Initial Market Assessment

1. Initial Market Assessment Transportation Distribution and Logistics Cluster ViTAL Economy Alliance

2. 1 Embryonic: An entrepreneur struggles to make the transition from idea to working concept. 2 Introduction: New, unique offering developed and patented. Focused on small group of customers. Industry Life Cycle: Five Stages Distribution Centers Maturity Growth 3 Growth: Market demand grows as the product is accepted. Significant funds required to increase the scale of production. Economies of scale increase; costs decrease. More new entrants join the industry; competition intensifies. Introduction Decline Embryonic 4 Maturity: Growth slows. Industry dominated by a few large companies. Few new product innovations. Container on Barge 5 Decline: Sales decreasing at an accelerating rate. Mergers and consolidations may occur in an effort to remain competitive and maintain profits.

3. Maximizing Economic Development Potential • INDIGENOUS • COMPETITIVE • ADVANTAGE • People • Location • Indigenous Assets • Infrastructure • Technology High Potential Clusters High Low High Low MARKETATTRACTIVENESS Evaluating Cluster Potential Clusters that leverage indigenous competitive advantage x high market attractiveness create sustainable economic development

4. Comments on Transport Developments • Transport industry typically reorganizes during recessions to reduce costs, increase services • Unclear how future will look • Observations • Fuel costs will encourage transport by energy efficient modes – rail and marine • International through regional connectivity will be a competitive advantage • The South Atlantic and Gulf will increase in importance as transportation gateways to the US

5. Distribution Centers Short-line Rail River Terminals Distribution Centers growing throughout Mid West. Responding to new Supply Chain management approaches. Short-line rail has expanded since rail deregulation. Many business inquires in SI related to rail access. High energy costs making marine transport attractive. Container on barge developing. Examples of Opportunities for SI

6. Life Cycle Consideration • The niches in the business life cycle • Short-Line Railroads • Over 500 short-line and regional railroads in U.S., including 17 in Illinois • Industry has grown substantially since rail deregulation in 1980 as Class I Railroads abandoned or sold off much of their mainline trackage • Increasing fuel and road maintenance costs for truck transport lead short-line railroads to be increasingly competitive for short haul traffic

7. Cluster Scale: Will it Contribute to SI’s Goals? • Short-Line Railroads • Examples of companies • Shawnee Terminal Railway • Vandalia Railroad • Decatur Junction Railroad • Average short line RR in the U.S. operates 85 miles of track and employs 36 workers (American Short Line Railroad Association, 2002) • Wide range of size in track length (from a few miles to several hundred miles), employment, capital depending on purpose

8. Market Segmentation: Short-Line Railroads Market Segments The best segments have Potential, Lifespan, Accessibility, and Profitability. Short-Haul Railroads Often former branch lines or spurs, connecting specific industries, commodity terminals or manufacturing plants to major railroads Short Lines Regional Railroads Longer haul feeder service connecting with major rail lines Switching Railroads Local scale, switching services between major rail lines

9. Life Cycle Consideration – River Terminals • The niches in the business life cycle River Terminals • Recent growth in river terminals has been relatively flat as a whole, varying from positive to negative growth by segment • Projected or potential growth in specific niches such as container-on-barge traffic • Southern Illinois is centrally located, has 2 major rivers, ports of entry, trucking and rail support infrastructure

10. Cluster Scale: Will it Contribute to SI’s Goals? • River Terminals • Hundreds of terminals on Mississippi and Ohio River systems • Varying in size from major ports (e.g. New Orleans, Memphis) to smaller terminals for single commodities • Typical terminal for grain handling employs between 50-100 workers

11. Market Segmentation: River Terminals Market Segments The best segments have Potential, Lifespan, Accessibility, and Profitability. Grain Coal Aggregates River Terminals Container-on-Barge Fertilizer

12. Cluster Scale: Will it Contribute to SI’s Goals? • Regional Distribution Centers • Examples of companies • Large companies with ‘in house’ DCs • Major department stores e.g. Walmart, Target • Home Improvement • Specialty big-box stores e.g. electronics retailers • Third Party Logistics providers (3PLs) • Operate DCs serving Single client or multiple clients from one DC • Large regional distribution center for a major retailer: ~1.5 million sq. ft, ~500 employees • Capital investment for DC of this size would be on order of $100 million

13. Market Segmentation: Regional DCs Market Segments The best segments have Potential, Lifespan, Accessibility, and Profitability. Large Department Stores Home Improvement Stores Food/Grocery Regional DCs Big Box Specialty Retailers 3PLs – Multi-client DCs 3PLs – Single-client DCs