COMPLEXITY IS OUR SWEET SPOT

Logistics Insight Asia, 1/11/2007

The more complex the supply chain the better, says Robert Bianco, President & CEO, Menlo Worldwide. He explains why to BOB GILL.

Robert Bianco joined Menlo back in 1989 as one of the first employees of the American third party logistics (3PL) company. After advancing through a series of increasingly responsible positions including operations research manager, logistics manager, and VP of operations, Bianco assumed his present role in 2005, being responsible for the strategic direction and management of Menlo’sincreasingly global business.

Menlo Worldwide, a US$1.4 billion subsidiary of NYSE listed Con-way Inc, now has operations in 20 countries around the world and employs 5,000 people. For Southeast Asia, the company is active in Singapore, Malaysia, and Thailand, and in September 2007, Menlo completed the US$34 million acquisition of regional 3PL company Cougar Logistics. The same month saw Menlo announce the US$60 million purchase of China’s Chic Logistics.

Q: MENLO’S HAS JUST MADE TWO SIGNIFICANT ACQUISITIONS IN ASIA. WHAT WERE THE DRIVERS FOR THESE?

A: Primarily, a platform for growth in both north and south Asia. Logistics is about moving raw materials to manufacturers, and finished goods to consumers. Manufacturing is at the center of all that and wherever that manufacturing point is, that’s where logistics has to be.

In addition, with the emergence of the global economy, not only is manufacturing being driven to Asia, but its markets are becoming more consumer driven, creating a demand to deliver products to the region from all over the world. Our customers were also asking us to do more in Asia – have broader capabilities, more infrastructure, more local management.

So will all that, it makes perfect sense to expand our capabilities in the region and complement our organic growth with a targeted M & A strategy.

Q: WHY COUGAR AND CHIC?

A: To me, Cougar is like a Menlo of south Asia: it aligns extremely well to our core solutionsbased hi-tech, automotive, and consumer/industrial products businesses and so allows us to expand the breadth of services to existing customers; gives us new capabilities in chemicals and wine & spirits sectors; and has a strong local management team.

As for Chic, it is a highly respected brand in China, with strong domestic capabilities (130 sites, 78 cities) in both third-party logistics and transportation management services. The acquisition immediately makes us a major player in the intra-China market, and positions us to benefit from the booming economy, which is seeing accelerating consumer demand for a diverse variety of goods.

With Chic and Cougar, I truly believe we have acquired the two best logistics companies in Asia, and Menlo now has a footprint that is unequalled in pure-play3PL.

Q: DO YOU PERCEIVE A CHANGING LEVEL OF EXPECTATIONS FROM 3PLCUSTOMERS?

A: Yes, expectations are rising every day, but that’s to the benefit of Menlo, coming closer to our business model. There was a time when you if you just operated a warehouse or managed transportation for customers you would grow. But today, that’s just not enough– the 3PL provider is expected todeliver value and expertise thatwill bring the client competitiveadvantage.

So you have to not only be great at distribution, for example, but experts in the part of the market they are going after and in the nuances of the particular industry. Only then can you assess and optimize their supply chain and so offer the maximum competitive advantage.

Q: IS THIS ALSO THE CASE IN ASIA?

A: It used to be that logistics providers here did not do much else than provide basic services, because customers would not want to pay for anything more. But that is starting to change. Increasingly, they are saying things like, “Look, I got a serious problem on my hands: a complex supply chain and I know I have to pay to get it sorted out.”

Q: HOW ABOUT MENLO’S OWN COMPETITIVE ADVANTAGE?

A: Our value is in delivering complex, technology driven solutions; that’s what we go after. And as supply chains get longer and more complex, the more opportunity we have to add value. Complexity is our sweet spot. To emphasize, Menlo is not just a forwarder, a trucker or a warehouse company, we are an asset-light, solutions-based 3PL provider.

And increasingly in Asia, customers are starting to realize the value that a company like Menlo can offer, in being able to take a solutions-based, holistic approach to their supply chain.

Q: WHAT DO MEAN BY THIS TERM, “ASSET-LIGHT”?

A: We don’t own our warehouses and we don’t own our trucks. We lease warehouses and we hire transportation providers on behalf of our customers. What that allows us to do is deliver the best logistics solution based upon the needs of the customer, not our own need to fill up warehouses, trucks or ships. It’s the supply chain design that should determine the optimal location of a VMI hub, for example.

So it’s a very customized solution that we take to the market, and one that is built on collaborating with best cost, best service partners. And it is our neutrality that really differentiates us.

Q: HOW WOULD YOU ASSESS THE STRENGTH OF THE MENLO BRAND IN ASIA?

A: Our brand in the region is strong and it’s getting stronger. The way I measure brand is through our customer pipeline, and since 2004, the pipeline has just been getting bigger and bigger.

We will eventually merge both the Cougar and Chic brands into Menlo. For Cougar, under the terms of the agreement, we have the right to use the name for just one year. But there will be a longer horizon for merging the Chic brand, because it is so well recognized in China.

Q: BEFORE JOINING MENLO YOU WERE A LIEUTENANT IN THE US ARMY. HAS THAT EXPERIENCE IMPACTED YOUR LEADERSHIP STYLE?

A: In the military, you have to make decisions on the spot. You don’t have the luxury of a teamwork environment or to see what a collaborative thought process would come up with. If it’s the wrong decision, you just have to adapt, quickly.

But in the civilian world, that style doesn’t work too well. At Menlo, I am a big proponent of teamwork, and it’s a leadership team that sets the strategy, goals and objectives, and prioritizes the initiatives. And there is a lot of collaboration in the company as well as a culture of open communications.

My job is to make sure that the vision and mission are communicated throughout the organization, and to steer the team to make sure we achieve those goals.

Q: ANY PERSONAL HEROES IN THE WORLD OF BUSINESS?

A: I’d say it’s more of a type of person that I admire. And that’s an entrepreneur who has taken an idea and been able to build a global business out of it. That’s a tremendous task, because it takes not only a visionary, but someone who can actually make that vision a reality. If you want an example of such a person, Bill Gates is a good one.