VanguardÆs vantage
Large NVO eyes acquisitions, supports multimillion-dollar IT system.
By Chris Gillis
The global recession may have stalled Vanguard Logistics Services' plans to become a mega-non-vessel-operating common carrier, but only temporarily.
The NVO has weathered the recession and believes it's in an even better position in the market to pick and choose among the best acquisition candidates to add to its global portfolio.
'We're looking at all markets right now,' said Charles Brennan, Vanguard's chief executive officer. 'For us it's about finding the best opportunities and feeding them efficiently into our network.'
Owen Glenn, founder and chairman of the company, told American Shipper in 2007 that he wanted to double the size of the NVO in two years mostly through acquisitions with the goal to exceed the $1 billion revenue mark. However, few in the industry foresaw the great tumble the global economy would take the following year, resulting in drastic cargo reductions across all ocean container trades.
Before the recession, Glenn's plan was in full swing. The company in early 2007 acquired Antwerp, Belgium-based Confreight Group, which had 12 European offices, handled more than 850,000 cubic meters of freight a year, and maintained a strong presence in Belgium, France, Germany, the Netherlands, Italy, Poland, Spain and the United Kingdom. Later that year, Vanguard bought U.K.-based Ocean Express Ltd. This acquisition significantly increased volumes for Vanguard in the United Kingdom and European trades, in addition to the United States, Caribbean, and Central and South America trades where Ocean Express was strongest.
Vanguard had its eye on other acquisitions worldwide, particularly in Asia. In 2005, the company acquired 11 offices including 600 staff in China by purchasing Ocean World Shipping. Also in that year, Vanguard bought Box Consolidators in the United Kingdom.
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Vanguard, which was established in 2001, was itself the result of a merger between three large neutral NVOs, Glenn's Direct Container Line, which he founded in 1978, and Brennan International Transport and Conterm Consolidation Services, which he acquired from 1998 to 2000.
While the recession cooled investments and battered the shipping industry, Vanguard put its growth plan on hold and focused on integrating its existing acquisitions into a unified network. Brennan believes the company has reached a level of operational maturity that will make future acquisitions easier to integrate.
Best Buys. For Vanguard, acquisitions aren't about bulking up. Rather the company carefully researches each opportunity for how it will fit and grow the network. As Glenn once put it to American Shipper, 'We're not interested in picking up rubbish.'
Vanguard attempts to find companies with a similar operation approach to its own, meaning it provides non-asset-based freight consolidation services strictly to the freight forwarding industry. The prospective NVO must also fill a service or trade lane gap in Vanguard's global network. This strategy has precluded the acquisition of other globally established players, and focuses on strong regional operators.
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| Charles Brennan chief executive officer, Vanguard Logistics Services |
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| 'For us, the focus of acquisitions will be on niche players. Our real ability to capture more market share is through our global footprint.' | |
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'The large neutral NVO industry, as it pertains to Vanguard, has consolidated as much as it can already,' Brennan said. 'For us, the focus of acquisitions will be on niche players. Our real ability to capture more market share is through our global footprint.'
While Vanguard generally prefers to operate its own offices, there are some overseas markets where it has no interest in making acquisitions and plans to continue maintaining agency relationships. In Canada, for example, Vanguard is represented by LCL Navigation, a neutral NVO, which provides global connections from Canada to the rest of the world. Vanguard is partnered with MTA for the markets of Finland, Norway, Denmark and Sweden. In India, the company also works with an agent.
'We will establish our own offices in markets where it makes sense, such as Eastern and Western Europe, North and East Africa, China and the Middle East,' Brennan said.
In late March, Vanguard increased its presence in Asia with the opening of a new office in Johor Bahru, Malaysia. VLS Johor Bahru augments Vanguard's regional trade lanes to and from high-traffic ports including Singapore and Hong Kong. Located in the same metropolitan area as the port of Pasir Gudang, the Johor Bahru branch will initially be staffed by 14 people, of which 11 are already on board, with the potential for up to 25 staff by 2011.
VLS Johor Bahru will initiate a number of trade lanes aimed at linking the local forwarding industry into Vanguard's global network. The first set of services include a three-times-weekly direct sailing from Pasir Gudang-Johor Bahru to Singapore, where freight can continue on to the 70-plus direct service destinations Singapore will offer this year. Twice-weekly services into Hong Kong will allow freight to connect through to Hong Kong's many direct port pairs in Latin America. In addition, Pasir Gudang-Johor Bahru offers weekly sailings to Jakarta, Bangkok, Tokyo and Shanghai.
'We're not a U.S.-centric company,' Brennan said. 'We're just as interested in business from Asia to Latin America and Europe. These markets are extremely good to us.'
Inland Connections. In recent years, Vanguard has expanded its operations beyond port-to-port moves to include inland connections.
In December 2008, the company partnered with RoadLink to start a new national intermodal service called DrayMate for U.S. customs brokers and forwarders. Vanguard said DrayMate allows its domestic and international offices and agents to offer competitive drayage services to its customers while quoting core ocean services.
RoadLink, a subsidiary of Fenway Partners, is a large privately owned North American intermodal logistics provider. The company operates a network of more than 60 service centers, 50 on-site customer locations, 2,200 vehicles and more than 5,000 associates and independent contractors. 'We were particularly attracted to RoadLink's neutral profile in building this product,' Brennan said.
In March, Vanguard started a less-than-trailerload in-bond rail service to Mexico City for freight originating in the U.S. Midwest, Northeast and Pacific Northwest.
Containers are moved in-bond across the U.S.-Mexico border and stripped and customs cleared at the Pantaco Rail Yard in Mexico City. Vanguard said the service 'virtually eliminates the threat of pilferage.'
The 53-foot containers are unloaded and available within 12 hours of arrival in Mexico City. Transit freight for Queretaro, Toluco and Puebla can be delivered within two hours.
The company said various pricing options are available to suit customer requirements, such as door-to-door, container freight station-to-container freight station, or CFS-to-door. Rates are calculated on a weight or measurement basis and 'lump sum' pricing is available for large LTL shipments.
Vanguard also continues to invest in its warehouses. Brennan said the company has more control over these investments than other neutral NVOs because it prefers to own its facilities rather than subcontract to public warehouses.
Several years ago, Vanguard introduced a bar code and wireless freight receiving system in its U.S. warehouses. Freight is now bar coded at receipt, linked to a booking number within the main system and then scanned at least three times as it makes its way into a consolidated container.
The company continues to explore other ways to make its warehouses more useful to customers. Recently, its 440,000-square-foot New Jersey CFS became a customs-bonded facility, offering 46,000 square feet under bond.
The bond allows customers to bring their cargo into the United States without paying duties until the cargo leaves the facility. Cargo can move into the United States in full container quantities and are only paid duties on what is drawn out in smaller consignments.
With the ability to keep freight under customs bond for up to five years at this location, customers can gain the benefits of ordering in bulk and paying duties only on what they use downstream. If no domestic buyer is found for the imported merchandise, the broker's importer can sell it for exportation and eliminate the need for duty.
Integrated. The key to Vanguard's operational consistency throughout the world is its multimillion-dollar information technology platform. Vanguard's Directions is a complete 'book to bill,' multilingual operations management software that the company has developed and refined in-house. The system offers communications in English, Spanish, Chinese, German, Japanese, French and Italian.
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| Kewalram |
'To our forwarding customers, this means that we offer the same uniform process and practice, coupled with unparalleled visibility, in more locations than any other NVO,' said Biju Kewalram, Vanguard's chief information officer.
Vanguard invests about $10 million a year in its global IT systems, which covers a combination of in-house-generated programs as well as off-the-shelf systems for non-core applications.
'Applications that touch customer service functions like Directions are developed and maintained in-house, while accounting applications are picked from best-of-breed vendors,' Kewalram explained. 'The company has centralized IT development in California and India, and regional IT development in Europe. IT support is also available centrally and regionally.'
A system of this size and diversity requires constant upkeep. In 2009, Vanguard made more than 1,800 enhancements, alterations, customizations, tweaks and fixes to its global systems to ensure IT is aligned with operations.
Last year, Vanguard launched a new Web site, and upgraded all its customer visibility tools from the basic GTT (Global Track and Trace) to the StatusMate (customer self-service reporting). In 2010, Vanguard will launch a new IT-based service that will help its customers in the competitive RFQ (request for quotation)/bid process.
'Forwarders regularly struggle with large volumes of tender requests,' Kewalram said. 'Vanguard's new tool will allow its forwarder customers to participate in more bids and collaborative targeting and lane segmentation.'
Vanguard will upgrade GTT to allow its overseas agents to participate in its visibility offerings at a similar level to Vanguard's own offices. Kewalram recently traveled to Asia to oversee the connectivity of GTT Plus with several agents. 'The project involves all agents and caters to varying levels of technical sophistication in the agency network, including EDI (electronic-data-interchange) connections with the more sophisticated trading partners,' he said.
In December 2009, the company hit a monthly record of 50,000 EDI messages. 'Vanguard sees EDI as vital to its customer's overhead reduction targets, an aim that as an intermediary Vanguard helps to achieve in general transportation and freight cost areas,' Kewalram said.
Vanguard's system development has also taken into account its landside services. Its new product called Shiprite-on-Demand, launched in conjunction with CTS, is a U.S.-based domestic LTL transportation selection and booking management tool that allows customers to find and book the best price, services and speed-value combinations for a particular trucking move, varying each time depending on the specific movement's requirements.
In addition, Vanguard, together with RoadLink, initiated a similar online product that caters to drayage moves. 'This online tool allows a similar target dray move to fit within the best cost and service parameters,' Kewalram said.
'Innovative development practices mean that Vanguard's IT department is always fitting individual country and regional requirements into a global corporate context,' he said. 'Consequently, the company believes that it has a platform that will allow future acquisitions to be rapidly integrated without requiring extensive customization.'
Kewalram said the ideal NVO system involves the single-time entry of any unique piece of data ' from one end of the transaction to the other. 'This is a concept that revolves around a core philosophy of 'never touch the same data twice' and drives the principles behind Vanguard's systems development,' he said.