Champagne Logistics – Adding Value to Final Mile Delivery

Tempe, Arizona USA

May 10, 2007

By

Kurt Baumann

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Key Personnel:

Richard Champagne, President & CEO

Dan Duplessis, COO

Chris Bozer, CFO

Dave Kaple, VP Business Development

The Shift from Household to High Value

In 1997, Rick Champagne shifted focus away from household moving to high value goods. In contrast to the no-growth household moving segment, shippers continue to search for 3PLs that can handle high value, fragile equipment over the final mile, as well as offer a broad range of value-added services, such as merge-in-transit and reverse logistics. Over the past decade, Champagne Logistics shifted from storage warehouses to distribution centers with space for value-added services, such as configure-to-order kitting, specialized packaging and returns processing.

Champagne is a leading agent for Specialized Transportation, Inc. (“STI”). STI was formed by the top 40 former agents for the high value goods shipper Sirva (North American Van Line, Inc.). Unlike many of its peers and competitors, Champagne focuses almost exclusively on high value goods movement. Through the STI distribution network, Champagne achieves nation-wide coverage for interstate transportation and final mile delivery. Through its own operations, Champagne has a presence in several major metropolitan markets including Boston, Raleigh, Tampa, Phoenix, Houston and Denver.

Adding Value-Added Services

Final mile delivery continues to drive roughly a third of Champagne Logistics’ top line revenue. These services are particularly important to heavy and large, high value and fragile electronics equipment manufacturers. Key customer industries are medical, industrial, robotics and high technology equipment, such as data storage, telecom switches and computer servers. Many of these customers leverage Champagne’s resources to execute postponement programs and integrated delivery programs. Champagne will hold and manage inventory in its facilities, add components to major components to assemble customer orders, apply specialized packaging and merge goods in transit for consolidated customer delivery.

For a major data storage equipment manufacturer, Champagne Logistics manages movement of finished goods from two primary manufacturing assembly plants in the United States to final customers. Most of these major assemblies pass through Champagne’s distribution centers where specific cabling, parts and manuals are kitted and packed in specialized crates as a unit. Major assemblies from different plants may merge in Champagne DC’s for final mile, lift-gate delivery that could include inside delivery, setup and debris removal.

The Phoenix hub operates as an STI Distribution Center. It is one of 44 STI DCs in North America which serves as a crossdock for final mile delivery and pickup for high value goods in the Southwest region, serving customers who need blanket-wrap, inside pickup or lift-gate service. Champagne stages equipment in the warehouse until all pieces are ready for shipment. They stage materials for various purposes, such as store construction, equipment installation and consolidated delivery to customer sites. Customers rely on Champagne for both forward and reverse logistics services. When equipment fails to meet customer expectations, breaks down or comes off lease, reverse logistics services come into play. Champagne’s distribution system works as well forward as in reverse. The same transportation equipment and distribution systems are utilized to pick up high value equipment, move it back to manufacturing plants, or send it to salvage and warranty repair facilities. Typically, Champagne pickups deployed equipment that has reached end-of-life, as they are delivering the new replacement equipment. The high value goods handled range from mobile x-ray devices to data storage towers to high-end cooking grills.

Transportation Options Include Final Mile Delivery Fleet and Heavyweight Air

From the plant and the end-customer, several transportation options are considered to find the optimal combination of on-time delivery and cost-effective mode selection. In addition to STI’s fleet and carrier contracts for truckload and LTL shipment within the U.S., Champagne dispatches a dedicated fleet of 30 tractor trailers and 20 straight trucks. By leveraging its own fleets, STI and Champagne gain the advantage of dedicated capacity and greater control of delivery quality.

Trucking modes are not the only transportation options considered. Heavyweight air freight arrangement is a growing transportation service offering for Champagne and its customers. Especially when expedited service is needed, heavy air can offer relative cost savings. Champagne’s air freight brokerage operations are housed in the Phoenix office. Customers and STI transportation coordinators call on them on an opportunistic basis to evaluate air service costs and tender freight. In cases where equipment ships abroad, Champagne generates international documentation and arranges shipment through its freight forwarder network. This network of air carriers handles heavyweight as well as small package shipments.

Staging and Delivery for Installation Projects

Champagne Logistics’ distribution systems are ideally suited to support installation projects, especially when the timing of equipment arrival and installation crews is critical. For simple installations, Champagne delivery crews can be trained and deployed to deliver and setup equipment in the customer’s store, computer room, utility closet, imaging suite or tradeshow booth. Champagne’s willingness to deliver to the point of use and setup is a convenient option to support tradeshow exhibitors, job fair recruiters and other marketing events. Champagne also picks up, receives and stores fixtures and equipment for store construction, remodeling, and office and plant relocations. Final mile, lift-gate equipment and installation capabilities differentiate high value products movers, like Champagne, from traditional household goods movers.

STI keeps track of installation components with its Resource Information Management System (RIMS), one of its core systems for asset tracking. Champagne Logistics knows the package very well, because they wrote the code. Champagne’s IT capabilities provide it with the advantage of building connectivity to customer systems and custom developed systems solutions to support customer requirements, which raise the level of customer integration and switching costs. Its proprietary systems are also used for warehouse management, Vendor Managed Inventory (VMI) with min-max inventory replenishment, cycle counting, shipment track and trace, and Merge In Transit services. In the example illustrated below, Champagne uses web-native applications to electronically receive shipments, monitor inventory, generate replenishment signals, notify customers of shipment, track shipments and communicate inventory status.

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Growing the Niche

A decade ago, Richard Champagne leveraged a unique delivery system from a fading industry segment to build a portfolio of logistics services that offers its customers a flexible means to deliver and return high value goods requiring special handling. In the transportation market, these requirements typically exceed the service scope and equipment capabilities of common carriers. Champagne’s shift in focus also shifted the company into a growth segment of the logistics market. In 2007, they expect to expand top line revenue by 25%. Champagne continues to invest in broadening its portfolio with value-added services and customer integration systems to complement its core final mile delivery capabilities.

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