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April 2006
The Logic of Logistics
By Lisa Hoffmann

It’s a good bet that a third-party logistics company handled the clothes you’re wearing, the coffee you’re drinking and the paper or monitor you’re reading from somewhere along their journeys to you. But the storeowners who sold you that chambray shirt or brewed your grande latte this morning probably aren’t even aware that a third-party distributor ever handled the products. And that’s just how it’s supposed to be.

Invisibility to manufacturers’ customers means success for a warehousing firm. The seamless process that takes products from manufacturers to warehousing and through distribution is the magic of third-party logistics, or 3PL. For partners Herb and Drew Harriss and John Kiser, of Baxter-Harriss in Belmont, mixing up 3PL magic is part of an ordinary day.

 

A Logical Formation

The warehousing industry does such a good job of staying under the radar that it is largely misunderstood. Many people assume all warehousing is private warehousing, where companies handle their own products in spaces they own or lease. In reality, third-party logistics play an essential role in improving core competency and maintaining the bottom line for manufacturing and retail industries.

“The nature of public warehousing – where businesses hire someone else to store, control and distribute their products – is that you only pay for the space you use,” Kiser says. “You don’t have to lease space for a year or more, and you can take inventory back whenever you need to. You have the added benefit of letting experts handle the warehousing while you concentrate on your business.”

Baxter-Harriss can play a temporary role or offer contract warehousing, a more permanent arrangement. They also act as the manufacturer’s distribution center, providing packaging, order fulfillment, freight management and transportation. These days, the whole process is tracked by specialized computer systems. It hasn’t always been that way, though.

“People used to call me a warehouseman and now I’m a logistician,” laughs Herb Harriss. “The basic premise is the same, but the process certainly has changed.”

Harriss’ father-in-law, Carl Baxter, was asked to partner in the original business, which became Baxter-Davis in 1968, when his neighbor, who ran a small paper company, decided he wanted to maximize the use of spare storage space. Herb Harriss joined Baxter-Davis in 1972, after leaving his post as an account manager for DuPont in Wisconsin and relocating to Charlotte. The company became Baxter-Harriss in 1978.

“As soon as I joined the business I knew it needed to grow,” Harriss says. “We operated about 35,000 square feet on North Tryon Street and started off with simple storage services. In the early ’80s we started offering packaging services. We’d store merchandise, take orders by mail, telephone and Western Union telex, pick and pack the items from the merchandise stock and ship them off to the retailer. Business was steady, but I knew there was more we could do.”

A 1982 incident forced their hand.

“We had a fire in the warehouse, which at the time was, of course, a terrible thing,” Harriss explains. “But we came back from it and it enabled us to build some small specialized facilities that were designed to store chemical products, something that was pretty unique in the business. That’s when the real growth began.”

In 1989, a distribution manager for Western Auto contacted Harriss to find out if he could help him store about 100 truckloads of tires. Western Auto’s storage facility was full and, faced with the pricey prospect of leasing a building and hiring people to run it, he was looking for other options. That distribution manager was John Kiser.

“Up until then, I had the same misconception that many people have about warehousing,” Kiser says. “When I learned that Herb had the flex space that I needed, I knew it was the right option. I was really impressed with the all-around great job Baxter-Harriss did controlling the inventory, and I was intrigued with the third-party warehousing idea. In 1992, I joined the company.”

In 1994, after several years teaching high school, Drew Harriss, Herb Harriss’ son, officially joined the company as well.

 

A Notable Niche

Baxter-Harriss began carving a niche for itself in the chemical warehousing market and landed a lucrative contract with an international chemical company, allowing them to build a 360,000-square-foot chemical warehouse in Belmont. Designing specialty storage space offers an effective competitive edge.

“We have the Cadillac of sprinkler systems in here,” explains Drew Harriss as he walks among rows of barrels, all neatly labeled and arranged. “We also have special rooms that can maintain certain temperatures, provide special ventilation and utilize containment systems, in the unlikely event of an incident. Safety and security are our first priorities, and customers like that. We cooperate with companies that want to come in and audit our facilities. We welcome suggestions on ways we can better handle their products.”

Most of Baxter-Harriss’ customers are not household names. But if you like colorful clothes, clean pools, safe affordable housing and tasty fruits and vegetables, they play a major role in your life. Clariant, Dystar and Chemtura manufacture textile dyes, pool care chemicals, insect control products, stabilizers for PVC pipe and vinyl siding and window frames, and flame retardants.

“Our warehouse features, combined with our experience in the market and a fantastically safe record, help us stay ahead of the curve,” Drew Harriss says. “Combining both short-term and long-term warehousing options with our specialization sets us apart from most of our competitors.”

Martha Rollefson, manager of third-party warehousing services for Chemtura in Middlebury, Conn., thinks they’ve found a winning combination. “It’s not too hard to find chemical warehousing companies,” she says. “But it’s very difficult to find one this good.”

Rollefson discovered Baxter-Harriss in 2001, when she was shopping for a company to take over the one that was overseeing Chemtura’s Fort Mill, S.C., warehouse; the warehousing company that was not fulfilling expectations.

“When I met with Baxter-Harriss, I was very impressed with the way they operated and their positive attitudes,” Rollefson recalls. “They took over our Fort Mill warehouse in 2002 and the improvements were immediate and considerable. It was uplifting to see everyone working together to get the job done right.”

When Chemtura’s lease in Fort Mill was up, Rollefson moved the entire inventory – nine million pounds worth – up to a 112,000-square-foot Baxter-Harriss facility, the second of their two Belmont warehouses. “We now have 12 million pounds of product there,” she says. “Superior inventory control helps us keep the facility full and keep the product moving through it, without hiring more people. Our cost of doing business continues to decrease.”

 

High-Tech Advantage

Inventory control is the name of  the game in warehousing, and technology plays a pivotal role in getting it right. Baxter-Harriss has an in-house warehouse management system that it uses for smaller companies. With larger clients, they employ SAP, a well-known enterprise resource planning (ERP) software package. ERPs are highly evolved, networked systems that integrate all of a company’s      database functions, including supply chain management. Baxter-Harriss operates as a satellite location of sorts for these clients.

“The trend used to be to set up different systems to communicate through electronic data interchange,” Drew Harriss says. “But as the economy and feasibility of running a line between two points has increased, we have found this to be a better solution.”

Baxter-Harriss has also installed Windows-based computers with bar code scanners on some of their forklifts. It looks impressive, but Drew Harriss isn’t convinced it’s worth the investment to put them on all their trucks – yet.

Affordable technology to make the forklift terminals more advantageous is right around the corner, Harriss predicts. Writable RFID (radio frequency identification) tags will make the system work. RFID tags contain silicon chips and antennas that enable them to receive and respond to a transceiver. This may sound like something out of high-tech spy novel, but you see them everyday. They’re the little devils that activate the security alarm at the music store when the cashier forgets to deactivate the one on the DVD you just bought. The security tags used in retail stores are passive tags, which have no power source of their own and are cheaper to manufacture. Warehouse inventory control requires active tags, which are much more expensive.

“Someday our operators will be able to pull an item off a pallet and the system will automatically recognize that it’s been removed,” Drew Harriss says. “As they drive past the shelves, the inventory will update itself through a system of chips and transceivers. The technology is available now, but it’s cost prohibitive. We’ll wait and target the point when the benefit best matches the required investment.”

 

Back in the Driver’s Seat

In 1999, Harriss, Harriss and Kiser were approached with the opportunity to merge with three other companies and create one large industry player. After much consideration, they decided to take the plunge and began operating as part of Logisco. Unfortunately, it just wasn’t a good fit.

“Our ability to make and implement decisions quickly has always worked very well for us,” Drew Harriss says. “We just didn’t anticipate the way consolidating into Logisco was going to change that process. The hierarchy included local, corporate and private equity market parties, and making decisions started taking a long time. We were used to making decisions over lunch.”

Shortly after the merger, Logisco invested in a 10-year lease of a 500,000-square-foot warehouse in Nashville, Tenn. Then, tragedy struck on September 11, 2001, and the economy sank deeper into recession. The monolith warehouse stood empty, and revenues could not outpace the increased expenses.

The original plan had included rapid continued growth through acquisitions, but the economy and its effect on capital markets prevented that. “Things weren’t happening the way we had expected them to,” Drew Harriss says.

In 2005, the partners decided they wanted to go back to making their decisions over lunch. Fortunately, Logisco accepted their offer. They reverted to operating as Baxter-Harriss that summer.

The team considers the years they spent with Logisco to be an invaluable learning experience. “People tend to regret inaction more than action,” Drew Harriss says. “If  we hadn’t tried it, we would have always wondered if we had made the right choice. And  now we’re wiser as we face the future.”

Their plan for the future focuses on controlled growth. Several customers have asked them to investigate moving operations into Georgia and Tennessee. Most of the space they currently hold  is full, creating an imminent need for expansion.

There’s also a plan in the works to ally themselves with a company that specializes in freight forwarding, one of the value-added services Baxter-Harriss is concentrating on for the future.

“We need to explore ways we can grow within our established niche to provide related services to our customers,” Kiser emphasizes. “We ship out hundreds of containers every year. Perhaps we can take them a step further. We need to find ways to make our service more complete for our core customers, which will make the process easier for them and allow us to grow at the same time. That’s a win-win situation all around.”

Lisa Hoffmann is a Charlotte-based freelance writer.
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