Fleets Offer Expanded Storage Options
By Jonathan S. Reiskin, Associate News Editor
This story appears in the May 21 print edition of Transport Topics. Click here to subscribe today.
With demand for freight-hauling services at a relatively slack point, some trucking companies are branching out within the logistics world and offering warehousing services — concerning themselves not with constant rolling motion, but the complete and prolonged absence of it.
Executives with three large trucking companies said in interviews that providing the services is yet another way to penetrate more deeply into the supply chains of existing customers.
“Trucking companies are migrating into warehousing and third-party logistics and vice versa. Both sides are doing it to deepen their relationships with customers,” said Joel Anderson, president of the International Warehouse Logistics Association in Des Plaines, Ill., and the former chief executive officer of the California Trucking Association.
“Offering reliable trucking capacity is a big selling point for a warehouse, and a trucking company that does distribution might want some warehousing. There’s a lot of cross-over,” Anderson said.
Managers with ABF Freight System and Landstar System said their companies are responding to requests from trucking customers and linking their clients with warehousing businesses. ABF and Landstar do not own the actual structures, but function instead as intermediaries.
At Celadon Group, the Indianapolis-based truckload carrier’s model is different in that it manages facilities, particularly for heavy manufacturers.
“We were brought in to make engine manufacturers more efficient. Using our facilities frees up space on their floors. In some cases, they’re storing just a couple of hours worth of parts on their floors, not three days worth,” said Jon Russell, executive vice president of logistics and son of Celadon Chairman and CEO Stephen Russell.
The younger Russell said that warehousing clients at Celadon Dedicated Services include Cummins Inc., In-ternational Truck and Engine Corp., ThyssenKrupp and Xerox Corp. In 2006, the work brought in between $10 million and $15 million, and “we’re looking to grow this substantially,” he said.
The Celadon warehouses often are located very near one of the customer’s facilities, and the close-but-separate strategy supports a specific benefit. The company’s work for Cummins provides an example of how the Celadon facility acts as a sort of bonded warehouse.
“Until the parts leave our warehouse, they are on the suppliers’ books and they are responsible for them. The parts are not Cummins’ responsibility until they leave our dock,” Russell said.
Known as Supplier Managed Inventory, he said it can be particularly helpful in international business when shipping parts from Asia to be assembled in the United States.
Cummins must have 30 to 45 days’ worth of parts reasonably on hand, Russell said, but only needs three days’ worth immediately available to operate. A computer system links Cummins, its Asian vendors and the Celadon warehouse.
Orders can be initiated or cancelled depending on pre-set minimum and maximum figures.
Russell said Celadon also provides trucks to complete the warehouse fulfillment. Day cabs might leave every 15 minutes on two-mile shuttle trips, but other routes might take two or three hours.
Sometimes, Celadon even has backhauls for this work as it often handles returns on components.
Working for both International and Cummins, Russell said that last year’s pacing on those accounts was es-pecially frenzied because of the pre-buy rush to purchase 2006 diesel engines rather than 2007 models.
“Sometimes, the warehouses were open 20 hours a day. With the pre-buy for trucks, it was a hectic fourth quarter,” he said.
Since then, the work has moved to 1½ shifts a day from three. “With the end of 2006, it was like a cliff. Now, it’s much slower in 2007,” said Russell, who added that customers in this line can be very demanding.
“This is a very high-paced business and you have to satisfy your customers. If not, there are sometimes penalties of $5,000 per minute for failure to deliver,” he said.
Celadon’s warehousing consists of five facilities with a combined total of more than 650,000 square feet. The company employs 156 people who handle 1,300 inbound and outbound weekly shipments from more than 400 suppliers.
The company got into the business when it bought Zipp Express in 1999. The corporation’s nontrucking segment also includes buying cooperative Truckers B2B and freight brokerage.
Managers at truckload carrier Landstar and less-than-truckload specialist ABF said they acted after listening to consistent requests from customers.
“We saw an opportunity to extend our business model into the warehousing realm,” said Jim Handoush, president of Landstar Global Logistics in Jacksonville, Fla.
“ABF’s design was customer-driven. They consistently have had the need for short-term storage or regionally based order fulfillment and distribution,” said Rick Brumett, director of supply chain services for ABF in Fort Smith, Ark.
Just as Landstar has owner-operators it calls business capacity owners, since July it has been using a network of warehouse capacity owners. As of Dec. 31, Landstar had 102 warehouse capacity owners scattered nationwide, Handoush said, describing the firms as regional warehouse operators.
In signing up to work with Landstar, the warehousing firms do not have to abandon pre-existing customers. The appeal of the arrangement, he said, is that Landstar’s national network booking agents for trucking services now can arrange for warehousing as well.
The company’s compensation formula for such a booking would be 90% of revenue to the warehouse capacity owner, 2% to the agent and 8% to Landstar.
Brumett said ABF has operating arrangements with 80 facilities nationwide that have a combined total of 20 million square feet. The warehouses do not work exclusively for ABF and have other customers.
ABF’s warehousing customers also use the company for transportation services, he said, adding that ABF manages the relationship with the warehouses for its clients.
“Regardless of the number of warehouse locations a customer utilizes, ABF is the single contact for all warehouse services, as well as for regional, national or internationally based transportation into or out of each warehouse,” he said.
Typical customers are those that import goods, need regional distribution or require certain product reconfiguration before being shipped to the ultimate customer. ABF took care in selecting warehouses in major markets such as Chicago, Dallas, Atlanta and all major U.S. port locations.
Brumett and Handoush said the work requires additional investment in technology by their respective companies.
“We provide the customer with real-time inventory visibility through our Web site, so cumbersome [electronic data interchange] data sets are not a necessity,” Brumett said.
Handoush said Landstar bought a warehouse management system from Provia Software, now part of Infor Global Solutions. He would not say how much his company spent but said such systems usually run between $500,000 and $5 million.
Handoush and Celadon’s Russell both said they have had to adjust to the timing of the warehousing industry, which is different from trucking. Russell said he is in the middle of about seven-to-10-year contracts.
Handoush said, “In warehousing, the sell-cycle is longer because it’s more strategic in nature. Three-to-five-year contracts are typical.
“Warehousing has become a coping strategy for tight trucking capacity . . . and this helps us offer a more complete transportation solution,” he said.
This story appears in the May 21 print edition of Transport Topics. Click here to subscribe today.
With demand for freight-hauling services at a relatively slack point, some trucking companies are branching out within the logistics world and offering warehousing services — concerning themselves not with constant rolling motion, but the complete and prolonged absence of it.
Executives with three large trucking companies said in interviews that providing the services is yet another way to penetrate more deeply into the supply chains of existing customers.
“Trucking companies are migrating into warehousing and third-party logistics and vice versa. Both sides are doing it to deepen their relationships with customers,” said Joel Anderson, president of the International Warehouse Logistics Association in Des Plaines, Ill., and the former chief executive officer of the California Trucking Association.
“Offering reliable trucking capacity is a big selling point for a warehouse, and a trucking company that does distribution might want some warehousing. There’s a lot of cross-over,” Anderson said.
Managers with ABF Freight System and Landstar System said their companies are responding to requests from trucking customers and linking their clients with warehousing businesses. ABF and Landstar do not own the actual structures, but function instead as intermediaries.
At Celadon Group, the Indianapolis-based truckload carrier’s model is different in that it manages facilities, particularly for heavy manufacturers.
“We were brought in to make engine manufacturers more efficient. Using our facilities frees up space on their floors. In some cases, they’re storing just a couple of hours worth of parts on their floors, not three days worth,” said Jon Russell, executive vice president of logistics and son of Celadon Chairman and CEO Stephen Russell.
The younger Russell said that warehousing clients at Celadon Dedicated Services include Cummins Inc., In-ternational Truck and Engine Corp., ThyssenKrupp and Xerox Corp. In 2006, the work brought in between $10 million and $15 million, and “we’re looking to grow this substantially,” he said.
The Celadon warehouses often are located very near one of the customer’s facilities, and the close-but-separate strategy supports a specific benefit. The company’s work for Cummins provides an example of how the Celadon facility acts as a sort of bonded warehouse.
“Until the parts leave our warehouse, they are on the suppliers’ books and they are responsible for them. The parts are not Cummins’ responsibility until they leave our dock,” Russell said.
Known as Supplier Managed Inventory, he said it can be particularly helpful in international business when shipping parts from Asia to be assembled in the United States.
Cummins must have 30 to 45 days’ worth of parts reasonably on hand, Russell said, but only needs three days’ worth immediately available to operate. A computer system links Cummins, its Asian vendors and the Celadon warehouse.
Orders can be initiated or cancelled depending on pre-set minimum and maximum figures.
Russell said Celadon also provides trucks to complete the warehouse fulfillment. Day cabs might leave every 15 minutes on two-mile shuttle trips, but other routes might take two or three hours.
Sometimes, Celadon even has backhauls for this work as it often handles returns on components.
Working for both International and Cummins, Russell said that last year’s pacing on those accounts was es-pecially frenzied because of the pre-buy rush to purchase 2006 diesel engines rather than 2007 models.
“Sometimes, the warehouses were open 20 hours a day. With the pre-buy for trucks, it was a hectic fourth quarter,” he said.
Since then, the work has moved to 1½ shifts a day from three. “With the end of 2006, it was like a cliff. Now, it’s much slower in 2007,” said Russell, who added that customers in this line can be very demanding.
“This is a very high-paced business and you have to satisfy your customers. If not, there are sometimes penalties of $5,000 per minute for failure to deliver,” he said.
Celadon’s warehousing consists of five facilities with a combined total of more than 650,000 square feet. The company employs 156 people who handle 1,300 inbound and outbound weekly shipments from more than 400 suppliers.
The company got into the business when it bought Zipp Express in 1999. The corporation’s nontrucking segment also includes buying cooperative Truckers B2B and freight brokerage.
Managers at truckload carrier Landstar and less-than-truckload specialist ABF said they acted after listening to consistent requests from customers.
“We saw an opportunity to extend our business model into the warehousing realm,” said Jim Handoush, president of Landstar Global Logistics in Jacksonville, Fla.
“ABF’s design was customer-driven. They consistently have had the need for short-term storage or regionally based order fulfillment and distribution,” said Rick Brumett, director of supply chain services for ABF in Fort Smith, Ark.
Just as Landstar has owner-operators it calls business capacity owners, since July it has been using a network of warehouse capacity owners. As of Dec. 31, Landstar had 102 warehouse capacity owners scattered nationwide, Handoush said, describing the firms as regional warehouse operators.
In signing up to work with Landstar, the warehousing firms do not have to abandon pre-existing customers. The appeal of the arrangement, he said, is that Landstar’s national network booking agents for trucking services now can arrange for warehousing as well.
The company’s compensation formula for such a booking would be 90% of revenue to the warehouse capacity owner, 2% to the agent and 8% to Landstar.
Brumett said ABF has operating arrangements with 80 facilities nationwide that have a combined total of 20 million square feet. The warehouses do not work exclusively for ABF and have other customers.
ABF’s warehousing customers also use the company for transportation services, he said, adding that ABF manages the relationship with the warehouses for its clients.
“Regardless of the number of warehouse locations a customer utilizes, ABF is the single contact for all warehouse services, as well as for regional, national or internationally based transportation into or out of each warehouse,” he said.
Typical customers are those that import goods, need regional distribution or require certain product reconfiguration before being shipped to the ultimate customer. ABF took care in selecting warehouses in major markets such as Chicago, Dallas, Atlanta and all major U.S. port locations.
Brumett and Handoush said the work requires additional investment in technology by their respective companies.
“We provide the customer with real-time inventory visibility through our Web site, so cumbersome [electronic data interchange] data sets are not a necessity,” Brumett said.
Handoush said Landstar bought a warehouse management system from Provia Software, now part of Infor Global Solutions. He would not say how much his company spent but said such systems usually run between $500,000 and $5 million.
Handoush and Celadon’s Russell both said they have had to adjust to the timing of the warehousing industry, which is different from trucking. Russell said he is in the middle of about seven-to-10-year contracts.
Handoush said, “In warehousing, the sell-cycle is longer because it’s more strategic in nature. Three-to-five-year contracts are typical.
“Warehousing has become a coping strategy for tight trucking capacity . . . and this helps us offer a more complete transportation solution,” he said.
