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Vandalism Voices from a Transportation Team

Montreal, Canada

July, 2016

Marco Anaya –Damage Prevention and Claims ManagerFCA Mexico Logistics and Customs

■ FCA –Vandalism facts and impact Incidence impact from 2014 Repair time impact Operation example

■ Countermeasures What can an OEM do? What can the Railroad do?

■ Conclusions

Agenda

FCA – Vandalism Facts and Impact

Incidence● Increased dramatically during 2015 and 2016, impact in customer satisfaction, losing

sales, affecting quality, not selling units as new, among others● Complex recovery processes and quantity of damaged units exceed the repair

facilities capacity

Incidence increased2014 – 2015: 505 %

Incidence increased

2015 – 2016 : 171 %

% of units Vandalized

2014: 0.05 %2015 (1st half): 0.21 %2015 (2nd half): 0.29 %2016 (1st half): 0.39 %

Repair time● It has become more violent throughout the time; damaged bumpers, doors, fenders,

missing batteries (cut cables), antennas, wheels and tires, headlamps and radios.● Many units have been total loss or loss of sale● Financial impact of keeping inventory (not selling)

Damaged units over 30 days (monthly result impact)

2015 (12 units) $ 0.48 M USD2016 (25 units) $ 1.00 M USD

Direct impact in monthlysales result

Total Impact in USD (average per month)

2015 (48 units) $ 1.92 M USD2016 (82 units) $ 3.28 M USD

Recovery at ports for Major Damages

3 - 30• Cancel / withdrawal of export operation

with customs authorities

1 • Transport to repair facility

1-3 • Unit condition evaluation and quote

1 • Repair order confirmation

1-15 • Place order and wait for part arrival

1-5 • Repair and labor program

1 • Vehicle test after repair

1-3 • Port entry request to custom authorities

1 • Transport to port

2-15 • Dwell for next vessel with available space

15 – 70 days

Countermeasures - What can an OEM do?

Understanding where, when, what and how?● Evaluation and diagnosis of the source of each issue

KEYS 42%TIRE 34%

TOOL BOX 13%BATTERY 7%

RADIO / OTHERS 4%100%

January February March April May June

TOOL BOX

BATTERY

RADIO / OTHERS

DAMAGE

UNIT / MONTH UNIT / ROUTEMODEL

DAMAGE %DAMAGE %

FXEKCSM

FXEFXE

2015 Average: 48

22 19 16 12 12

RAM WRANGLER PATRIOT GRANDCHEROKEE

JOURNEY OTHERS

66 51 46 419 1

SALTILLO -VERACRUZ

PIEDRASNEGRAS -

CHICALOTE

SALTILLO -PIEDRASNEGRAS

SALTILLO -EL PASO

TOLUCA -LAREDO

SALTILLO -LAREDO

TOLUCA -LAZAROCARD.

506426

15679 64

KEYS TIRE TOOL BOX BATERIES RADIO /OTHERS

KEYS TIRE TOOL BOX BATTERY RADIO /OTHERS

FXE KCSMFXE FXEFXEKCSM KCSM

KCSM2014 Average: 9.5

Clean your house first• Eliminate any different source of vandalism – Armour your yard

Valet Sim

VIN ID

Position

Valet Sim

VIN ID

Position

Valet Sim

VIN ID

Position

Valet Sim

001112131415 1016

VIN ID

Position

Valet Sim

Leader becomes liable for the Group’s keys.

Any discrepancy must be notified immediately to supervisor.

Valet Sim

Leader delivers keys to supervisor, responsibility now turns over to key supervisor.

Any discrepancy must be notified immediately.

Valet Sim

Load Process (1)

ID Inspector: Checks and keeps record of key count / validates discrepancies found.

Load Process (1)

Security Guard: Must review that no one outside the operation is around the area.

Any stranger found around the operation must be reported immediately to supervisor.

Load Process (1)

ID Inspector: Records the key count “Check List / Buy-off document ”

Load Process (1)

Load Process (3)

Chock adjustment

Load Process (3)

TAKT Time?Chock adjustment

Load Process (3)

Cycle Time?

Load Process (3)

End Operation

Load Process (3)

Leader of the loading Team

Load Process (3)

Leader: Last person of getting off the platform.Responsible to check all the keys are in CUPHOLDERMust keep record of any discrepancy and notify

Load Process (3)

Gets off the platform checking for discrepancies

Load Process (3)

QC WEEK #Before QWEEK 1 8

WEEK 2 43WEEK 3 46WEEK 4 16WEEK 5 12WEEK 6 17WEEK 7 17WEEK 8 37WEEK 9 31WEEK 10 39WEEK 11 24WEEK 12 57WEEK 13 23WEEK 14 25WEEK 15 1WEEK 16 1WEEK 17 1WEEK 18 5WEEK 19 0WEEK 20 0WEEK 21 0WEEK 22 0WEEK 23 0WEEK 24 0WEEK 25 0WEEK 26 0WEEK 27 0

403 TOTAL

Key Theft Metric (Railcar Load - QC Project)

0 0 0 0 0 0 0 0 0

WEEK10

WEEK11

WEEK12

WEEK13

WEEK14

WEEK15

WEEK16

WEEK17

WEEK18

WEEK19

WEEK20

WEEK21

WEEK22

WEEK23

WEEK24

WEEK25

WEEK26

WEEK27

Before QC

Avarage 15

Clean your house first• Be certain units are shipped without any discrepancy• Liability must be addressed to rail

Re design your network● Take away volume from the railroad to use different type of transportation (truck

– vessel)

Risk management – Proactive approach● Keeping inventory in repair facilities of parts needed (“demand planning” /

“knowing what the customer wants”)● Develop repair facilities and increase capacity● Forecast services needed (transport, Customs formalities, fiscal depots, etc)

15.93 16.39 16.12

7.576.83

January February March April May June

Repair Time (Days)

2015 Average 13

● Increased repair capacity

● Development of a more reliable forecast to keep inventory

Addressing issues with local / federal authorities● Take advantage of industry strength in local / country economies● Join forces with all OEM’s and railroad to become louder● Government affairs department in each OEM should be placing this issue in their

agendas as an important decision topic for local investment● Work with AMIA in addressing this issue as an industry issue to authorities

Collaboration between OEMs● Sharing routes and rail space to avoid interchanges and / or delays in yards● Share initiatives and best practices● Develop logistic alternatives, ports, new routes (take advantage of the industry

volume)

Countermeasures - What can the Railroad do?

Investment (vandalism impact may justify)● Equipment used in Mexico, use only safe equipment for Mexico service● Specialized Security ● Infrastructure, develop safe routes to avoid reducing speed, hot spots, etc.

Countermeasures - What can the Railroad do?

Legislation● Work with government authorities in laws and regulations that will ensure safe

transit and law enforcement.

Network design - logistic● Optimize current network to seek for alternate routes to avoid hot spots

OEM’s are willing to cooperate / participate in any Railroad initiative!

Conclusions

Vandalism has increased to become a major concern for the industry causing constraints in the supply chain and financial impact

Railroad companies must take actions immediately and consider this as a serious problem (might become cost-effective to use a different source of transport)

OEM’s need to play an active roll seeking for possible solutions and initiatives

Understand that this issue is related to the socio-economical situation of the country

Understand that this is not a competitive advantage / disadvantage for any OEM, we should collaborate, join efforts and use the industry strength to support the rail companies to fight this issue

Vandalism - aar.com management – Proactive ... Share initiatives and best practices Develop...

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