SSecurity: i What Do Shippers Really Want? pp y Truckload Carriers Association Transportation Security Session May 17 2010 May 17, 2010

Session Agenda • Today’s Desired Effect • “What Do Customers Really Want” – One Perspective • Customer Challenges and Expectations • Sample Best Practices Sample Best Practices • Open Discussion

Today’s Desired Effect y To provide attendees with additional insight and  To provide attendees with additional insight and perspective regarding security and shipment  integrity concerns requirements and best integrity concerns, requirements and best  practices currently in practice for LXP’s  customers

What Do Shippers Really Want? One Perspective ‐ The Right Product in the 

‐ Right Quantity from the  ‐ Right Source on the   ‐ Right Carrier to the  ‐ Right Destination in the  ‐ Right Condition at the  g with the  ‐ Right Time ‐ Right Documentation for the  Right Cost ‐ Right Cost 

Product Security and Integrity

Customer Challenges and Expectations: D li Delivery  • Customers want what they want when they want it Customers want what they want when they want it • Customers want more value each time they shop – Good prices on good product in good condition G d i d d i d di i • Customers take for granted that loads will arrive: – Secure and without tampering

Customer Challenges and Expectations:  Cargo Theft Cargo Theft • FBI estimates cargo thefts cost US industry $15‐$30 billion/year • Direct Cost and Risk Considerations: o Loss or partial loss of the product o Introduction of contaminants to the shipment Introduction of contaminants to the shipment o Illegal items being added to the shipment o Unauthorized access to the product • Related Considerations: o Potential impact on insurance rates and coverage p g o Expedited shipment of replacement goods o Sales lost to stolen goods Source: FleetOwner, September 2009 Food Shippers of America CSX Intermodal Panel Presentatiion 2/10.

Customer Challenges and Expectations:   Cargo Theft (continued) Cargo Theft (continued) Locations of Cargo Theft

Top Targeted Commodities 15%  Consumer electronics (TV/DVD) 14% Food & food products 14%  Food & food products 10%  Clothing & footwear 8%  Computers & related items 5% Pharmaceuticals 5%  Pharmaceuticals

Source: FleetOwner, Chubb Group of Insurance Companies Food Shippers of American CSX Intermodal Panel Presentation 2/10

Customer Challenges and Expectations:  Product Integrity 2009 Harvard Survey found consumer confidence is  Harvard Survey found consumer confidence is • 2009 down: – 37 37 percent had a  percent had a “good good or great amount or great amount” of  of confidence in government food inspections ‐ Down from 47 percent a year ago. – About 48 percent had “significant faith” in grocery  stores to safeguard food ‐ Down from 58 percent a  year ago.  February 13, 2009 MIKE STOBBE AP Medical Writer Food Shippers of America GMA Panel Presentation 2/10

Customer Challenges and Expectations:  g p Product Integrity (continued) • Fallout from Peanut Corporation of America Incident F ll f P C i fA i I id – 691 people sickened in 46 states • Half were children Half were children – 108 hospitalized – 9 deaths reported 9 deaths reported – Affecting over 361 manufacturers – Over 3913 products involved in the recall

Food Shippers of America GMA Panel Presentation 2/10

Customer Challenges and Expectations:  Regulatory Compliance • On On September 27, 2007, the President signed into  September 27, 2007, the President signed into law the Food and Drug Administration Amendments  Act of 2007 (FDAAA).  • The Reportable Food Registry is to provide a "reliable  mechanism to track patterns of adulteration in food mechanism to track patterns of adulteration in food  [which] would support efforts by the Food and Drug  Administration to target limited inspection resources  g p to protect the public health"  Food Shippers of America GMA Panel Presentation 2/10

Customer Challenges and Expectations:  Regulatory Compliance (continued) House approved new legislation • House approved new legislation – H.R. 2749, Food Safety Enhancement Act 

• Senate Health, Education, Labor and Pensions (HELP)  ( ) Committee voted unanimously to approve – S.510, the  FDA Food Safety Modernization Act  N t t i f S 510 t b Next step is for S. 510 to be considered by the full Senate and  id d b th f ll S t d then on for a Senate/House conference.

• Roll out of CSA 2011 program in 2011: p g – Load integrity requirement implications  Food Shippers of America GMA Panel Presentation 2/10

Customer Challenges and Expectations:  Th B The Bottom Line Li ALL SHIPPERS HAVE A VESTED INTEREST IN  PROTECTING SHIPMENT SECURITY FOOD SHIPPERS MUST ALSO PROTECT THE INTEGRITY  OF LOADS FROM ORIGIN TO DESTINATION ALL TRANSPORTATION STAKEHOLDERS MUST BE  PARTNERS TO ACHIEVE MUTUAL SUCCESS

Shipment Security/Integrity Considerations Shipment Security/Integrity Considerations • Shipment tender – Proper messaging • Shipping location – Defined/disciplined protocols • Carrier performance  Carrier performance – Disciplined driver behavior Disciplined driver behavior • Receiving location – Defined/disciplined protocols • Communication – C i i C i Consistent and two way d • Documentation – Detailed and accurate • Continuous Improvement – Structured follow up

Sample Best Practices Sample Best Practices • Work with your Shippers/Receivers to ensure: • Joint verification of seal integrity upon shipment or arrival and at  physical release or receipt • Joint inspection of trailer and product to identify potential  Joint inspection of trailer and product to identify potential contamination or temperature abuse issues • Continuous temperature monitoring with alarm and recovery  protocols (for refrigerated and frozen products) l (f f d df d ) • Routine audit programs to ensure compliance with regulations  and company standards 

Sample Best Practices Sample Best Practices • Make sure your shipment tenders include special messaging  regarding security or special requirements for example: regarding security or special requirements, for example: • SHIPPER MUST  SEAL TRAILER OR CONTAINER! • CABLE OR BOLT SEAL(S) REQUIRED!  • CARRIER MUST ENSURE ALL DOORS OR VENTS ARE PROPERLY  SEALED BEFORE DEPARTURE!  • CARRIER MUST VERIFY THE SEAL NUMBER ON THE TRAILER OR  CARRIER MUST VERIFY THE SEAL NUMBER ON THE TRAILER OR CONTAINER MATCHES BILL OF LADING BEFORE DEPARTURE! • CARRIER MUST CONFIRM BOL TEMPERATURE BEFORE DEPARTURE! • CARRIER MUST MAINTAIN PROPER TEMPERATURE SETTING! • CARRIER MUST REPORT IN ROUTE INCIDENTS IMMEDIATELY!

Sample Best Practices • Take ownership for your own destiny: • Consider new hire background checks on key personnel • Ensure communication to drivers of security requirements for a  specific load  ‐ p have driver acknowledge message receipt g g p • Coordinate shipment dispatch to move by the most direct route • Require drivers to park with trailer doors up against a wall or  stationary structure and in well lit areas (preferably manned) t ti t t di ll lit ( f bl d) • Require the use secondary locks such as pad locks or products  like the “Enforcer” or other latch covering device

Sample Best Practices • Take ownership for your own destiny: • Maintain Maintain remote tracking of trailing equipment (to provide  remote tracking of trailing equipment (to provide location tracking, door activity and temperature monitoring) • Install and have available for use remote shutoff devices that  allow for remote disabling of engine if tractor is stolen   ll f t di bli f i if t t i t l • Properly secure and/or monitor terminal and/or yard facilities  including facility access • Be proactive and provide “robust” chain of custody information  for any seal breach or temperature “abuse” situation • Train and make all personnel aware of shipment security and  Train and make all personnel aware of shipment security and integrity goals

Sample Best Practices – “Borrow Good Ideas”

Closing Comments ‐ Discussion • Transportation security and food safety requires a  di i li d d disciplined and comprehensive process driven  h i di approach… • All stakeholders must prepare, execute, monitor and  drive continuous improvement for better results… • Failure by any one stakeholder will likely influence all  stakeholders… stakeholders