A&A Transplace Site Visit 1-2014Armstrong & Associates

Transplace Continues its North American Expansion
Frisco, Texas USA Site Visit
January 23, 2014
By
Evan Armstrong

Key Personnel:
Tom Sanderson – Chief Executive Officer
George Abernathy – President & Chief Commercial Officer
Tony Cossentino – Chief Financial Officer
Vincent Biddlecombe – Executive Vice President & Chief Technology Officer
Frank McGuigan – President, Transportation Management

Transplace Overview
Transplace is a non-asset North America based company offering transportation management, intermodal, software-as-a-service (SaaS) TMS capabilities as well as truck brokerage operations. In 2012, Transplace generated gross revenues of $1.3 billion, including $550 million in freight brokerage revenue, and increased its net revenue to $110 million with approximately 700 associates in seven operating centers. Its service portfolio has expanded significantly over the past few years and includes:

Transportation Management
Truck Brokerage
SaaS TMS
Intermodal
Mexico/Canada Transportation Management
International Transportation Management

From its founding more than a decade ago, Transplace has rapidly developed into one of the leading North American transportation network managers. Key strategic accounts include AutoZone, Colgate, Cummins, Del Monte Foods, DIRECTV, Office Depot, Philips, RockTenn, Sunny Delight Beverages Co. and USG.

Ownership changed in 2013 as Greenbriar Equity Partners and Transplace Management bought out PE group CI Capital Partners in a highly publicized acquisition. Greenbriar focuses on supply chain companies and Transplace proved a good fit for its portfolio. Transplace itself has been strategically acquiring companies. In April 2011, Transplace bought SCO Logistics adding chemicals industry expertise to Transplace’s service offering. The SCO Logistics acquisition also provided Transplace a key geographic operations center in the Northeast.

Six months later, in October 2011, Transplace made another strategic move and announced it was joining forces with intermodal marketing company Celtic International, creating a stand-alone operating business unit.

In December 2012, it acquired Torus Freight Systems, a Canada based 3PL focused on Canadian cross-border and intra-Canada transportation management services.

In tandem, Transplace’s three strategic additions substantively increased Transplace’s North American operating footprint, overall operational capabilities, vertical industries served, freight under management and net revenue.

Transplace Mexico Finds Success
With new nearshoring manufacturing activity and a growing base of over 200 active customers across its spectrum of services, Transplace Mexico has grown quickly and now has annual gross revenue of over $80 million. Recent customer additions include ABB Mexico and Cummins PGBU and CGT.

Transplace Mexico has developed significant cross-border and intra-Mexico operations. Monthly, Transplace Mexico clears more than 2,000 cross-border shipments, and in May, Transplace received its Custom-Trade Partnership Against Terrorism (C-TPAT) certification for supply chain security. Transplace Mexico’s staff of 80 people are headquartered in Monterrey, Mexico and Laredo, Texas. The growing operation is managed by Jose Minarro, Ben Enriquez and Troy Ryley.

Transplace Mexico’s key service offering includes cross-border and intra-Mexico over-the-road transportation management, U.S. and Mexico customs brokerage, border processing, warehousing and distribution, secure products transportation management, ocean and air freight management, technology solutions (TMS), and consulting. Modes handled in its land transportation management operations include: dry van, flatbed, refrigerated/protective service, rail (boxcar) and intermodal.

Transplace Mexico’s warehousing and distribution operations include a 106,000 sq. ft. facility in Laredo, TX; 40,000 sq. ft. in Monterrey and 25,000 sq. ft. in Mexico City. It has also recently opened a 30,000 sq. ft. warehousing operation in Guadalajara for one of Transplace’s strategic enterprise customers.

Transplace Mexico’s largest transportation management operation is in Monterrey and it has sales offices in El Paso, Mexico City, Nuevo Laredo, Monterrey, and Puebla. Its company sites and contracted agent network is detailed in the figure below.

Transplace’s Mexico Operations and Sales Locations

Transplace Mexico is working with approximately 80 Mexican carriers to provide capacity for intra-Mexico shipments. Its shipment volumes have been growing steadily, and Transplace Mexico is currently managing over 1,000 intra-Mexico shipments per month. In addition, it is filing approximately 2,050 customs house brokerage entries per month.

For systems, Transplace Mexico fully utilizes Transplace’s TMS with the recently developed Mexico market capabilities, ICON’s web-native warehouse management system, and CargoWise for international (import and export) transportation management.

Over half of Transplace Mexico’s growth has been derived from existing Transplace U.S. customers, but an increasing amount of Mexico based accounts are being developed. Its customers now include a mix of U.S. and Mexico based companies including ABB Mexico, AutoZone, Carhartt, Cummins, Daltile, Hershey’s, Pace Industries, The Home Depot, and USG.

TransMATCH Transportation Modeling to Identify Co-Shipping Opportunities
Transplace has developed an engineered transportation service backed by an operating model named “TransMATCH” to work with shippers in identifying and executing co-loading opportunities. TransMATCH starts by mapping transportation flows from and to customer locations and potential customer candidates for co-loading. The figure below shows an example of six different consumer packaged goods (CPG) customer locations. By working across its customer base, Transplace can identify backhaul and underutilized carrier lane capacity. It then works with customers in developing co-shipping plans to optimize carrier routings and better utilize carrier capacity.

TransMATCH Mapping for Identifying Potential CPG Customer Co-loading Opportunities

Once overlaps in warehouse and transportation networks are identified, Transplace runs multiple co-loading optimization scenarios to identify the best possible solutions. Transplace then works with its customers in developing multiple pickup truckloads, cross-dock consolidations, and other strategies for reducing overall transportation costs and improve operating efficiencies. Once the strategy is finalized, it is then set up in Transplace’s TMS for daily transportation execution and tactical management.

In one example, Transplace worked with its customer Daltile to identify co-loading opportunities for Mexico to U.S. rail boxcar shipments. Since Daltile’s product is very dense and heavy, Transplace began looking for shippers with less dense products that could be easy co-loaded. The first company identified was Whirlpool because of its large items such as laundry products and refrigerators, which, despite their size, provided the right balance of cube and weight to complement Daltile’s dense products. After further analysis, the co-loading strategy evolved and Convermex (plastic cups, plates and utensils) and Werner Ladder (aluminum and fiberglass) were identified as possible co-loading partners. Each customer was then presented with the co-loading opportunity by Transplace and agreed to move forward with a test phase. During the co-loading test phase, loading and customs cross-border handling issues were resolved and the process was improved.

In the current operation, Daltile is shipping 10-12 co-load shipments per day with Whirlpool, Convermex and Werner Ladder. The rail moves include co-loaded boxcars from Monterrey, MX destined to Carlisle, PA; Chicago, IL, and Dallas, TX. According to Transplace, Daltile and its co-load partners have achieved consistent 20–30% respective net cost reduction from the program.

As a nod to the complexity, the challenges involved, and the outstanding results achieved, Transplace, Daltile, Werner Ladder and Convermex were all awarded with the Council of Supply Chain Management Professionals (CSCMP) Innovation Award in 2012.

Ongoing Proprietary Transportation Management System (TMS) Development
The technical backbone for Transplace’s transportation management operations comes from its software-as-a-service delivered TMS platform. The TMS has a comprehensive functionality set for daily transportation planning and execution. Transplace uses an ongoing systems upgrade approach and releases a new version of the TMS every four weeks. It has an IT staff of approximately 100 with 25% in applications and business intelligence (reporting & analytics) development.

The core TMS components have been in place since Transplace’s founding, but during the past year, Transplace has made significant systems upgrades including:

Freight Allocation Module (FAM) 2.0 rewrite to improve private internet load board functionality
Order Management System (OMS) rewrite to enhance inbound transportation management
Yard Management System (YMS) 2.0 rewrite for deep integration with TMS workflows
Parcel Rating & Execution functionality upgrades
LTL Rating & Execution functionality upgrades
Increased Carrier Portal functionality (carrier workflows & inquiries)

Transplace’s TMS has solid on-demand business intelligence analysis and reporting capabilities for its internal operations and customers. It has built standard business intelligence dashboards for customers in specific vertical industries including Consumer Packaged Goods, Food & Grocery, Manufacturing, and Retail. Transplace’s online business intelligence reports/dashboards include:

On-time deliveries using multiple metrics, charts of late deliveries by reason, and details of the most challenging transportation lanes
Executive summaries of volume and cost information by transportation mode
Cost maps showing transportation costs between points on a map which allow for “drill downs” to more detailed cost component information and analysis
Carrier scorecards that track on-time service, shipment tender acceptance, and check-call reporting percentages

Transplace markets its TMS separately from its transportation management services. Currently Transplace has 15 SaaS customers, including six-year customer Pep Boys. Over the past two years, Transplace has added TMS customers Advanced H2O, Diamond Foods, Feeding America, Nike and a leading U.S. retailer.

Summary
Transplace has expanded its service offering and geographic coverage. It now has significant North American presence and extended capabilities. Its recent acquisitions provide it with operations in Canada and enhanced capabilities in chemicals logistics and intermodal transportation management. Its Mexican services are providing Transplace with key operations in a higher growth market. With new ownership and an increasingly focused business strategy, we anticipate that Transplace will to continue to expand its market position as a leading transportation management 3PL.

Sources: A&A Primary Research, http://www.transplace.com/