May 2011, TruckingInfo.com - Fleet Innovators
All trucking is competitive, but the corner occupied by Cardinal Logistics Management Corp. is particularly tough.
Cardinal's dedicated logistics business calls for a highly customized, hands-on, top-level service that few can provide, says industry analyst John Larkin. There's not a lot of room for failure in customer relations, he said.
Or, as Cardinal Chairman Vin McLoughlin puts it, "We try and do the hard stuff."
McLoughlin recounts getting a phone call from a customer who wanted him to know that Cardinals' chief information officer, Clay Holmes, was out on the dock, crawling over skids and scanning boxes.
"The guy said, 'that doesn't happen.' I said, 'Well, he grew up doing that and that's how you make sure it works.'"
Roadway docks and banana boats
McLoughlin, who with his team founded and has directed the growth of Cardinal's $300 million business over the past 14 years, grew up in the trade. His dad was a traffic manager for Arrow shirts, and he started working around trucks in his hometown of Troy, N.Y., at age 14. Roadway docks and banana boats were where he earned his spending money and learned how trucking works.
Making it work is one cornerstone of Cardinal's approach. "If it's just banging docks, that's a fungible skill," McLoughlin says. "But if it's hard and there's a technology piece to it, we think we've got technology that will rival anybody in the industry."
The hard stuff might include providing real-time status information in 6-minute increments, an order management system, dynamic route monitoring, tracking refrigerated trailer temperature before and after delivery, integrating a logistics management system or providing any of a dozen other services to a customer - and then providing a different cluster of services to another customer.
"It's unbelievably customized," McLoughlin says. Cardinal's customer base crosses a broad swath of U.S. industry, from retail, manufacturing and building products to automotive, food services and bulk transport. Among the familiar names: Eastman Kodak, Land O'Lakes, Office Depot, PetSmart and Kraftmaid Cabinetry.
Hiring people who are smarter
Cardinal's edge in technology comes from many years of cultivating people and building in-house expertise - without reinventing stuff that others have already built.
"The only thing I've done right in my business career is hire people who are smarter and more capable than I am, especially in esoteric areas like technology," McLoughlin says.
He doesn't keep 300 code-writing MIT grads locked in the basement, he adds. Cardinal starts with its own base systems and then finds systems that other people have developed that it can integrate into its own and customers' systems.
"The thing that we do best is how we build that connection with our customer's system."
An example would be Cardinal's home-built Dynamic Workflow system, which uses a handheld device to deliver to the driver a step-by-step procedure for fulfilling a customer's transportation requirements.
The data is all stored in a server, but it shows up on the device as a simple reminder or check-box that walks the driver through what needs to be done. Clay Holmes compares it to having a single universal remote with only as many buttons as you need, rather than one remote for the TV, another for the screen, a third for the cable box and another for the DVD player - each with a dozen or more buttons.
Dynamic Workflow, by the way, is the core of a new line of business Cardinal just launched. The software as a service, or SaaS, offers Cardinal's logistics software and service systems to other trucking companies. It launched six months ago and brought its first customer on early in February.
More than technology
Technology may be the key to Cardinal's edge in the market, but McLoughlin ranks it third of three differentiators.
The first is trust, he says. "There's a leap of faith that the customer has to make in this business. People put their jobs on the line when they make the decision to outsource. It's a game of who do you trust."
The second is execution. The technology has to work, it has to work early and at a reasonable cost, and it has to provide value, he says.
What ties it all together, McLoughlin says, is the team. "This is a people business," he says. "This business has absolutely nothing to do with trucks. Who you hire is the most important decision you're ever going to make."
Cardinal's key management people have been together for 20 or more years. McLoughlin's trucking resume includes stints at Roadway ("an unbelievable business college") and Ryder Truck Lines before grad school (Northwestern's Kellogg Graduate School of Management). He spent almost a decade at Ryder's dedicated services operation, then in the early 1990s was tapped to head J.B. Hunt's contract carrier services division. There, he and vice president Thomas Hostetler (now CEO of Cardinal) built a $175 million business over four years.
His next move was in 1997 when, as McLoughlin put it, a private equity firm out of Chicago, GTCR, bought his team a truckload carrier, Cardinal Freight Carriers.
CFC was a regional operator that did not have the scale to compete with the likes of J.B. Hunt, Schneider National or Swift Transportation. "But it was a very good fulcrum for us," McLoughlin recalls. "It paid the light bill as we began to grow dedicated." Eventually they sold CFC to Swift.
"We have grown the dedicated business with pretty much the same people we knew at Ryder, who followed us to Hunt and came over to Cardinal," he says.
McLoughlin says drivers are the most important part of the team. Cardinal's business is not long-haul - routes go up to 250 miles out and back - so the company is able to get drivers home almost every night. But it does place high demands on drivers because they have to interact personally with customers, a key feature of the dedicated business.
Hiring a driver is a multi-million dollar decision, McLoughlin says. "Putting a $10,000 ad in the Newark, N.J., paper isn't going to do you much. You don't want to hire the guy who doesn't have a job. You want to hire the guy who's had a long-term job, with very few companies and a long record of success, who has a sense of stability in his community and in his life. You want to get him home and let him see his son or daughter score the next soccer goal."
Customers have a say in gauging driver performance. Each account is asked to score its drivers, and the manager who hired the driver will see that score reflected in his bonus.
The company is in the process of linking pay to an account's CSA score - the new federal safety enforcement system going into effect this year. Scores are localized by store, rather than the overall account, and each manager is judged on his local operation, McLoughlin says. The company uses Vigillo to manage its CSA data.
McLoughlin, like many others, believes CSA is a game-changer for the trucking industry. And he likes that.
"The tighter you make the rules in terms of driver qualifications, the happier we are," he says. "We'd like to place a bet on us recruiting and training and retaining the right kind of guys. If it's tough, we like it. And it's the right thing to do. There's a moral imperative to have the right people on the road. "
Cardinal suffered during the recession, as the housing collapse hit the building materials business hard, but McLoughlin sees some positives coming. "You feel that things are incrementally better. Customers are willing to talk about doing things now."
Converting private carriers
The company's opportunities going forward continue to lie in converting private carriers, he says.
Many private carriers are doing