Logistics Quarterly Magazine - Volume 15, Issue 3, 2009 - A Conversation With Steve Ramescu, President, Axsun Group - LQ Archives
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LQ’s Executive Interview Series:  Excellence in 3PL Technology
Steve Ramescu

Defining Leadership in Logistics and Transportation in North America

A Conversation With Steve Ramescu, President, Axsun Group

Questions for this Executive Interview have been prepared by LQ’s Editors and Advisory Board.

LQ: What are some of the opportunities afforded by today’s supply chain challenges and how will supply chains emerge from the financial downturn we’re facing?

Steve Ramescu: We’re in a territory that hasn’t been seen in ages. Some of today’s supply chain will remain the same, but to a large extent, it will be transformed and look a lot different. This is primarily due to the fact that in a downturn the industry is going to bleed out a lot of good-quality people. Another major issue in our industry is that we have an aging population and we do not have a wave of relief behind us. In an economic downturn, especially on the carrier side, companies downsize and put people out to pasture. But in the upturn, finding qualified people to handle the demand is going to be a challenge.

On the other side, the downturn puts an emphasis on partnering. Partnerships really need to be entrenched to offer stability between the 3PL, the service provider and the customer. If a customer has promised thousand-load shipments, carriers put people in place and 3PLs put the required infrastructure and IT in place. However, it’s challenging if the thousand load forecast ends up being 50 loads instead. You must have stability.

In other words, it is important to try and bring the peaks and valleys of the supply chain closer in line to make it more stable. People have a hard time managing peaks and valleys. I think we may need to look back to past precedents, for example in the seventies. We may have to build up inventories, maybe not to the same degree, but more to a flatline across the system. That’s where I see that things are going to change going forward.

LQ: During such volatile times, leadership is critical to the success of every organization. Where should supply chain leaders focus their time and energy to improve their company’s performance? (Lucas Kuehner, Vice President, Panalpina USA)

Steve Ramescu: I cannot say this enough about the value afforded by the right people. We have to retain the good people in the industry. We have to reward them well and we have to make investments in new people and prepare for growth coming into the system. It is always a short-sighted vision to lay off or dissolve functions, and in today’s circumstances sometimes you must. But quite often things get cut too far to the bone and we don’t think about the long-term effects.

At the end of the day, what will differentiate one company from another is its people—their knowledge and ability to serve. If you don’t have the right people and you don’t invest in keeping your people, you are going to find yourself in the next boom without any qualified people to handle your business. So you will not even be able to make the cut when business booms. In a recession, you may be able to hang on, but when business booms, that may be your demise.

LQ: It’s our view that the financial downturn is prompting more business executives to identify new opportunities with fresh thinking in order to apply innovative solutions; however, some providers aren’t well positioned for today’s economy, while others will thrive. Can you identify the characteristics of those companies most likely to prosper?

Steve Ramescu: Those that will prosper are those that had a business plan—plans for the rainy days and the good days. A lot of times in financial downturns, companies try to come up with fresh thinking and new ideas. The fresh thinking and new ideas should have happened during the good times, not the bad times. The bad times are when you implement your plan. You can’t simply react to everything that’s bad.

We have opened up new operating divisions that complement our other ones. This wasn’t conjured up last week; this process started last year. The best time to expand is not when times are good, because people are riding at 110 percent. When times are bad and people are riding at 70 percent, you have two choices: cut back on staff or make sure you can implement your rainy-day plan, so they have that 40 percent in them to work.

LQ: The best firms identify short-term processes and efforts to enhance their future competitive advantage as well as long-term. Your company is clearly investing in innovation and growing. Can you provide us with an overview of your company’s short-and long-term strategy in today’s marketplace?

Steve Ramescu: Short-term goes hand in hand with long-term plans and strategies. Understanding where our customer needs to go in the future, how we need to streamline their supply chain and how we can capitalize our relationship with them—not on just reducing rates but rather, reducing costs. Customers are going to rely increasingly on 3PLs. In certain cases we could call them “light-asset 3PLs.” The days of 3PLs just outsourcing freight the way they once did is going to change, and the 3PL may have to become slightly more, albeit, light asset-based. Certain 3PLs are starting to get into assets, and asset providers are starting to get into the 3PL field; there is a convergence, and with the next new wave, are you going to clearly differentiate between the 3PL and the carrier? I don’t know. I think what you will see is strategic business partners specialized in the transportation industry or supply chain industry. You’ve seen trucking companies opening up logistics firms, and you’ve seen logistics firms opening up light-asset trucking or warehousing, such as ourselves. We have our trucks, chassis, assets; we’re not a multi-billion dollar carrier, but we do have assets to help facilitate the transactions to help control the cost and performance of the supply chain without relying on outsourcing in many cases. This is how we can reduce costs and not necessarily our rates.

We have opened up more divisions, and the value of our assets are well thought of, because all of our divisions complement each other. We are integrated into one operating system. All three of our divisions are tied in operationally and they feed off of each other. This is why we are able to minimize downtime and unnecessary duplication of jobs, maximize revenue, minimize the empty mileage and dispatching time, and become less reliant on external services. When a customer calls Axsun and makes a request, we can tell them yes, we can do it, internally; we do it, and we don’t need to hire A, B, C. In certain cases we have business partners because we are global in our scope, but in most areas we are able to minimize this hand-off to outside companies and keep the business internal, which controls the cost and improves performance.

Our growth strategy has mirrored this approach. Our firm has participated in many acquisitions since its founding; we are growing organically, because we are one community housed under the same roof. 3PLs have a tendency of not seeing the freight; instead they see the paperwork and administration. We see the paperwork and the flow of information as well as the product on a daily basis.

LQ: Will the economy create a greater trend for more to focus on, deriving even greater value from their existing outsourcing relationships? Will they likely use these circumstances as a lever to renegotiate existing agreements regarding pricing, service levels and other key terms?

Steve Ramescu: In an economic crisis, when one person takes a wrong turn, and jumps off a bridge, often others follow. Will customers use this circumstance to renegotiate? Absolutely. They will try to capitalize because there is overcapacity for equipment. I have seen ridiculous instances where trucks are moving for a dollar a mile and contracts are in place for $1.60 a mile. It’s hard for a customer to say, “I’m not going to take advantage of that.”

However, a carrier who signs a long-term agreement for two years or three years based on this depressed market is jeopardizing his business going forward. When the economy turns, they may not be able to capitalize on more profitable business. And if the customer, on the other side, banks on their own profitability, market price, costing and distribution based on depressed-market pricing for two or three years, they will be in for a rude awakening when their supplier is no longer there. Then the cost of re-getting the product to the marketplace down the whole supply chain might double or triple his cost.

LQ: How do you continue to innovate in ways that continue to capture the imagination of your customers? Do winning ideas tend to come from within or outside your company?

Steve Ramescu: You have to be able to read your customers and understand what their expectations are. You can’t be innovative with customers who say, “My marketplace only includes our immediate customers, and I have no vision of growing or going anywhere else, nor do I want to.” You can’t be innovative with that. It depends on the mindset of the directorship or ownership of the customer as well as the directorship or ownership of the service provider. If the will is there to expand and be innovative, you can do it as long as both parties are there and willing.

LQ: What is the role of 3PLs and carriers in working with firms to identify and mitigate potential sources of risk and enhance overall firm sustainability? (David Closs, Ph., Michigan State and LQ Executive Editor)

Steve Ramescu: It goes back to what I said about partnerships. It can’t just be a word. If even one of the two parties is not profitable, you are at risk. The peaks and valleys are critical because, for example, people will not purchase more equipment because you are going to have a busy quarter. During your busy quarter, your shipments are going to sit on the dock unless you have planned it properly for production, distribution, warehousing, inventory control—whatever the process that has to be managed. And it must be managed with a sustainable, long-term method. We can’t change because one person in the party wants to revamp the process simply to manage a brief spike in business, an anomaly; those are the things that can put everybody at risk. Also, we can’t expect to do a great job on a dime. That’s why it’s important to manage the peaks and valleys together.

LQ: With respect to creating goals and strategies, such as in the application of supply chain technologies—how do you ensure the alignment of expectations of everyone in the supply chain—from employees, suppliers and customers?

Steve Ramescu: The most important component of our goals and strategies is that our employees are engaged directly, all the time. We try to knock down the hierarchy barriers, because everybody has good ideas and everybody touches customers in different ways and facets of the business. Technology helps, but it does not talk and solve business problems. It only transmits, sends and receives information.

Having our employees feel and know that they’re part of the plan is critical to our survival. We all say we want the same thing for our employees, but you really have to reward your employees well: namely, with respect and monetary awards. The more they get a part of the pie, the more they will contribute and the more excited they will be to come to work. Especially in a crisis situation like today, I can make the decision not to be as profitable this year as we were last year or the year before, because we are going to invest in our people instead. When my people go home at night knowing their job is here tomorrow morning, that the boss isn’t simply taking a short sighted perspective of cost cutting for today, they come to work with pride and they take ownership because they know they have the support of their leadership, and therefore they will support the company’s leadership as well.

LQ: Is there a view that developing green supply chain practices will increase corporate efficiency and add to profits?

Steve Ramescu: We have one planet; we have to be green. Is green going to add to profits? Maybe, maybe not. But do we have a choice? If we keep burning our resources and there is no more drinking water, it’s irrelevant how much money we have. The green practice is similar to IT; it is ever-evolving and once it’s in practice, it will become more efficient. It follows that as we become more efficient in anything we do, we tend to be more profitable.

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