks empty, the shipper that had been paying for that Empty Miles is part of the contract price. It is really a win, win, and win for the companies engaged in this initiative. I think it is something that we will touch on perhaps a little bit more. So, Empty Miles is really a quick win.

This slide has helped me contain a number of North subscribers to join us. The lane is not a lane of travel in a highway. It is in origin destination pair. Imagine looking in the Empty Miles system and looking to find one lane that someone has posted as being routinely empty. Let's assume it is a 500-mile lane. You are able to occupy or utilize that lane with your own product shipments. Let's just assume, as I said, it is 500 miles. You have been able to use that because I talked about the strategic nature of the Empty Miles System. You are able to use that for one year. That will eliminate 41 tons of CO2 from the environment. For anyone that cannot visualize what a ton of CO2 looks like, the picture on the right, that alone next to the double decker bus is one ton. Roughly double the size of a double decker bus is what a ton of CO2 would look like in the environment. Now we are talking about 41 of those. Diesel fuel; 3700 gallons in that example that I just described of diesel are saved. Tractor-trailers' are getting about 7 miles per gallon. That equates to at $2.70 per gallon, which I know is a low price compared to what the rates would like today, that is a savings of $10,000. I did not take into account the wear and tear on the vehicle, nor did I take into account the labor savings. That is just strictly to the amount of diesel fuel that has not been consumed and emitted into the environment. Based on some statistics I was able to find, there are about 9 gallons of diesel produced for every 45-gallon barrel of oil. That equates to roughly 20 barrels of oil not needed to be purchased from our partners out there, or as I use the term loosely at least, are Mid-east partners where we are now protesting already about two thirds of our needs. Imagine being able to cut that down just in the one lane by 20 barrels. It is pretty significant. I had done a little bit of background information and research on a major grocer. I looked at their corporate responsibility page. I saw that there are making strides to increase the amount of corrugated recycling that goes through their stores as suppliers ship products into this, the stores. The chain talk about how much more they were going to focus on recycling that material. They also talk about a program where they were going to accept plastic bags from their customers and offer them a rebate. When I compared that program that they have on their corporate social responsibility page to what they could do with just matching one empty mile lane, they were blown away, because the numbers were just so much larger and the potential was a much greater than what they had already published on there website as their part for the environment. The potential is just huge. That is our mission today to try to get that word out.

Joe Andraski
I think you've done a really fine job of explaining the opportunities. I think the two examples you have given certain made the case for action. We are not going to spend a lot of time, because I think we're about out of time. However, if your interested in spending more time, please get in touch we us. Tony would be happy to take you through it in as much detail or level of detail that you would like to talk about I think what it can do is help you understand the reduction of CO2 emissions in terms of kilograms or pounds or in metric tons. This is a pretty dynamic tool that you can use to help identify those opportunities. The next slide is the Empty Miles participation. We have just chosen a few of the companies that have signed. You can see these are many of the leading companies either in retail or service. Some have taken this into their strategic plan to be able to offer to their customers in the case of a couple of the transportation providers an opportunity to be able to substantially reduce their costs while they themselves may not benefit directly, but it would be an offer to be able to be more holistic in their service offerings. We find that Empty Miles right now we have over 40 participants. We have a couple that just came in yesterday, which we are excited about. We have been endorsed by the Council of Supply Chain Management Professional, between eight and 9,000 members. I don't know what the numbers are now, but it is greater than 2500 live posted lanes. Of course, we're very happy with the National Retail Federation who is in focus. I have already mentioned that a SmartWay is a supporter of VICS Empty Miles. Publicity is growing. We found ourselves being written up in a number of articles. If you go to the Supply Chain Management Review, there is a very interesting article that they have posted about Empty Miles. I think we have been up there twice in the last couple months. We're now getting more and more speaking opportunities where people are asking us to come and talk about Empty Miles because there is a high level of interest now I am going to turn us over to my dear friend, Steve Matheys, Executive Vice President and Chief Administrative Officer for Schneider. He is one to talk to the national case study. Steve, it is all yours.

Steve Matheys
Thank you, Joe and Tony for that good set up. Good morning to some of you, good afternoon to others. Again, I am Steve Matheys. I work for Schneider National. Schneider National is celebrating its 75th anniversary this year. We are one of the largest, most diversified transportation and logistics companies in the marketplace. We have been safely moving freight for 75 years. The thing that is important to understand as our company has evolved in today's market is that we're moving on average, give or take, somewhere around 5.5 million miles a day on our trucks. Things like Empty Miles and other solutions have become a critical aspect of our business. I have the honor today of walking through the case study. I will do that rather quickly. Macy's wanted to be with us, but they have a couple of conflicts so they could not be here. So I will speak to some of the things that they have seen. Joe and Tony did not mention this, but the case study is available with talk sheets through the VICS website if you have an interest in reading that further. If you try to think about, so, what did we do here? What is it that happened? I guess what I would like to suggest is that what I would define as two fairly progressive companies, Macy's who everyone knows as a premier provider of retail apparel to the industry, and Schneider who I've just talked about a little bit, came together to solve a problem. What we did was decide to join forces to go about trying to solve a problem that has, basically, been here forever. Many questions that I have taken over the last year are regarding people who are wondering, are you solving a different problem? Really, the answer is, no. This problem has been around for a long time. We think we are trying to solve it in a different way. Hopefully, we will articulate that in the course of our discussion here today. What the solution really is about is trying to find an answer to the problem that creates mutual value, which is critical to Empty Miles working. It is also about taking out cost and addressing environmental concerns. We are doing that in what I would define as a durable manner. In other words, as has been mentioned by Tony and Joe, this is not about a posting. It is not about trying to fill the truck tomorrow. This is about trying to find areas within networks where there are gaps, and those gaps are somewhat repeatable. There is a commitment between two companies to solve that. In the Macy's/ Schneider case, I have just put in the results that occurred. A lane is an origin destination, so, Dallas to Chicago. And the savings on one particular lane in the course of a year can be quite significant as is outlined here. I will apologize. I believe the 150 tons is actually defined as a round trip and as you will see on the next page, the savings on one lane is more in the range of 60 tons. In either case, it is quite dramatic. The benefits are real and substantial. These are things that are quantifiable. They are laudable, if you would like to look at it that way. And they are not intangible. They are not subjective. When you solve these problems, it has real bottom-line results. The areas we were able to improve include sustainability, and Joe has talked about the significance of that. It creates an opportunity for increased revenue. It allows you to decrease your costs. It is nice when you can do both. It creates an opportunity for business that you may have not had before. And it truly does strive to enhanced satisfaction, which is always a good thing for creating additional market opportunities down the road. As I stated before, and as Joe stated, we measure what the actual improvements are. The solutions we have put in with Macy's are in the range of saving 60 tons of carbon dioxide and 147 tons of particulate matter. Particulate is the soot that comes out of the stack of a truck. The nitrous oxide is the after effect of the burn of fuel. Nitrous oxide is an additive that does not burn cleanly. Both of those are not good things to be discharging into the air. And the gallon savings, as you can see, are certainly significant. Joe showed you the cost per gallon and calculated those savings.

Macy's is also confident that they have seen similar types of improvements. They have not necessarily put a savings plan together, but they're planning to do that going forward. What is also interesting is that when you are involved you have a chance for additional opportunities for revenue. Every mile you can move a load on has revenue opportunity. Macy's experienced 30 additional back haul loads a week. What is interesting is you can make a lot of money on the fringe. You do not have to solve 90% of the problem to see substantial bottom-line results. I really believe that is what has occurred in this particular situation. The other thing that is interesting is not only do you create an opportunity for future potential relationships, but through this process of hosting and matching, it almost acts as a surrogate for a sales process. Macy's has been very, very vocal in the marketplace and public about their commitment to sustainability. Macy's is also one to take the lead on many initiatives. They have been very aggressive in urging their suppliers to get involved in Empty Miles. It is important to get people involved. They certainly work dutifully to get that to happen. Macy's has also been wonderful to work with in that they are very open and opportunistic. The thing about this is that there are not a lot of emissions. If you start carving out things that are eligible or not eligible, you'll start to reduce the solutions that can make it difficult to find matches. What Macy's would have told you if they were here, they found 44 additional lane opportunities were their company can directly benefit. I think their story is pretty clear and certainly pretty profound. From our perspective, we sought a similar opportunity. This has not been mentioned, but the design of Empty Miles in the original intent was to go after private fleet Empty Miles, which means that if a shipper, manufacture, whoever, had their own trucks; they would be a candidate for these types of services because their trucks tend to have some empty miles. As Joe stated, the Private National Truck Council would indicate that empty number is somewhere in excess of 25%. It was also designed for carriers to run their own dedicated fleet so they are specifically networked to go from one point to another, and then back. That was really the intriguing part. The other thing is that the problem is not a new problem, as I stated earlier, but the solutions have never really had this concept of durability. The design of this was about parties willing to engage in this work and making sure that what they were going to come up with was going to create benefits but it was something that would be durable and something people would commit to and contract for once they found solutions so you could kind of rely upon the solution both as the shipper and as the carrier, which creates kind of this long-term value stream as opposed to the individual streams. The nature of finding the solutions requires some work, so it is not a technological thing that you just the push a button and it solves a problem. This is about leading people through opportunities and having participants decide that this is plausible enough to get the benefits we just articulated.

Here is a quote from a person at Schneider. This individual actually spends they're entire day trying to fill Empty Miles along our highway infrastructure. You will see that the bottom line from our perspective is that the Empty Miles solution is good for the economy, good for the environment, and it is also good for business. In this case, it is good for Macy's business. What does success look like? I've tried to come up with how I would summarize this for you. You know, two companies with a common objective are pretty important. You've got to be committed to drive out waste. As I said before, it requires some work. You have to look to find solutions that create value on both sides of the spectrum. You know, you want both parties to be winning. I believe Empty Miles set up both parties, if not more. Sometimes it is a three party relationship. But it is a solution that allows all people to win. There will be obstacles. There have been obstacles. Joe alluded to some when he talked about putting together some contractual frameworks. The people that have been successful in this program so far have had a committed set of leaders that helped the teams get through the obstacles. It is not that there won't be some. And I would only close that by saying, those that have been the most successful seem to be the folks that have the strongest belief that there are better ways to do things than running a large part of the nation's trucking capacity at 25% empty. And I think people who believe in that are finding ways to get to a better solution. The great thing about it is it doesn't take much to get going. You can log on to the VICS website through the webinar referenced earlier. You can log onto the Empty Miles system itself. Within that system are a set of frequently asked questions and some video self-paced tools to help people get oriented to what it is. There is a nominal fee that is charged for members of VICS and trading partners, remembering that this is not a software company or a company trying to make this their marquee money-making product. This is about trying to solve an industry issue through the collaboration of folks who want to make a difference in this particular area. You get that stuff started, then you start posting your capacity, start searching for additional capacity and you get savings. Tony mentioned there will be a new release in March that will enhance some of the capabilities. Certainly, all of us involved are excited about that. Really, that kind of brings us to the question and answer session. I appreciate the opportunity to share some of my thoughts on behalf of Macy's and Schneider and some of the things we have seen from the case study perspective. It looks like we got done seven minutes early, so we are kind of like the on-time machine here. I will turn it back to Jennifer to facilitate.

Q&A

Jennifer Symoun
Thank you Joe, Steve, and Tony. and thank you to those of you who posted questions. I'd now like to start off the Q&A session with the questions posted online. Once we get through those questions, if time allows I'll open up the phone lines for questions.

The first question is what proportion of industry uses a VICS? What does it cost to subscribe? I think you just covered that second question.

Tony Galli
This is Tony, by the way. If the question was specific to Empty Miles, the VICS Empty Miles service, that is, our subscription fees are listed here. Our fees are listed here, and they are $1600 and $1850. That's to join the service. We would love to have you think about becoming members of the VICS Association as well. With that, you will get the opportunity to work with our committee efforts to drive efficiencies in the industry.

J. Symoun
Next question is, is a similar concept used for shipping containers?

Steve Matheys
I can that that question, and I think that the answer is a similar concept can be used for shipping containers. I am not exactly sure of the context, but sometimes what we have is domestic containers which move intermodally so they tend to stay landlocked. The intent of this system was not to be used for containers that go on a train, but there is no reason why somewhere in the future that capability could not be created. If some players in the market place take containers and run them on trucks, in that particular configuration there would not be any reason why those folks couldn't use Empty Miles. So if the question is tied to domestic containers, that's how I would see the Empty Miles Service working.

J. Symoun
The next question is could you take a second and clarify in what fashion SmartWay endorses VICS? SmartWay certainly endorses the reduction of Empty Miles and SmartWay verifies certain technology, but does it actually endorse particular products and services, and are you a SmartWay affiliate partner?

T. Galli
We are affiliated with the SmartWay transport. What we actually said on the slide is that VICS is a proud supporter of SmartWay. They have taken a look at our program and think it offers a foundation and unique opportunity for companies to save dollars and reduce impact on the environment.

Joe Andraski
If you are interested, I would suggest you get in touch with Buddy Polovick, he is involved with SmartWay. I spoke to Buddy a couple years ago at a conference down in Dallas. He and the SmartWay team were there. I spoke about VICS Empty Miles and there was immediate interest and we have been working together since then. I encourage you to give Buddy a call I know he would be happy to talk to you about how the Empty Miles is important to their membership.

J. Symoun
Can the dray question of intermodal be addressed?

S. Matheys
I want to articulate that the nature of the solution was originally intended for private fleet optimization, captive capacity with a shipper or a carriers dedicated operation. The reason we did that is that we wanted to make sure that the capacity was really there on a regular basis. When you look at how freight moves, it can be in a random configuration. Dray is a very interesting component as it is not thought of being dedicated capacity. It spends lots of its time going from ramp to customer then maybe another customer then back to ramp. So there would be no reason why the opportunity to find backhaul freight in that configuration couldn't be done. The model of Empty Miles would mean that you would find a shipper with a return load which would take you somewhere close to your original location back to your ramp. If you could find that, it could be a very successful.

J. Symoun
The next question is, in regards to the Schneider experience, has this program found success in traditional backhaul lanes?

S. Matheys
Yes, absolutely. If I share a little more of the story from Schneider's perspective, we are like a lot of shippers as we have random and dedicated capacity. In the situation with Macy's it was another customer's dedicated capacity which had the dedicated lanes which Macy's had a set of loads which were perfect for it. I think what is helpful to understanding this for some is that I run that lane empty five days a week, and Macy's had loads on that lane three days a week. That is not a perfect fit, but it is pretty good. We were able to layer it together and meet Macy's service needs while continuing to meet my customers dedicated need and drive down cost. From my definition of a traditional backhaul lane, I would consider this a traditional backhaul lane and yes, it has been able to help Schneider.

Joe Andraski
Would you just take a minute to explain how the three would benefit occurs for the people involved in that particular situation?

S. Matheys
Let me make sure I answer it correctly.

Joe Andraski
Would be the answer to benefit Schneider and Macy's and the third-party?

S. Matheys
There is just a lot of different ways to do this. The other third party might be on some sort of revenue share on the empty leg. You may sign a deal that if you are able to fill that lane, we get 30% of it and you get 70% of it. In that case, you would have the original shipper who is in essence paying for the entire dedicated route have something that says if you fill that you are getting a kicker, I get a kicker because I am covering some of my additional costs, and Macy's gets the benefit of the fact that this empty lane can allow you to maybe, possibly, price more effectively the marketplace. They get a reduced cost for moving their freight on some capacity that is already on the lane. That would be an example for three people winning by solving one empty lane issue.

J. Andraski
This is Joe. In my view, that is how unique this opportunity is. With creative opportunities and creative minds, you have a three way win. Once you put it in place, Steve, I would ask you to comment on this. Once it is put in place, you don't see the type of operational problems you might expect, save for a bad winter storm. In terms of the loading windows or unloading windows or amount of labor, Steve just comment on that a little bit of what you have seen.

S. Matheys
Joe used the word magic early on. To me, the magic comes where the operational aspects of this are up front and dealt with and committed to by the parties who want to engage in this. If the value that can be derived is significant enough so that folks go " here is what I am going to do to make this work". And those of you who may not be as close to some of this, if you know of a truck coming into a market and it is available at 11:00 but the shipper says, my freight is available at 2:00. Theoretically, my driver sits for three hours before I can move him. That is wasted time, wasted productivity. He is on the clock and he may not have enough hours to run that load. That load might traditionally look like I cannot solve the problem, but however if the shipper is willing to move the window up to 11:00 because they can adjust something, they get the benefit of loading my driver within his available hours. We can move him without sitting him. All the sudden, I can create maybe a better solution, a more cost-effective solution for that particular configuration. That is when everybody wins. I use the word durable. Everyone is committing to make that happen and make their end of the transaction work so you don't have any breakdowns. When people make that commitment, then this thing can kind of work in an executed fashion to drive some volume.

T. Galli
Again, going back to magic, part of magic here is that the opportunity to save money is substantial. It encourages companies to take the steps to get that truck loaded to make sure that they don't create a situation where it is not advantageous for the transportation company, for example. And being involved in another industry in the past where we attempted many times to make that backhaul work, it never really did what it should have done, because there were always issues around operating guidelines, around the transportation that was being made in what have you. It never really did do what it should have been able to do. This is a totally different and unique opportunity for companies that don't necessarily have to operate within the same vertical to be a will to take advantage of transportation savings.

J. Symoun
Okay. What obstacles did you run into in implementing the program?

S. Matheys
I guess that one is directed at me. I would tell you probably the most significant obstacles were first historical perspectives, probably the number one obstacle. What we ran into often was people involved in the transaction or involved in trying to solve the problem going, we tried to do this before, and it always sounds good but never works. The party is doesn't stay committed to solving the problem. Because this is not a problem that just popped up in recent times, because it has been around for folks who have been in transportation, it has probably been around since the day they started. You get a lot of folks that goal, been there, done that. Tried to solve this, and there is nothing magical about this. They try to equate it to something else they typically know. That is just the same thing that XYZ did or somebody else did or we tried to do this ten years ago. The obstacle was more about getting people through maybe what I would call the emotional side of believing that this can solve the problem. Once we got through that, the obstacles that in my expect to run into like technical issues or contractual issues or operational issues from our experience, especially as it relates to Macy's, those were less significant than just getting it moving. That is what I was alluding to. That is what I was alluding to when I was talking about leaders meeting to take some of the obstacles out of the way because it was more those types of issues early on that we were trying to wrestle with.

J. Andraski
If I could just hitchhike on that a little bit. This initiative has a lot to do with two broad areas. One is change management and the other is collaboration. What we have seen in practically every new initiative that has been brought up and suggested by the VICS organization is the resistance to change. Companies really need to understand that change is probably one of the most prevalent barriers that they've got to manage. Therefore, what we are now introducing is another way to manage transportation. In many cases, we will find that companies that are in a particular way of managing transportation begin to resist it. The other idea in transportation is that of collaboration. There are not many companies now which can be successful if they are running in a silo. That silo can be looked at in a number of ways. In this Empty Miles Initiative, it really is bringing together two or more entities that would work together in a collaborative way that would all enjoy the substantial benefits. That is what we have to do, make sure that companies understand that this isn't just about the technology. You've got to be able to understand that you have to change the way you are doing business. As one of our subscribers has made it very clear to us, and that is all lot of sweat equity. The information may be there, but you've got to reach out to the opportunity that exists and to be able to move forward to make it happen. That is what kind of organization companies have that they're managing.

T. Galli
This is Tony. I'll just mention a point that comes to mind for me. Those subscribers that signed on and said I put in a couple of lanes, and the phone never rang. One of our subscribers from J.C. Penney said it best when he said it requires sweat equity. It really requires both the system, digging deeper than just what you might see on the surface like Steve talked about earlier the situation where if it is off by two hours it can't work. If you just look at it that way, I guess it can't. Steve also talked about making some compromises and concession along the way and that is what ultimately got the lane working. The Empty Miles is a low cost investment, but it requires commitment. Those companies that have put in that sweat equity have been the ones that have realized the benefits from it.

J. Symoun
Is there a similar concept for shipping ocean containers internationally? If not, are there plans to do this in the future?

T. Galli
I think you just asked that question earlier.

S. Matheys
I think what you're talking about here is international shipping. This is the container that originates in Hong Kong or Shanghai and is destined for Chicago. I would say that, and Joe you can take over here, but I would say that the design of the system is not necessarily intended to address that issue, I will also tell you that one of the things that is somewhat in the background here is that the system is looking for, it is trying to balance demand and capacity - your trucks and the freight that moves on them. The international freight problem is still pretty significantly imbalanced. The imports into the U.S. are far superior to the exports we send out. There are an awful lot of containers. Hence probably the reason for the question, but there are a lot of containers that are empty. If there is no freight to put on them, Empty Miles is not necessarily going to find them freight. There's a concept here about balancing that is fairly critical. Whether or not we would think of being able to do something in the future is something that could be looked at. You may have some other thoughts, Joe.

J. Andraski
The opportunities are often defined by the VICS membership. As the membership moves down this path, let's say for argument's sake it proves the benefits of Empty Miles and we begin to look at the opportunities to do a better job with managing ocean freight. We have an affiliate in Beijing that is Asia/Pacific that is deeply in with China apparel council. They have companies trying to realize that low-cost labor is no longer a competitive advantage. They are very interested in working with us and with the VICS organization to do a much better job managing supply chain. We are seeing the opportunity to demonstrate that something like Empty Miles works. From that, we go into other areas that become apparent to the subject matter experts which are our VICS membership.

J. Symoun
The next question is, you touched on legal concerns. Do you provide template agreements based on input received, or does each partner set resolve this in their own way?

J. Andraski
I will try this, but Tony you can jump in and Steve too. I think what we have as a template that companies can refer to, but I certainly wouldn't put myself out to be able to represent the legal entities for each of the companies. They may have a totally different view. We can give you a start. From there, you can take it to your own legal department to be able to identify what are the liabilities. Steve would you like to comment?

S. Matheys
I think it is a great question. One of the reasons we put together a legal template, a contractual template, is that in this industry if you are a carrier and there is a shipper that wants to create a relationship, the idea of contracting for that relationship is very common. It happens all the time, the shipper with the carrier. The carrier understands the nuances and what kind of insurance they need to have. What we found is this solution can work from shipper to shipper. If you are a shipper with a private fleet, you may want to work directly with another shipper and try to solve the Empty Miles issue shipper to shipper. Well, they are not necessarily positioned to contract with each other as they have traditionally done their contracting with a carrier. We ran into some issues early on. We did this to facilitate the process a little more effectively. I agree with what Joe said, when it comes down to it you need to put a contract in place. We need to look at it on a solution by solution basis and liability is a big issue. Tony do you have anything to add?

T. Galli
No, I think you hit the nail on the head. It was always our intention to provide a starting point and not the actual documents.

J. Symoun
The next question is, and I guess this question is for Steve. Does Schneider use dedicated for Macy's, if not, does Macy's benefit if they provide freight for the Empty Miles.

S. Matheys
I think I may have touched on that, but I will quickly go over it. Our dedicated solution is not dedicated for Macy's. I was using a different customer's dedicated solution. Macy's did benefit. The benefit they received is that their freight moves on what used to be an empty mile leg. The reason they can get the benefit is that I can potentially provide a solution at a more effective market rate because I already have the capacity. That is how they benefited. That was a three party type of benefit.

J. Symoun
Which area of the country do you think benefitted the most from the program so far, such as less traffic?

S. Matheys
From our perspective, I am not sure if Joe or Tony can talk about it, but it has been somewhat dispersed. I would not say there was a significant geographic location. It is more opportunistic so we see different locations. There has been some activity in the rust belt area, there has been some activity in the South, and so it has been a little more spread out than concentrated in a specific area. The reference to congestion is an absolute benefit to the program as you are using trucks which already out there and are not adding to the congestion.

J. Andraski
I would probably say east of the Mississippi is where we see concentration of movement.

T. Galli
I would agree.

J. Andraski
It is rather broad, but that has what we have seen so far. Anywhere from Dallas to Ohio to Chicago and then to Florida and North Carolina, and of course the Northeast we are seeing a particular amount of activity.

J. Symoun
I think we have covered everything that is typed in. Joe or Tony or Steve, are there any questions typed in to you?

T. Galli
Not to me.

S. Matheys
Yeah, there is one that is: could you address the concern that this individual has heard that this service is only really benefiting an organization that has their own fleet was the question. Again, I will try to summarize. The shipper can benefit whether they have a fleet or not. What they are really looking for is to find ways to get their freight moved by capacity that is already captive on a lane. It is almost indifferent to whether you have a fleet or not. Although, it has been launched with the target of the private fleet, but where the freight comes from, those folks do not have to have a private fleet to get benefits. Hopefully, that was made clear through some of the other questions.

J. Andraski
This is Joe. I think is immaterial whether you have a private fleet or contract a fleet. The opportunities to do everything we talk about accrue to both. If I contracted for a lane for a particular movement, it might as well be my equipment. If I can make better utilization, I am going to benefit. I think it is pretty broad based.

T. Galli
Yeah. The vast majority of our subscribers do not have their own fleet, they contact for all of their product movement.

J. Symoun
I do not believe we have anything else typed in and we have a few minutes left so we will go ahead and see if anyone has any questions over the phone. If the operator can, go ahead and give instructions on how to ask questions over the phone.

Operator
Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one. Please unmute your phone and clearly record your name when prompted. Your name is required for your question. To withdraw your question, press star one. Again, to ask a question,, press star one. It will be one moment for the first question.

Linda Newcomb
Yes, this is Linda with JCP logistics. It is more of comment. I know there was a lengthy talk on the success that Schneider had. I just want to make a comment. In every statement they had is true, I am not the one that says it takes sweat equity but it does. I am not the initial person at JCPenney that was part of the sign on, but it can be a very successful program. We do not have our private fleet. It is a dedicated fleet. For those that are listening, it seemed like some of the things I have experienced, but it does take a lot of work for all three parties involved. It can be a very successful program for all three parties involved. I just want to emphasize that. But there is work involved. It is not something that can be done within a week. It may even take a month or so to set it up. I am experiencing that now, but just wanted to reiterate kind of what Steve and Joe had said because there was a lot of conversation based on that successful program that Schneider had with Macy's.

J. Symoun
Thank you. We appreciate your feedback.

S. Matheys
Thank you.

T. Galli
Thank you very much. We are just about to release the JCPenney case study. It just tells a phenomenal story all over again, actually, on top of what we saw with Macy's and Schneider National.

L. Newcomb
Like I said, I am not the initial one that was involved. I am getting more involved. I didn't hear the JCPenney quote until the webinar. I've got an idea who said, but this was a very good webinar. I mean, it's helped me, and I am involved in this.

Operator
A reminder, you can ask a question by pressing star one.

J. Symoun
Do we have any other questions?

Operator
I show no further questions at this time.

J. Symoun
Okay. Well, then we are going to go ahead and close all for today. Thank you all for attending today's seminar. The recorded version of this event will be available within the next few weeks on the Talking Freight website. The recorded version of today's seminar will be available online within the next few weeks as well as the presentations and a transcript from today's seminar.

As a reminder, if you are an AICP member and would like to receive 1.5 Certification Maintenance credits for attending this seminar, please make sure you were signed in today with your first and last name or type your first and last name into the chat box if you are attending with a group of people. Please download the evaluation form and email it to me after you have completed it. Please also download the CM Credit instructions if you are unsure of how to obtain your credits for today's seminar. If you are not applying for credit, but would like to fill out the evaluation form, I encourage you to do that as well.

The next seminar will be held on March 17 and will be about Clean Air at Port Facilities.

If you haven't done so already, I encourage you to visit the Talking Freight Web Site and sign up for this seminar. The address is up on the slide on your screen. I also encourage you to join the Freight Planning LISTSERV if you have not already done so. One other thing I will mention is that we will be offering the audio over the computer as we have heard a lot of people are interested in that. So just stay tuned and you will hear more information about that with your log in instructions. Enjoy the rest of your day!

Updated: 03/28/2011
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