MOVING FORWARD

MOVING FORWARD

''I have probably been misquoted a hundred times,'' laments Phillip C. Yeager, chairman of Hub Group Inc. Somewhere in this column I am sure I will add to that tally once or twice. Phil and his family-led intermodal marketing company manage equipment and the freight that's transported in it across the U.S. and internationally.

I have a suspicion that if Phil were given the chance to manage the media, he would take on that challenge with the same zeal.

For 25 years, Hub Group has been the largest IMC. Last year's sales reached $1.3 billion. As an industry leader, Phil Yeager is often in the spotlight and he does not shy away from this role. ''We are twice the size of our nearest competitor,'' he noted. ''Overall our second quarter revenue grew 7.8 percent compared to 1999 and our intermodal rail revenue increased 4 percent. We are pleased with the results, but Wall Street analysts were not as impressed. A railroad would be in seventh heaven with that performance. I do not understand what the analysts expect.'' In fact, Phil has a keen awareness of how to increase shareholder value in a company that is still 74 percent family owned. I will do my best to convey his thoughts.

Phil and his wife started Hub Group operations in Detroit in 1971. Family values were important to the company's growth; many satellite offices were opened by husband-and-wife teams. Before the Interstate Commerce Commission deregulated domestic transportation in 1981, IMCs were known as shippers' agents. ''We were called a lot of things in those days, but my favorite was ''the dark hole of intermodal,''' Phil laughed. Shippers' agents were restricted in their transport logistics functions. For example, they could not contract for drayage on the delivery end of a multimodal move.

Today, Hub Group's business is divided among intermodal rail (77 percent), over-the-road brokerage (15 percent) and other logistics solutions (8 percent) including complete distribution services. ''Understanding transportation is demanding,'' Phil acknowledged. ''Not all large shippers can cost effectively handle logistics in-house. Small shippers are even more disadvantaged. Hub Group does not need to own the transport assets to add value to shippers' supply chain. It's economical management that counts.'' Hub has added to its management portfolio including transport services for flatbeds, less-than-truckload containers and rail carloads. Four years ago Hub Group established an international division handling full containers.Recently the company added a domestic airfreight service as an offshoot of its LTL service. Hub Group operates 30 offices in North America and Europe with a staff of 1,500.

On the surface, attempting to control freight without owning transport assets does not sound like much control at all. Hub Group views itself as a people company, with assets more valuable than locomotives, trucks or terminals. ''We manage and control with information,'' Phil explain-ed. When Union Pacific Railroad experienced service problems in 1997, Hub hired 140 temporary customer service staffers to handle the phones. ''We could not change the fact that a normal third-morning delivery turned into a fifth-day delivery,'' Phil said. ''But at least our customers knew the score as soon as we did.'' Expansion has led to growing pains. In 1996 the company went public and roared through its first year as a Nasdaq newborn with a 26 percent gain in volume and a similar upshot in profits. Subsequent ill-executed railroad mergers slowed Hub Group's growth as frustrated shippers shifted transportation to trucks. Phil says railroad service is improving, although one East Coast operator still worries him. I won't mention names. ''I still criticize the railroads, but respect them,'' Phil said. ''Remember, I was one of them before starting Hub Group.''

Hub Group is not a company that touts its e-commerce expertise. Phil knows that he needs to change that view to excite investors. Interestingly, Hub Group provides a full range of information-sharing tools, but does not label them with the ''e-word.''

Nine years ago, Hub established a direct mainframe-to-mainframe documentation flow system with a leading retailer. That's in the works for an Internet transition. Hub also built a ''track and trace'' service for one of the largest alcoholic beverage importers. Phil says the Hub Group still processes too much information manually. ''We're working on that, too,'' he added.

Under Phil Yeager and his sons, the Hub Group has been nimble in adapting to industry changes. It's easy to believe that the company will control its move into e-commerce quickly and win over Wall Street in the process.