Lean Logistics Purchase To Aid Transport Options

March 16, 2008
| By Pete Daly |
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HOLLAND — Brambles, an Australian firm with operations in 45 countries, has agreed to acquire LeanLogistics, a major provider of computerized transport and supply chain systems via the new business trend known as software-as-a-service.

Brambles announced it will pay $45 million in cash for LeanLogistics, which was founded here in 1999 and now employs 56. It will become part of Brambles’ CHEP division, which owns millions of pallets and containers leased throughout the United States to manufacturers, distributors and retailers for the shipment of products.

According to the Brambles Web site, CHEP is an acronym for Commonwealth Handling Equipment Pool, which Brambles acquired from the Australian Government in 1958. The pool included cranes, forklift trucks and standardized pallets left behind by U.S. forces at the end of World War II.

Dan Dershem, president and CEO of LeanLogistics, said joining CHEP would enable expansion of its technology to more customers across the U.S. and, in the future, to other countries. Dershem will continue to manage LeanLogistics, reporting to the group president of CHEP Americas, based in Florida.

Dershem said LeanLogistics was founded by him and Jeff Potts, Craig Hall, Andy Bass and Rick Tucker. Until its acquisition by Brambles, the privately held firm had been owned by the management team plus other shareholders in West Michigan.

Sale of LeanLogistics was to be finalized March 7 at CHEP offices in Florida.

The LeanLogistics goal is to help companies reduce shipping costs by connecting them to more than 4,000 carriers throughout the U.S., without those companies having to make a significant capital investment in office technology.

LeanLogistics developed transportation management software called LeanLogistics On-Demand TMS (transportation management system), which went online in 2001. The Web-based infrastructure was developed in partnership with Sun Microsystems. The customer sends its information to LeanLogistics, where it is integrated into the LeanLogistics Web-based transportation network. On-Demand TMS provides daily planning, execution, settlement and procurement functions, and is currently used to process five million shipments a year, representing more than $4 billion in annual freight charges.

"We've built a program for the supply chain that we actually host and operate on our customers' behalf," said Dershem, adding that LeanLogistics is using the business model known as “software as a service,” or SaaS. Rather than shipping software as a product to its customers for installation on their computers, the software actually resides in two LeanLogistics locations: one in Grand Rapids and one in Chicago.

Software as a service is a major new trend in the way software is sold. A growing number of tech companies use SaaS. Customers, particularly businesses, pay a fee for access to the software programs through the Web.

At the Morgan Stanley Technology Conference in San Francisco in early March, CFO Chris Liddell of Microsoft Corp. said, "Clearly, software as a service is going to be a bigger component of the business going forward."

In 2006, LeanLogistics introduced its Managed Transportation Services, a customized combination of On-Demand TMS software and business information that enables customers to outsource transportation-related activities while retaining strategic relationships and contracts.

Dershem said LeanLogistics had been "hiring quite a bit" lately. About a third of its employees are technology experts; the rest are logistics professionals.

LeanLogistics’ first client was Meijer Inc. Today, LeanLogistics serves more than 40 major corporations in addition to Meijer, including Procter & Gamble, Unilever, Pepsi Americas, Barilla America, Bay Valley Foods, Chiquita, Johnsonville Foods, Pinnacle Foods, Otis Spunkmeyer and the Kellogg Co.

CHEP has more than 7,700 employees and operates in 44 countries, offering pallet and container pooling services to many of the world's largest companies. It tracks movements of 92 million pallets in the U.S. at more than 21,000 locations every day, according to Brambles CEO Mike Ihlein.

CHEP spokesperson Ronald Margulis said CHEP has a huge database of product container movements.

"Across the (transportation) network, they know where that product is at any given time," said Margulis.

If a company requests it, CHEP can even track individual pallets with the use of a tiny radio frequency identification chip inside the pallet.

Kevin Shuba, group president of CHEP operations in the U.S., said CHEP can now offer LeanLogistics customers "the ability to optimize transport routes and reduce empty transport miles by using the most efficient transport provider available."

According to Margulis, "The biggest taboo in transportation these days is empty miles" — meaning semi-trailers being moved while empty, after delivering a load. The LeanLogistics network can quickly direct an empty trailer to another load ready for pickup nearby. 

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