Transplace Generates Growth through its Flexible Solutions Approach
Lowell, Arkansas USA
July 7, 2009
By
Evan Armstrong

Key Personnel:
Tom Sanderson – Chairman & Chief Executive Officer
George Abernathy – Executive Vice President & Chief Operating Officer
Vincent Biddlecombe – Executive Vice President & Chief Technology Officer
Matthew Menner – Senior Vice President, Sales and Alliances
Vincent Chiodo, Senior Vice President, Sales
Matthew Harding – Vice President, Consulting Services
Barry Gasaway – Vice President, Operations (Start ups)
Barth West – Vice President, Freight Services
Tammy Rice – Vice President, Solutions Design
Chad Palmer – Vice President, On-Boarding/Lean Six Sigma
Kevin Higgins – Vice President, International Services
Mark McEntire – Vice President, Operations (CPG & Industrial)
Troy Ryley – Managing Director, Transportation & Distribution (Mexico)
Jose Minarro – Managing Director, Customs Brokerage (Mexico)
Cindy Winkel – Vice President, Information Technologies (Reporting & Analytics)

Overview
Transplace is a non-asset based transportation management services-centric third-party logistics provider (3PL). It has developed into one of the leading domestic transportation network managers having directly managed in excess of $3.0 billion in transportation in 2008. Its transportation management activities included processing over 4 million shipments and 15 million orders. Transplace’s operations generated approximate gross revenues of $975 million and net revenues of $70 million and it has a staff of over 520 employees.

The Transplace story began in 2000 when it was created from the merger of non-asset based logistics business units from six of the then nation’s largest publicly-traded truckload motor carriers. The backbone for its operations comes from a web-native, proprietary, on-demand transportation management system (TMS) platform.

Figure 1 – Sample Transplace TMS Online Business Intelligence Report

The Transplace service portfolio has expanded significantly over the past few years and now includes: lead logistics provider (LLP) capabilities, network transportation management, supply chain consulting, hosted/on-demand TMS technology, freight brokerage, intermodal transportation, dedicated transportation management, and international transportation management services. Key strategic accounts include: Anna’s Linens, Cummins, Cott Beverage, Del Monte Foods, The Home Depot, Glatfelter, RockTenn, Sunny Delight Beverages Co. and Walmart. Transplace added seven new strategic accounts in 2008, and is on track to more than double that in 2009.

Transplace is providing customers with network value driven solutions such as multi-party transportation sourcing events to increase the utilization of customers’ capacity requirements to meet other customer service and cost (savings) objectives.

In addition, to meet changing customer carrier capacity needs, Transplace has been growing its non-asset based freight brokerage/carrier capacity operations. The operations now have a staff of over 100 based in Lowell, AR; Stuttgart, AR and its satellite operations in Memphis, TN. In 2008, the group had approximate gross revenues of $350 million and managed over 180,000 shipments. Approximately 60% of the shipments required frozen or refrigerated trailer equipment.

Growing International Transportation Management Capabilities
While Transplace has been a significant domestic transportation management 3PL since 2000, it lacked an international presence until 2006. To build out its international transportation management capabilities, Transplace brought Kevin Higgins onboard as vice president of International Services. He has extensive international transportation management experience gained primarily from key positions held within Walmart’s international supply chain organization. Transplace is now a licensed air/ocean freight forwarder and NVOCC (non-vessel operating common carrier) and received its C-TPAT (Customs-Trade Partnership Against Terrorism) certification in March 2008.

In addition to providing import/export services between the Asia Pacific and North America, Transplace now manages shipments between North America, Europe and Latin America. The initial business development approach has been to work with existing customers in improving import/export operations. From its efforts, the Transplace international transportation management operations managed just over 3,000 TEUs (trailer equivalent units) in 2008 and are on track to manage 6,000 TEUs in 2009.

For international operational capabilities, Transplace established its own company Transplace Asia Ltd. in Hong Kong and has contracted with three agents for 77 combined operating locations in 25 countries within the Asia Pacific, Europe, and Middle East. Transplace also has agreements with Carmichael and Maersk Logistics to provide customs brokerage services.

To support its international transportation management operations, Transplace has subscribed to, integrated and deployed two technical platforms. Log-Net is used for global order/shipment management and visibility, and IES helps manage NVOCC and freight forwarding operating functions.

Transplace Mexico Adds Key Customers In First Year
In February 2008, Transplace founded its Mexican operations by establishing two entities: Transplace Mexico, LLC and Transplace de Mexico S de R.L. de C.V. To lead its new operations, Transplace hired industry veterans Troy Ryley and Jose Minarro who were both ex-managers for Expeditors International in Mexico.
The operation’s key service offering includes cross border and intra-Mexico over-the-road transportation management, ocean and airfreight transportation management, U.S. & Mexican customs house brokerage, border processing, warehousing and distribution, technology solutions (TMS), and consulting.

Modes handled in its land transportation management operations include: dry van, flatbed, refrigerated/protective service, and intermodal. Transplace Mexico’s 2008 and projected 2009 volumes are below:

Land Transportation Volumes

  • 2008 – 2,600 Truckloads
  • 2009 – Over 8,000 Truckloads

U.S. and Mexico Customs Entries

  • 2008 – 1,400 Entries
  • 2009 – Over 4,000 Entries

Ocean Movements

  • 2008 – 20 TEUs
  • 2009 – Over 700 TEUs

Transplace Mexico has a staff of 13 associates. In addition to its Mexican headquarters and 110,000 square foot transload/warehousing facility in Laredo, Transplace also runs a transportation management operation in Guadalajara and sales offices in Mexico City, Nuevo Laredo, Monterrey, and Puebla. Its internal and agent network is detailed in the figure below.

Figure 2 – Transplace Mexico Operations and Sales Locations

Key Mexican customers include: BDT, Cott Beverage, Del Monte Foods, DirecTV, Fresenius Medical, Guardian Building Products, Microsoft, NxStage Medical, Pace Industries, Portacool, The Home Depot, and UFPC.

Value-Added Services Now Include Supply Chain Consulting
Recruited in 2008, Matthew Harding has developed the Transplace consulting practice and provides customers with transportation benchmarking and procurement services, supply chain network analysis and design, and joint Lean Six Sigma consulting engagements.

The recent deep economic recession has generated a strong demand for transportation services sourcing engagements. In 2008, Matthew’s consulting group managed over $1.5 billion in transportation spend through carrier bids as part of its customers’ carrier procurement activities. In the first quarter of 2009, it managed 15 shipper bids representing over $600 million in annual transportation spend. According to Matthew, the average transportation savings has ranged between 8% and 20% for the various bids recently conducted.

In addition to individual shipper carrier bids, Transplace has recently completed their third multi-customer bid event – pooling and leveraging its customers combined transportation spends while ultimately being responsible for delivering the sourced routing guide savings. The 2009 event included truckload shipments from five different customers with total annual spends ranging from $1.2 to $25 million. The projected overall savings from the multi-customer bid were $8.96 million, or 14%. A multi-customer intermodal transportation sourcing event is currently underway. Key consulting services clients include: Del Monte Foods, Dole Food, Ebro North America, Energizer, The Home Depot and Thermadyne.

Del Monte Foods Case Study
Del Monte Foods is best known for its pet products and consumer foods businesses. Its popular brands include: Meow Mix, Kibbles n’ Bits, Del Monte, and StarKist. Its retail customers include Walmart, Costco, and Sam’s Club. Approximately 90% of Del Monte’s sales are in the U.S. and solid domestic transportation management is a key to its success.

Prior to engaging Transplace, Del Monte was having significant problems in meeting its transportation and stocking requirements for Walmart. Del Monte’s two main logistics management performance measures for Walmart are an on-time delivery service goal of 96% – which includes all shipper and transportation related service failures measured against the “Must Arrive by Date” – and having 55 or fewer distribution center (DC) stock outs per month.

In 2006, to address these issues, Del Monte replaced its incumbent 3PL with Transplace for domestic outbound to retail customer DC shipments. Del Monte’s shipping locations include 27 DCs, multiple plants and co-packers. Transplace set up a dedicated retail customer service team for Del Monte in less than 60 days that began with managing a portion of its domestic transportation in July 2006. The current Transplace operation has an approximate staff of 16 (a number that is constantly weighed and reduced based on continuous improvements through operational and systematic efficiencies). The team manages over 200,000 annual outbound/replenishment shipments via truckload, intermodal rail, conventional rail (boxcar) and less-than-truckload (LTL).

Transplace worked with Del Monte to improve its customer service levels and capacity planning for peak volume seasons. Del Monte experiences three main annual volume peaks: packing season, peak demand season and quarter ends. Working together, an ongoing process for capacity planning–which confirms available transportation capacity against demand forecasts–was developed and implemented by Transplace. After one year of use, the new process significantly reduced the costs for premium/expedited freight compared to the previous year’s benchmarks. Also, Del Monte experienced no transportation delays from transportation equipment issues for shipments destined to its manufacturing facilities. The responsibility for the capacity planning activities has now been fully migrated to Transplace.

In addition, Del Monte no longer has any issue with reaching and maintaining the two main logistics measures set by Walmart. By placing a dedicated Customer Service Manager at Del Monte’s Bentonville, AR office and increasing supply chain visibility through reporting, Transplace has helped Del Monte’s on-time delivery service levels improve from under 90% to more than 98% on-time for 2009. In addition, Del Monte’s stock out performance requirements are now met on a consistent basis.

Sunny Delight Case Study
Sunny Delight Beverages Co. was spun off from Procter & Gamble (P&G) in 2004. As a “new” company with $550 million in sales, it needed to quickly develop its own key business processes in sales and order management, production planning, and transportation management.

After a formal 3PL evaluation and selection process, Sunny Delight selected Transplace to manage all of its outbound dry van and refrigerated truckload transportation from its five plants in the U.S. The drivers leading to outsourcing with Transplace were its ability to manage transportation with minimal technology investment from Sunny Delight, reduced personnel requirements, and to allow Sunny Delight the time and energy to focus its efforts on core production and marketing functions.

In November 2004, Transplace began phase one of implementation with Sunny Delight. Information systems interfaces were built to gather data from P&G’s systems and Transplace began converting P&G truckload carriers to Transplace. This conversion included an online carrier bid with incumbent and new carriers. Truckload carriers were awarded lanes based upon their bids and their ability to provide transportation capacity. Eight core carriers were established and back-up carriers were also specified for each lane. All of the carrier contracts were finalized by the end of January 2005. Transplace’s Sunny Delight operations were fully trained and staffed on February 2, 2005. Training included multiple site visits to Sunny Delight plants for observation of current production and shipping processes and the opportunity to form working relationships with plant personnel.

The final phase of the implementation was to integrate Sunny Delight’s new enterprise resource planning (ERP) system with the Transplace TMS for the April 1, 2005, “go live” date. The operation startup began as planned and by December 2005, the operation on-time delivery percentage was more than 95% and approximately 99.8% of orders were shipped complete.

In January 2007, Transplace performed a second on-line carrier bid on behalf of Sunny Delight to address changes in carrier capacity and product demand. The results included new carriers being added, lanes by carrier being modified, and overall transportation cost savings to Sunny Delight of 6%. In 2008, Transplace managed over 130,000 shipments for Sunny Delight with an operations team of six.

Moving on with continuous improvement, Transplace completed the bi-annual rebid of Sunny Delight’s refrigerated business using its Collaborative Bid Module tool during the first quarter of 2009. Through the bid process, Transplace introduced several new carriers to the business that in turn yielded a 10% savings from the previous rates while increasing service metrics. At the same time, Transplace Freight Services partnered with Sunny Delight to single source the inbound and outbound shipping from Sunny Delight’s Littleton, MA facility. This change generated Sunny Delight an 11% savings from its 2008 rates and has improved its 2009 carrier service levels.

The relationship between the companies is strong and allows for a level of trust that enables best business practices. Based on changing market and company dynamics, SunnyD can adjust how much, or how little, managed services and technology solutions Transplace provides to achieve the appropriate balance for a successful supply chain.

For SunnyD’s customers, the transition from a P&G managed logistics operation to a Transplace-run system was virtually unnoticed due to careful planning and Transplace’s ability to provide the necessary logistics infrastructure. Sunny Delight is a good example of how a 3PL can work hand-in-hand with a customer to build and optimize a transportation network.

Summary
Transplace has expanded its service offering and capabilities. This combined with a flexible customer solutions approach are helping to drive its growth as a transportation management provider and its new international and Mexican operations are providing Transplace with an entrée into higher growth developing markets. Transplace’s increasingly focused business strategy and expanding service portfolio will allow it to continue to develop and build upon its market position as a leading transportation management services-centric 3PL.

 

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

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