Special Coverage: Schneider’s drive into the supply chain

Schneider has become more than just a long-haul trucker as shippers seek logistics services.

Source: Schneider

   With a combined fleet of more than 51,500 orange truck trailers and intermodal containers rolling along the nation’s highways, Schneider is easily one of the largest and most recognized long-haul trucking operations in the United States. 

   However, it is what’s now occurring behind the scenes in terms of Schneider’s non-trucking services that’s helping fuel substantive growth at the $4 billion Green Bay, Wis.-based company. These expanding service offerings to shippers include supply chain management, warehousing and transloading, and freight brokerage.

Michael Kukiela, vice president and general manager of supply chain management and shared services, Schneider Logistics
Source: Schneider

   “I’m not a trucking guy. I’m a supply chain specialist,” said Michael Kukiela, vice president and general manager of supply chain management and shared services for Schneider Logistics, which typifies the out-of-the-box thinking that’s encouraged among the company’s senior management. “We’re here to solve problems that trucking can’t solve alone.”

   In recent years, Schneider has poured millions of dollars annually into both systems and staffing to expand its supply chain services. Last year, the company completed a complex, multiyear implementation of the Oracle-based transportation management system, in addition to adding inbound and outbound visibility tools and procurement technology.

   This technology investment has allowed Schneider to advance its logistics services, while providing a differentiated and integrated service to its customers. 

   “Combined, the Schneider suite of technology offers unparalleled visibility, planning, and forecasting,” Kukiela said. “Customers can build hypothetical scenarios from their active bids to test competing models for the best fit within their supply chains.

   “Our technology then coordinates production orders to the most ideal transportation methods and practices that allow for a more prescriptive and cost-effective delivery on the inbound side,” he explained. “Our TMS examines exceptions while planning either dynamically or from an established routing guide. It also becomes the basis for business insight and continuous improvement, as well as carrier scorecarding.”

   Schneider’s new TMS has also enhanced its ability to provide greater outbound visibility to shippers, especially with unexpected volume surges or service changes, in addition to reducing claims by as much as 30 percent. 

   And all of this is what Schneider’s logistics customers are experiencing now. “You can only imagine the speed of improvement in performance and level of visibility for a new customer of Schneider Logistics,” Kukiela said.

   “Historically, we have worked with automotive and other large manufacturing companies—those with $100 million-plus transportation spends,” Kukiela said. “We are now targeting small to midsized companies with as little as $1.5 million to $2 million annual freight spend. These companies don’t have to buy a TMS because Schneider already has it, along with the thought leadership.”

   The company also finds itself increasingly working with shippers on procurement, network optimization, and supply chain activities in Asia and Europe. 

   “We continue to selectively collaborate with key customers on international needs, but primarily focus on the tremendous amount of opportunity to drive value within domestic freight networks,” Kukiela said.

Creating “Healthy Tension.” According to Schneider, most shippers that take advantage of its systems and services to improve their supply chains experience a 20 percent savings within their transportation departments during the first year. 

   These savings may be realized through customers enlisting Schneider for one-time consulting projects, such as designing a distribution center network, material flow, and total landed cost optimization. These projects can last from 90 days to more than two years in duration, depending on their scope, Kukiela said.

   “We will then help identify strategic initiatives they should be exploring over the next three to five years to improve service or lower costs,” he said.

   “Overall, we want a return on investment of over 25 percent a year and our account teams are tasked with leading strategic quarterly discussions to help our customers see beyond current fiscal year objectives,” Kukiela said. “Since our commercial terms are not like a typical 3PL or broker we provide complete transparency in cost which supports a collaborative environment between Schneider and its customers.”

   Schneider, for example, recently worked with an oil and gas company that wanted to centralize its transportation procurement and execution. Since this process was decentralized, the company had no visibility to its contract terms. On top of that, it had no history on how much it was spending on freight transportation, Kukiela said.

   Schneider helped the company by building a freight audit program, customizing its inventory technology, implementing a TMS, and supplementing its staff with Schneider supply chain specialists. 

   “The result was a more than $50 million savings in year-one, followed by a $30 million savings in year-two,” Kukiela said. “That was an enormous amount of money driven by leveraging Schneider Logistics’ people, processes, and technology.”

   Sometimes getting at the root of supply chain problems with a customer takes creating “healthy tension,” Kukiela said. This requires both Schneider and customer logistics teams to set aside time and block out distractions to address touchy subjects.

   Schneider recently worked with a shipper that struggled with its dry-bulk logistics. Schneider did not manage that aspect of the shipper’s business, but it did have visibility to those costs.

   “We pushed the customer to allow us to examine the network, supplier and customer locations, and conduct a freight audit,” Kukiela said. “We quickly identified that contracts were not standardized, that there was potential to optimize the network with dedicated solutions, and with simple controls that cost and service would improve.

   “This area led to immediate performance improvement above 10 percent on delivery and reduction of 7 percent cost in transportation spend,” he added. 

Third Party Services. Schneider continues to expand its third party logistics services throughout North America, particularly via dedicated warehouse operations.

    Warehouse space in large consumer markets has tighten significantly in the past two years due to the rise of e-commerce activity. “We haven’t seen it like this in a long time,” said John Miller, vice president of commercial development, port logistics and warehousing at Schneider. 

   Schneider operates more than 7 million square feet of warehousing, with an expectation for that to grow.      Its warehouses serve both as transload operations and distribution centers. “We’ve had quite a bit of growth in the medical supplies business of late, and quite a number of large retail customers seeking warehousing and transloading services,” Miller said.

   Transloading involves the handling of containers or trailers of cargo which are drayed from nearby marine terminals or intermodal hubs to these facilities for deconsolidation or reloading in the case of outbound shipments. 

   “If you have something that’s going more than 200 miles away from the port, then you should transload,” Miller said.

   Inside its warehouses, Schneider will provide pick-and-pack, kitting and quality inspection for some customers. “We provide options so people can tie things together and meet their supply chain challenges,” Miller said.

   However, he said “We’re not a build-it-and-they-will-come operation. We are customer-led. If a company has a proven need for any of these services, we will find the space and set up then.”

   This summer Schneider announced an aggressive growth into the final-mile delivery of freight by acquiring two companies, which have long specialized in this business. The two firms are Watkins & Shepard, based in Missoula, Mont., and Lodeso, based in Zeeland, Mich.

   Watkins & Shepard provides less-than-truckload (LTL), truckload and logistics services for difficult-to-handle goods, such as furniture and floor coverings, across North America. The company was founded in 1974 and has more than 1,300 employees, including nearly 800 drivers based out of 20 terminals across the United States.

   Lodeso, which is also a final-mile logistics solution provider, specializes in the delivery of overweight, oversized and difficult-to-handle goods, including furniture and mattresses. The company has more than 50 employees and nearly 600 agents across the United States.

   Schneider said Lodeso has “proprietary technology developed by its in-house experts to handle supply chain complexities within the national home delivery industry. In addition to continuous delivery tracking throughout the supply chain, this unique technology platform allows delivery agents, customers and all appropriate parties to handle any issues in a proactive manner.”

   Over-dimensional and hard-to-deliver products—anything from home furnishings to exercise equipment and gun safes—are increasingly going through an e-commerce home delivery channel, Schneider Executive Vice President and Chief Operating Officer Mark Rourke explained to American Shipper.

   He said the two final-mile companies have a long history in that niche and “can accelerate our footprint and our capability to address that trend. Things that don’t go well for the small parcel channel and things that don’t go well through a traditional LTL channel, that over-dimensional freight is really what we believe we can bring the best mousetrap to the industry.”  

   “The ability to provide differentiated experiences for retailers, manufacturers and consumers is a primary area of strategic growth for Schneider,” added Schneider President and CEO Chris Lofgren in a statement. “We will continue to make significant investments to capture the full potential the combined companies now have to connect the first mile to the final mile.”

   Rourke was careful to point out that Schneider was not aiming to take on FedEx or UPS, stating “they do a terrific job, but we’d heard complaints from our customers on heavier freight [for final-mile deliveries].”

   Schneider usually builds its services organically, but determined through internal analysis that in this case a strategic acquisition into the final-mile delivery space was the way to go. “We’re going to start on top and build from there,” he said.

Freight Brokerage. One of the fastest growing and largest third party services offerings at Schneider is freight brokerage. The company entered the field about 10 years ago when one of its largest retail customers, Walmart, started generating more freight than what Schneider’s actual truck and trailer fleet could accommodate in certain areas.

   Freight brokerage allows large trucking companies like Schneider to essentially supplement their fleets by tapping assets of other owner-operators of trucks and work routes that otherwise would go unserved. 

   This model also fits well with Schneider, since “a lot of customers buy multiple services across our portfolio,” said Erin VanZeeland, senior vice president and general manager of Schneider Transportation Management. 

   Competition within the freight brokerage space is fierce, as there are numerous non-asset-based providers offering these services, often with 30,000 to 40,000 carriers in their mix.

   Schneider has grown the list of carriers within its freight brokerage operation from about 10,000 carriers five years ago to more than 21,000 carriers today. These carriers, which provide dry-van trailers as well as specialized equipment such as refrigerated trailers and flatbeds, may be as small as one- or two-truck owner-operators. However, each one is rigorously vetted for their compliance with all federal and state regulations if they want to handle Schneider’s freight. “We do our due-diligence. These providers must provide an orange-like service, orange-like capability,” VanZeeland said.

   “We have two customers in every [freight brokerage] transaction—a shipper and a carrier,” she said. “We understand what it takes to be a successful carrier and try to match the trucker’s capabilities with those of the shipper. This comes because we clearly understand utilization, value the driver’s time, and seek an efficient turn on their equipment. Carriers feel comfortable working with Schneider.

   “We help the carriers get into lanes that work well for them,” she added. “This allows them to be competitive and shows the customer that we’re in control of the execution of the freight.”

   Another area of freight brokerage that has taken off in recent years for Schneider is the handling of LTL shipments on behalf of its large truckload customers. 

   “Schneider has done a lot of LTL business with national, regional and local LTL providers,” VanZeeland said. For some of Schneider’s trucking customers, “we handle all their LTL business.”

   Under its port logistics operation, Schneider also offers freight brokerage for drayage services. 

   “We put together this service about three years ago and it has grown consistently,” Miller said. The company now has drayage capability in Los Angeles/Long Beach, Houston, Savannah, Norfolk, and Chicago, in addition to Port Reading, N.J., where it recently doubled its facility footprint to 300,000 square feet to better serve its growing business in the New York/New Jersey market. 

   The largest percentage of Schneider’s drayage customers are shippers, and the company will work with their ocean carriers and forwarders to move those containers to their facilities. 

   Schneider works with a range of shippers in terms of container volumes requiring drayage. “The smallest company brings in about 10 containers a year,” Miller said. “We try to maintain a balance” in terms of serving both large and small shipper drayage customers.

More Changes. While privately-held Schneider continues to invest heavily in its drivers and truck fleet in terms of the latest equipment and training, a wave of federal regulations imposed on the trucking industry continues to reshape how shippers employ these transportation assets in their supply chains.

   Starting with the implementation of the Federal Motor Carrier Safety Administration’s Compliance, Safety, Accountability (CSA) initiative in 2010 to improve large truck safety, the imposition of the hours of service rules and other health and safety regulations on drivers has forced many small trucking companies out of business. According to the American Trucking Associations, the industry is currently experiencing a shortfall of 48,000 drivers, and its long-term projection is that as many as 239,000 drivers will be needed to haul the nation’s freight by 2022.

   “Another shake up is coming, and we’re asking ourselves, how can we get ahead of it?” Kukiela said, referring to the electronic logging devices (ELDs) which will be required in the cabs of all long-haul trucks by Dec. 18, 2017. 

   “An ELD synchronizes with a vehicle engine to automatically record driving time, for easier, more accurate hours of service (HOS) recording,” FMCSA said. 

   While large, well-heeled trucking companies like Schneider will invest in the technology to comply, many smaller outfits or individual truck operators may choose to leave the long-haul trucking business altogether to avoid the added expense. This may result in continued erosion of available truck capacity, VanZeeland warned.

    Kukiela believes that further changes in the long-haul trucking industry will force shippers to rethink their supply chains and become more creative with how they use trucks to move their freight around the country. That may result, for example, in the use of more intermodal moves for long-distance domestic moves or setting up transload operations further inland to load exports from truck trailers into ocean containers. 

   Kukiela said his team looks forward to these supply chain challenges. “We can get into anything. We are problem-solvers at Schneider Logistics,” he said.