111/19/2012

7th Annual IANA Logistics and Supply Chain Management Case Competition

Mary Schoals, Catalina Quinones, Ripley Wren, Adam Sharpe

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Florida East Coast RailwayIntermodal Proposal

• Proposed intermodal service linking Southern and Central Florida

• Economy and Community• Evaluation Criteria

– Profitability– Capacity for Growth– Investment required for implementation– Company culture

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Introduction

• Intermodal from Southern Ports- Central Florida

+ Growth plan • Volume into West Coast

and southern Florida

ports is about 160,000

TEUs

Source: Freight Analysis Framework

IANA UNF Case-Paper 2015

We Recommend

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236,142.71 FEU 167,138.56 FEU

Option 1 Miles Total revenueMiami 248 623.85$ Fort Lauderdale 156 536.57$

Trucking Miles to Orlando Total revenueNS Jacksonville Ramp 158 654.50$ Port of Jacksonville 160 662.83$ Port of Savannah 277 1,017.45$ Port of Miami 232 874.65$ Port Everglades 211 794.92$

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Other Proposals to FEC

Option 2 Miles RevenueMiami 262 842.08$

Trucking Miles to Orlando Total CostPort of Miami 232 874.65$ Port Everglades 211 794.92$

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Years Loads Revenue/ Unit2010 325,000 347$ 2014 400,000 450$

Overall growth rate2013-2014: 13 %

Profitability

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Plan Route

FEC Intermodal

Drayage

• Revenue rates include:• Round trip rail movements• Contracted drayage movements• Non-contracted drayage

movements

FEC Miles to Orla. RevenueMiami 248 572$

Fort Lauderdale 225 555$ Trucking Miles to Orlando Total revenue

Port of Miami 232 874.65$ Port Everglades 211 794.92$

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Investment• Cocoa Beach $ 5- 10 Million

• This terminal is the pivot point of operations/service to Central Florida

• Container Yard• $100,000• Necessary for increased volume

through the terminal

• Tractors

10 Trains 12 Trains40,000 110 10.96 9.13

Units/ TrainVolume Units/day

• Assuming the profit/overhead for rates= 15%• Just focusing on Miami-Orlando• Worst case scenario for investment

– $11,540,000– equivalent of 149,095.61 units moved– 37% increase from 2014 movement

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What would it take to cover investment?

MiamiRail Miles to C.B.

203Revenue

515.72$ Profit %

77.36$

48%Moves needed Total 2015 projected Percent of Market

149,095.61 310,087.46

Rail-Friendly Current Dray1,692.99 1,956.73

87%

2015 Projected Ktons

Percent of Market

Capability for Growth

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Miami to Orlando

Commodity Mode Total KTons in 2012

Gasoline Truck 199.504

Fuel oils Truck 104.6954

Food products Truck 67.2468

Gravel Truck 55.1897

Other ag prods. Truck 36.424

Fertilizers Truck 29.5866

Cereal grains Truck 28.0577

Furniture Truck 11.9595

Building stone Truck 10.1789

Wood prods. Truck 9.3323

Animal feed Truck 9.1492

Plastics/rubber Truck 9.1243

• Rail-friendly commodities

• Advantages• Long hauls• Large capacity• Low fuel costs

• Comparing rates from Asia to Orlando– Via FEC– Via Drayage Firms

• Variables needing consideration– Time in Transit– ICC based on Freight Value– Freight Rates

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Economic VariablesApprox. T-in-T Total Cost

CSX Winter Haven Ramp via L.A./Long Beach + 30 days 6,030$

NS Jacksonville Ramp via L.A./Long Beach +

intermodal 23 days 6,255$ CSX Winter Haven Ramp via

Houston + intermodal 31 days 7,141$ NS Jacksonville Ramp via

Houston + intermodal 28 days 7,408$ Port of Houston 24 days 7,862$ Port of Savannah 28 days 5,695$

Port of Miami 30 days 5,812$ Port of Everglades 30 days 5,745$

Capability For Growth

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• 24 New 4,400 hp ES44C4 Motors – Two plants planned around Miami and Ft. Lauderdale– LNG Trains get 800 miles/tank– Shippers benefit from a lower fuel surcharge compared to

drayage• Diesel switch to ensure lowest fuel costs

-Extremely marketable/great visibility

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Capability of Growth

• Mission– “To provide safe, timely and cost-effective rail and logistics solutions to meet the

demanding transportation needs of our domestic and international intermodal and carload customers; to partner with PortMiami, Port Everglades(Fort Lauderdale), the Port of Palm Beach, and motor carriers to efficiently move intermodal freight; to provide on-time, damage-free carload service to customers.”

• Vision– “To provide flexible, truck-like transportation solutions for customers; to make

South Florida a major hub for international trade; to lower the overall shipping cost for customers moving freight.”

• Values– “Customer Service Driven. Reliable. Safe. Employee-Focused.”Source: fecwry.com

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Company Culture

• Perspective – Time in transit– Cost – On time delivery

• Differences in shippers – Commodities – Lead times – Required due date– Production

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From the Perspective of the Shipper

• We recommend the FEC provide intermodal service to the Central Floridian Region• Growth plan• Investments of container yard, tractors, and terminal• Evaluated by profitability, capacity for growth,

investments, and company culture

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In Summary

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Thank You

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Did we evaluate profitability?• FEC 10k Report 2013

Operating income: 26%

• Freight Analysis Framework (FAF) • Calculations based on data from 2012 • Due to rate competition, it is all up to proper

marketing

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Justify Volume Increase

Origin Destination 2015 LoadsMiami Orlando 146,754.62Orlando Miami 163,332.84Total 310,087.46

• Truck is faster• Intermodal has

more competitive rates and capable,

• Targeting certain commodities that are better for intermodal transport

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Truck v. Intermodal

• Hialeah transloading estimate • 1 hour to 5 days• Costly• Currently want to compete for the shorter distance • Future consideration

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Transloading

• $5-10 Million• FEC known to partner with the community • Joint Venture • Necessary for operations

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Investment Model