Landstar - Evolution of a Longhaul Trucker

June 18, 2010

By

Richard Armstrong

Landstar continues to adapt to its customers and agents needs.  Over the last three years, Landstar has added integrated warehousing, freight forwarding and stronger transportation management. These new capabilities meet expanding customer needs and provide Landstar’s network of agents with better tool kits for rapidly changing markets.

The push has been from the top.  Landstar's Chairman, President and CEO Henry Gerkens has welcomed the change and together, he and Co-COO Jim Handoush have been the catalysts and drivers.

Handoush was named co-chief operating officer last fall along with Pat O’Malley who is in charge of trucking operations including Landstar’s large agent network.  Handoush is responsible for integrated logistics, supply chain solutions including transportation management, and national and international account sales.  Executive Vice President of Logistics Services, Kevin Fletcher, is responsible for intermodal, air, ocean, warehousing, freight under management and logistics technology services as well as the logistics engineering and analytical design function reporting to Handoush.

Last summer, Landstar acquired two transportation management companies.  They bring with them solutions for small to Fortune 100 sized companies.

The two new companies, A3i and NLM, add significant SaaS (Software as a Service) and long term contract transportation and supply chain management solutions at a time when Landstar has revised its marketing emphasis.  In addition to traditional transportation services, Landstar now emphasizes:

• Optimization of the order-to-cash process

• Freight under management services

• Freight optimization

• Complete carrier visibility

• Event management

• Warehousing

Landstar’s new sales efforts emphasize more corporate sales solutions, business unit specialists, supply chain solutions options and more integrated and sophisticated agent efforts.  A3i brings a large customer enterprise solution for transportation and supply chain management.  NLM offers a straight forward transportation management system alternative.  Either solution can be managed by Landstar or the customer.

NLM

Key Personnel:

Scott Taylor, President

Greg Humes, Executive Vice President

Eric Christian, Vice President – Information Technology

Jim Applegate, Vice President – Business Development

Mike O’Donnell, Vice President – Operations

NLM is a transportation management firm with two options.  Customers can have NLM manage their transportation systems or they can use NLM’s software and manage their own transportation systems.

NLM’s managed logistics solution in Detroit, Michigan operates 24x7x365.  It currently provides multimodal transportation coverage for approximately 1,500 shipments a day.  Order receipt is by EDI (electronic data interchange), web portal entry, phone and fax.  Web portals are set up with dashboards for ease of use.  Daily shipment modes include truckload, less-than-truckload, airfreight and expedited.

NLM maintains contract relationships with over 1,300 carriers.  For this managed capacity, an extensive rate database is maintained.  In most cases, when NLM receives an order it is matched to a specific carrier according to pre-assigned preference and/or price and service considerations and a notice is sent to the carrier asking him to verify acceptance of the shipment.  Carrier bidding auctions are also available, when necessary, with the carrier allowed to accept, decline or offer its best alternative.

When a new customer joins NLM, it can set up its own management rules through its dashboard or it can have NLM managers establish them.  NLM’s software allows for significant flexibility in shipper and carrier specifications.

To give you an idea of the software’s capabilities, here is a sample of some basic functions:

• Account Manager – allows for establishing and modifying rules for an individual customer account.

• Carrier – allows the carrier to specify its equipment and availability parameters.

• Carrier Preference – in this section, customers define which carriers they want to use at what locations, by zip codes or by states.

• Carrier Failures – a list of failures used by managers to keep control and improve results.

• Carrier Invoicing – the process for carrier billing to NLM.

• Debit Process – allows for the NLM customer to have NLM complete the customer’s billing and processing to its customers.

Other features include: Location Docks, Mileage, Order Entry, Projects & Auctions, Rates, Reporting, Shipment Tracking, Alert Messages, Staff Security, Tariff Manager, Vehicle Availability, Zip Zones, etc.  In short, NLM’s software is a comprehensive solution for transportation management.  It has been developed over the past 20 years and does a great job for small to medium sized customers.  At the same time, larger customers like major original equipment manufacturers (OEMs) and Tier 1 and Tier 2 suppliers find the system very adequate.

NLM has 125 employees.  Half of them work directly with accounts on a daily basis as transportation managers.  Seven are engaged in transportation procurement and ten are involved in carrier billing and accounting.

About 10% of shipments require exceptions handling by transportation managers.

Carriers receive monthly score cards.  Carriers who have proven their worth are assigned Tier 1 status.  The automated process from offer to carrier acceptance takes an average of less than 15 minutes.

As the economy rebounds and agents sell this new opportunity, NLM’s shipment count should grow rapidly.

A few NLM customers use NLM’s software solution to manage their own transportation.  For these customers, NLM provides the following features:

• Online shipment entry

• Mode optimization at the shipment level

• Open auction or tariff-based carrier bidding

• Award shipments to carriers of your choice

• Insert your own contracted carrier base

• Pro-active track & trace module that brings issues to your attention

• Carrier online invoicing for easy resolution

• Monitor compliance by carriers with insurance requirements and notify carriers within two weeks of insurance expiration.  If insurance lapses, carrier is unable to bid on new shipments until rectified.

• Monitor carrier performance based upon customized criteria with the "Carrier Excellence Program"

• Receive online customer reports for activity and compliance monitoring

• Electronic integrations sets – 210, 213, 214, 820, 824, 858, 997

• Provides customers with high quality shipment management with full visibility on every shipment without the worry of system maintenance

Most customers decide that it is easier to let NLM provide its experience and expertise rather than their own.

A3i

Key Personnel:

Lorne Darnell, Chief Executive Officer

Michael Caruso, Executive Vice President – Operations

Ravi Muppirala, Vice President – Technology

Bo Cheng, Director – Business Development

Lorne Darnell has a long history of developing logistics and supply chain solutions.  He was involved with Yossi Sheffi in setting up LogiCorp, one of the original combined transportation management and freight bill payment services providers.  Darnell was also an advisor and investor in G-Log which became a leading transportation management software solution.  In 2005, G-Log was acquired by Oracle and renamed Oracle Transportation Management (OTM).

Oracle is consistently improving OTM which will be a significant part of the complete solution.  A3i is an integrated logistics service provider using Oracle's products.  That is, A3i is a business process outsource partner with its IT solution operating at Oracle’s “On Demand Center” in Austin, Texas.

A3i aims to deal with total supply chain costs and business process improvements for its customers.  Its basic service is transportation order management ("TOM").

A3i’s TOM provides customers complete, integrated transportation management functionality within a single system accessed via the web.  Basic features are:

• Logistics order management – Integration (machine to machine XML, EDI, etc.) or manual web-browser entry of customer’s real-time material orders through their ERP (enterprise resource planning) systems including warehouse management, material order management and purchasing management.

• Shipment planning – Material order consolidation, dynamic shipment optimization across all modes, and load building based upon customized planning parameters or pre-configured business rules.

• Shipment execution – Booking and tendering of shipments to service providers through integration or manual input.

• Event management and visibility – Pro-active monitoring of shipment status and milestone markers.

• Financial settlement – Audit, payment and management of customer’s freight bills.

• Business intelligence & reporting – Customized or pre-configured dashboard, key performance indicators and reports.

A3i’s TOM uses sophisticated algorithms to execute multiple optimizations in real-time.  Multiple orders can be aggregated into single transportation orders.  Carriers can be selected based on contracts and pre-established rules.  Daily lowest cost optimizations and mode conversions can be provided.  Cubic capacities can also be optimized.

Summary

Jim Handoush and his management team are moving Landstar into new markets with expanded transportation management and warehousing capabilities.  The new functionality expands agent's capabilities so they may keep up with increasing customer expectations.  Over 350 Landstar agents have already been trained on how the NLM and A3i solutions can assist customers.  Landstar agents should be particularly effective for mid-tier customers.

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