MCST ties growth to rapidly expanding warehouse partner
May 9, 2002 12:00 PM, Gary MacklinIn a move that ignited his business, Mike Cara quit making deliveries for wholesalers at New York's Fulton Fish Market and began to concentrate on delivering to those same wholesalers.
Starting in 1979, he made store deliveries from vendors on the market. It didn't take too long to discover that the best trucking business was going into the market, not out. To get into the inbound business, he began buying crabs and selling them to market wholesalers. Cara also hauled fish into the market to help increase revenue.
“The size of the fleet varied in those days, depending on how much volume we had,” Cara says. “Our basic equipment was two used vans. After a while, we began looking at the idea of delivering frozen food as a way to smooth out the workflow. The idea worked, and in 1982, we bought our first refrigerated truck. From that point forward, we had a strong presence delivering to those seafood wholesalers. We operated as M Cara Seafood Transport, and ran four trucks from 1990 to 2000.”
Partnership with growing warehouse Although the company remained small for 10 years, it took a step in 1990 that provided the key to its current size; Cara entered a 50/50 partnership with Preferred Warehouse. Operating as MCST Preferred Transportation, the company became the transportation arm of the warehouse system, which now has nine facilities nationwide with two more ready to come on stream by June 2002. Preferred Warehouse has changed its name to Preferred Freezer Services and has grown to four warehouses in New Jersey serving the New York metro area, two in Miami, Florida, and three in Los Angeles. The two new warehouses are being built in New Jersey.
Preferred Freezer Services is a general public refrigerated warehouse chain that aims its primary services at the very same target as MCST Preferred Transportation. Both companies focus on a narrow, but lucrative niche of the food business — expensive frozen seafood. “Notice that all the warehouses are in port cities,” Cara says. “Other public warehouses don't really like the extra handling and risk associated with frozen seafood.”
In addition to the construction going on for Preferred Freezer Services, MCST is about to complete a 90,000-sq-ft freight handling facility of its own in Jersey City, New Jersey. It will have space for 800 refrigerated pallet positions and 3,000 pallet positions in its freezer. Storage space will open onto a 20,000-sq-ft refrigerated dock served by 18 doors.
Large refrigerated terminal
At present, MCST operates from a leased building in Edison, New Jersey. Located just a mile from Interstate 287 and only two exits away from the New Jersey Turnpike, the building has 3,000 pallet positions for goods held at -5° F and 600 positions in a cooler room at 38° F. The refrigerated dock has 36 doors. Open 24 hours a day, seven days a week, the terminal has parking capable of storing 100 trailers or containers under 24-hour security.
MCST now has 40 tractors and 50 refrigerated trailers in the company-owned fleet. The bulk of business for this fleet is consolidated delivery from multiple shippers to single receivers. Unlike the receiver-paid freight for most truckload carriers, the shipper pays the bills for LTL frozen seafood. More than 60% of freight handled by MCST delivers to seafood wholesalers. What little truckload work the company does is for large grocery chains. The business model is built around working hard to compete within a 50- to 300-mile radius of New York with shipments that average 5,000 pounds.
Concentrating almost exclusively on frozen seafood in LTL shipments, MCST Preferred generates about $13 million a year from trucking. This is almost three times the revenue that would be generated by a fleet of the same size in general truckload service. In addition, it maintains a constant business with 25 independent contractors who haul loads outside Cara's heaviest traffic lanes. A third part of the business handles 25 owner-operators who provide local cartage of marine containers.
Intermodal from three locations
The intermodal group operates from locations in New Jersey, California, and Florida, moving containers of imported seafood from ports to Preferred warehouses. Cara says that the port of Los Angeles (Long Beach) is the nation's largest destination for imported seafood and that the Northeast corridor is the biggest consuming market. Delivering imported product in marine containers beyond a 300-mile radius is impractical, so containers are unstuffed at Preferred locations and the cargo consolidated with other product for delivery to other Preferred warehouses or to the final receiver. MCST handles an average of 25 to 40 containers a day in New Jersey, usually 10 or more in Miami, and 15 in Los Angeles. A separate brokerage operation books about 30 loads a week. Much of this brokered freight is imported product moving to New Jersey from Florida or California. The brokerage began operation in 2000.
Brokered freight from Florida is shared between the MCST fleet and its independent contractors. The company runs the north-south lane with its highway fleet or with leased teams. Running with teams, MCST can cover the 1,300 miles from Miami to New York in 22 to 28 hours.
In addition to MCST Preferred, Cara operates a smaller company known as Cara Van, a local same-day delivery operation for the New York metro area. It runs mostly smaller trucks and vans that do not require drivers to have a commercial license. These drivers are paid by the hour. With the exception of one single axle tractor and a 38-ft trailer for larger accounts in New York and Long Island, Cara Van runs a fleet that ranges from insulated compact vans up to 22-ft straight trucks. The company was created specifically to compete with the small trucking companies that do so much delivery in and around New York. In fact, Cara Van is intended to deal with companies just like M Cara Seafood Transport used to be.
Full logistics services
The growth pattern for MCST Preferred has been to follow the changes in Preferred Freezer Services. Together, the two constitute a classical logistics service, handling imports, providing inbound transportation to warehouses, contract storage, outbound transportation for further distribution following load consolidation, and final delivery to receivers. Cara says that Preferred, unlike some warehouse chains, is big enough to work for its clients while remaining small enough to care about personalized service.
In addition to freight generated internally and by Preferred, MCST offers delivery services to truckload carriers inbound from other parts of the country. Cara says that the service at MCST offers truckload carriers the opportunity to empty a trailer in one to two hours and avoid the waiting times at receivers in the New York area. Another benefit of dropping freight with MCST is avoiding the onerous length and width restrictions in the city of New York. For instance, MCST operates one 38-ft trailer and single axle tractor specifically for distribution in Manhattan.
Inbound carriers can make money by dropping multi-stop loads with MCST and getting back under a south or west bound load as quickly as possible. The total revenue is not quite as high for the inbound carriers, because MCST unloads the inbound freight and bills the carrier for the service. Still the advantage of getting out of New York with a paying load quickly far outweighs the costs associated with waiting for appointments at two or three different warehouses, Cara says.
Less waiting time
Because they do so much repetitive business with the same group of receivers, MCST does not face as much waiting time as some of its competitors. “We make our appointments, arrive on time for those appointments, and then give the receiver two hours to take the freight,” Cara says. “We'll take every step necessary to get the freight delivered, but if a slow stop begins to put all other receivers on a route in danger of missing their deliveries, we will go on with the rest of the route and reschedule the missed stop for another day.”
More than 60% of MCST's freight comes from Preferred warehouses. The trucking operation routinely covers 14 states with overnight service. This trade area stretches from Manassas, Virginia, to Londonderry, New Hampshire. Unless all the freight in a load is destined for the same receiver, trucks stop in Edison in the course of every trip. Freight is pulled off the trailer, consolidated with other shipments for the same receiver or in the same area, and sent back out.
The goal is to maximize revenue on every load out of Edison. In an operation built around LTL delivery, what is called a full load is not as heavy as a normal truckload. Most truckload carriers consider that a full load should weigh 44,000 to 46,000 pounds. At MCST, the different pallet configurations required for LTL shipments limit truckloads to 30,000 to 34,000 pounds.
Routed at pickup time
By the time MCST picks up a shipment, it is already in the company computer system and routed to its final destination using Profit Tools, an operations software package developed by a company of the same name in Lee, New Hampshire. Inbound freight is staged for loading on outbound equipment. In most instances, freight remains in the building only four to five hours.
The terminal operates 24 hours with inbound loads on MCST equipment arriving between 3 pm and midnight. Inbound freight on third party carriers is usually handled between 6 am and 3 pm; however, the company will unload from other carriers at any time of day. By 8 pm, routing is well underway and loading begins by 9 pm and is, in general, finished by 5:30 am. The warehouse crew numbers six during the day and 12 at night. Drivers are scheduled to arrive for work based on the location of their receivers and appointment times. Total freight volume through the terminal can range from 540,000 pounds to 700,000 on any given night. Forty routes dispatch from Edison every morning.
Maintaining the service levels set by MCST and Preferred is a detail-filled business. For instance, all new drivers, regardless of previous experience, begin work in the receiving crew at the MCST facility in Edison. The purpose is to learn how to handle frozen seafood both from a physical and thermal perspective. MCST stores and hauls seafood at -5° F. With multiple door openings during a delivery route, box temperature inevitably climbs during the day. Some receivers will accept product at temperatures as high as +15°, but many use +10° as their standard maximum.
Careful handling required
By working the dock, new drivers learn to remain constantly aware of product temperature and to handle seafood gently. Unlike many frozen products, a lot of frozen seafood is prone to physical damage if handled roughly. It involves a lot of delicate packaging, which is responsible for many of the claims the company receives. All loading is done at the Edison facility, where new drivers also learn the hard lesson that all MCST freight gets touched by hand. “It is not easy work,” says Cara, who drove and delivered for 23 years.
On the receiving crew, workers must count freight, check it for damage, and secure it with stretch-wrap before it is put away. To maintain control of expensive products in a high-claims business, MCST shipping personnel check every outbound order three times. A different person performs each check. Delivery drivers are given a schematic drawing of every trailer load showing each pallet position with details of the pallet contents and the intended receiver. Drivers are instructed to call headquarters immediately from any stop where physical damage or product shortage is detected. If customers request it, a portable temperature recorder will be placed in an order.
Notwithstanding the careful in-house training, MCST will not hire inexperienced drivers. For work in the New York metropolitan area, a driver must have five years of local delivery experience. To help improve performance and customer satisfaction, MCST tries to give drivers routes they know and like. Seafood receivers can be notorious for their picky behavior, so MCST tries to keep drivers with the same customers in the hope that they will develop a positive relationship.
With all the changes in recent years, one constant remains from earlier days at MCST: the tractor and trailer fleet is leased. Cara says that any small fleet walks a fine line in making a decision of sourcing equipment. In his view, the few cents per mile between owning a fleet or leasing it with all service included is irrelevant.
One of the most important factors in making the decision to lease is service. A leasing company charges for maintenance as part of the total lease payment, but the cost of owning a fleet, operating a shop, maintaining a parts inventory, along with hiring and paying mechanics is almost as high. Besides, the present facility doesn't really have enough room for trailer parking and a shop. “The biggest factor is hiring the right technicians,” Cara says. “In this labor market, top notch mechanics won't work for a fleet that doesn't have a first rate, fully equipped shop.”
Two leasing companies are involved at MCST. They are Penske Truck Leasing and AMI, a local NationaLease franchise. Although applications are mixed between the two vendors, Penske provides a lot of the highway equipment, while AMI supplies much of the local delivery fleet. Highway tractors are FLD120 Freightliners with sleepers and big horsepower, typically Cummins N14 engines with 435 horsepower. MCST uses Mack CH613 day cabs for delivery within a 200-mile radius. Those tractors use Mack engines rated at 350 hp. The application difference between Freightliner and Mack equipment is not a hard rule; a quick inspection of the fleet readily reveals Mack sleepers and Freightliner daycabs.
Trailers show more distinct specifications. Local delivery trailers are built to wholesale grocery specifications. Those are 48-ft Great Dane Classics with flat aluminum floors and roll-up rear doors. The newest highway trailers are 53-footers from Trailmobile and are equipped with Carrier Transicold Ultra refrigeration units. They have hinged rear doors.