McCarty-Hull Seeks Expansion in Logistics

Good fortune and a favorable real estate market provided McCarty-Hull Inc with an opportunity to occupy a vast, new distribution center in 2000. Hard work now is required to fill those parts of the 405,000-sq-ft facility not needed to support the company's core business.

McCarty-Hull is a wholesale distributor to convenience stores with customers in Texas, New Mexico, Oklahoma, and Kansas. Headquartered in Amarillo, Texas, the company has remote distribution locations in Lubbock, Pampa, and Vernon, Texas. The trade area reaches from Presidio, Texas, a small community on the Rio Grande west of Big Bend National Park, to McPherson, Kansas, to the north of Wichita. East-to-West, McCarty-Hull runs from Wichita Falls, Texas, to Santa Rosa, New Mexico, halfway between Amarillo and Albuquerque. Within this vast, but sparsely populated region, the company serves 1,200 customers on a bi-weekly to weekly basis.

Considered a medium-sized distributor among the ranks of convenience store suppliers, McCarty-Hull will generate sales of roughly $100 million in 2001. The company, effectively, is 76 years old, a preceding company having been started by the McCarty family as Wichita Cigar & Tobacco Company in Wichita Falls. That was in 1924 when much of West Texas was still empty range land. At that time, Charles Goodnight, the legendary cattleman of the XIT Ranch, was still alive and the huge ranches that once sprawled over the plains from the Texas Panhandle all the way north into Wyoming were just being broken up into farms. The towns that now dot the High Plains were slowly being founded at that time.

McCarty-Hull's operations began in Amarillo in 1949 under the name Amarillo Cigar Company. At the time, the city had a population of roughly 40,000 and was the largest community in the Panhandle. Today, Amarillo has grown to more than 175,000, but has lost its population edge on the High Plains to Lubbock, 118 miles to the south, which has about 200,000 people.

As a wholesale distributor, McCarty-Hull seeks to supply everything needed by convenience stores. Obviously, tobacco products remain a key part of the inventory. In addition, the company distributes health and beauty aids, paper goods and cleaning supplies, candy, milk, ice cream, frozen foods, and refrigerated products such as processed sandwich meat. Delivery is made to schools, hospitals, and government installations as well as convenience stores.

McCarty-Hull also is a secondary grocery supplier to chains such as Albertsons, Homeland Foods, and United Foods. In a curious sequence of circumstance, McCarty-Hull is a member of Affiliated Foods, a wholesale grocery cooperative based in Amarillo. “We have an interesting relationship with Affiliated in that we buy from them, we sell to them, and we compete with them for business on the street,” says Kevin McCarty, vice-president of operations.

Current efforts aimed at becoming a presence among third party logistics providers are driven by the acquisition of a new distribution center. Until 2000, McCarty-Hull was located inside the city of Amarillo in a 70,000-sq-ft building. In addition, the company leased roughly 5,000 sq ft in two other locations. Expansion on the headquarters site would have used all the available property, causing extreme congestion for fleet parking, says Bill McCarty, president. Although highway access from the city site was good, traffic also was a problem, especially for motor carriers delivering to the warehouse.

The local economic development commission suggested that the company consider an empty building in a free trade zone near the airport west of the city. At first, the price seemed high, but a more detailed examination of the proposed transaction showed that the building previously used as a manufacturing and distribution facility by Levi Strauss & Co could be acquired for little more than the cost of expanding the city location. Another argument in favor of moving out of the city involved space for future expansion. If the city location were to be expanded, the company would probably need more space again within three to five years, space not available on the property, Bill McCarty says.

The purchase has provided McCarty-Hull with the flexibility to grow for years. The new site contains 56 acres of which 38 acres are undeveloped. The building covers 405,000 sq ft and has three different ceiling heights — 22 ft, 24 ft, and 42 ft. Only 150,000 sq ft of the building is used to store product for McCarty-Hull's core business. Most of the space is used for tobacco, health and beauty aids, and dry grocery warehousing. Roughly 11,000 sq ft of temperature-controlled storage has been built inside the existing structure — 4,800 sq ft of medium temperature space and 6,400 sq ft of freezer.

Although volume is small, McCarty-Hull already has begun to find customers for the remaining building space. “We have a low supply of public warehousing in Amarillo, especially refrigerated warehousing,” Kevin McCarty says.

Part of the building is used to store product for some customers. Others use McCarty-Hull as a holding service that can provide distribution. In this value-added service, the company stores goods until directed to ship them. These shipments are moved with McCarty-Hull's own distribution fleet or placed with for-hire carriers if the destination is outside the trade area. Another service provides cross-dock operations from customers to longhaul motor carriers with no storage involved.

The McCarty-Hull warehouse also provides storage for the government's federal commodities program. The main item in this effort is frozen meat intended for export.

Kevin McCarty says Amarillo provides a perfect location for logistics services throughout the Southwest. “We sit at the intersection of two major highways roughly halfway between Oklahoma City and Albuquerque on Interstate 40 and 400 miles in each direction on a combination of US Highway 287 and Interstate 25 from Dallas to Denver,” he says. “Amarillo is the heart of the Texas meat patch, so we have an ample supply of inbound transportation. McCarty-Hull can supply the transportation capacity to reach any location in West Texas, eastern New Mexico, plus parts of Oklahoma and Kansas.”

Those locations already see McCarty-Hull once or twice a week with trucks dispatched from Amarillo or from three satellite operations. Amarillo is home to 17 refrigerated straight trucks plus one tractor and refrigerated trailer used to support remote locations in Lubbock, Pampa, and Vernon, Texas. Lubbock is the largest of the satellites with a fleet of eight vehicles. Pampa and Vernon each host two trucks. The tractor and trailer delivers daily loads of pre-picked orders to the satellites.

All store delivery is currently made with straight trucks ranging from 15 to 28 ft in length. As some of the older trucks are replaced, McCarty-Hull plans to switch to medium tractors and short trailers. “Tractors and trailers will give us the opportunity to shuttle loaded trailers to the satellite locations in pairs of doubles,” says Mike King, delivery supervisor.

Routes into the Southwestern part of the trade area are handled from Lubbock. Trucks from Vernon serve eastern areas, and Pampa handles the northern Panhandle and part of Oklahoma. The Amarillo fleet is responsible for the metropolitan area, New Mexico, and some of the longer routes.

The entire Amarillo fleet is not used every day. Twelve routes are run Monday through Thursday. Routes from Lubbock and Pampa do not run on Mondays. The total driver complement in Amarillo is 13. McCarty-Hull has six drivers in Lubbock and two each in Pampa and Vernon. The warehouse crew in Amarillo is 17 in a total staff of 107 people of which 90 are at headquarters and 17 are based at the three satellites.

Customers have a wide choice of ordering options. They can transmit orders electronically, telephone customer service representatives, or give their orders to sales personnel in person. These options are priced differently and reflect the amount of personal attention each customer requires. Most stores receive delivery once a week. No matter how orders are received, they are delivered the next day. Orders are selected and loaded on the night of receipt for the following day's routes. Order processing for tobacco products includes affixing tax stamps for four states: Texas, Oklahoma, New Mexico, and Kansas.

An average route makes about 20 stops a day, handling about 600 pieces hand loaded on the truck body floor. A full load contains many more than 600 individual items, because McCarty-Hull sells everything from cases to single packages. If a customer orders one package of razor blades, one eyebrow pencil, a carton of candy, or one package of lunch meat, that's what they get. Singles are consolidated for loading in plastic tubs called bundles by McCarty-Hull.

These are long routes. Most of the small towns in West Texas are about 30 miles apart. The majority of routes are completed in a single day with only a few stopping overnight. In making their 20 stops, drivers will cover 200 to 250 miles a day. This puts an average of 65,000 miles a year on trucks. Driver pay takes distance into account. An incentive compensation plan pays a base rate plus additional increments for miles, stops, and pieces delivered.

The fleet is a mixture of International and Isuzu chassis, mostly with Supreme truck bodies. The majority of truck bodies are 24 ft long. Refrigeration units are from Thermo King.

Although McCarty-Hull owns the fleet, all maintenance services are outsourced. Trucks are maintained by Robert's Truck Center in Amarillo. Refrigeration units are serviced by Amarillo Thermo King.