Transplace Refines its Business Model and Expands Internationally
Lowell, Arkansas USA
May 29, 2008
By
Evan Armstrong

Key Personnel:
Tom Sanderson, President & Chief Executive Officer
George Abernathy, EVP & Chief Marketing Officer
Robert Brescia, EVP & Chief Operations Officer
Steve Crowther, EVP & Chief Financial Officer
Vincent Biddlecombe, EVP & Chief Technology Officer
Kevin Higgins, VP of International Logistics
Barry Gasaway, VP of Lean Six Sigma and Customer On-Boarding
Matthew Harding, VP of Consulting
Troy Ryley, Director of Transportation and Distribution
Jose Minarro, Director of Customs Brokerage

Overview
Transplace is a non-asset based transportation management third-party logistics provider (3PL). It managed $2.75 billion in transportation in 2007 generating approximate gross revenues of $850 million and net revenues of $70 million. Transplace has over 540 employees. Leadership changes over the past three years and a refocusing on core transportation management skills have helped Transplace improve its profitability and have spurred 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 system (TMS) platform.

Today, the Transplace service portfolio has expanded to include: consulting, network transportation management, hosted TMS technology, freight brokerage, intermodal transportation, dedicated transportation management, and international transportation management services. Key strategic accounts include: Cummins, Cott Beverage, Del Monte Foods, Home Depot, Glatfelter, Grainger, Rock-Tenn, 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 2006. To build out its international transportation management capabilities, Transplace brought Kevin Higgins onboard as VP of International Logistics. He 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) and also 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 10,000 TEUs (trailer equivalent units) in 2007.

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 purchased, integrated and deployed two new information systems. Log-Net is used for global order/shipment management and visibility, and IES helps manage NVOCC and freight forwarding functions.

Transplace Mexico Startup
In November of 2007, Transplace founded its Mexico operations. To lead the effort, it hired industry veterans Troy Ryley and Jose Minarro who both had worked together at Expeditors in Mexico. According to Ryley, Transplace Mexico should have a staff of 32 people by the end of 2008. Its service offering includes: international transportation management, including ocean and air freight forwarding, customs brokerage, and warehousing. In addition to the 110,000 square foot transload/warehousing facility in Laredo, Transplace also has a transportation management operation in Guadalajara and a sales office in Mexico City.

Del Monte Foods Case Study
Del Monte Foods had 2007 net sales of $3.4 billion and is best known for its pet products and consumer foods businesses. Its popular brands include: Meow Mix, Kibbles n’ Bits, Del Monte, and StarKist. Approximately 90% of Del Monte’s sales are in the U.S. and solid domestic transportation management is a key to its success.

In 2006, Del Monte replaced its incumbent 3PL with Transplace for domestic outbound to retail customer distribution center (DC) shipments. Del Monte’s shipping locations include 27 DCs and multiple plants and copackers. Its retail customers include Wal-Mart, Costco, and Sam’s Club. Transplace setup a dedicated retailer team for Del Monte and began managing a portion of its domestic transportation in July of 2006. The Transplace operation has an approximate staff of 20 (an ever shrinking number based on continuous improvements through operational and systematic efficiencies). The team manages over 230,000 outbound shipments per year; truckloads account for 85% of the shipment volume, 12% of the shipments are intermodal rail, and the rest are less-than-truckload (LTL).

Transplace worked with Del Monte in improving 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. By 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 has significantly reduced the costs for premium/expedited freight and 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 been fully migrated to Transplace.

Prior to engaging Transplace, Del Monte was having significant problems in meeting its transportation and stocking requirements for Wal-Mart. Del Monte’s two main logistics management performance measures for Wal-Mart 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 DC stock outs per month. Nine months after converting transportation management operations to Transplace, Del Monte’s on-time delivery service levels improved from under 90% to above its 96% on-time performance goal. In addition, DC stock outs are now running under 30 per month.

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 main decision drivers for outsourcing to Transplace were its ability to manage transportation with minimal technology investment from Sunny Delight, reduced personnel requirements, and to allow Sunny Delight to focus its efforts on core production and marketing functions.

In November of 2004, Transplace began phase one of its 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 on-line 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. Operationally, Transplace’s Sunny Delight operations were fully trained and staffed on February 2, 2005. Training included multiple site visits to Sunny Delight plants to observe current production and shipping processes and 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 of 2005, the operation on-time delivery percentage was over 95% and approximately 99.8% of orders were shipped complete.

In January of 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%.

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. In 2008, Transplace expects to manage over 35,000 shipments for Sunny Delight and has multiple continuous improvement efforts underway.

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/