Steve HaynesDirector – Commodity Marketing and SalesNorth Carolina State PortsChairman – Domestic Waterways CommitteeNational Industrial Transportation League

The Horizons of TransportationUnderstanding the Needs of Shippers(To Attract New Customers to the Waterways)

National Waterways Conference2006 Annual MeetingPortland, OregonSeptember 7, 2006

Waterways Commerce – Assuring a Vibrant Future

Will the barge industry attract the new customers it needs to sustain positive growth?

Our opening premise:

Today, barge services are utilized by a small group of shippers that have long understood the benefits of low cost and reliable water transportation for volume shipments

Few new users are attracted to the use of barge transportation, even though many have the volumes to utilize this mode

New users may lack the understanding of how to add the barge mode to their inventory of transportation options

Knitting Together the Barge Transport Puzzle

Inland

Freight

Supply

Chain

Water

Terminals

Inland

Freight

Barge

Transportation

It’s the arrangement and these multi-modal steps that frustrate and turn-off prospective users of barge transportation

Surveying NIT League Members about Barge

To get a better understanding of shipper attitudes about waterways transportation, NITL surveyed its membership, asking a variety of questions.

• NIT League members represent almost all commodity groups

• We surveyed members belonging to the following committees:

- Rail Transportation- Domestic Waterways- Ocean Transportation

• We surveyed both users and non - users of barge, seeking:

- Drivers for users- Barriers for non-users

Waste & Scrap

Mfd. EquipmentPrimary Mfd. Goods

ChemicalsFood & FarmProductsCrude MaterialsCoal

0 20 4010 3030 1040 20 0

Petroleum & Petroleum Products

Source: U.S. Army Corps of Engineers, “Waterborne Commerce of the U.S. 2004 Edition.”

2004 Barge Volume Profile

Survey Responders’ Commodity Profile

NIT League Survey Participants

Barge volume profile vs. League responders commodity profile

Percent of total Percent of total

Does your firm currently ship via barge ?

Our NIT League survey received 59 responses to our questionnaire

• 61 percent – YES, we use barge transportation

• 39 percent – NO, we do not use barge transportation

61%

39%

YESNO

Of those responders that utilize barge, we asked:

What are the greatest benefits from utilizing barge transportation?

• Reduced freight costs• Ability to accommodate large volumes• Ease of handling cargos• Reliable conformance to transit time expectations

0%

10%

20%

30%

40%

50%

Cost LargeVolumes

Ease &Reduction of

Handling

ReliableTransit

Competition Location &Access

What are the greatest disadvantages to utilizing barge transportation?

• Slow transit times• Equipment availability• Location and access (proximity of waterways)• Cost (multi-modal)

0%5%

10%15%20%25%30%

Of those responders that utilize barge, we also asked:

Of those that utilize barge transportation, we then asked:

What are the barriers that keep your company from shipping even greater volumes via barge?

0%

5%

10%

15%

20%

25%

30%

Lack o

f

Pro

xim

ity to

Wate

rway

Barg

e

Equip

ment

Availa

bility

Cost

Slo

w

Tra

nsit

Shrinkage

Ris

k

Weath

er

Restr

ictio

ns

• Distance from waterways

• Availability of barge equipment

• Aggregate cost

• Transit Times

0%10%20%30%40%50%

Tra

nsit

Tim

es

Pra

ctic

ality

(Car

go T

ype)

Vol

ume

&C

apac

ity

Sto

rage

Req

uire

men

ts

Fac

ilitie

s

Sch

edul

ing

Wor

king

Cap

ital

Por

tA

vaila

biity

Why would their customers refuse to accept barge?

• Transit times for shipments are too long (This may be a planning horizon problem that can be corrected)

• Cargo cannot be handled effectively by the customer (Perhaps this is due to a lack of proper receiving terminals)

• Shipment volumes do not meet minimums and produce higher freight costs

• Customers frequently do not have sufficient storage to accommodate volumes

Do rail shippers have volumes needed to ship barge?

86%

14%

YES

A key requirement to economical use of barge transportation is the ability to accumulate sufficient quantities to meet barge minimums. Of the volume rail shippers that did not use barge, 86 percent believed they had the volumes to use this mode.

Are non - barge shippers and receivers near water?

• It was significant that almost 80 percent of volume rail shippers who do not take advantage of barge transportation were close to a navigable waterway

• 65 percent of their receivers were near water, too

78%

22%

YES

65%

35%

YES

Shippers Receivers

26%

74%

NO

Did rail shippers have access to more then one railroad?

Almost 75 percent of volume rail shippers that did not use barge had no reasonable routing alternative. They were captive to a single railroad.

As the railroad industry continues to consolidate, volume shippers need to develop routing alternatives – water transportation is the natural alternative for many.

Do companies have the expertise to understand barge?

64%

36%

YES

Almost 65% of responders that currently do not use rail, believed that they had the necessary expertise to understand how to identify favorable barge opportunities and initiate their use.

So why don’t they?

Are barge lines making enough sales calls?

44%

56%

NO

More than half of prospective barge shippers report they never receive sales call from barge lines.

Could increased sales coverage produce more business?

Do you receive sales calls from barge lines?

In Conclusion – Interpreting the data

Our survey suggests that there may be many additional prospective shippers that could be introduced to water transportation.

There may be a tendency, however, to focus on growing existing relationships, rather than to also identify new prospects.

NC Ports now seeks out potential importers or exporters who, for one reason or another, are not participating in global trade between the U.S. and the world.

Our theory is that sooner or later, to survive in business, all commodity and manufacturing concerns will eventually become global.

We want prospective customers to understand what services NC Ports can provide before they decide to go global.

Back to our opening question

Will the barge industry attract the new customers it needs to sustain positive growth?

What is the solution?

- Identify new prospective barge shippers

- Educate prospective shippers how to use barge

- Offer multi-modal supply chain solutions

- Show them the “SAVINGS”

Thank you for listening

All American Towing Company

Ship Barge

by

A ATC O