UTi Distribution
Blending North American Transportation Services
May 31, 2012
By
Richard Armstrong

Tier one global supply chain manager, UTi, provides a series of well-run asset and non-asset distribution services through four business units which were acquired as part of UTi’s aim to offer end-to-end supply chain services. Each business unit including, Sammons Trucking, Market Transport, Transport Solutions, and Transportation Management, has a long history as a successful standalone operation. In alignment with UTi’s client centric strategy, the business units are transforming to present a synchronized view to their clients through a single brand – UTi Distribution.

Through providing one view of the distribution portfolio to clients, UTi will offer distribution solutions across modes and services that meet specific requirements. UTi’s asset offerings provide consistency and predictability, the non-asset services leverage 43,000 carriers representing more than a million power units nationwide, and the supply chain management offering drives coordination of business processes through advanced systems to decrease cost and increase efficiency.

Through integrating services and best practices across all four companies, UTi Distribution aims to deliver greater client value.

Table 1. UTi Distribution Services

Transportation Services

Key Personnel:
Greg Galbraith, Vice President Distribution, Transportation Services, Market Transport
Tim Burke, Vice President Distribution, Transportation Services, Sammons Trucking

UTi Distribution’s Transportation Services are managed by Market Transport and Sammons Trucking. Market Transport began as a motor carrier in 1969. Its traditional operations were up and down the I-5 corridor on the West Coast.

Market Transport operates 311 tractors and 770 53′ dry vans in its traditional trucking business. The West Coast service area has been expanded to Arizona, Illinois, Ohio, Pennsylvania and Texas. One hundred eighty-one tractors operate on the West Coast and into Texas. Most of the remainder of the fleet operates in dedicated delivery services (DDS) in the Northwest. Its operations include hostling and multi-stop milkruns and store deliveries. DDS and Managed Logistics operations have been expanded to Chicago, Cincinnati and Allentown for long-term grocery and chemical customers. On-site personnel manage inbound and outbound transportation for customers in locations east of the Mississippi and in Washington. Market Transport tractors are all Qualcomm satellite tracking equipped. Driver turnover rates are low and Market Transports’ CSA (compliance, safety, accountability) scores are uniformly low.

In addition to evolving transportation management for its larger customers, Market Transport developed an IMC (intermodal marketing company) capability from Oregon and Washington to California. Also, Market Transport handles up to 1,000 containers a month through the Port of Portland as part of an import transload program. An inbound transload program with direct-store delivery is provided to the Northwest and into the Eastern U.S. For its IMC operations, Market Transport has a network of drayage agents outside the Northwest. Multi-store deliveries are standard as part of this service. For its intermodal services, UTi uses a long-term contractor in Los Angeles. Rails used are UP (mainly), CSX, NS, BNSF and CP. West Coast IMC operations are able to use 14′ high trailers providing customers greater capacity. IMC customers include a major grocery chain, an airplane assembler, a paper goods company, and a well-known fruit juice brand. About 6,600 IMC shipments a year are handled by Market Transport.

Shortly before UTi acquired Market Transport
in 2006, it purchased Sammons Trucking, a specialized truckload carrier started in 1962 and based in Missoula, MT. Sammons operates flatbeds, drop decks and other specialized trailers using over 300 owner-operators. Shipments are handled throughout the lower 48 states, into Canada and Alaska. Sammons is headquartered in Missoula, MT and has terminals in Fontana, CA; Davenport, IA and Baltimore, MD. Sammons handles a lot of heavy equipment, tractors and structural construction

materials. John Deere is a major customer. Forty-eight percent of its loads are overweight and over dimension.

In addition to its four company locations, Sammons uses 50 agents to obtain and balance lanes. Drivers are allowed to pick and choose loads. The company’s mantra is to give its owner-operators a lot of freedom of choice and independence.

Market Transport and Sammons have developed strong partnerships with Fortune 500 accounts. UTi Distribution can gain substantially by cross-selling and developing major account relationships with clients currently utilizing transportation services.

3PL Transportation

Key Personnel:
Don Farthing, Vice President Distribution, 3PL Transportation

UTi Distribution’s 3PL Transportation services are executed by a high quality, niche transportation intermediary with 200 exclusive agents. The emphasis is on flatbed, drop deck and van business. Farthing’s management team is tight and communicates well–an essential in this fast-paced operation. An average of 16,000 loads are handled per month. Last year, loads were handled for 5,455 customers and during the year, 2,500 new customers were added. The average number of shipments per customer is 218. The network for UTi is very broad and the majority of shipments are handled from the spot market. Primary customers are mid-sized with an annual freight spend of $3-$15 million.

UTi Distribution’s 3PL Transportation offering is an efficient model. Communication is key. The system used is Visual Freight Track. Developed in-house and well suited for supporting 3PL Transportation operations via the internet, Visual Freight Track helps minimize phone calls and fax communications. The information subroutines in Visual Freight Track are general information, rates, comments, P&D basics, load tracking, billing/payment administration backup info, scanned documents and load requirements. Every user has a profile and picture which are easily displayed to any other user. You get to see who you are talking to. Here are other features of UTi Distribution’s Visual Freight Track:

• Proprietary technology developed by corporate development team
• EDI technology
• Designed to handle full truckload, partial truckload and less-than-truckload shipments
• Access to information in Visual Freight Track is also available to clients on the website in real time
• Enables real time sharing of information between affiliates, corporate support staff and UTi’s external clients and carriers
• A fully integrated solution for managing clients, carriers, freight, issues
• Establishes and enforces rules of conduct with respect to company policies

Last year, the team members in Carrier Services processed and cleared 8,400 new carriers and updated information on 33,000 existing providers. Six invoices an hour are processed per person.

Here is UTi’s Carrier Qualification Summary:

• CSA 2010: Verify operating status and safety rating. Unacceptable ratings are unsatisfactory and conditional.
• FMCSA: Verify FMCSA authority status is active as a Common, Contract and/or Broker.
• Carrier’s Identity Validation: Verify the person that requested to be setup is actually representing the carrier’s company.
• Insurance Agent’s Identity Validation: Verify the insurance agent’s telephone number is a valid number by searching the internet.
• Insurance Policy Verification: Request the insurance agent provide the policy limit and deductible for General Liability, Auto Liability and Cargo General Liability and Workers Compensation. Request a copy of the Insurance Certificate and have your company listed as the certificate holder.
  – Limits should meet or exceed minimum federal requirements (or client’s requirements, if greater). Cargo limits must meet or exceed value of shipment.
  – Verify if policy has exclusions.
  – Verify the insuring company’s A.M. Best financial rating is a B+ or higher.
• Carrier Packet: Carrier submits signed Contract and W9.

In exchange for its high quality service levels, UTi Transport Solutions receives average load revenues in the range of $1,000-$1,600. Van loads are at the low end; drop deck, specialized loads are at the high end. Significant opportunities for cooperation exist within the UTi Distribution group with its emphasis on flatbed and drop deck equipment.

UTi Distribution provides strong competition for Landstar and other agent model brokers. We expect it to grow significantly as it becomes more visible, does more to promote its brand and expands the cross-selling and service options with the rest of the distribution services.

Supply Chain Management

Key Personnel:
Walt Zelichowski, Vice President Distribution, Supply Chain Management

UTi Distribution’s Supply Chain Management services are IT systems based. UTi Distribution handles all or large chunks of its client’s shipment orders every day. It uses JDA transportation management and planning software to handle about 3,000 orders a day for over 120 customers. Orders are normally received by electronic data interchange (EDI). Shipment information is relayed (normally by EDI) to carriers who are given a limited amount of time to accept the shipment.

There are two major components to UTi Distribution’s service–transportation planning and transportation execution. In planning, UTi builds its approved carrier base. All of the requirements used for 3PL Transportation are also part of UTi’s Supply Chain Management processes. In addition, a file of rates to be charged is built. For each customer, a file of acceptable carriers to be charged and other contract conditions are set up. The contract terms are normally set for 1-3 years and usually become evergreen as the relationship matures. Carrier performance is measured closely by UTi and regular reports are issued to customers and carriers. Some customers prefer to pay carriers directly based on UTi’s approval. UTi has about 900 carriers under contract and utilizes 150 employees to carry out its services.

A key feature of UTi Distribution’s service is to optimize daily the transportation cost of shipments received. This optimization includes consolidation of small shipments into truckload shipments and end-to-end matching of trucks utilized. These capabilities rely on UTi’s JDA software.

Figure 1. JDA/UTi Distribution TMS Components and Capabilities

UTi Distribution provides intensive, systems-focused supply chain management for its clients. Significant opportunities exist for it to expand options for other clients. When UTi Transportation Management has business spikes, the 3PL Transport solutions can be of great assistance finding capacity in spot markets. All of UTi Distribution’s services are well-run, successful operations with good models. A major opportunity for them is what they can do together to expand the UTi Distribution brand and business.

 

Sources: A&A Primary Research, https://www.us.dsv.com