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Logistics Quarterly Magazine - Volume 16, Issue 2, 2010

A Conversation With Craig Callahan, Vice President Logistics & Corporate Sales, Werner Enterprises

Interviewed by LQ’s Executive Editor, Nicholas Seierson

LQ: Tell us what you’re most proud of last year and what’s carrying you over for 2010.

Craig Callahan: In 2009, one of the significant accomplishments of our organization was to come out of the recession healthier than we went in. We are a company that is very proud of that because there aren’t many companies in this position. We went into the economic recession in a strong financial position with no debt; we came out of the economic recession with a leaner, meaner organization and debt-free with cash flow, putting us in a position to expand where needed and necessary in 2010.

LQ: What’s your position on the cost of fuel? Is that worrying you?

Craig Callahan: For a company like us, where over 80 percent of our revenue is generated in the trucking business, the cost of fuel is the largest operating cost. Everything we do with our equipment and with the training of our drivers revolves around two important items: fuel consumption and safety. There are improvements we’ve made on the efficiencies of our equipment that have enabled us to gain extra miles per gallon. The advantages and the performance that we’ve been able to achieve in the last two years have helped us save millions of dollars. In turn, we are able to put ourselves in a position to be more competitive in the market.

LQ: Have you seen a change in the importance of the supply chain in your organization in the current economic context?

Craig Callahan: We make our living at solving problems in the supply chain. The supply chain has gained more importance and more exposure in most companies around the world. As you think of all the inputs associated with the supply chain, specifically, the cost associated with fuel, as well as the inventory and carrying costs, they have leant more exposure to the supply chain as a whole. This has helped our firm to expand our horizons around the problems we solve. It’s no longer just a point A to point B solution our customers ask for. Our customers require us to help them provide visibility for their goods from the factory in China to the store in the U.S. You can only do that if an organization commits itself to technology systems and talent.

LQ: In the drive to reduce assets that are committed to the supply chain, more of the players are trying to push the warehouses, the trucks, the ships, and even inventory and payment terms off to third parties. Is there anyone who is going to want to own those assets and how are they going to make that work?

Craig Callahan: We’re certainly a part of that strategy. When we look at our asset networks, our number of trucks has decreased from a high of 9,100 to a current number of around 7,300. So we’ve gone through a significant right-sizing of our own fleet. From a capacity perspective, although we don’t have that capacity to offer on our own assets, we certainly try and gauge outside trucking companies through our brokerage model to bring in that buffer capacity to offer to our customers. So, to answer the question — we have approximately 7,300 of those assets, and that’s because we want to. We don’t want to own any more than that. Recent history has indicated that it’s a losing proposition because you find yourself oversized and underleveraged.

LQ: Isn’t that just pushing the problem one arm away?

Craig Callahan: I don’t think so. The way we see it, we’ve got very good relationships with many of our third-party carriers. We’re a big, well-known organization that does business with many of the Fortune 100 companies. Some of the smaller carriers would never have that opportunity to engage with customers of that size; yet, they can through us. We are truly taking these Fortune 100 companies’ capacity that they otherwise wouldn’t have exposure to or wouldn’t want to.

LQ: Do you see the same thing happening with risk on the supply chain, pushing it off to third parties?

Craig Callahan: When we think about third party, we think about the work we do in outsource contract logistics. In many cases, what our client may see as risk, we see as reward. That’s how we make our living. We would certainly want to have a conversation with our customers on how they would want to insulate themselves from that risk. If you think about the business that we’re in, and about the liability cost associated with running a large fleet, do you really want to expose yourself to that type of liability? If you are a carrier, and that’s how you make your living and you are the experts in that specific area, then you are best positioned to insulate yourself from that risk and take that responsibility and risk away from your customer.

LQ: We’ve just seen one of the worst years in the memory of today’s leaders. Are there any lessons that we can take to try and bust the old business cycle and try and keep supply chain improvement on a path of continuous improvement?

Craig Callahan: I think if there’s anything that can be learned, as a country in general, is that we’re guilty of overspending. From Werner Enterprises’ perspective, it has certainly helped crystallize the business plan that we have always held. As I mentioned, we’re a debt-free organization. Being fiscally responsible has been priority one in this organization since the founder started it back in 1956. We’ve always held the position that we will take calculated risk, but at the same time, we don’t want to put ourselves in a situation where we no longer have leverage. Going forward, we plan to even use a more conservative strategy so that we can remain financially sound and debt-free to continue to be in existence for the next 50 years.

(This interview is an abridged and edited edition of LQ’s Executive Insight Interview Series, held on June 10, 2010, at the Toronto Board of Trade’s Country Club.)

Transcript of this interview can be downloaded here: Craig Callahan Interview


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