AIT Worldwide Logistics

Source: Supply Chain Digital

Date :6/1/2007 3:56:29 PM

As the domestic market flattens, AIT Worldwide Logistics sees its future growth as an international provider of logistics solutions.

Written and produced by James Buchanan & Michael Magno

With volatility in oil prices, a changing regulatory world designed to address national security concerns, and a flattening domestic market, freight forwarding companies such as AIT Worldwide Logistics are developing new strategies to gain a competitive edge.

Those strategies the Chicago-based company are exploring include enhanced services, customized products that reflect the customer’s needs, and the strategic use of existent technologies.

“For us, once we get through the rocky road of it we should do very well,” says Vaughn Moore, VP of Sales for AIT, “because it’s the companies that are financially stable that are going to be able to weather the storm very well.”

AIT at a Glance…

Founded in 1979 as a one-office startup, AIT Worldwide Logistics has grown to include 35 locations nationally in order to bring the products they ship the last mile to its customers and its customer’s clients. As such, AIT is an international logistics provider for industrial manufacturers, perishables, consumer electronics and more. They coordinate with air, sea, and land transport carriers for all kinds of freight to act as the customer’s agent and logistics provider.

According to cofounder Dan Lisowski, they are a non-assets based transportation logistics company. That means they don’t own the infrastructure used to transport their customer’s freight, and they don’t own much of the equipment that handles that freight, but they will carry freight for what could be described as the first mile and the last mile. Being a non-asset based logistics provider, explains Lisowski, they act to coordinate the shipping of their customer’s freight through recognized carriers such as United Airlines.

“What we do,” says Lisowski, “is focus on the best transportation partner to provide the service from point A to point B rather than getting stuck with one mode of transportation, instead of having our own equipment handling those transport lanes.”

What the above means, says Moore, is that AIT is able to be a very dynamic transport company with the flexibility to choose the best mode and carrier for their customer. They are not charged with trying to fill space on their own trucks, planes and rail cars, but can assess each customer’s needs and develop flexible arrangements to help meet their cost and logistical needs.

For the company’s partners, says Moore, “They are able to do a focus sell on their own behalf, which means they only have to call on us to tap into our network to increase the volume of materials going through their system.”

As an example of how effective this business model is for their customers, Lisowski points to one customer who, after being quoted some pricing based on the information the customer had provided about her company’s needs, remarked that she could not believe how much more affordable AIT was compared to her previous carrier.

“We dug a little deeper and we found out the reason why we are so much more affordable,” says Lisowski. “She had been using one of the van line companies to move her product and they were charging her a very high minimum, whether it was a quarter truck load or half a truck load, and it was costing her $3,000 to $4,000 just to move her goods across the country.”

Because AIT is able to work through a number of carriers and a number of different modes they were able to come up with a price for this customer of approximately $2,000.

In this way, they could be thought of as a shipping consultant, which is the basis of their business.

“We use a consultative sell,” said Lisowski, “to find out what the customer’s needs are and then we tailor our transportation logistics solutions to meet the customer’s need.”

Once a logistical solution is found and agreed to, AIT takes responsibility and is accountable to its clients for the freight from start to finish, while the carrier is directly accountable to AIT. Further, AIT will ensure the shipment can be tracked and traced not only by AIT, but by the customer as well.

The systems used to track freight vary by type of transport and the carrier used, but each typically has its own internal freight control systems that AIT has been able to interlink their computer s with. In cases where they have not established links, Lisowski says they do it the old fashioned way, “we pick up the phone and give them a call.”

The whole purpose of integration, adds Moore, is to make sure the process is as seamless as possible from the perspective of the customer.

There is also the issue of carrier choice. According to Lisowski, price is always consideration, since the company wants to find the best deal for their customers. However, this does not mean that they will compromise on the quality of the carrier. One company may be able to do it for a nickel a mile or for $100 less, but if they are not a reliable carrier, AIT simply will not use them.

Vetting carriers, therefore, is an important process to AIT’s work. According to Moore, they have a rather dynamic process through a function they call the Agent Service Center. The partners they select have to go through a rigorous qualification process that includes everything from credit to reputation in the industry and AIT’s own experience with the carrier.

“But the Agent Service Center actually holds the agent [carrier] responsible for service from a financial penalty standpoint too,” says Moore. “That’s important and it also leads to whether they submit a proof of delivery in a timely manner or not because there is also a financial penalty attached to whether they are turning those in on time.

“Our goal is to have as close to real-time proof of delivery as possible and the agent is also financially vested in getting that information to us. Therefore, we have a very good product we are delivering to our customer.”

While the corporate office is located in Chicago, they have a presence in another 35 cities nationally. Of these, roughly half are company owned stations and the other half are through independent contractor relationships. According to Moore, there is a high degree of seamlessness here as well.

“You would not know if you were dealing with an independent carrier or a company store from a customer standpoint,” he says. “It’s all the same. Everyone answers the phones as AIT, it’s just a different contractual relationship and how we handle royalties.”

On a management level, each region has a vice president out in the field that reports back to corporate. There are station managers in each region that report to their respective regional manager. The regional vice presidents report to Moore and to the vice president of operations, and receive direction on the company and what is happening on the profit and loss of the stations. They also hold quarterly meetings where the regional vice presidents are advised further on direction for the individual stations.

“There is also a lot of day-to-day interaction for guidance, mentorship and direction for the company,” adds Moore.

Information sharing is also a two-way street, says Moore, as a lot of information is driven from the field. “They are the ones that are closest to what’s happening in the battle everyday and we foster the relationship where they give us the information and we make good decisions as we move forward. The proof is in the financial stability of the company and just how well we are doing,” he says.

Managing Customer Needs…

According to Moore, AIT uses the AS-400 software system, which is commonly used within the logistics sector. What distinguishes AIT from its competitors, though, is how it uses this software to enhance its internal operations and how it provides shipping data to its customers. From Moore’s point of view, “It’s what you do with it to enhance it and make it your own from an AIT standpoint.”

What AIT has done is to use the AS-400 software as a platform upon which to build its Electronic Advantage suite of products, which is a trademark of AIT. Developed by the company’s vice president of IT, the suite gives the company a means to deliver on the customer’s needs for communications via the trace and tracking side of process, says Moore.

“The customer can log on and get all the information they need and they can customize how they receive that information,” he says. “They are not getting a canned report, unless that’s what they want. Instead, they can customize it to their needs by utilizing the 80 different columns from which they can pick what information matters most to them. If they want to track by PO number as opposed to some other identifier, they can. If they want to track by what is coming out of a certain DC they have in the field they can do that also.”

Further, says Moore, one of the major advantages of the company on the technology front is its rather sizable programming staff of 31 programmers. The staff is able to provide and support whatever the customer’s needs are and the customer is able to either retrieve the information that is important to them on their own or the information can be sent to the customer.

The above technological service is just part of the entire package AIT provides the customers they serve and, according to Moore and Lisowski, is one of the many ways the company differentiates itself from competitors.

As said above, sales representatives from AIT will meet with customers to assess their shipping needs and then AIT will build a program for what the company will do for its client. So if the client needs to ship product from Shanghai to Chicago and it’s only ocean freight AIT will give them pricing for the freight, set them up with a known shipper (which is a requirement of the Transportation Security Administration (TSA)) and establish a credit line.

While the product is in transport AIT will be responsible for providing the client with information via its Electronic Advantage suite of products. AIT will also make sure that all of the necessary documentation is in order and then when the product arrives at its destination city they will check for damage and then carry it to the end destination.

One of the biggest challenges, though, to this smooth stream is regulations from the TSA that took effect on March 12, 2007. The regulations call for the screening of all cargo, which Lisowski says will be handled by the airlines and other carriers initially, but could also become part of what AIT does for its customers. “We do see it increasing costs, but by how much is unclear,” he says.

Asked about the company’s strategies to deal with this changing regulatory landscape, Moore and Lisowski demurred, saying they didn’t want to give anything away that could undermine their competitive advantage. “We do have a plan, though,” says Lisowski.

Moore adds that these new regulations will shrink the pool of freight forwarders by adding to the burdens under which they must operate. Those with the financial resources and stability to ride out the initial reverberations will come out the other end in good shape, says Moore. He expects that AIT is in a strong position to flourish.

Another challenge to AIT’s growth is the flattening of the domestic market for their services. Moore says he does not see an up tic in their industry from a business standpoint domestically, but due to the above mentioned regulations and other market dynamics, there will be fewer forwarders competing for the same amount of business. Basically, the same size pie with fewer companies taking bites out of it.

To generate new customer’s, though, Moore says, “We use a combination of direct sales, literally knocking on a lot of doors, and through customer referrals, which generally come with a ringing endorsement that helps open the doors. We also use our carrier base to exchange information on routing of orders and leads on an integrated online system, which provides us with a worldwide reach.”

Moore adds that he expects the company’s main growth over the next three to five years to be in the international arena. Currently, 30 percent of the company’s business is international in nature, but Moore expects that to grow to approximately 50 percent of their total. Asked if this will mean opening offices in other countries, Moore said, “We’ll see what the future brings us. We are currently having success growing the product as is, but if expanding to include international offices would best meet our customer’s needs we would grow in that direction.”

Because AIT is essentially in the transportation business, the price of fuel is a constant and vexing cost issue for them to deal with. To help smooth the volatility associated with the ever changing price of oil the company continually reviews the conditions of the world oil market and adjusts its fuel surcharge on a monthly basis in conjunction with statistics published by the U.S. Department of Energy.

“We have a sliding scale for the customer to pay only what the Department of Energy publishes on a price per barrel standpoint for a barrel of oil,” says Moore. “That is the only way we can mitigate those costs; so that the customer is aware of it on the front end.”

Corporate Culture…

While service to their customers is critical to AIT’s business, service to community is a critical aspect of the company’s culture. They are the primary sponsors of the U.S. curling, skeleton and bobsled teams and are sponsors for the Making Strides in Breast Cancer walk in Chicago. In 2004, the company received the American Cancer Society’s You Rise Above the Rest award for its dedication to spreading awareness of breast cancer. In 2005, the company received the Hats Off Award for outstanding participation from the American Cancer Society.

According to Lisowski, these efforts are not only good for the community, but they are good for the business as well because they act as good team building exercises and to demonstrate the company’s family values commitment.

Part of the company’s team building efforts is also represented in the kinds of people it seeks to hire.

“Business and industry is about serving our customers and providing the best product,” says Lisowski, “and in order to do that we have to have the best people out there. We treat the customer and our employees the way we would want to be treated.”

Asked about the company’s hiring practices, he says they really don’t do anything all that different from any other company. “We are always looking for the best person,” he says. “Treat people well. Be open, honest, fair, and equitable and have empathy for your employees.”