RoadLink USA

Source: Supply Chain Digital

Date :01/06/2007 13:28:51

Already the nation’s largest intermodal trucking company, RoadLink USA is relying on a success merger strategy to grow and increase efficiency even move over the next two years

By David Weldon

One of the most efficiently designed creatures in all of evolution, sharks all have one distinct drawback — if they stop moving, they’ll die.

The same holds true for companies in the logistics and distribution space. Success depends on getting goods to their final destination quickly, safely, efficiently, and cheaply — or else.

No company knows that better than RoadLink USA, the nation’s largest intermodal trucking and logistics company, headquartered in Bethlehem, PA.

As the intermodal leader, RoadLink does not maintain large fleets of 18-wheeler rigs that truck large loads from coast to coast. Long-haul and cross-country delivery is more likely done by railroad. Instead, the primary role that RoadLink plays in the distribution supply chain is the so-called “last mile” of delivery — taking goods from a port or railhead to their final destination, generally less than 500 miles from pick-up point.

“Containers from overseas are moved by ship, arrive at a port, often then moved inland by rail, and finally move by truck to their destination,” explains Mark G. Fornasiero, senior vice president of finance and acquisitions at RoadLink. “We take those goods the last step, and are the ones who actually see the customer.”

Because of that, RoadLink needs to always be at the top of its game. Customers will quickly blame missing loads, late deliveries, or damaged goods on the last carrier in this global relay race.

Traveling many last miles

There are a lot of last miles in the nation’s distribution system, so RoadLink relies on over a thousand owner-operators, as well as its own fleet of trucks, to quickly and efficiently haul those goods. RoadLink currently has 60 service locations and a combined capacity of 1,700 trucks.

Strength in numbers is definitely the driving force behind this company. RoadLink was formed in 2000, with the merger of seven of the largest regional intermodal trucking companies at that time, serving markets in the Midwest, the Northeast and the West Coast. There have been six more acquisitions by the company since then. In December of last year, RoadLink acquired Transus Intermodal, a company with 300 drivers serving the Southern market. And RoadLink itself was acquired in September of 2006 by Fenway Partners, a New York-based private equity firm. The RoadLink acquisition was Fenway’s 14th acquisition in the transportation and logistics arena.

But all of this pales in comparison with the changes to come for the company, according to recently appointed CEO Chris Munro, who took over at the end of January 2007.

“There will be dramatic changes in supply chains across the world this year,” Munro says. “With the emergence of China and India, there is a change in the balance of the flow of goods globally, and a huge growth in the imports of goods into the United States.”

That will mean more goods, moving greater distances, to different places. “If you’re in the supply chain, you’re going to be having products come from much farther away, and you’re going to have to get them to your customer much faster than ever before,” Munro says.

This would seem on the surface to be good news for companies such as RoadLink. But Munro says “there are several issues for companies such as ours.”

First, Munro calls the nation’s port system challenged, as they have historical capacity and flow-through bottlenecks, which can cause expensive delays and cost escalation for intermodal companies.

Second, to retarget ports accordingly, there will be a large-scale “change in the flows of traffic, with more goods coming into the East Coast and Southern states. There will be a lot of changing of entry points and exit points in the country.”

Third, many areas of the country are served by somewhat inefficient rail systems, Munro claims, which are in the process of re-inventing their service offerings to the IMC and end user community.

On top of these logistical concerns is a heightened sense of security in the country since Sept. 11, 2001. “There is much more attention on containerized imports coming into the country, how do you protect it, and how do you track it,” Munro says.

Change as the routine

One of the advantages in being a company that has seen numerous mergers and acquisitions is that you learn how to effectively and rapidly handle dramatic change, Fornasiero says. Those lessons will serve RoadLink well over the next two years, he says, as the company sets its sights on more growth and new markets.

“We plan to make significant other acquisitions, to round out the geographies in North America,” Fornasiero says. “We want to offer the largest, and best, intermodal coverage in North America. And that is a 12 to 18 month goal.”

Munro says the company is well positioned to meet that goal. “This company has learned how to integrate new businesses, how to value businesses and not overpay, how to assimilate them, how to deal with the soft side (employees and drivers), and the hard side (systems and equipment),” Munro says. “We have a very well-oiled acquisitions and integration team that knows where the pitfalls are.”

Where the company will have to make significant investments this year, Fornasiero says, is in technology, especially as it brings more owner-operators on board.

While there is a public misconception that the nation’s trucks are all tracked now by GPS systems, Fornasiero says that is not the case. “There are thousands of companies in this sector. Most are mom and pop companies.”

For RoadLink, the challenge is to bring the numerous small operators they work with up to speed with technology, as well as the customers that RoadLink serves. It is only at that point, Fornasiero says, that the system will be 100 percent.

Fornasiero says technology will play a crucial role in evaluating existing processes, and looking for ways to track trucks and loads more efficiently, and cheaply. It will also help the company better evaluate the total national trucking infrastructure, “to drill down to specific profit market areas,” as acquisition targets are evaluated.

Driven to better serve drivers

The other area that RoadLink is making large investments is with its growing pool of drivers and employees. Although the majority of drivers in the fleet are still owner-operators of their own trucks, RoadLink is offering them more and more benefits to foster a culture of being part of the company. RoadLink also assists drivers with insurance and licensing matters for their trucks, and with maintenance.

“The company has done a great job of attracting the right type of people, and in turn, offering ancillary services to them finance their vehicles, get repairs and servicing,” Munro says.

That is not just a matter of being a thoughtful employer, Munro stresses, it is a critical retention strategy. After all, Munro says the company has traditionally seen staggering driver turnover of over 100 percent each year. And when “75 percent of our assets on the road are with owner-operators,” Munro says it is not hard to understand why the company wants to embrace them more tightly into the family.

With all of the change and challenge facing RoadLink this year, Munro offers advice to other executives who are pondering, or involved with, mergers and acquisition strategies. First off, Munro stresses that “this is a long race.”

Executives need to evaluate corporate missions and cultures as closely as balance sheets, Munro says.

“You need to be clear before you get going where the synergies are,” advises Munro. “Buy at the right value (not just the attractive price). Think through how you will acquire and integrate, and when you will integrate.”

Most importantly, Munro cautions against trying to “do it all on day one. If you try to do it all at once, you will lose customers, and you will lose people.”

It may take two, three, or even more years, to realize the full potential and savings of a merger, but if all parties do it right, Munro says the benefits will definitely be there. “The end product is fulfilling the ambition of creating the leading intermodal logistics solutions company in North America.”