“We’re the original 3PL” is the tag line for the Eden Prairie, Minnesota-based third party logistics company C.H. Robinson. Over the company’s century plus existence, it has adapted with each regulatory, economic and technological challenge. In an interview with John P. Wiehoff, chairman and CEO of C.H. Robinson, he explains the process behind creating one of the world’s largest 3PLs.
The Original. C.H. Robinson’s tag line is “We’re the original 3PL.”
For the largest U.S. 3PL [Third Party Logistics], posting well over $13 billion in annual revenues , the expression doesn’t do justice to the expansive breadth of supply chain services C.H. Robinson provides.
For many, the company is an LTL or full load trucking business, a produce company, or a global forwarder or perhaps a third-party supplier of a dazzling array of technology based products. Whatever business silo you dive down, quickly there’s a realization that C.H. Robinson is one of the most complex yet integrated supply chain service companies in the world, as each silo widens into a holistic whole held together by technology.
Over C.H. Robinson’s century plus existence, it has adapted with each regulatory, economic and technological challenge. For that reason, it is at once both an old company, with its own tried and true corporate culture, and yet a new company moving at a giddy pace being reshaped with each growth spurt.
From Produce to 3PL
In an interview with AJOT at C.H. Robinson’s headquarters in Eden Prairie, Minnesota, John P. Wiehoff, the company’s chairman and CEO, explained and offered some insights on the company’s journey from produce broker to global-3PL, “C.H. Robinson goes back to 1905. Charlie Robinson was a produce broker … [there are five operating divisions today] And the fresh division, where we buy, sell and distribute fresh fruits and vegetables is the part of the business that goes back all the way to 1905. But really prior to 1980, a lot of the things that C.H. Robinson does today as the 3PL wasn’t really allowed. What we do today globally in all verticals, really we were doing in produce from 1905 to 1980, for those first 75 years. For the last 37 years, since the deregulation of North American Transportation, we’ve been diversifying our produce into all the other verticals and diversifying geographically…”
Ultimately 3PLs, like C. H. Robinson, are crafters of supply chain solutions for their customers (see chart on page 11). And through this lens, the 3PL and the solution are perceived to be one in the same. But at the core, there are significant differences between 3PLs. As Wiehoff explains, “If we were to use, let’s say, a North America Service Transportation (NAST) as an example, some of the 3PL companies operate their own warehouses for the customers. ‘Do you do that?’ Some of them have a combination of doing that as well as, let’s say, having strategic relationships with warehouse and distribution operators in different markets. ‘Do you have that combination?’ Yes, we do, we do. We have that same combination. There’s a few facilities that we own, we have a few hundred under lease, and we have a lot of partnerships where we rely on others. I think in the universe of third party logistics companies, we’re more biased toward transportation and transportation execution than contract logistics or warehouse pick and pack (PNP) activity. We have a lot of facilities where we’re consolidating and deconsolidating freight. We do some inventory management. Despite the size and diversity of Robinson today, there are still things that we specialize in that are unique to how you might put customer solutions together. We have that network of facilities and service providers. It’s an area where we’ll continue to invest and grow our capabilities ...”
Although C.H. Robinson has evolved into a highly integrated 3PL, Wiehoff says many are still surprised at the company’s service diversity. “We still have people come in and go, ‘No, you’re mostly a produce company, right?’ They know us through the perishable side. We’ve got managed service customers who think of us as a technology company. We’ve got all different, and we’ve got over 100,000 customers, so you get a lot of people who get unique windows into who we are.”
Part of the challenge for a 3PL like C.H. Robinson is simply keeping the company branding and the corporate story intact. There is a chameleon like quality to a 3PL like C.H. Robinson, because of the designer solutions it creates for its customers residing within any link in the supply chain (see chart on page 11). If the management solution is for warehousing or trucking, the perception of C.H. Robinson might be different than for global forwarding but ultimately the basic service model – how the company gets things done – remains the same throughout.
The Building of a 3PL
3PL is an amoeba-like expression [who is the third party and what is logistics?] contrasting sharply with the capital-intensive hardware of ships, planes, trucks and warehouses connecting the supply chain. In many respects the 3PL business model is as much a step-child of the Silicon Valley as it is of any innovations in transportation itself. As Wiehoff explains the phenomena, “When I joined 25 years ago, the 3PL space was not really as commonly understood.”
After C.H. Robinson became a public company in 1997, Wall Street, as Wiehoff remarked, “lumped” C.H. Robinson with other transportation companies like Hub, Landstar or JB Hunt. But as Wiehoff notes, “In some ways we’re all very similar and some of the Wall Street people will lump us together, but underneath it our businesses are all very different.”
A great deal of the difference is how the companies began in business. As Wiehoff points out, “We [transportation companies] came from very different places. For JB Hunt, intermodal is their most important part. [Although] they do have some digital freight initiatives, some 3PL type things. Robinson coming from the deregulated era of produce and perishable, we’re very focused on people, process, and technology.” People, process and technology is the mantra to the asset light C.H. Robinson.
But staying asset lean isn’t the same as being averse to investment – C.H. Robinson has invested to the tune of $150 million a year into technology, literally over a billion has been invested in building the IT (Navisphere) platform. What it does mean is that C.H. Robinson has stayed away from investing in the big-ticket items in the supply chain like trucks, warehouses, ships and planes.
From Wiehoff’s perspective it is a company’s strategic choice on where to invest its capital. He gives the example of investing in autonomous vehicles. “Autonomous vehicles, on the capital side of surface transportation is huge. It’s precisely why a company like Robinson shouldn’t, can’t, get deep into the capital allocation and leverage around that… We want to help our customers evolve to what the best answer is in the marketplace. We want to use the best distribution center to serve our business model, and if we have one that we have a 20-year capital investment in, we’re going to work hard to try to keep that customer and that distribution center, as opposed to moving them to where their supply chain can be more competitive.”
Succinctly, “Separating the infrastructure and capital investment money, from the people, process, technology, innovation. That’s precisely why I think our space in our company is growing more effectively today,” Wiehoff said in summing up how investment is determined.
The focus at C.H. Robinson is more on specializing in the customer’s own specialization – a corporate agility that is derived from the business model.
An asset light 3PL is designed to be “mobile” (in every sense of the word) making expansion into global markets a natural extension of the business model.
As Wiehoff explains, “In this big, broad world of transportation and supply chain, understanding the competitive landscape and the various business models and who’s good at what, [is important]. It’s a complex landscape. One of the things that we think is unique about us is that we’re really focused on global capabilities, our platform is global, as is our technology…”
The emphasis on expanding globally is clear in the pattern of acquisitions (see pocket history on page 10). Since going public in 1997, C.H. Robinson has brought fourteen logistics providers under the corporate umbrella as well as a number of other related service companies.
Many of the acquisitions have been global freight forwarders and logistics providers including the seminal acquisition of Chicago-based forwarder Phoenix International for $635 million in 2012. That same year, the company added Polish forwarder Apreo Logistics S.A.
For Robinson, M&A is an ongoing process. In 2016, C.H. Robinson acquired APC Logistics, a freight forwarding and customs brokerage company serving the Australia and New Zealand markets. And in August (2017) C.H. Robinson added Milgram, a Montreal-based forwarder with a strength in surface transportation in Canada.
But for C.H. Robinson, adding through M&A is really an extension of the organic growth of the platform. As Wiehoff explained, “At the end of the day we [3PLs] all care about the same things that matter, like scale and geographic footprint .... I would say that we’re biased more towards people, culture, innovation, that we’re trying to focus more on organic growth. The consistency of our approach - we’re trying to stay very true to our platform, our culture, our innovation, and that’s in part because technology has become so important, and innovation and pace of change has become so important, that for us, to be very aggressive on the M&A front and [then] go after scale and try to sort out culture and integration.”
The tag line “We’re the original 3PL” may soon need some revision as technology drives the business model in directions uncharted. Inside the entrance to C.H. Robinson’s is an interactive wall display measuring connections and activity throughout the company’s entire global network – the knee jerk is to say it looks like something out of Star Wars, but in reality, Star Wars looks like something from the C.H. Robinson visual display. The rest of the tech center is equally impressive and supports the entire C.H. Robinson architecture.
So, with technology as the progenitor of progress, is the 3PL still a 3PL or is it morphing into something completely different?
Wiehoff said of the shift, “I think the 3PL concept and label is going to fade over time, too. I think it’s been the evolution of business models around how you use technology and how you create value in the supply chain.”
But whatever the future designation of a logistics provider might be, C.H. Robinson will still be an original.