room in the - clark schaefer hackett industries we serve, and to share that insight for the good of...

A lite paper on what we learned in a room full of People to Know.

The Transportation and Logistics Edition

roomIn the

Ken Ackerman President The Ackerman Company

Leslie Barth Director of Client Solutions ODW Logistics

Charles Coogan President and CEO Acquisitions Logistics Engineering

Richard Durst CEO Artic Express

Dick Hitchcock Vice President of Corporate Accounts New Age Transportation

Janet Prior President AllRite Logistics

The People to Know‘In the Room’ Initiative

At Clark Schaefer Hackett, we’re proud to be industry specialists. We strive to know everything we can about the industries we serve, and to share that insight for the good of our clients and communities. When we gathered the 2013 Transportation and Logistics People to Know around one table to talk, we were privy to profound thought, unique perspectives, and intelligent understanding. Here, we share their wisdom with you.

An industry driven by efficiency

Adapting to the business environment

The realities of a technological world

What we learned

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An industry driven by efficiency

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Logistics is about moving goods from Point A to Point B in the fastest, most efficient and best economical ways possible. It is an industry driven greatly by location, reach and how the economy is working at any given time.

Columbus has developed into a logistics hub because of its proximity to a large swath of the nation’s population. The city’s location lets providers capitalize in a marketplace that is being altered by the speed of service customers are demanding from their providers.

Because Columbus is a tremendous location from where to access a good portion of the U.S. population, and because we are a logistics haven, so to speak, we are in the thick of it when it comes to the discussions businesses have about finding providers who are close to their operations. Really, Columbus is the place to be.

As providers, we are living in a strategically important community. Chicago, Atlanta, upstate New York or New York City – Central Ohio is close to many big markets. What that means is if you live in Cincinnati or Cleveland, there’s a good possibility that service to those cities will be faster compared with cities such as Cheyenne, Wyo. or Boise, Idaho because of population density and how the distribution systems are now set up. Everyone is looking for the biggest bang for their logistics buck.

The idea of being closer to your customers is a philosophy that we all have experienced at one time or another across industry lines. Everything is cyclical in life and in logistics, and I think some industry lines are looking at that issue again. Providers will always locate closer to the customer if it makes financial sense. They’re many ways to try to save money. For awhile, it was zone skipping where you might bypass using a UPS to ship from Columbus to the end destination and instead load them onto a smaller semi trailer that would drop them at a UPS on say the West Coast, ultimately saving you money on shipping fees.

Janet PriorAllRite Logistics

Richard DurstArtic Express


Insight from roundtable participants...

Insight from roundtable participants...A desire for shorter delivery times – many customers expect a two-day window at best – has indeed always been part of the landscape. But the emphasis is stronger today and requires that the provider think it through. Using Los Angeles as an example, I like dual locations so that you’re hitting the population centers on both coasts, because eventually everybody wants to tap into the West Coast population centers. For me, I prefer to use Columbus as my first location. Maybe it’s Columbus/LA or Chicago/LA. It’s the dual model where you are best able to serve customers who are trying to hit that two-day window.

There is little doubt that speed of delivery plays an integral part of the supply-chain process, but often overlooked is the basic desire to shave expenses, and it’s where I think intermodal works well. Intermodal is not about speed, it’s about reducing your cost. I once worked for an intermodal provider who ran 19 trains a day between Los Angeles and Chicago, and our delivery time was about the same as if a load were shipped via truck. Saving $300 to $800 a load was not unusual. As long as it’s over 700 miles, you can save with intermodal. It is not about speed with intermodal, but it is a good way to reduction your transportation cost.

Dick HitchcockNew Age Transportation

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Leslie BarthODW Logistics

4

Adapting to the business environment

Changes in distribution management have transformed how shipping lines are filled and supply chains operate. Adapting to these changes has caused providers to reimagine their roles and the way they interact with customers.

Insight from roundtable participants...Business is always evolving and it’s no different in this industry. A few years back, I wrote an article in which several areas were identified as situations where warehouses and retail have merged. One of the newest is what we refer to as reverse logistics. Let’s say the TV you bought at a major retailer doesn’t work, so you take it back to the store. In the past, the retailer might ship those off to one of its properties to refurbish or repair. Today, there is a third party provider based perhaps in Pittsburgh that has a national return center for the retailer. Your TV would head there, get fixed if it can be fixed, and returned to the store. The retail industry is now outsourcing those jobs. There are other third-party specialists working in particular niches, as well. Some major appliance stores outsource fulfillment services such as delivering and installing a refrigerator or washer in the customer’s home.

I think so many manufacturers are taking on the responsibility of doing inventories for retailers. Every shipper we move freight for, 25 to 30 percent of what they ship domestically goes to Wal-Mart or Sam’s Club. So you have to be on top of your inventory management system within the Wal-Mart network or you won’t be supplying the product. They have gotten very good at being able to do that.

Ken AckermanThe Ackerman Company



Charles CooganAcquisitions Logistics Engineering


Emulating the supply chain for a retailer like Wal-Mart is a little more difficult when working with the government. There are some inherent supply-chain challenges they face mostly because of the density of some of the products they’re required to supply and have on hand, especially as it applies to the military. For instance, some parts the Army might need every two or three years only. The challenge is getting them to really understand the thousands and thousands of pieces of product the commercial system ships daily and adapt that system to fit their needs. It doesn’t translate over directly. You try to take the best practices to the military and government but the density of some items is very thin and wide as opposed to deep and narrow. The challenge isn’t relegated to the government only.

We work with a lot of people facing similar challenges and find solutions for them that balance low-density items with the need out in the market for those items.

From a manufacturing side, we see a more intertwined relationship because of the labor environment. The warehouse wage structure starts at different levels than the manufacturing wage structure would be. The further we get into a manufacturing environment providing services that are line-side, the more cost effective the whole solution becomes for them. So you may have a full distribution center that’s receiving their parts, you may have their finished goods, you may be doing line side delivery and be completely integrated with that line and the manufacturer. That’s where I think a nexus forms.


The realities of a technologicalworld

The Internet and new security regulations have influenced the logistics industry in positive and sometimes flummoxing ways. Technology has improved efficiencies while new laws have added a layer of bureaucracy to the business model.

I like to talk about big data. We used to scour magazines and books across the country looking for leads. The fact that we have this instant communication and access to information and reams of data at our fingertips is really wonderful for people coming out of college. I talk about the role of technology in our business when I speak to students at Ohio State University. I’m not a technology expert, but I can tell them how much better it is when they use it.

When Internet and online orders became really prevalent, there was stress on the supply chain. It was tough to go from a 48-hour window of shipping and ordering to maybe four hours. Any order received by 2 p.m. today has to ship by 5 p.m. UPS can’t pick up on my dock until 5 and that happens to a lot of companies that may have second shifts, so they may ship at 7, 8 or 9 at night to hit a next day delivery. That is now normal for us but in the beginning, it wasn’t. We just had to change as the paradigm shifted.


Dick HitchcockNew Age Transportation

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9


If you’re moving goods by semi trucks, the shipper uses seals to ensure the integrity of his product. So when you leave the shipper’s facility, there is a cable seal or a bolt seal or maybe some cheap tin metal seal that is a numbered seal that correlates with what’s on the bill of lading. When you get to your destination that seal better still be intact. It’s not enough to have just a padlock on the back of a trailer, because you must have both the padlock and seal. There also are times, although infrequent, when some government agency, the DOT or an inspector may want to open your trailer to inspect what is in there. That violates the seal’s integrity, which then prompts us to call the shipper and alert them to what is happening. We will reseal the trailer and have the inspector sign that he has witnessed us resealing

the trailer. This process is repeated each time during trips with multiple stops. When we do reach the final destination, and for us it involves primarily food products, everybody is confident there has not been any tampering with the food.

Those security concerns over shipments and the regulation that’s been put in place to mitigate them - they drive costs into the model that would not have been there in the past.



About Clark Schaefer HackettThe core competency of CSH is to provide best-in-class technical expertise in assurance and tax services to mid-sized organizations and their stakeholders. For 75 years, our accountants have served as the primary trusted business advisor to the organizations that form the backbone of the region’s economy. We align resources by industry to better serve the needs of our clientele. Specialization permits us to develop deep knowledge of the issues facing our clients and to anticipate needs based on our understanding of industry trends. We select a team that best fits the needs of the client from our strong bench of firmwide industry specialists. Our industry and specialty groups provide expertise comparable to a national firm but with the benefits of personalized service and a value-added fee structure found in a regional or local firm.

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PICTURED Above:

Top: Denice Hertlein, CPA, Shareholder, Clark Schaefer Hackett

Left: Patty Azallion, CPA, Principal, Clark Schaefer Hackett

Right: John Curtis, CPA, Manager, Clark Schaefer Hackett

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