Trucking, Autonomy and the Future of Rail. Doug Reese Chief Strategy & Growth Officer GE Transportation Digital Solutions

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2 Trucking, Autonomy and the Future of Rail Doug Reese Chief Strategy & Growth Officer GE Transportation Digital Solutions 2

3 Freight transportation trends threaten rail ecommerce changing the way we acquire goods era of guaranteed shipping Driving high service expectations Last-mile delivery gaining in prominence Emergence of disruptive technologies platooning, autonomous trucking, electric Likely to improve trucking competitive position vis-à-vis railroads Logistics startups attracting new investments Potential logistics value chain disruption through digitization 3

4 Other potential disruptors Democratization of manufacturing Blockchain technologies Uberization of freight Commercial drone deliveries Additive manufacturing or 3-D printing has the potential to disrupt supply chains Blockchain likely to become integral part of supply chains Potentially disruptive to carrier/shipper business models Drone delivery likely to impact on final mile delivery. 4

5 Trucking has it s own challenges Capacity crunch/high demand Driver shortages Spot rates skyrocketing Electronic Logging Device (ELD) mandate How will this all impact the railroad industry? 5

6 Rail isn t going anywhere 40% 4x Amount of freight moved by rail in ton-miles in the U.S. Average fuel efficiency of rail as compares to trucks 75% Reduction in greenhouse gases emissions moving freight by rail instead of truck 67% NA Class 1 op ratio - compare to ~90% for trucking rail is far more profitable 6

7 Rail can (and should) take share from trucking Edit Presentation Title in [Insert Tab > Header & Footer] 2 November

8 WHY? 1% shift in N.A. share from truck to rail = ~10% rev increase for N.A. rail Share losses to trucking are selfinflicted & correctable

9 How? 1. Sustain & enable intermodal growth 2. Integrated visibility & logistics to improve service 3. Unclog networks with optimization & op changes 4. Double down on cost savings with automation 9 October

10 Sustaining intermodal port & terminal effectiveness Customer Challenge: Solutions: Choke ports & terminals High fixed costs to expand ports & intermodal terminals Fragmented, disconnected, and often manual processes YOY Intermodal growth >6% Port Optimizer Smart Intermodal TOS Outcomes: 8-12% projected Port of LA Visibility Work Order Assignment Optimization Automation Railcar Blocking Unit Location Assignment < Real time optimization & visualization > 10-15% gantry lift productivity 15-20% hostler moves 10

11 Integrated visibility & logistics integration - Ports Port Optimizer Cargo Owner Cargo Owner Visibility + Cargo Velocity Marine Terminal Op r Cargo Dwell + Cargo Velocity + Rail Volume Ocean Carrier Visibility + Cargo Velocity Ocean Carrier visibility for better customer service Better planning for dray partners cargo velocity thru ports container dwell velocity of cargo thru port rail volume thru terminal velocity of cargo thru port velocity of empty returns Terminal Operator Motor Carrier Motor Carrier Railroad Chassis Provider Chassis Provider Turn Times + Productive Turns Rail Volume + Visibility + Speed Accuracy + Chassis Utilization Railroad Faster truck turn times number of productive turns per day rail volume through ports visibility to empty railcar inventory speed of rail volume thru ports accuracy of chassis inventory and forecast chassis utilization Improved planning chassis utilization Enabling visibility and execution across an integrated supply chain 11

12 Integrated visibility & logistics Bulk Shippers Customer Challenge: We want to ship (and receive) more rail. We don t have information or confidence as to when we will get rail cars. So, we truck more. Pulp and Paper Producer Solution: First railcar & inventory-intransit visibility solution Connects shipper, Class I and short line rail data to enable informed decision-making Outcomes: 10% Rail Volume 14 days Advance Visibility 1 Information Source I used the visibility tool this morning and within seconds, I had all the data at my fingertips. There have been days where it s taken me hours to get this information the availability of the tool has been especially meaningful due to the effects of the hurricane. 12

13 Unclog networks with optimization Customer Challenges: Solutions: Network optimization + operational changes 2018 rail network velocity is worse than 4 years ago... rail systems need to change operating models and fix bottlenecks Terminal dwell has been nearly static since >20 hours (!!!) Outcomes: 10% Network velocity modern user experience 50% expired crews Terminal& yard optimization cloud capable services/ containers optimization / automation 10-15% lift productivity open system / integration 15-20% hostler moves systems of systems not just a TOS 13

14 Double down on cost savings with automation Customer Challenges: Solutions: Train Automation Crew costs and fuel represent the biggest opportunities for cost reduction in rail Energy Management (TO) Progression Outcomes: Interface to control system (DP) Foundation (Available today) Movement authority & optimization (MP) Level 2 automation (1-3 years) Interface to Signaling (Safety Overlay) Full automation (3+ years) ATO Authorization Sensory Monitor ATO Control Engine 3-17% fuel efficiency Safety & hauling capacity 90% train break-in-twos Up to 50% crew costs possible near term 14

15 More connected, more visible, more integrated, more flexible the new freight rail landscape is happening now Port & Supply Chain Visibility Automation Edge devices & cloud connectivity Transportatio n Management Asset Performance Management Network & Yard Optimization 15

16 GE Transportation... soon to be part of 16

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