Transplace Transitions, Keeps Trudgin?

From Viagra to potato chips, Sheetrock to spark plugs, Transplace Inc. has kept its clients’ goods on the go for four years. Now the Plano, Texas, company is shifting its own gears.

Since December, the third-party logistics and technology provider has replaced three of its top five executives and enlisted international public relations firm Ruder Finn Inc. to pump up the company’s heretofore low-profile. Transplace, which in part morphed out of J.B. Hunt Transport Services Inc. of Lowell, is simultaneously transitioning its technology from older software running on a leased mainframe in Lowell, to new software running on Sun Microsystems servers in Plano.

The privately held concern declined to discuss its financials, including its latest capital investments. Tom Sanderson, who has served as president and chief operating officer since December, did say the company has enjoyed an annual 8 percent growth in its employee base, and that the firm manages about $1.3 billion a year in freight.

Transplace, owned by six publicly traded truckload carriers, doesn’t own any of its own trucks. The third-party logistics company (3PL) arranges for shipment of goods for other companies.

But despite its list of impressive clients — including Pfizer Inc. of New York, AutoZone Inc. of Memphis, Frito Lay Inc. of Plano and Weyerhaeuser Co. of Federal Way, Wash. — J.B. Hunt’s 2003 annual report said Transplace’s, 2003 gross revenue was down 2.5 percent to $655 million from $672 million in 2002.

Swift Transporation Co. of Pheonix, which owns 29 percent of Transplace, said in its 2003 annual report it had $1.2 million in equity losses from Transplace for 2003. That’s better than the losses of $2.7 million in 2002 and $3 million in 2001.

J.B. Hunt reported losses of $1.35 million related to Transplace for calendar 2002. But J.B. Hunt still purchased an additional 10 percent equity share in the company on Jan. 1, 2003, from Werner Enterprises Inc. of Omaha, Neb.

Of Transplace’s owners, J.B. Hunt is the majority equity shareholder, weighing in with a 37 percent stake, thus the common local misperception the companies are one and the same.

Sanderson said one of the reasons he was recruited was “to help push the company further ahead on a faster growth plan.”

Word on the Street

Sanderson said 2003 was a disappointing year due to the termination of a large 3PL contract and lost brokerage business. But the executive added, “Transplace has not had the need for any additional equity infusion” since the carriers made their initial investments in 2000.

Sanderson hired George Abernathy as executive vice president of sales and marketing in March, and Roy Cashman as chief technology officer in June — two industry veterans he hoped could help him turn the company around.

Both Sanderson and Abernathy worked at J.B. Hunt Logistics in the early 1990s, though not together.

Cashman was recently the CIO and senior vice president for Ruan Transportation Management Systems of Des Moines, Iowa.

Sanderson was also chairman, CEO and president of Boston-based Clicklogistics before it was sold off by its holding company, and at that time, was supervisor to Eric Wolfe, who is now vice president of competing BNSF Logistics LLC in Springdale.

Sanderson said, from what he can see, the economic outlook for the country and his industry is good. Transplace has plenty of both manufacturing and retail clients, and he said the logistics business this year has been brisk. Shipments are already revving up for the holidays.

“Our brokerage business is growing and profitable,” Sanderson said. “Our 3PL business is also growing and profitable. Our new hosted technology services business is very profitable since we do not need to assign staff to these new customers and are utilizing technology that is already built.”

The only major expenses the company has at the moment are in upgrading Transplace’s technology, he said.

Abernathy has replaced a large percentage of the company’s field sales staff, Sanderson said, and things are looking up.

“We feel we are on the right path for growth and our pipeline reports from our sales force automation system substantiate that there is a large amount of new business just around the corner,” he said.

When asked if Transplace is preparing for an initial public offering, Sanderson didn’t miss a beat, though he didn’t like the “preparing” connotation.

“I think it’ll be a very attractive company to Wall Street somewhere in the two-to-five year horizon,” he said.

Perception and Shares

Public perception is high on the company’s agenda. Sanderson said he doesn’t think the Transplace name means a lot to the public right now.

Abernathy said some of the Lowell employees have confessed to telling people in social situations that they worked with J.B. Hunt to simplify the conversation. But that is on the mend, he said.

The company is starting to participate more in Northwest Arkansas corporate sponsorships to try and get the Transplace name out in the public eye, Abernathy said. The company has also started talking with the media more, after what was a tightlipped beginning.

Transplace began operations in July 2000 and employs about 700 people. About 400 of those work from the Lowell facility, just down the street from the J.B. Hunt headquarters. The company also has offices in Stuttgart, Memphis and Phoenix.

Transplace was initially owned by seven trucking firms: J.B. Hunt; Swift; Werner Enterprises; Covenant Transport Inc. and U.S. Xpress Enterprises Inc. both of Chattanooga, Tenn.; and M.S. Carriers Inc. of Memphis, which has since been acquired by Swift.

According to their annual reports:

• Swift Transportation contributed all of its transportation logistics business, some intangible assets and $10 million for a 29 percent equity share in Transplace.

• J.B. Hunt contributed its logistics business, other intangible assets and $5 million in cash for a 27 percent stake in Transplace. The additional 10 percent bought from Werner in early 2003 was for an undisclosed amount.

Werner said it now has about a 5 percent share in the company, leaving 29 percent between U.S. Xpress and Covenant.

J.B. Hunt said in its 2003 annual report that its “financial exposure is limited to its approximate $7.8 million investment” in the 3PL.

Turnkey Technology

In July, Transplace was ranked No. 8 of the Top 10 in Inbound Logistics magazine’s 3PL excellence awards. It followed heavy-hitters like Schneider Logistics of Green Bay, Wis., (No. 2), Miami-based Ryder System Inc. (No. 4) and Fed Ex Supply Chain Services of Memphis (No. 5).

Springdale’s BNSF Logistics came in behind Transplace at No. 9.

“Although the survey is not an encyclopedia of 3PL providers,” the editors of the magazine write, “it is an important differentiator in identifying leading 3PLs. Their clients — our readers — are the most well-informed buyers of 3PL services in the world.”

Sanderson and Abernathy said the major advantage Transplace holds over its competition is the proprietary software.

“Often times in the 3PL marketplace you’ll find that providers will be buying technology or acquiring technology from a variety of places and cobbling together a solution to deliver,” Abernathy said. “At Transplace, we’ve built it and we’ll deploy it.

“It’s different than a 3PL that might have the software that 20 other — 50 other — 3PL’s have,” he said. “If you’re using the same technology, how are you going to deliver a better answer than the other guy?”

Transplace’s chairman and CEO, Jun-Sheng Li, who was president of J.B. Hunt Logistics before it was invested into Transplace, is the developer of the company’s software. The product identifies “synergies” and helps lower costs between the shipper and carrier.

What’s more, it is Web-based, so a customer can use it to coordinate loads without installing software across all its systems.

Other clients can choose to outsource all of their logistics needs through Transplace, and they may even get a dedicated team to manage their account.

Cashman said as creator of its own software, Transplace can package certain services and target specific customers. And, he said, Transplace is in control of the generational aspects of the software, so it can respond quicker than a 3PL using someone else’s software.

Transplace process about 10 million individual orders, or loads, per year. That equates to about 200 million different computer transactions annually, Cashman said.

Cashman said about 40 percent of Transplace’s loads run through the new system, and he expects the remainder will be rollin’ within the next 18 months.