Leggett & Platt, the sprawling manufacturing and consumer products company, had little idea of what it was getting into when it hired Maik Breckwoldt out of the automotive industry in 2005 as its vice president for logistics.
Theoretically, there was much to gain for a multibillion-dollar global company that had grown largely by acquisition and had never centralized its logistics. But anyone who has ever tried to bring far-flung fiefdoms to heel within a corporation will tell you it’s no easy task. Throw in the global economic storm that was about to hit and Leggett would soon learn how much of an agent of change it had acquired.
The transformation started with less than truckload, selected, Breckwoldt said, because of the longer-term nature of LTL carrier contracts. Leggett at the time had 3,500 LTL shipments in the U.S. per week, delivering product to retailers’ distribution centers or parts to manufacturing sites. It was using 40 carriers, spending tens of millions a year and had no visibility as to how much it was spending, the whereabouts of cargo or compliance with its requirements.
“Nobody could give me an answer as to how much we were spending on LTL, so I asked the branches to send one week of invoices, and got mountains of paper,” he said. Once an extensive outside audit was completed and the operation revamped, the number of carriers had been slashed to nine and were being centrally controlled.
Next up was ocean freight, an imperative thrust upon Breckwoldt and his team following the erosion in ocean carrier service quality beginning in 2007. Carriers were reducing inland service points in North America, starting to pull out of chassis and moving documentation and customer service centers overseas. Soon they would be hammered by the global recession. With 20,000 TEUs being shipped among 19 countries and every country doing its own thing, the ocean program was ripe for reform.
“We decided to take control of things in our own hands as much as possible,” he said, acknowledging, “This was a fight, as you can imagine. “We strengthened our operational presence by putting staff in China to manage the origin process with the suppliers better, implemented vendor/order management programs, went for a global corporate-wide TMS implementation. We added distribution centers, implemented transload programs, strengthened our electronic communication with the carriers with EDI status and invoices, centralized freight audit and payment programs.”
Little known to Leggett when it hired him, Breckwoldt, a Hamburg native and naturalized U.S. citizen, had an entrepreneurial streak. So when an aluminum division was sold in 2008, reducing ocean container volumes by 20 percent and thus his leverage with ocean carriers, he started a shippers association to replace the volume. No-frills, shippers participate in Leggett’s contracts without a membership fee or minimum volume, for $100 per container. The market welcomed the move, and today Leggett ships 70,000 TEUs for itself and dozens of shippers, mostly in the eastbound trans-Pacific.
As it turns out, Leggett is the ideal company for a logistician-entrepreneur. Not only is senior management open-minded, but, critically, logistics reports up through operations, not procurement. Breckwoldt, 45, says this keeps the focus on value as opposed to a procurement mentality where “people generally tend to look for year-over-year cost savings. From an operational mindset, we understand the challenges better; we look at logistics as a core strength that will help us to stay ahead in our business and take control of our own destiny.”
That’s increasingly what Breckwoldt and what he describes as an all-star team have been up to. An in-house trucking fleet is growing its third-party business and offers truck brokerage. Earlier this year, Leggett acquired a 388,000-square-foot e-commerce distribution center in Fontana, Calif., capable of processing 35,000 packages per shift, pushing the burgeoning 3PL up the value chain and into a fast-growing market. Further acquisitions could come soon.
Breckwoldt’s plans are to take what is today a $200 million 3PL business, called Leggett & Platt Global Supply Chain Solutions, and “continue to look for profitable growth, while expanding on our strength to service different industry verticals, and expand geographically.”
Ambitious for a corporate logistics department, but not the first to take its skill set to the market: Neovia Logistics, formerly CAT Logistics, grew out of Caterpillar. RR Donnelley Logistics grew out of the printer, while Ingram Micro Logistics came out of the technology distributor of the same name, said Dick Armstrong, chairman of the 3PL consultant Armstrong & Associates.
Each gains in its own way from its in-house experience. “Our management team sees the value we have been able to bring to the corporation from a logistics standpoint, and understands that other smaller companies may not be in a position to make the logistics investments we made, and will be looking for ‘external help,’ ” Breckwoldt said. Look for more from this emerging 3PL.