Transplace Keeps Companies Rolling

From dog food to toilet paper, tomatoes and T-shirts, each product on retailers’ shelves got there through a series of highly complex transactions. And increasingly, manufacturers and others who ship their goods are turning to third-party logistics, or 3PL, providers to handle this process.

The 3PLs provide expertise in moving goods from the manufacturer to the consumer quickly and affordably. That frees manufacturers to focus on what they do best – making their products.

“We act as the transportation and logistics department for many of our customers, managing 100 percent of their freight transportation,” said Tom Sanderson, president and CEO of Transplace, a 3PL created in 2000 by Lowell-based J.B. Hunt Transport Services Inc. and five other trucking companies.

“Certainly the Fortune 500 companies we serve can do it themselves,” he said. “But this is all we do and we’re very good at it.”

J.B. Hunt maintained majority ownership of Transplace until 2009, when it was acquired by private investment firm CI Capital Partners LLC of New York.

About twice a month, Sanderson travels from the company’s headquarters in the Dallas suburb of Frisco, Texas, to Lowell, where its largest operations center is located. About 275 of the company’s 550 or so employees work in Lowell.

Transplace is a non-asset-based company, meaning it doesn’t own any trucks or warehouses. Instead, it contracts with a number of fleets in its carrier network to haul freight for its shipper clients.

The 3PL market posted gross revenue of $107 billion in 2009, according to Armstrong & Associates Inc., a Milwaukee-based 3PL consultant.Of that revenue, non-asset-based 3PLs like Transplace grossed a total of $31.8 billion.

With Transplace closing in on $1 billion in annual revenue, the company takes a pretty big bite of that market pie – but there’s always room for more, Sanderson said.

Transplace made its first acquisition in April, buying up SCO Logistics of Philadelphia for an undisclosed sum.

Sanderson, who’s been with Transplace since 2003 and has 31 years experience in the transportation industry, said the company is looking to make a few more acquisitions, with one deal fairly close to completion.

That transaction should be finalized by Aug. 1, he said. It involves a company “significantly bigger” than SCO, which has about 30 employees.

Still, Transplace expects most of its growth will be organic, Sanderson said.

 

How It Works

Transplace is based in the Dallas area for ease of access for its clients, said Barry Gasaway, vice president of operations, new accounts. He works out of the Lowell operations center.

That office, at 509 Enterprise Drive, mainly serves suppliers to Wal-Mart Stores Inc. It counts among its clients such heavyweights as Microsoft Corp., Del Monte Foods and AutoZone.

Transplace also operates a freight brokerage business in Stuttgart that employs about 75 people. And an office in Laredo, Texas, serves as the base of operations for freight movement to and from Mexico.

Gasaway began working at J.B. Hunt in 1989 after earning his bachelor’s and master’s degrees at the University of Arkansas, and worked his way up through different departments. His first job in the trucking firm’s logistics division took him to Seattle from 1997-2000.

He returned to Northwest Arkansas when J.B. Hunt spun off its logistics arm to form Transplace along with partners Swift Transportation, U.S. Xpress Enterprises, Covenant Transportation Group Inc., M.S. Carriers and Werner Enterprises.

Gasaway served as the company’s Lean Six Sigma champion before taking his current post in September 2008. According to the Lean Six Sigma Institute website, Lean Six Sigma provides tools to reduce waste and improve productivity, quality and reliability.

In his current role, Gasaway makes sure new customers get set up with all the technology and services Transplace offers.

These include dedicated account teams that focus exclusively on one client. This relationship enables the company to deliver services tailor-made to fit each customers needs and save them money, Gasaway said.

Customers’ computer systems feed shipment data to Transplace’s computers using web-based software. Then the account teams arrange the most efficient and cost-effective transportation for those shipments, whether by truck, rail, sea or air.

“A lot of times, customers would not put that freight together as efficiently as we could,” Gasaway said. “So they potentially ship it on two different trucks, and we’re able to use our technology and our optimization processes to ship it on one truck.

“Our technology also helps us make better financial decisions from a cost perspective for that customer, so where maybe they used to spend $10 million moving that freight, we’re able, by using our people and our processes, to do that for maybe $8 million or $8.5 million.”

 

Outsourcing Option

According to the Transportation Intermediaries Association, many shippers have cut costs over the last decade by reducing their in-house transportation departments and contracted out the function of arranging transportation to third-party providers.

Nearly every Fortune 100 company now has at least one 3PL among its core carriers, the Alexandria, Va.-based trade group states on its website.

In addition, Armstrong & Associates data shows demand for 3PLs grew at an 11.8-percent compounded annual rate from 1995 to 2010.

An article in Heavy Duty Trucking magazine outlines several economic trends that account for this shift.

One of these is the high cost of diesel. Multimodal operations, which 3PLs excel at coordinating, can help offset volatile fuel costs.

Also, shippers are positioning inventory closer to the end customer. This results in shorter lead times and requires a more responsive supply chain.

Gasaway pointed out that 3PLs also benefit from increased focus on sustainability. Consolidated loads translate into fewer empty miles, which means less fossil fuel is used and less pollution is emitted.

Sanderson said the 3PL model offers advantages for both shippers and carriers.

For shippers, 3PLs give them a single point of contact for such vital functions as selecting from hundreds of qualified carriers, managing cargo claims and accessing state-of-the-art transportation software.

For carriers, 3PLs provide access to shippers of all sizes worldwide and expedite payments.

A paper Armstrong & Associates released in February notes that while the U.S. domestic transportation management market declined 15.1 percent from 2008 to 2009, Transplace’s year-over-year performance grew more than 10 percent.

The company managed more than $3 billion in transportation that year, and processed more than 4 million shipments, the paper stated.

Transplace had record years in both 2009 and 2010, Sanderson said. Revenue for 2010 was about $800 million, according to a company press release.

The company is on track to set a new record this year, Sanderson said.