A&A Concentrek/UTi Worldwide Site Visit 4-2009

Concentrek Thrives after UTi Acquisition

Grand Rapids, Michigan USA

April 29, 2009

Evan Armstrong

Key Personnel:

John Patterson, President and CEO

Greg Morello, EVP Business Development

Mike McClelland, Chief Operating Officer

Walt Zelichowski, VP Client Services

Julie Cooper, Director of Operations

Eugene Williams, Director of Operations

UTi Worldwide and Concentrek Overview

UTi Worldwide has developed into a Tier-One global supply chain manager building an operation of over 20,000 employees working in 88 countries. UTi’s supply chain operating network includes 390 branch offices, 200 logistics centers, and 130 exclusive independent agent offices. Its revenues have increased from $164 million in 1993 to $4.5 billion in fiscal 2009. Asia Pacific business accounts for 24% of UTi’s revenues, the Americas and Europe generate 32% and 30% respectively, and Africa accounts for the remaining 14%. After subtracting out purchased transportation, 47% of UTi’s net revenues come from value-added warehousing and distribution, 22% from airfreight forwarding, 13% from ocean freight forwarding, customs brokerage is 7%, and other services account for 11%. As part of its global business strategy, UTi extended its North American domestic transportation management capabilities by acquiring Concentrek in 2005.

Concentrek was founded by its current President and CEO John Patterson and two other third-party logistics (3PL) veterans as the 3PL operation of truckload carrier Knight Transportation in 1999. Concentrek’s transportation management operations are run by a North American staff of 150 people processing over 675,000 shipments annually. Its major customers include: Ansell, Bell Canada, BRP, Bombardier Transportation, Cummins, Rain Bird and Rotary Lift. Concentrek’s core service offering includes: supply chain network modeling, transportation management process reengineering, inbound and outbound transportation planning and management, carrier procurement, rate and contract administration, freight bill audit and payment, and claims administration.

Concentrek Leverages i2 Technologies Solutions

To support operations, Concentrek has been a heavy user of i2 Technologies transportation management and planning systems since 2001. It upgraded to version 6.2.3 of i2’s transportation management systems (TMS) in March 2008. Concentrek primarily uses i2 to optimize and manage customers’ transportation on a daily basis. The system has 120 active users and processes approximately 13,000 shipments each week. While the shipment counts are high, the data management requirements are even higher. Approximately 58,000 shipping locations, 205,000 consignee locations, 900 carriers, and 7.3 million lanes are configured and maintained in the TMS. The i2 TMS components and capabilities utilized by Concentrek are detailed in the figure below.

Figure 1 – i2/Concentrek TMS Components and Capabilities

The following customer case study highlights how Concentrek reengineers and manages customers’ transportation and how it has benefited from being part of the UTi organization.

Bell Canada Customer Case Study

Bell Canada required a 3PL who could manage high-volume, time critical distribution of over 450,000 small package shipments per year from its Unigistix/UTi warehouse in Brampton, Ontario. (A&A reviewed this operation in 2007; for our report please see: http://www.3plogistics.com/UTi_Canada_11-2007.htm.) After a formal RFP process, Bell Canada selected Concentrek for outbound transportation management in 2007. The distribution operation had a $9.1 million annual transportation spend and a goal to reduce its net transportation cost by $1.65 million in one year.

Concentrek deployed its network engineering team on the project and developed a redesigned transportation management solution in July 2007. During the startup Concentrek had to deal with many challenges. Concentrek was able to begin implementing the solution in August and the operation went live on August 27. Concentrek recruited onsite staff familiar with Bell and its freight, and Bell supplied key personnel to support the success of the implementation. While using less-than-truckload (LTL) carriers was not necessary for mobile phone products, Bell’s satellite television receiver product was mode shifted from small package to LTL and truckload. Through better carrier selection and mode conversion, Concentrek was able to generate net first-year savings exceeding Bell’s goal. In addition, carrier on-time delivery service was tracked from “Day 1” and has shown significant improvement.

Its ability to reduce costs allowed Concentrek to secure Bell Canada’s remaining transportation management business in October 2008. This new business totaled $25 million in annual freight spend and included rationalizing Bell’s dedicated fleet operations–van, flatbed, and mail–serving 63 routes delivering further savings to Bell.

Today, Concentrek has a staff of six onsite at the Brampton warehouse performing daily transportation optimization and management services for Bell’s entire Canadian transportation network. Concentrek is also providing freight audit and payment services which have significantly improved Bell’s data collection and reporting capabilities.

Summary

Concentrek is a growing part of the UTi organization and as the Bell Canada case study illustrates, it has done a good job of supporting existing UTi accounts in delivering integrated supply chain solutions. We anticipate that as UTi expands into providing more and more end-to-end supply chain management solutions for customers, Concentrek will be increasingly relied upon to manage complex networks in a 3PL and lead logistics provider role.

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