Transplace Plays to its Strengths, Expands Operations and Increases Profitability
Lowell, Arkansas USA
April 17, 2007
By
Evan Armstrong
Key Personnel:
Tom Sanderson, President & Chief Executive Officer
George Abernathy, EVP & Chief Marketing Officer
Roy Cashman, EVP & Chief Operations Officer
Steve Crowther, EVP & Chief Financial Officer
Vincent Biddlecombe, SVP & Chief Technology Officer
Kevin Higgins, VP of International Logistics
Barry Gasaway, VP, Lean Six Sigma
Matthew Menner, SVP of Sales & Alliances
Vincent Chiodo, SVP of Solution Sales
Jun-Sheng Li, Founder
Overview
Transplace is a non-asset based domestic transportation management 3PL. It managed $2.4 billion in transportation in 2006 generating gross revenues of $700 million and net revenues of just under $60 million. Transplace has approximately 550 employees. Leadership changes over the past two years and a refocusing on core transportation management skills have helped Transplace improve its profitability and have spurred its new growth.
The Transplace story began in 2000 when it was created from the merger of logistics business units from six of the nation’s largest publicly held truckload carriers. The founding carriers were Covenant Transport, J.B. Hunt Transport, M.S. Carriers, Swift Transportation, U.S. Xpress, and Werner Enterprises. The backbone for its operations comes from a proprietary on-demand transportation management systems (TMS) platform. The optimization technology for the TMS was developed by Transplace’s Chairman Dr. Jun-Sheng Li.
Today, the Transplace service portfolio has expanded to include: network transportation management, hosted TMS technology, freight brokerage, intermodal transportation, dedicated transportation management, and international transportation management services. Key strategic accounts include: AutoZone, Ball Corporation, Circuit City, Cott Beverage, Del Monte Foods, DIRECTV, Glatfelter, Grainger, Sunny Delight, and U.S. Gypsum.
International Expansion
While Transplace has been a significant domestic transportation management 3PL since 2000, it lacked an international presence until last year. To build out its international transportation management capabilities, Transplace brought Kevin Higgins onboard as VP of International Logistics in January of 2006. Kevin has extensive international transportation management experience gained primarily from key positions held within Wal-Mart’s supply chain group. Once onboard, Kevin quickly went about shoring up Transplace’s international capabilities. It is now a licensed air/ocean freight forwarder and NVOCC (non-vessel operating common carrier).
To add operational capabilities in the Asia Pacific region, Transplace has contracted with Capital Distribution Services Group (CDS). CDS has a total staff of over 400 in 35 offices in 12 countries. The Asian Regional Headquarters is Hong Kong SAR, with operating offices in major countries including Australia, China, India, Indonesia, Japan, Malaysia, Singapore, Taiwan, Thailand, Vietnam, and the U.A.E.
To support international transportation management operations, Transplace has purchased, integrated and deployed two new information systems. Log-Net is used for global order and shipment management and IES helps manage NVOCC and Freight Forwarding functions.
Transplace’s initial business development approach has been to work with existing customers in improving import/export operations between North America and Asia. Its freight forwarding operations managed 210 FEU’s (full trailer equivalent units) in 2006 and are on track to handle 3,100 FEU’s and approximately 100,000 air tonnes in 2007. Transplace will be providing import/export services between North America and Europe and North America and Latin America in 2008.
DIRECTV Case Study
Founded in 1994, DIRECTV’s customer base has grown to over 9 million subscribers. As a result of its rapid growth, DIRECTV soon encountered a host of logistical challenges. To increase its supply chain efficiencies, DIRECTV has outsourced significant logistics operations to 3PLs and selected Transplace as a primary transportation manager in 2004. Transplace was selected to reduce DIRECTV’s overall cost of product distribution via its skills in transportation optimization, claims management, and reverse logistics. Scalability was another critical factor. DIRECTV anticipated that its Home Services Division’s rapidly increasing distribution volumes would continue. Transplace was perceived as providing the most comprehensive and scaleable transportation management solution to fulfill DIRECTV’s needs.
Today, Transplace’s centralized dedicated DIRECTV operations team of six employees is managing all inbound to and outbound transportation to and from DIRECTV’s three main US distribution centers in CA, GA and PA. Through the application of Transplace’s TMS and focused dedicated operations team, DIRECTV’s average monthly transportation costs have been reduced by $.20 – $.40 per unit. Additionally, the team has maintained an average on-time delivery rate of 97% while managing 1,500-2,000 shipments per month, or approximately 28 million individual units annually. Transplace has also diversified DIRECTV’s LTL carrier base for improved service levels. Previously, only one LTL carrier was utilized. Prior to outsourcing, the number of DIRECTV carriers that utilized EDI or any type of automated shipment status updates was less than 15%. As of January 2007, the number of carriers supplying automated shipment updates exceeded 75%.
United States Gypsum Case Study
In 2003, Transplace was selected by United States Gypsum (USG) as part of a customer service improvement effort. USG is a 100+ year old manufacturer of building materials including wall board and ceiling tiles for commercial and residential construction. Its product mix, large number of plant sites, high shipment volumes, and lack of order/shipment visibility led USG to Transplace. USG saw value in Transplace’s automated TMS technology, logistics processes, Internet visibility and real-time information flow.
To immediately improve USG’s supply chain operations and customer service levels, Transplace developed an outbound shipment Load Control Center and an Outbound Shipment Status report for full visibility of outbound shipments. In 2004, the USG plant rollout to Transplace for all 46 U.S. facilities was completed. In 2006, an additional eight Canadian facilities were brought onboard by Transplace.
Today, Transplace manages shipments from USG’s 54 U.S. and Canadian production facilities with a central dedicated operations group of five employees. For transportation capacity, it utilizes over 114 individual carriers for both truckload dry van and flatbed moves. In daily operations, Transplace’s TMS is used to assign freight to contracted carriers, provide visibility, and manage exceptions. Daily processes for USG include a complete daily load plan for each shipping facility and shipment status tracking based on electronic carrier input (EDI or through Transplace’s carrier web suite). Transplace also systematically maintains USG’s carrier rates and business rules. In 2006, Transplace managed over 500,000 truckload shipments for USG.
Summary
Transplace has refined its business model, management and operations. It is now a profitable and growing transportation management provider and its new international operations will provide an entrée into high-growth developing markets. Its business strategy and revitalized focus will provide it with the service portfolio needed to continue as a top transportation management 3PL.
Sources: A&A Primary Research, http://www.transplace.com/