Salem Logistics

A Unique Transportation Management Alternative
Winston-Salem, NC
March 12, 2003

Richard Armstrong

In this age of elaborate transportation solutions designed for Fortune 200 companies, it’s nice to encounter a modest, inexpensive solution for mid-sized companies. Salem Logistics is among the small number of transportation management 3PLs in the U.S. It is one of the few, along with Landstar and C.H. Robinson, who operate with procedures emphasizing software supporting people rather than people supporting software. Customers call Salem’s freight managers and are instructed by phone how to route their shipments. The Salem manager then uses Scanex, the Salem transportation management system to handle the shipment.

Scanex is a transportation execution system with purchase order and inventory management added according to individual customer specifications. (The name Scanex is an acronym for shipment control, analysis and expediting.)

Scanex is straightforward and easy to modify. It is built primarily from preprogrammed applications with modest modifications as necessary

Del Perry, vice president of information technology, is proud of Salem’s ability to redesign and implement new routines for customers within days of receiving requests. Perry’s straightforward approach reflects his considerable knowledge of transportation management.

Perry and Salem consider their ability to be nimble a distinct advantage over competitors. Salem execs observe that i2 is an expensive, hard to implement solution for their mid-sized customers.

Scanex has also worked well for large retail customers like Value City and Circuit City for whom a range of distribution and inbound supply chain control are utilized. The base operations for these accounts are in Columbus, OH and Los Angeles.

Winston-Salem is home to Salem’s execs but not home to the majority of its nationwide focus. Many of Salem’s key personnel were employees of the large LTL carrier McLean Trucking. CEO David Eshelman was McLean’s lead regulatory counsel.

He started Salem in 1986, primarily as a freight bill payment service. Salem still does freight bill payment for its customers offering extended transportation value-adds. Eshelman has instituted a unique approach in which Salem pays freight bills for less than $1 each and charges nothing for those for which it functions as a transportation manager. Salem simply handles these shipments based on standard contractual pricing it has with its customers. Salem makes its money off of the spread being careful to give its customers prevailing market rates.

Salem currently has about 70 employees. Its revenue yield per employee is good and net revenues are in the neighborhood of $5 million a year.

We believe Salem is in a good position to double its revenues over the next five years.

Here’s a look at its inbound transportation management process:

Inbound
• Purchase order download
• Shipment optimization
    o Review for mode shift
    o Review for combination loads
    o Review for multiples from and same location
• Load plan preparation
• Carrier selection
• Load plan and carrier selection communication to vendor
• Shipment pickup instructions to carrier
• Confirm pickup with carrier
• Track carrier progress
• Make delivery appointment
• Confirm delivery
• Update system for each step to support shipment status visibility
• Receive freight bill
• Audit freight bill for correct rates and charges
• Audit freight bill against database to confirm shipment detail same as pickup request
• Prepare invoice
• Prepare invoice reports by carrier
• Maintain database
• Prepare monthly reports
• Prepare quarterly reports
• Maintain information system
• Continually upgrade system as a new technology becomes available
• Provide custom reports upon request
• Meet monthly/quarterly to review program progress
• Answer legal, regulatory, operations, systems, customer service and other questions
• Provide savings reports