“Our core competency is swine genetics,” says Ole Torgesen, PIC (Pig Improvement Company) USA Transport Logistics Manager. “We used to have our own fleet and drivers, but we realized that transportation was not our specialty and it would probably be better for us to outsource it to someone else.”
As the company explains, PIC USA is the leading supplier of breeding stock in the US and the largest worldwide. Founded in 1973 in Spring Green, WI, it is now headquartered in Hendersonville, TN. Today more than 2,000 family farms, cooperatives, contracted multipliers and integrated pork systems in the US are PIC USA customers, including 23 of the largest 30 US producers.
As with other verticals the pork industry has undergone significant consolidation resulting in fewer but larger pork producers. In order to meet customer needs PIC USA has reconfigured its source farms and now has fewer but larger sources geographically closer to producer systems.
With a refreshed business model, PIC USA moved from a centralized transportation system hauling large volumes of lower priced animals to a decentralized system hauling relatively low numbers of high priced animals. Although its original outsourced transportation supplier was able to improve efficiencies and save on costs, it wasn't flexible enough to meet PIC USA's new business requirements.
The producer's search for a different supplier of logistics services led it to select NationaLease, a full service organization with more than 700 locations throughout the US and Canada. “Our main production areas had changed,” claims Torgesen, “but the logistics company didn't want to accommodate that by decentralizing and right-sizing the fleet. They were all about growing.”
Mike Oetjen, vice president, Integrated Logistics, NationaLease, explains that PIC USA really needed to improve their system design. Any time an animal spends less time in transit it will be in better shape and the chance for injury is lessened. “Due to the former supplier's inflexibility,” he notes, “there were too many deaths on arrivals; too many cripples, and the integrity of the animals was not being maintained as well as possible. One animal on a truck could be worth $25,000. The best breeding stock will start a genetic line that will produce the best animals over time.”
NationaLease did a site location study as well as a routing and scheduling analysis. It performs trailer configuration and load building for the company. The site location study revealed that PIC USA was too far away from source farms. In revamping the transportation system, domicile locations for distribution hubs were placed closer to source farms. This drives cost out simply because less fuel is needed. More importantly, the animals now spend less time in transit.
NationaLease merged with AmeriQuest in December 2006. With the combination, Oetjen is able to reach out to a number of members of the ownership of the company. In the case of PIC USA, for example Oetjen involved West Brothers Transportation Services of Raleigh-Durham, NC to hire the drivers and provide all fleet needs, including leasing, customized maintenance, finance leasing, asset services, distribution routing and analysis technology, business management, and fuel and fleet support. He also utilizes the services of two other members of the ownership body of the company, Brown NationaLease, headquartered in Des Moines, IA and FirstLease, headquartered in Norcross, GA. A special service NationaLease has been able to provide the breeder is a biosecurity program from Corcentric, a wholly-owned subsidiary of AmeriQuest.
“NationaLease has been very flexible, changing as our needs have changed,” says Torgesen. Miles per pig delivered has been cut 11%, from nine miles to eight, resulting in an annual savings of $80,000. The reduction in trailers and power units has saved PIC USA another $50,000 annually. With its previous logistics firm, PIC USA was able to recover 47% of transportation costs. Using NationaLease, the company is recovering 87% of the transportation costs and Torgesen expects further efficiency improvements.