Hometown heroes

Earlier this month I traveled to the village of Greene, N.Y. It’s the kind of place where, as you drive up hill and down dale, carefully passing John Deere tractors, you can’t help thinking that there might be more cows than people among the local population.

Greene is home to the lift truck maker The Raymond Corp. I’d been invited to observe a program designed to introduce students to manufacturing and engineering careers, and to attend the ribbon cutting for a major expansion to the company’s facilities.

I reported on the events of the day, but there was something else that bears mentioning—something I’ve observed when visiting a few other lift truck OEMs: that despite being world-class, technologically sophisticated operations, they still feel like small-town, family businesses. (In the case of privately owned Crown Equipment, it is a family business.)

The population of Greene swells dramatically when Raymond’s 1,500-plus local employees are on the job. The mayor, Phill Brown, is a 35-year Raymond employee, and several other town officials work for the lift truck maker. There’s no doubt that the company plays a central role in the lives of people who live in the village and surrounding communities.

The same is true of Crown, which is not only by far the largest employer in rural New Bremen, Ohio, but also has purchased and renovated historic buildings in the town center, provides ongoing support to local organizations, and has employed multiple generations of families throughout the area. It’s not a stretch to say that if not for Crown, New Bremen would be a different place than it is today.

Like many Japanese companies, the attitude that “we are not just a business, we are a family” is ingrained in the culture of Toyota Industrial Equipment Manufacturing (TIEM), maker of Toyota lift trucks and a sister company to Raymond. That was manifest during a recent celebration in Columbus, Ind., of TIEM’s 25 years of manufacturing in the U.S. The plant was shut down for the afternoon—a very expensive proposition, and a decision not made lightly—while more than 1,500 associates attended the ceremony, lunch, and concert the company put on for them.

Of course, you can’t expect everyone to have warm feelings about his or her employer. But clearly many of Toyota’s U.S. employees do. For example, when retired former TIEM President Yoshimitsu Ogihara was introduced during the ceremony, the crowd of factory and warehouse workers cheered loudly. Later, as Ogihara walked around the grounds, many of those associates greeted him warmly. Out on the lawn, associates didn’t hesitate to toss a soccer ball to Toyota Material Handling North America President and CEO Brett Wood and kick it around with him.

These are not the only lift truck OEMs that have close relationships with their employees and the communities where they do business, of course. All of them exemplify why a strong U.S. manufacturing sector is not just about competitiveness and employment numbers, it’s also about quality of life.

May the Force Be With You: Are delivery droids better than delivery drones?

The first live-action movie that I saw was the original Star Wars. I was almost 4-years-old and had to sit on my knees to see over the heads to the people in front of me. From the moment that the opening credits scrolled across the screen with words that I could not yet read, I was hooked, and like many people of my age, Star Wars became my foundational myth.

So when I stumbled across this video a couple of weeks ago of lollipop-colored delivery robots, it delighted something deep within me. 

Israeli engineer designs grounded drone delivery service 

While the creator, Kobi Shikar, an Israeli engineer calls them “Transwheel Delivery Drones,” they looked to me more like something that would come out of George Lucas’s Industrial Light & Magic Studio. The video shows the unicycle (!) robots holding packages on their heads with robotic arms as they zipped down city streets and then using face-recognition technology to deliver the package to the correct person. (For larger packages, two or more would team up.) Yes! My heart responded. Yes! If R2D2 could deliver an appeal for help to Obi-Wan Kenobi living in his cave on Tatooine, why couldn’t a candy-apple droid deliver a box of socks to me in my triple-decker in Boston?

It’s appealing: the thought of a cute robot handing a package to you with a cheerful chirp and beep, instead of an whirring insect-like drone (with its militaristic overtones) dropping one down from on high. There seem to be fewer risks of from a small drone malfunctioning on the ground than an aerial one breaking down and dropping on someone’s head. We are used to AGVs in DCs delivering pick bins. It's an easy step to them delivering packages to consumers.

Yet, the adult me (who is more than ten times older than the me who saw Star Wars), is skeptical. Just how cost effective are these delivery drones? And how secure? What’s to stop a Jawa from waylaying a lonely drone and then selling it on the black market? What happens when a drone breaks down en route to a delivery? I want this technology to exist, but there are a lot of real-world issues that have to be figured out before Boston looks like Mos Eisley.

So it may take a while. (Indeed Shikar believes the first applications could be not in delivery networks but at airports and military bases.) In the meantime, I have a four-year-old daughter of my own, and The Force Awakens opens in just a couple of short months.

University on wheels

Last month I attended the Material Handling and Logistics Conference in Park City, Utah. In my opinion, this is always one of the better industry events held each year. It always has high caliber content on supply chain operations, with the emphasis on distribution and material handling systems. And the mountain scenery is also easy on the eyes.

 

The MHLC is organized and sponsored by the folks at Dematic. One of the events in the conference program this year was a tour of the Dematic manufacturing facility in nearby Salt Lake City, which featured the latest lines of Dematic material handling systems.

 

Dematic used the tour to also showcase its Dematic University Mobile Training Unit, which had arrived in Salt Lake City to coincide with our visit. The Mobile Training Unit basically consists of two tractor-trailers that are stuffed full of conveyor and sortation modules designed to train the operations and maintenance personnel of customers using Dematic equipment. This technical training center on wheels travels the country between customer sites. Each equipment module is mounted onto its own wheels so that it can be quickly offloaded and wheeled into the customer site for the training sessions.

 

A key benefit for the customer is that they do not have to shut down their own conveyor and sorting units in order to conduct training – operations can hum along as normal while the training occurs in a space that is away from causing disruptions.

The equipment modules are also designed to work on standard 110-volt outlets so that no additional power needs to be run for them. They can quickly be put in place and powered without extra assembly or installation. The modules are also self-contained with everything that might be needed typically by a conveyor or sorter system, such as air, motors, electronic sensing, and controls.

 

According to a Dematic brochure, the units brought to a customer site include transportation and accumulation conveyors, motorized rollers, segmented belt on roller, right angle transfers, and curves. We also saw a sliding shoe sorter module there. The units can be disassembled to demonstrate belt changes, motor replacement, preventative maintenance procedures, and more. The training program can be customized according to the needs of the host company and the equipment they have installed or are about to install. Dematic says that the training is also augmented with video and e-learning instruction.

 

In an age where keeping systems up and running is crucial to any operation, having this type of mobile training available for customers just makes a lot of sense. It is a good example of a systems manufacturer responding to the needs of its user community.

Brad Jacobs: Rock Star

 

We got 10 minutes of Brad Jacobs’ time this week at the Council of Supply Chain Management Professionals’ (CSCMP) annual meeting in San Diego. Granted, it was standing against a wall outside the CSCMP sponsors’ room. But given the elevated stature of XPO Logistics, Inc.’s founder, chairman and CEO, we were happy for any time and venue we could get. 

Going from almost nothing in five years to a $15 billion a year company, largely through a spree of acquisitions, will attract attention. Sure enough, as we talked, peripheral vision picked up people stopping and staring as they walked by. Jacobs professed not to notice (we did). There were also folks lining up to get a chance to pick Jacobs’ brain about any number of issues—not the least of which would be what it would take to buy their company. If you think that scenario to be far-fetched, consider that a freight broker attending last April’s Transportation Intermediaries Association annual meeting, where Jacobs was appearing, said he was there for the sole purpose of convincing Jacobs to buy his firm. (We have suggested the silk screening of t-shirts that read “Bought By Brad.” Jacobs, for his part, said he wants one.)

Our talk covered as much ground as can be trod in 10 minutes. On acquisitions, there will be none in the near term—integrating two transactions with a combined cost of $6.5 billion will take priority. The integration of the French firm Norbert Dentressangle, bought in April for $3.5 billion, is virtually complete, Jacobs said. The focus now is on Con-way, Inc., the $5.8 billion a year asset-based truck, brokerage and 3PL provider bought by XPO last month for $3 billion.

Asked why he entered the asset-based game after building a model around non asset-based services, Jacobs said customers, almost from XPO’s founding, would ask if the company had trucks or if it didn’t; the constant querying led Jacobs to believe that assets were something customers were interested in. In a world of tight capacity, truck assets are king, and will serve as the gateway to conversations about XPO’s other services, according to Jacobs. Besides, XPO is no stranger to assets, having owned container equipment operated by intermodal marketing company Pacer International, which XPO bought in 2014, and trucks that are operated by Norbert Dentressangle in Europe, Jacobs added.

Re the Con-way assets, which consist of LTL carrier Con-way Freight, Con-way’s largest unit, and truckload carrier Con-way Truckload, the work still lies ahead. Headcount at Con-way Freight’s corporate level will likely be reduced, but the operations will largely be left alone. Jacobs said Con-way Freight customers have told him the service levels are excellent and customers love the provider.

Maybe so. But 2013 numbers for Con-way Freight’s national accounts didn’t demonstrate a lot of love. According to internal data, the company lost more than $72 million in aggregate on its top 20 national accounts that year. Of those, only three generated a profit. National accounts made up more than 65 percent of the unit’s overall revenue in 2013, according to the data.

A good chunk of the losses were the legacy of the 2008-10 LTL price wars when Con-way and FedEx Freight, the LTL unit of FedEx Corp., led the charge to slash prices in an effort to drive YRC Worldwide, Inc., the then-market leader and way, way back on its heels, out of business. As those who follow the business know, the effort failed. YRC is still in business, and most of the industry managed to dig itself a huge hole that took several years to emerge from.

Yet there is a belief that Con-way Freight has lost market share because it is not as efficient and productive as its peers. Its second-quarter operating ratio—the ratio of revenues and expenses—rose to 92.4 from 91.2 in the second quarter of 2014, not a positive trend. Revenue, tonnage and operating income also fell year-over-year. Yield rose a scant 0.4 percent, benefiting modestly from better pricing. 

Jacobs has said XPO will boost the Con-way parent’s operating profits by up to $210 million a year for the first two years through “synergies and operational improvements.” The LTL unit may be the best place to harvest those synergies and improvements. Given the unit’s so-so operating performance, the gains there are likely not to come from robust top-line growth, at least in the near term.

Five years on, the jury is still out on Jacobs’ great experiment. Some point to his solid track record in the energy, solid waste, and equipment rental businesses, and say the same principles of scale, scope, and density that worked there can work here. Others say XPO is a house of cards, pointing to a near 50 percent drop in the company’s market value in the past few months. Still others say that, by buying Con-way, Jacobs bit off more than he could chew.

We will let time answer the first two arguments. To the third, we contend that the opposite is true. Asset-based players will have superior leverage for the balance of the decade as a shortage of drivers and tougher government regulations reduce the carrier playing field. XPO needed a meaningful asset-based position in the U.S. to balance out its service proposition and support the rest of its portfolio. There is no doubt non-asset based players enjoy fatter margins, but if the world is changing as many people believe it is, then the deal was something Jacobs had to do, and one that will ultimately pay off.