Looking for high service carriers

May 1, 2005
In a modern logistics environment, running a public refrigerated warehouse without including integrated inbound and outbound services sounds a lot like

In a modern logistics environment, running a public refrigerated warehouse without including integrated inbound and outbound services sounds a lot like owning a wonderful highway tractor with a brand new, recently installed transmission, but without an engine or drive axles. It looks great, but it's unlikely to go very far.

Hanson Logistics in St Joseph, Michigan, has the engine, transmission, and drive axles and has long been able to offer all three components of the logistics triad, adapting to changing trends and expanding service offerings throughout its 51-year history. Within the last year, the company changed its name and added a refrigerated pool distribution program to ensure that customers and prospective clients would know that Hanson could provide the full range of services required for inventory management and service throughout the distribution stream. Within weeks of implementation of its transportation management program, Hanson began regular service to three of the nation's largest retailers.

Now the 13th largest refrigerated warehouse network in the US, the company was founded as Southern Michigan Cold Storage in 1954, and built its Benton Harbor warehouse in 1955 to serve processors in the fruit and vegetable-farming region along the shores of Lake Michigan in the Southwestern corner of the state. Although relatively far north, the lake moderates the climate to the extent that a great deal of tree fruit can be grown. Southwestern Michigan even boasts a small wine-growing region.

Frozen storage was added to the Benton Harbor facility in 1956 and an expansion for dry storage was built in 1962. Beginning in 1969, the company began to expand geographically, purchasing Vroom Cold Storage in Hart, Michigan, a little more than 100 miles to the north. By 1973, warehouses had been constructed in Logansport, Indiana, and a facility opened in South Bend, Indiana. In 1979, a processing plant in Hartford, Michigan, was purchased from the Duffy Mott Company, a 100-year old processor of apple juice and other fruit products.

In 1989, Tri-State Investments became the majority stockholder, and in 1993, the name changed to Hanson Cold Storage. In the following 12 years, more locations were added, raising the total to eight facilities with an aggregate of 32 million cubic feet of storage space able to accommodate deep frozen, refrigerated, or dry goods. When integrated transportation services were added to the mix, Hanson faced the reality that cold storage was no longer an accurate description of its product offerings. To present the full range of company capabilities to the public, Hanson Cold Storage adopted a new name — Hanson Logistics — in early 2005, and after operating from corporate headquarters at the Benton Harbor warehouse for 50 years, moved into new corporate offices in St Joseph, a community on the edge of Benton Harbor.

Change continues as well. Hanson has plans in the works that will double the size of the Benton Harbor facility within the next three years.

All Hanson storage locations offer public warehousing; however, some serve one customer to such an extent that the service resembles a dedicated service. One plant is located across the street from a Tyson pork plant. Another has an even closer contact with its main customer. Product moves from the customer's processing line through a wall between two adjoining buildings into the Hanson freezer. In the network, as a whole, about 85% of stored product is frozen, and the remainder is refrigerated or part of a small amount of dry groceries. The company maintains inventory sufficient for two to three week's shipping for most customers.

New logistics management system

With its freight consolidation plan in place and transportation management handled with newly adopted LeanLogistics On-Demand management software, Hanson can provide a full range of warehousing and transportation services, says Andy Janson, vice-president of business development. Warehouse management runs on the Provia ViaView software system. The company purchases transportation on a large scale, shipping as many as 150 loads a week during peak season. On an annual basis, the company handles 1.5 billion pounds of freight into or out of its facilities. This high volume allows Hanson to negotiate competitive rates from a large number of carriers, with about 50 carriers on the daily working list and an additional 30 carriers available from the call list, he says.

Negotiating competitive rates from carriers requires more than simply looking for the lowest price, Janson says. The company has to be absolutely confident in the service provided by the carriers it selects. “We have hard assets in our warehousing facilities, so selecting carriers that fail to perform would be the same as failing in the warehouse,” he says. “We simply cannot allow a transportation failure to endanger our warehousing business. In effect, high quality transportation protects the future of our warehousing.”

This requires finding carriers with lanes that match Hanson's delivery requirements. Many of the carriers on the active working list are small — as few as two trucks up to fleets with as many as 60 trucks, Janson says. Until the pool distribution program that began May 1, 2005, reaches critical mass, most carriers make multi-stop LTL runs from Hanson facilities on relatively short hauls. Those short hauls are attractive to some small carriers, because they have negotiated regular return hauls that terminate in or around Grand Rapids and other points in Southern Michigan.

Central Midwest location

The Hanson warehousing network runs in a 200-mile north-south line starting along the shores of Lake Michigan in Hart, Michigan, north of Muskegon, south through the Benton Harbor area, and on farther south through South Bend to Logansport and Lafayette, Indiana. Distribution from these eight warehouses is available nationwide, but is concentrated in an area of about 300 miles around the locations. That service area places 82 million people, more than a third of the US population, within reach of a Hanson facility on an overnight basis.

Multi-stop loads routinely head for Chicago, Cincinnati, Cleveland, Des Moines, Detroit, Knoxville, Memphis, Milwaukee, and St Louis. Hanson coordinates truckloads to more distant points such as Atlanta, Denver, and Phoenix. Upon request, the company can also arrange full car rail service to points on the East Coast.

Hanson is able to negotiate rates that pay carriers well, because it does not take a large portion of the freight charge. “Our transportation fee is less than that charged by many freight brokers, because we have other revenue streams besides trucking,” Janson says. “Brokers have to depend on brokerage fees for their entire revenue. Hanson depends on its warehousing services for the majority of revenue. Transportation management is a value-added service to support the physical assets represented by warehousing. If we do a good warehousing job and select high-service carriers, we can keep our customers happy and keep our warehouses filled. The carriers we select are not picked because they offer the lowest rates. We pay compensatory rates for trucking, not just the lowest possible price.”

Reduced administrative effort

Hanson's LeanLogistics transportation management system allows warehousing customers to take care of delivery arrangements with little or no administrative effort by the shipper. Details of desired shipments are relayed to Hanson, and the rest gets done without additional shipper involvement. Customers get complete, transparent visibility of the shipping and delivery process without any requirement for information management investment. Handling transportation through Hanson takes just one phone call to set a process in motion that can be monitored on the Internet. “Hanson's services can reduce the administrative cost of transportation to the shipper by almost 25%,” he says.

In addition to its traditional LTL service with multiple shipments on a truck scheduled for multiple delivery stops, Hanson Logistics recently launched its pool load consolidation program to offer shipments from multiple vendors to receivers as single truckloads. Although the entire Hanson network is involved with the pool truckload operation, loads originate only from the Benton Harbor and Lafayette locations. Hanson transfers products from other warehouses to make up full loads when necessary. Unlike the multi-stop program, the pool truckload operation is aimed specifically at receivers in the central Midwest with special attention to Chicago.

“In today's supply chain, receivers want single consolidated truckloads so that they can utilize their distribution center receiving capability more efficiently,” Janson says. “That desire for truckloads is a disadvantage for small and medium-sized processors, because their orders often are not large enough to require a truckload for a single receiver. Small orders also add to distribution costs, because multi-stop LTL shipping carries a more expensive freight rate. The new pool distribution program delivers its greatest value when multiple shippers utilize a single load that allows all the producers involved to deliver in a cost-effective manner on a predictable, manageable schedule.”

The pool distribution program launched on May 1, 2005, and has a stated goal of growing rapidly to 25 loads a day split between the two origin points. On a broader scale, Hanson's goal is to provide total outbound transportation management for all its warehousing customers. Many customers do not have the personnel or resources to match loads to carriers, particularly where small shipments are concerned, Janson says. As a result, those customers often rely on brokers. “Our transportation management program offers the same — better — service as brokers in a simplified manner,” he says. “By turning transportation management over to Hanson, our customers get a simplified program that takes several of the usual steps out of the transportation transaction — one call does all, in other words. Every time we take a step out of the transportation process, we reduce the cost and improve service to our customers and provide more efficient operation for receivers as well. We want to make it easier for shippers and carriers to do business cost efficiently at reasonable margins for all concerned.”

About the Author

Gary Macklin

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