Transportation, Distribution & Logistics (TDL) Cluster Wednesday, February 11, 2009 1:00pm-4:00pm

1. Industry Cluster Opportunity Analysis Kick-off Workshop Transportation, Distribution & Logistics (TDL) Cluster Wednesday, February 11, 2009 1:00pm-4:00pm Mt. Vernon, Illinois ViTAL Economy Alliance Jim Haguewood.- jim@onegroupconsulting.com Mark Madsen – mmadsen@priorityone-advisors.com

2. Industry Cluster Kick-off Workshop Agenda 10 Min.–Welcome & Introductions – Kathy Lively 10 Min. – Connect SI Vision and Goals – Kathy Lively 30 Min. –VE Industry Cluster Approach 20 Min. – State of the Industry? 45 Min.–Let’s Get Started! • What constitutes the SI TDL industry cluster? • What is the industry cluster sense of urgency? • What is worth your time, talent and treasure to participate? • Current industry initiatives and short term win opportunities? • Define and agree on the cluster market niches (3-5) & hypothesis 10 Min. – BREAK 20 Min. – Industry Cluster Team Roadmap 15 Min.–Industry Cluster Team Recruitment Plan 10 Min. – Industry Cluster Team vs. Research Team Work Plan 10 Min. – 60-Day Work Plan

3. Why….? Connect SI Vision and Goals Southern Illinois will: • Be the fastest growing economic region in Illinois • Be the regional gateway: • From America’s Heartland to the global economy • From the global economy to America’s Heartland • Be named a national and regional model for collaborative, regional rural economic transformation • Achieve a positive balance between livability & sustainable growth

4. Greater Egypt Greater Wabash Southeastern Southern Five Why….? Connect SI Vision and Goals 16,379 New Jobs @ $43,500 10,919 New Jobs From $36,517 - $40,785 41,461 Existing Jobs >$5,000/Yr Increase SI Export Value by $1 Billion/yr $642 Million New KBE Activity 1,600+ Firms 4,500+ Families with Healthcare Coverage Lift 10,000 Citizens Out Of Poverty $200 Million Information Technology Investment

5. Why….? Connect SI Vision and Goals • Tourism • Bio-Agriculture • Knowledge Based Enterprises (KBE) • Healthcare Technology Products & Services • Advanced Manufacturing • Recreational, Marine, Hunting, Technology Products & Services • Visual Creative & Performing Arts and Services • International Incubation and Innovation • Green Technologies • Homeland Security Response and Services • Life Sciences, Plant and Animal • Global Workforce Opportunities • Energy • Mining Technology • Transportation, Logistics & Warehousing • Senior Living • Education & Training(also supports all the other clusters) Is SI worth fighting for? All new jobs created by Industry Clusters will be targeted to include private payer health benefits for workers and families

7. ViTAL Economy Industry Cluster Identification and Assessment System System Framework Characteristics of the Approach Clusters vs. Clusters Teams Guiding Principles of Success Discover the Value Chain - Input Identify Key Existing Local Research - Input

8. Framework….Geographic Region 130 Miles East-West 100 Miles North to South Population=423,670 Workforce=195,429

9. Traditional Industry Cluster Definition A cluster is a geographically proximate group of interconnected companies and associated institutions in a particular field, including product producers, service providers, suppliers, universities, and trade associations. Clusters arise out of the linkages or externalities that pan across industries in a particular location. Vertical and independent orientation

10. ViTAL Economy Industry Cluster Definition Establish core value linkages both within and across industry sectors.  These linkages creatively leverage the indigenousstrengths of a region. Clusters are assessed and prioritized in a collaborative process which insures that the critical challenges and opportunities of a region are continually addressed.   Horizontaland interdependent orientation

11. I. Market Description/Segmentation II. Market Attractiveness Market size--regional, national, international Market growth rates General business trends within markets Demand trends--regional, national, international Supply trends--regional, national international Market profitability III. Regions Competitive Position to Produce a Product or Service Local production capabilities Local technical capabilities Local capacity utilization Cost components, i,e, labor, raw materials, finance costs, etc Cost curve position vis-à-vis potential regional, state, national and international competitors IV. Timing Issues to Establish Competitive Position in Market Length of time to establish industry Likely actions of potential competitors V. Financial Viability and Financial Resources Required to Pursue Opportunity Business Case Assessment Capital requirements Availability of capital at the regional, state and national level Framework…Cluster Assessment Outline

12. Framework…Structured Fact-Based Analysis Structured framework utilizes fact-based hypotheses Followed by fact information gathering and analysis To prove or disprove the hypothesis Defines the “boundaries” of an issue and breaks it down into component parts Eliminates blind alleys quickly, allowing you to focus on the main issues The VE approach uncovers opportunities for the industry clusters in SI. It does not apply a “generic silver bullet” method typical of other processes.

13. Framework….Hypothesis Testing A set of propositions based on facts already at hand, and intuition to address issues, challenges, and industry and economic trends. Propositions will be prioritized and evaluated through questions, research and Quick and Dirty Testing (QDT) “Not everything that can be counted counts and not everything that counts can be counted.”Albert Einstein Today, you as the core cluster team members will define the key initiatives of this cluster team as you determine the critical questions (hypotheses) for the research team to analyze.

14. Clusters should leverage indigenous resources HIGH POTENTIAL CLUSTER IDENTIFICATION APPROACH Maximizing Economic Development Potential Desired Economic Development Goals • INDIGENOUS • COMPETITIVE • ADVANTAGE • People • Location • Indigenous Assets • Infrastructure • Technology High Potential Clusters High • Diversify economy • Create sustainable economic growth • Create jobs which exceed average national wage • Create jobs with associated benefits • Increase workforce capabilities • Attract outside capital • Deepen and strengthen capabilities of existing industry clusters Low RESULTS IN Low High MARKET ATTRACTIVENESS The ViTAL Economy Alliance Brings Significant Capabilities to Identify Competitive Advantage Elements and Assess Market Attractiveness

15. Clusters are economic environments where people turn ideas into businesses Better Faster More Reliably Cluster teams are catalysts…. To provide the vision and leadership To assess and prioritize opportunities To link resources, internal and external To transform regional economies Important Distinction; Clusters vs. Cluster Teams

16. The Vital Economy Industry Cluster approach achieves measurable results through the recognition and endorsement of key principles Industry Cluster Team Guiding Principles Industry cluster leadership and participation are key to generating outcomes Work plan discipline, completing all elements of each phase, is key to achieving success Trust and respect is required between companies and individuals Collaboration is recognized as a key to achieving regional goals Uncovered opportunities will have action teams assigned with leadership immediately

17. ViTAL Economy Core Principles Collaboration Builds Sufficient Critical Mass to Compete Globally, while Emerging Cluster Strategies Assure Regional growth + Connectivity Links Geographically Remote Resources to Increase Access, while Creating Opportunity, Building Diversification, Enabling Collaboration + Changed Spending Increases Productivity and Revenues Opens New Markets, Expands Opportunity, Establishes Measurable Benchmarks and Goals

18. Cluster Teams Understand and Use the 8-steps of Managing Change • Establish a Sense of Urgency • Form Powerful Guiding Coalitions • Create a Vision • Communicate the Vision • Empower Others to Act on the Vision • Plan for, Create, and Communicate Short Term Wins • Consolidate improvements and Produce More Change • Institutionalize New Approaches Source: Harvard Business School

19. P C Friction is the Cost of Getting From P to C P=Producer & C=Customer P C Move Up the Value Chain, Capture Greater Share of Value Chain Margins, Increase Economic Prosperity Rural Economies Must Move Closer to “C”

20. Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Receiving Warehousing Inventory Control Input Materials Activities required to get the final products to the customer; warehousing, order fulfillment Activities that enhance the products value including customer service and repair services Value creating activities that transform inputs into final products Activities associated with getting buyers to purchase the products; channel selection, advertising, pricing Discover the SI TDL Value Chain Elements Step #1 – Identify each element of the industry value chain Step #2 – Identify whether the element exists in the study region 

21. Foundation: Key Local Research Reports and studies five years or younger: • CSI Readiness Assessment - www.mantracon.org/new_connectsi.htm • CSI Asset & Indigenous Resource Mapping - www.mantracon.org/new_connectsi.htm

23. State of the Industry…Major Trends? As more and more global opportunities open up, logistics, transportation and distribution increase in importance — Southern Illinois is truly at the crossroads of virtually all modalities. Connect SI Readiness Assessment, Chapter 1.09

25. State of the Industry…Major Trends? • Recession has reduced demand for transportation in short term, despite lower cost of oil • While the speed of recovery remains unclear, longer term expectation is • increased global trade and related transportation • continuing supply chain changes to reduce costs • green transportation developments As more and more global opportunities open up, logistics, transportation and distribution increase in importance — Southern Illinois is truly at the crossroads of virtually all modalities. Connect SI Readiness Assessment, Chapter 1.09

26. TSI Freight TSI Passengers Trend…Transportation Is a Growth Sector DOT Transportation Services Index, 1990-2008 The DOT TransportationServices Index Shows the national growth of Passenger and Freight services Since 1990, this sector has experienced steady growth 9/11 reduced passenger services significantly, but they returned to trend in subsequent year Impact of 9/11 on passengers Source – DOT Department of Transportation Statistics

27. Trend….US Rail Traffic Projected to Increase The thickness of the lines in 2020 show projected demand for rail services. How to serve these demands is unclear as rail lines do not currently have the required capacity.

28. Trend….US Ports Cannot Keep Up with Demand By 2020 demand will exceed current capacity of many U.S. ports by as much as 200%. Source: Vickerman & Associates, 2008

29. Trailers Containers Total Rail-Truck Intermodal Traffic Growth Strong KEY: U = Data unavailable NOTE: Container-trailer breakdown not available prior to 1988. SOURCE: U.S. Department of Transportation, Research and Innovative Technology Administration, Bureau of Transportation Statistics, based on data from Association of American Railroads, 2004: Class I Rail Road Statistics, page 2; 1990-2003 Rail Road Facts 2003, page 26; 1980-1985 Rail Road Facts 1991, page 26; 1986-1989 Rail Road Facts 2001, page 26. Container Movements by Truck, 1988-2004 • Container movements by truck have increased rapidly, and surpassed trailer movements in 1992. Millions of Units

30. Short-Term Container Trends • With the slowing world economy, container imports into the U.S. were expected to decline 8.2% in 2008 • Mostly because of Gulf port closures during the summer • Exports, however, were forecast to grow 22.6% • Destinations included Brazil, India, Indonesia, Malaysia, and South Korea Grain container exports down year over year in 2008, but 3-year average trending upwards Source: Global Insight

32. Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Receiving Warehousing Inventory Control Input Materials Activities required to get the final products to the customer; warehousing, order fulfillment Activities that enhance the products value including customer service and repair services Value creating activities that transform inputs into final products Activities associated with getting buyers to purchase the products; channel selection, advertising, pricing Identify the SI industry cluster components

33. What is the cluster sense of urgency?

34. What is worth your time, talent and treasure to participate?

35. Current Initiatives….Short term win opportunities

36. Identify 3-5 Market Niche Opportunities TDL • Readiness Assessment Identified Markets • Multimodal/transload facilities • Distribution Centers • KBE Logistics • Niche markets leveraging aviation assets

37. Industry Cluster Recruitment PlanWhat industry cluster segments are missing from the table?

38. Prospect Recruiter Cluster Team Recruitment Plan

39. Industry Cluster Roadmap

40. Stage #1 – Formation Establish broad-based core leadership team Define the industry cluster, geographic boundary, and niche or sector identification. Invite and recruitment of key cluster participants What will keep a participant at the table for 18 months? Define industry cluster team vision Pursue short term wins Stage #2 – Recognize & Research Begin industry cluster mapping Be on the lookout for linkage opportunities Map the industry cluster indigenous resources Determine economic value of the industry Identification of workforce development needs Industry cluster gap assessment Global and national industry research exchange Pursue short term wins Industry Cluster Roadmap START 3 MONTHS 5 MONTHS 8 MONTHS Implementation Institutionalize Stage #1 Stage #2 Stage #3 Report • Stage #3 – Report • Global and national industry research exchange • Analysis and apply new information into the industry economy • Benchmarking the industry cluster • Delivery of Industry Cluster report • Pursue short term wins

41. TDL Industry Cluster Team Schedule

42. Industry Cluster Team Support Structure • Project Management • Integration with overall CSI effort • Deliverable quality • Project timing Jim Haguewood Mark Madsen Kathy Lively • Research Team • Cluster team management • Approaches & methodologies • Economic and business analysis Steve Martin Rob Beynon Research Analysts Cary Minnis CSI Support • Cluster Teams • Data collection • Economic and business analysis • Recruitment Energy Transportation, Distribution and Logistics

43. Industry Cluster & Research TeamsWork Plans

44. Establish a leadership team Recruit members to the cluster team Keep industry cluster team members engaged Identify existing local research Attend key cluster meetings providing input and analysis Create and lead action teams Provide input and analysis of market niches and hypotheses Conduct industry cluster asset mapping Provide input to final report Present cluster report in public session Provide guidance and advisement to VE industry cluster approaches Provide key primary research based upon the cluster work plan Market Attractiveness Macro and Micro analysis Regional and national industry interviews Provide facilitation of key industry cluster meetings and teleconferences Transfer knowledge to the cluster team Prepare final cluster report Overall Roles and Responsibilities Industry Cluster Team Research Team

45. Industry Cluster & Research TeamsWork Plans Next 60 days

46. Industry Cluster Team Determine core cluster leadership team Draft cluster vision statement Complete cluster participant recruitment plan Conduct recruitment calls List indigenous resources leveraged – each niche market Link resources to hypothesis to be tested SLIDE 29 Begin list of key regional, national industry interviews Refine niche markets Research Team Market attractiveness research – each niche Size Growth rates Business trends Political, economic & business data Expanded value chain mapping Niche market Demand trends Supply trends Regulatory and political trends Conduct hypotheses testing Conduct preliminary industry interviews Refine niche market focus Prepare for interim conference call Stage #1 Work Plans Next 60 days Interim Conference Call - Date: Time: Month #3 Meeting - Date: March ? Time: Location:

48. Industry Cluster Opportunity Analysis Kick-off Workshop Transportation, Distribution & Logistics (TDL) Cluster Backup Slides ViTAL Economy Alliance Jim Haguewood.- jim@onegroupconsulting.com Mark Madsen – mmadsen@priorityone-advisors.com

49. Jim Haguewood Mark Madsen Experience: • 21 years in property management & development, • Executive Director of Clallam netWorks Economic Development Council 2000-2005 • Leader in development of Clallam Business Incubator and Clallam netWorks economic and community development strategy • Community leadership; Mainstreet, tourism committees, College Foundation Board, Tribal Gaming Board • 16 years President of Haguewood’s Restaurant, Inc. • Bachelor of Arts, Washington State University, 1982 Areas of Strength: • Industry Cluster Development Strategies and Coordination • Presentation and Facilitation • Strategic Planning • Property Management • Project Management • Innovation Entrepreneurship Ecosystems • Experience: • 27 years experience in business, education and government • Transitional CEO, Board Member and mentor to startup or expanding firms • Founding President of the North Olympic Peninsula Resource and Conservation District • College Foundation Board • Bachelors – Agricultural Economics, Brigham Young University • Masters – Economics and Business, Utah State University • Doctoral – Economics, Oklahoma State University. Teaching and research emphasis in Community and Economic Development, and Applied Business Economics • Areas of Strength • Business Organization and Management • Entrepreneur Training and Mentoring • Economic Counsel • Rural and Regional Economic Development • Community Development • Community Leadership • Management of complex real estate development and construction projects

50. Steve Martin InterVISTAS Consulting Experience: • Senior Vice President, Strategic & Development Planning, Washington, DC • Former Assistant Director, U.S. Government Accountability Office, with experience in infrastructure issues • 20+ years’ experience working with the U.S. Congress, including extensive contacts within the departments of Transportation, Justice, Commerce, and State • Working with issues concerning the economic vitality of smaller communities. • Principal investigator. Transportation Research Board, Guidebook for Small Community Air Service Development • A.M, Duke University, 1982 • B.A., Miami University (Ohio), 1979 Areas of Strength: • Project Management • Economic Research and Analysis • Extensive contacts throughout federal government and DC-based trade associations • Presentation and facilitation Rob Beynon • Experience: • Vice President, Development Economics, Vancouver, Canada • Successful experience developing winning business cases for airports, ports, and communities seeking rail carriers • Specializes in work in rural economies with smaller organizations and communities • Work experience throughout the U.S. and Canada • M.A., Japanese Business/Economic History, University of British Columbia, 1989; • B.A., University of British Columbia, 1986 • Areas of Strength: • Economic Research and Analysis • Business Case Development • Strategic Planning • Multiple Accounts Evaluation • Transportation and Logistics