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Logistics Quarterly Magazine - Volume 16, Issue 2, 2010

A Conversation With Geoff Bennett, President, Co-Founder, Kelron Logistics

Interviewed by Cameron Joyce, President, Accuristix

LQ: Your firm provides a number of domestic and cross-border transportation services from Canada. How have you had to reinvent your business in the last year or so?

Geoff Bennett: Like most Canadian companies, we’ve had to adapt to the dollar, which would certainly have been the major change driver. From our perspective, we’re a seller of services.

We found the Canadian dollar has changed our pricing model and our expectations in terms of both the cost of buying Canadian transportation in the U.S. market and, to a great extent, our business model,which at points in the past, was largely a labor play on selling services to a significant percentage of our customers, who are U.S. customers, and selling them our labor from Canada.

LQ: How have the recent changes with security and border crossings impacted you? How do you deal with them?

Geoff Bennett: As a third party, we’re in a challenging position. The carriers have very challenging requirements in order to comply with the border crossing requirements. We’re forced into managing remotely the type of provider we’re going to bring to our customers, specifically customers who might have signed on as North American or international businesses, to provide either C-TPAT or the Canadian version – the PIP Security system – and to become partners in those programs. We, as a Canadian-based company and a non-asset-based company, aren’t yet eligible for participation in the C-TPAT program, though that will happen soon, but we are members of the PIP program, which is accepted by the U.S. as equivalent. For our customers, the requirement for them to work with Kelron involves having us check the carriers, make sure that they are appropriately secure and that their processes and their people meet the required tests. In a lot of cases, where there might not be an absolute requirement to use a certified carrier, we’re still providing a level of assurance that we’ve done the required vetting and a contractualization process with the carrier that most customers themselves don’t have the time or the people to conduct.

LQ: You’re in a somewhat unique position as a non-asset-based provider. You still have to compete with a lot of the full-service providers in several aspects. How do you accomplish that?

Geoff Bennett: We have three separate streams of business that all run relatively seamlessly together. We have a very transactional business that meets the requirement of somebody who’s gotten caught short. Potentially they had a regular carrier on who can’t handle the surge in volume, or it’s a sporadic move where non-asset-based carrier might view that as being a preferential lane where they’d want to commit to having availability all the time.

We have a business where we act very much like a carrier to the customer — in many cases these might be Fortune 1000 organizations with a very predictable requirement to move product between production and warehouse or warehouse and customer, on a very predictable timeline. We would provide the same or better service and meet or beat the carrier cost in order to be awarded those lanes.

Then we have engagements where we’re a transportation management organization where we handle all of the freight requirements for that customer for a particular entity or for the whole organization.

LQ: How do you deal with capacity constraints? Obviously there has been an ebb and flow of over and under capacity at various times, depending on what the U.S. economy is doing.

Geoff Bennett: Clearly, we need to understand what is actually driving the operator of the equipment. As the market is changing a lot right now, that’s much more of a real-time process. In the last five years, up until what we thought was a capacity surge four years ago, generally I could get a good read on what the carrier was trying to accomplish. Generally that would be relatively consistent. It would last a while — it wouldn’t be a month-to-month change. Right now, because of the draw down on inventory that we had over the last year and a half, we’re seeing a big stretch in terms of everybody building inventory back up. Nobody wants to get caught short when the customer goes to the store and they don’t want to be caught without product. We’re getting surges that are very unpredictable. The carriers who haven’t really kept all of their equipment running, or let some of the older stuff go and haven’t replaced it yet, are finding that challenging. They’re adapting by deciding what lanes make the most sense for them — where can they get the least amount of empty miles, where can they get the highest efficiency out of their equipment, or the greatest return on the miles that they run.

For us, we have a large carrier base that we must understand beyond the larger carriers. You’re often filling an order with somebody who’s got 20 trucks. I need to know what’s going to motivate him and be able to bring him to the table quickly, in the case of a demand that might not have been there a month ago. An example for us of something that is ongoing in terms of capacity is a club store that we do a lot of business for as a transportation capacity provider. We pick up all the lanes that aren’t regular and repetitive. When you walk into that club store and you walk down the middle aisles, they always have a change in product line. They buy whatever they spot buy and that’s it. When that’s sold, they don’t have any more of it. From a carrier point of view, I’m not going to move my network around to go get that product for two months, and then not have it again because you don’t have another vendor in that particular location that I could count on getting other freight from.

From my perspective, typically we know a year in advance what is going to happen. And then a month in advance, if we don’t have a sufficient carrier base in that neighborhood, we will work diligently to build up our knowledge of which carriers are most likely, and then we dump that back into our TMS and get ready to go.

In our world, there’s no shortage of solution providers. We’re competing with the asset and the non-asset-based groups, from the global 3PLs down to the 3PL on the corner. I think we’re positioning ourselves as a broad-based niche transportation provider in that while we’re providing domestic transportation within North America, we’re doing it on three different levels. And, we’re technologically enabled beyond what most providers that offer the whole gamut of services would be. The large guys would all have some sort of transportation management offering, and could potentially offer some solutions in a dedicated capacity. Most of those people have a hard time getting into the spot market. In most cases, whether it would be through my firm or other competitor’s firm on the spot market side, they would farm out their customer’s requirement for the spot market requirement.

A vital element in our world is agility in business. We have the technology interface, the key performance indicator (KPI) definition process, the requirements on less-than-truckload (LTL) capacity, to have a point of delivery 99 percent on time at retail locations within a half hour window. We’ve adapted very effectively in that environment and I think those are some unique attributes we provide. It is a challenge for any 3PL to consider how to build a model that allows you to move seamlessly between each one of those hats with agility to meet the needs of each customer but I feel that we do a great job of it.

(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.)

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