Finding New Growth Opportunities

Lanter Company Integrates Six Related Divisions DISTRIBUTION carriers face a stern challenge: find a way to grow in a declining market or fade from the scene. The Lanter Company in Madison, Illinois, just minutes across the river from St Louis, believes that its best opportunity for growth resides in filling the distribution, warehousing, and truckload network built over the past 30 years.

The Lanter Company actually began in the 1950s as Wayne Lanter Dairy Delivery Service with home delivery milk routes in rural southwestern Illinois. By the 1970s, the company evolved into a breakbulk operation for perishables, mostly candy. Full loads of candy along with some loads of meat would be delivered by for-hire carrier to the Lanter dock. These loads would be broken down for delivery in smaller quantities to receivers within a 150-mile radius of St Louis. The next step in Lanter's evolution added truckload carriage to the mix, with the company attempting to expand its reach by providing linehaul service from distribution customers to its own breakbulk dock. As the truckload service grew, it provided outbound trucking from distribution shippers to destinations other than Lanter terminals.

The breakbulk operation evolved as well, growing from simple crossdock facilities into full-blown warehouses, some open to the public and other dedicated to specific customers. The Lanter Company now operates 32 separate facilities containing five million cubic feet of refrigerated and dry storage space and employs more than 1,000 associates in Atlanta, Chicago, Kansas City, and Memphis, as well as Madison, Illinois. In addition to these primary distribution points, Lanter operates satellite locations in Knoxville and Nashville, Tennessee, and Omaha, Nebraska. Physical facilities are split between warehousing and pool distribution, which operates seven crossdock terminals with 400,000 sq ft of space.

Fleet Growth The truck fleet has grown accordingly with 130 tractors in the distribution fleet and 175 tractors in the truckload division. The truckload fleet subdivides into 75 company owned tractors and 100 leased from independent contractors. The distribution fleet serves receivers in a radius around the six crossdock terminals. The truckload operation provides service from the Rocky Mountains east to the Midwest and Southeast. Although the truckload division still fulfills its original purpose of feeding freight to the distribution division, it has grown into a substantial little truck line all its own with only 30% of its volume moving to Lanter terminals. The average length of haul for the truckload fleet is 500 miles, which allows nearly all freight to be delivered overnight.

The fleet serving pool distribution is divided among the terminals with 70 vehicles assigned to Madison. Kansas City has the second largest fleet, followed by Memphis as a close third. The other terminals are small, with eight trucks in Nashville, five in Knoxville, and two in Atlanta. The number of trucks required in Chicago varies, depending on the volume of freight to pick up and on activity required to service the Illinois state school commodity program.

The company today is organized into six loosely defined divisions that together amassed about $140 million in total revenue for 2000. Divisions interact fluidly, with the result that lines between them are not all that distinct, Lanter says. In the year just wrapping up, the distribution division accounted for roughly $25 million of total revenue, and the truckload division brought in about $30 million. The warehousing division generated a little more than $40 million. Lanter's traffic management division and the dry freight LTL division accounted for about $15 million each, while dedicated trucking brought in another $10 million or so.

Doubled Company Size Although revenue sources are changing, growth is not only possible, but probable. "We set out five years ago to double the size of the company," says Steve Lanter, president and chief operating officer. "We actually accomplished it in four years."

As the Lanter Company has grown, its customer base has changed radically. "Our first growth came from pool distribution," Lanter says. "However, total tonnage from pool distribution has been declining for years. That is part of what forced the company to diversify."

Freight has begun bypassing traditional pool distribution companies such as Lanter, Howell's Motor Freight, and others. Consolidation in food manufacturing has changed shipping patterns. Shippers that once produced small orders for grocery wholesalers can now build large orders utilizing several different product lines held under the same ownership. These large shipments give manufacturers the option of using truckload carriers instead of pool distribution carriers. Truckload rates, even with stop-off charges, are usually still lower than pool distribution rates for the same amount of freight, Lanter says.

Fewer Pool Points The drop in distribution tonnage has a bright side hidden under the cloud of declining business. Pool freight is still a factor in the transportation market, but it now moves to fewer points. "Shippers want broad coverage from fewer origins," Lanter says. "Some of them ship what amounts to super-pools destined for a large number of states. They put a single distributor in charge of the operation, although more than one carrier may be involved. These shippers want a single point of contact with a seamless distribution system across large areas. Within the Lanter Company we are responsible for 14 states. We may not haul all that freight, but we provide billing and customer service. We work with seven distribution partners, but in the final analysis, we are responsible for the freight. This represents an expansion of our distribution network but not an expansion of our fleet."

This has had the effect of helping the few pool distributors that offer service to large regions of the country. The Lanter Company, for instance, has coverage of most midwestern states and reaches the mid-Atlantic and southeastern states through partnership with another distribution carrier, Lanter says.

As pool distribution tonnage has fallen, Lanter Company has poured assets into contract operations, both in warehousing and dedicated trucking. A good example is a 350,000-sq-ft warehouse operated for Hershey Foods. "They have a full-service package," Lanter says. "We provide truckload service from their plants to the warehouse, store every sku in the Hershey inventory, pick orders at their direction, and provide outbound transportation, both in truckloads and pool delivery. Our service gives Hershey a complete regional distribution center with the ability to fill orders throughout the Midwest."

More Refrigerated LTL Another way to offset the loss of pool distribution tonnage has been to alter the company's focus somewhat from pool delivery more to point-to-point refrigerated LTL. Pool distribution has always been based on the concept of the freight coming to Lanter for delivery. The new focus involves picking up small shipments of freight for delivery in other parts of Lanter's service area. This is built around changing shipping patterns. Some manufacturers that once shipped full loads for pool distribution have changed their procedures to tender individual LTL shipments instead of full loads for breakbulk.

"For instance, Chicago is a busy origin point for refrigerated LTL," says Bill Behrmann, Lanter's vice-president and general manager of the distribution division. "Currently we are moving four to five loads of LTL a day from Chicago to Madison. Some of it goes to receivers in and around St Louis, and a lot goes to other Lanter locations for delivery. The majority of refrigerated LTL from Chicago stays in the St Louis area. About 28% of our Chicago freight goes on to Kansas City and something between 5% and 10% goes to Memphis. Some of that freight for Kansas City goes on to Omaha for final delivery."

In general, freight from Chicago is picked up in delivery order, load-to-ride. If possible, LTL orders are only handled twice, once at pick-up and again at delivery. The trailer used for pick-up may be repowered in Madison with a new tractor and driver bound for Kansas City or Memphis, but the load is not disturbed if possible. Some additional handling is usually necessary if the final destination is Omaha or Nashville, because Omaha freight goes through Kansas City and Nashville shipments feed through Memphis.

Stable Freight Mix Although the volume of refrigerated LTL is rising compared to distribution volume, the freight mix remains much the same. Lanter still relies on candy, fresh and processed meat, snack foods, pharmaceuticals, and health and beauty aids for the bulk of its LTL and pool distribution traffic.

This method of operation provides an alternative source of revenue for Lanter Company with refrigerated LTL filling the niche left open by loss of tonnage from pool distribution. However, building LTL volume would not be as easy as it has so far proved if the Lanter Company did not have experience with pool distribution. "Running a scheduled pool distribution system required us to build an established network that provided daily service to the major metropolitan areas," Lanter says. "Within the distribution division, we run scheduled delivery every week with repetitive routes. This route network is a major asset. Refrigerated LTL freight provides another source of traffic to keep the network filled."

Most of the LTL delivery routes are loops from a terminal out and back. In general, delivery trucks are empty on their return. Lanter delivers on a set schedule that makes filling trailers difficult on some days. "We try to keep LTL equipment loaded to at least 20,000 pounds," Behrmann says. "Trucks make 14 to 18 warehouse or storedoor stops a day, dropping 1,000 to 1,500 pounds at each stop. Drivers are home every night."

Different Fleet Specifications Handling lighter loads in the distribution division requires different equipment than that used by the truckload division. The truckload fleet uses all 53-ft refrigerated vans built to common general freight van specifications. The distribution fleet uses a mix of 36- and 48-ft trailers built more like grocery trailers than truckload vans. For instance, they have roll-up rear doors and side doors. Many of them have multi-temperature refrigeration systems.

The two tractor fleets are kept separate and are built for specific purposes. The truckload fleet uses C120 Freightliner sleeper conventionals powered by Detroit Diesel engines. Shortnose International 8100-series day cabs with Cummins M11 engines provide power for the distribution fleet. Each fleet has its own replacement cycle with distribution tractors staying in the fleet for five years and truckload equipment replaced after four years. Older truckload tractors are not moved into the distribution fleet at Lanter as they might be in other operations. One indication of the separate nature of the fleets is that each has its own maintenance shop.

Lanter says that filling the company network with business with refrigerated LTL, general trucking, dedicated trucking, warehousing, and traffic management provides the best opportunity for growth. Adding incremental volume from every part of the company makes the whole network more productive. Filling up the network makes the company more attractive to shippers, because it shows that the company has the flexibility to provide a wide range of service throughout its trade area. "For instance, not all freight moving in the refrigerated fleet is perishable," he says. "We combine health and beauty aids with our refrigerated LTL, because those products need to be protected from excess heat and extreme cold. In addition, wholesalers usually order these products in small lots."

Another selling point is that Lanter Company is a family business and customers work directly with the decision makers. "Our senior management team has an average of 17 years' experience with the company," Lanter says. "They have the experience to know what to do and the authority to make decisions. We tell every new customer that we should be fired if we do not provide the service that we promised, service that meets and exceeds their expectations. So far, nobody has fired us."