UNF Powerpoint Slides (1) (1)

Editor's Notes

• #3: Ripley
• #4: Ripley- I am Ripley, and these are my teammates Mary, Adam, and Catalina and we are from the University of North Texas. We are here with our recommendation for intermodal service to central Florida via the Florida East Coast railway. The FEC has had large success in the intermodal market as a regional rail line. As the economy and market in Florida continues to grow, the FEC is facing 2 critical decisions, those being, the question of should they expand their reach of service to central Florida and if so, how are they going to do it? We have evaluated our decision based on the criteria of profitability for the FEC, the capacity for growth, the required investment to implement the new service options, and on the culture of the company. (Mary will talk about the breakdown of our recommendation).
• #5: Mary- We recommend that the Florida East Coast railway service Central Florida with Intermodal transport from the Southern Ports, with an added growth plan. Outline of routing service: The plan is for any containers bound for Central Florida would be loaded at the Ports of Miami and Fort Lauderdale. These containers would be grouped together in “blocks” for easy hook-up with trains heading northbound. Blocks from Miami would catch a train heading out of the Hialeah terminal, and both trains would stop at the Cocoa Beach terminal for a 45 minute train switch. Once the switch is done, the trains would continue north with the remainder of the freight bound north. The containers that had been dropped off would be unloaded, drayed from the terminal to a newly invested container yard for temporary storage. The draying from the terminal to the container yard would be done by newly (also) invested tractors and drivers under the FEC Highway services. However, for the drayage to and from Orlando, we recommend contracting a third party firm to eliminate any unnecessary liability and fixed costs. Since this service would be a “milk run” for the contracted firm, we believe would could negotiate really good rates both ways. Once the containers were unloaded in Orlando, they would be reloaded with any freight heading South and drayed back to the container yard. From there the containers would be drayed by the FECHS to the terminal, built into easy loading blocks, and put on the next train heading south to the appropriate port, where the process would regenerate. In respect to the loads, we kept our analysis simple and focused a goal of a volume increase of 10%, which would reduce the average cost per unit to FEC by 2%. Since the total intermodal movements from 2014 were 400,000, we set a MINIMUM goal increase of 40,000 units. We used the current volume of containers flowing via truck to and from Orlando, as shown in the map. With competitive rates, a positive operating income, and the proper use of marketing mediums, we believe the FEC will have no difficulty diverting enough of the current flow via truck to validate the needed increase to service Central Florida. On that note, I will pass it off to Catalina, who will rundown the costs and rates associated with our recommendation. (3:41)
• #7: Catalina- Profitability: Due to the market that the FEC is currently operating in, AND the proportion of annual intermodal freight movement, we rationalized profitability of the proposed service as the most important criteria. Just from 2013 to 2014, there has been a growth in annual intermodal freight volumes of 13%. The FEC reported 400,000 units moved via intermodal in 2014, which has brought up the percentage from 63% to 76%. With the implementation of this new proposed service, this percentage will continue to grow.
• #8: Catalina- From here, we calculated the total rate charges for both the FEC intermodal round-trip movement to Central Florida and the competing drayage companies, on a unit-by-unit basis. All charges were consolidated into one rate, including all highway and rail movements, along with the fuel surcharges. To calculate the drayage rate from Cocoa terminal to the container yard we took the operating ratio reported by the FEC in 2013 PLUS the average cost to operate a truck provided by the American Transportation Research Institute. Rate for contract drayage services we contacted CH. Robinson for a quote on an average drayage rate to Orlando. The drayage companies chosen as a comparison were evaluated based on length of haul, and proximity to the competing ports. These (point to Miami and everglades) are the two main competitors which we believe the FEC can divert volume from.
• #9: Ripley- In order to implement intermodal service from the Southern Ports-Central Florida with an added growth plan, we recommend the FEC make several investments to infrastructure. Since the Cocoa Beach facility can handle an average of 50 units at a time or 100 units per day, we are recommending that the FEC either upgrade the Cocoa Beach facility or consider building a larger facility in an adjacent area (perhaps City Point?). In considering an investment of the caliber needed for the increased volume to Orlando, we believe that a range of $5-10 million will be necessary for upgrading the current Cocoa Beach terminal. This terminal currently can handle about 36,500 loads annually, which is 3,500 less than our minimum goal of a 40,000 increase. The upgrading or relocation of this terminal is essential to the success of the service to Central Florida. Due to the volume increase, we recommend that the FEC invest $100,000 in a container yard to serve as a temporary storage area for containers waiting to be drayed or sent back out on the next train. We recommend that the FECHS take ownership of the draying to and from the new container yard, since all dray to and from Orlando will be contracted out. To be able to operate the movement between the container yard and the terminal, (again, just working on the 40,000 unit increase goal), we recommend a minimum of 10-12 tractors to be purchased. Each tractor is at a cost of $120,000.
• #10: however, these loads do not include the amount moving from ft. lauderdale AAR.org, everyone $1 billion investment in new rail = more 17,000 jobs
• #11: Adam- The FEC railway has excellent growth capability. When analyzing the rates shippers are paying for services into the Central Florida Region via drayage versus the rates the FEC can charge it is clear that service through the FEC is a cost efficient alternative, giving FEC a competitive advantage and resulting in growth by redirecting the flow of goods into central Florida. Some of the rail friendly freight such as wood, plastics, grain, etc. which is currently flowing into Central Florida via truck is a prime target for marketing FEC services due to all the inherent advantages of rail movement such as large cargo capacity, long haul distances, low fuel costs, etc. that would directly cater to BCOs moving these commodities. It is also important to note, any company wishing to integrate “green” initiatives into their supply chain, the FEC railway provides for a transportation alternative to highway movement that reduces the environmental impact.
• #13: Adam- With the completion of the Panama canal, ships carrying loads of up to 13,000 TEU’s will be able to service East Coast ports. The Port of Miami has made arrangements for these ships by providing necessary infrastructure improvements at its port with the Port of Everglades planning to do the same by 2017. Completion of the Panama Canal will provide opportunities to BCOs to obtain cheaper rates aboard Post Panamax ships The short distance from these ports to the open sea should provide a reasonable setting for the ports to be called on, thus increasing growth. The increased peak volume levels caused by these ships will create a stronger need for reliable container transportation and storage which we have already proposed
• #14: Mary- The FEC has recently begun the switch of 24 new LNG engines to run on their lines, which is huge step in innovative rail transport. With two planned LNG plants around the Ports of Miami and Fort Lauderdale, all the benefits that come with operating LNG engines would give the FEC major visibility and marketability to all current and new market regions. One great advantage that we believe will divert volume from trucking to intermodal is the ability for the new LNG engines to be switched back to diesel without any disruption in the supply chain. This practically throws out the volatility of the fuel market’s effect on FEC rates.
• #15: Catalina- The final criteria considered was how the option would align with the Mission, Vision, and Values of the FEC. We noticed that the FEC maintains and thrives under a culture of sustainability, which by definition, is the impact of actions on economy, society, and the environment. There are many prevalent examples of this culture in FEC practices: LNG, investments in infrastructure, involvement in the community, and employee happiness. We believe that our recommendation will provide BCOs with a very sustainable option to move their freight to Orlando. This service will also make the FEC extremely marketable and visible to the environmentally aware. This option also will improve relationships with the shippers, east coast labor groups and provide clean competition in the market.
• #16: Time Rates Fuel costs – LNG engines On time delivery Shipper b Education 66 are shipping products Intermodal adds value Opportunity lies within companies that need to be educated on the value that intermodal will add to their supply chain Lead time – supply chain planning
• #19: Due to the fact that it is privately held, we found the 2013 10k report. Operating ratio, operating expenses, and all calculations were indexed based on the operating ratio % presented in the report.
• #20: We utilized Freight Analysis Framework. We looked at the projected 2015 freight movement into and out of Orlando. We based all of our calculations based on 2012 since it is already a solid number.
• #21: Although, trucking can get it there in a shorter time. Intermodal advantages are length of haul, reliability and capability. That is why the targeted commodities that are currently being transported via truck to be converted into rail volumes.
• #22: We talked to the actual Hialeah terminal on an estimate for transloading and they told that that it could be anywhere from 1 hour to couple of hours. It is extremely costly and it tights up the inventory. If we want to compete with a short distance We would not recommend it right now. However, we might consider it in the future in case that they expand substantially in the volumes carried and perhaps expansion.
• #23: 5 million – 10 million FEC is known to partner with the community to obtain the money required to invest. Aside from being necessary from operations it will create an opportunity to reach out to other municipalities to joint venture.