Innovators: Forward positioning

Since 2003, Central States Trucking has increased revenues by 67 percent, from $23 million to being on pace to hit $42 million this year.

Chicago always has been a major hub for all modes of freight transportation, and by all indications, its share of domestic and international freight volumes will continue to grow. In 1980, in the wake of deregulation, Fred Grane seized an opportunity to improve customer service in the Windy City’s intermodal freight market. He launched a new company, Central States Trucking, centered on intermodal and dedicated contract carriage.

Early on, the Bensenville, Ill.-based company had formulated a strategy to differentiate itself from the many competitors that saw the same opportunity. The initial strategy was to offer multimodal services to solve customers’ logistical challenges, says company president Doug Grane, who along with his brother, Bryan – chief executive officer of Central States – purchased the company from their father, Fred, in 2006.

By 1982, this initial strategy had played out well – in its first year, Central States pulled in nearly $4 million in revenue. One of the world’s largest container transportation and shipping companies, American President Lines (APL), asked Central States to manage its first inland terminal, a U.S. Customs-bonded Container Freight Storage (CFS) station situated on a 22-acre facility in Summit, Ill. A CFS is a physical location for devanning – i.e. unpacking – and packing of intermodal containers.

In 1985, the Burlington Northern railroad and a consortium of five large Pacific Northwest shippers urged Central States to open a new CFS warehouse facility in Berwyn, Ill. One of the unique features of this facility was that a U.S. Customs official was on site to ensure products matched the paperwork, Grane says. U.S. Customs quickly adapted this first-of-its-kind facility as a prototype for the many other Central Examination Sites (CES) in the country today, he says.

The success of these first two CFS locations led Central States to expand into the airfreight business by opening its two present CFS sites. One facility doubles as the company’s headquarters in Bensenville, near Chicago’s O’Hare airport; the other site is in Romulus, Mich., near the Detroit airport.

Partner Insights
Information to advance your business from industry suppliers

By 2003, despite its diversification of services, Central States still fit the mold of most trucking companies in the Chicago area, Grane says; it had two locations and a fairly standard set of equipment, drivers and technology. That hasn’t kept the company from being a success: Since 2003, Central States has increased revenues by 67 percent, from $23 million to being on pace to hit $42 million this year. The company has 300 employees, 200 tractors and 300 company-owned trailers, and serves customers across six Midwestern states.

Location, location, location
In 2006, however, the company’s new sibling owners decided to chart a new path in building a better mousetrap for customers. Few companies in the area offered multimodal services, while Central States operated four divisions: intermodal, dedicated contract carriage, CFS warehousing and break-bulk services, and expedited LTL linehaul. And even fewer companies had positioned themselves to solve a growing problem for customers – congestion of containers at railyards.

To minimize congestion, railroads were charging shippers expensive per-diem fees – up to $100 per day – for each container detained in a yard beyond their free period, typically 24 to 48 hours. Shippers have tight annual budgets for their importing costs, and rarely consider the cost of detention associated with having to manage the imbalance of freight that arrives via railroad.

“We started recognizing that to offer better service, we needed to add more locations,” Grane says.

The strategy they developed was to “forward-position” the company’s capacity and resources to solve congestion problems for customers. Since 2006, Central States has increased its number of secure drop yards from two to eight. These additional locations all are within two miles of the major railyards in Chicago, allowing Central States to offer a “safety release valve” to help customers avoid detention charges, Grane says.

“We try to focus more on giving customers a smooth inbound flow into their facilities rather than bunching them all up,” he says. “It is a convenience for them.” The company can quickly pull a team of drivers together from one of its other divisions, such as dedicated carriage, to pick up and store excess containers at its drop yards. The company charges customers nominal fees for stop-off and daily storage.

Central States provides intermodal and dedicated carriage for several major customers in the area, including Jewel-Osco, Crate and Barrel, and Johnson & Johnson, Grane says. For its dedicated business, executives use the same forward-positioning strategy: Central States partners with full-service equipment leasing companies to domicile their equipment at locations closest to the customer, rather than managing equipment and drivers from a central location.

“We locate our dedicated contract fleet as close as we can to various customers to where their distribution centers are,” Grane says.

Since 2006, Central States’ executives also have been strategically positioning the company to capture future market share in the growth of intermodal freight.

In March, Central States purchased 20 acres near Joliet, Ill., near the Burlington Northern Santa Fe-Logistics Park Chicago (BNSF-LPC). This facility is shaping up to become the largest intermodal transportation center in the United States, Grane says.

“Our 20 acres is right in the heart of it,” he says. “We are very confident in the future.” Since purchasing the property, Wal-Mart and IKEA also have announced plans to build major distribution centers near the BNSF-LPC, Grane says.

Being positioned nearby will enable Central States to better serve its customers with a drop yard, and to more efficiently serve customers due to the proximity of major state highways south and southwest of Chicago, Grane says.

In May, Central States further expanded its future growth potential by purchasing seven acres of land in Rochelle, Ill., near the Union Pacific Global III (UP-Global III) facility. This location, which is off Interstate 88, will allow the company to serve its customers more efficiently due to its proximity to major state highways west of Chicago, Grane says.

“With the overall macroeconomic factors, we thought that it would be a good idea for us to be closer to the points of service where customers find value in that,” he says. “Location for us is a key driver of us being at least competitive – if not offering a little bit more in terms of competition.”

Innovators profiles carriers and fleets that have found innovative ways to overcome trucking’s challenges.

If you know a carrier that has displayed innovation, contact Avery Vise at [email protected] or (800) 633-5953.