Crane Worldwide takes aim at the middle ground

24 / 09 / 2018

Crane Worldwide Logistics recently celebrated its tenth anniversary. In that time president and chief executive John Magee has watched his business grow from nine to almost 1,900 employees despite being launched in the face of adversity.

In 2008 the global financial crisis was in full swing, while the company was created following a takeover battle for his former company that saw many executives decide to team up with Magee and go it alone.

Like many in this industry, Magee was not dreaming of a career in transport and logistics when he started his business marketing major at the University of North Texas, but an assignment led him to interview a friend’s father who was working for a freight forwarder called Eagle USA.

After finishing his degree in 1994, Eagle got back in touch with Magee and offered him the chance to join its fledgling management trainee programme.

Magee did not look back and worked for the company until 2007 when the forwarder, now called Eagle Global Logistics (EGL) and a major player with revenues of more than $3bn, was at the centre of the aforementioned takeover battle between founder Jim Crane and investment firm Apollo.

Apollo eventually won the battle and merged EGL into Ceva Logistics, which it also owned.

Going it alone

Magee says that he thought about leaving the company for the first time when the takeover battle had been at its peak as head hunters started to get in touch, knowing that a change in owners could lead to some executives considering their future.

Eventually, Magee decided to go it alone and start his own business along with eight colleagues from EGL.

They spent a year formulating their business strategy, partly because of a non-solicitation clause in their contract with EGL, and in late August 2008 Crane Worldwide Logistics was born, backed financially by Jim Crane, who also became chairman of the company.

“Any type of start-up is hard,” says Magee. “Most of them fail, not because they are bad people or they have bad ideas, but because cash is king.

“If we did not start with the financial backing of Jim, it could have been a different story.

“But we were very fortunate. We had a group of leaders with a lot of experience and we had great financial backing.”

Midsize ambition

The team identified a couple of Houston-based forwarders to purchase, to give the company a base to grow from. These acquisitions brought the company’s total number of employees to just under 100 people.

“We were not trying to re-create EGL 2.0,” explains Magee. “EGL was a great company but during the year off we looked at how we wanted to position ourselves and what we wanted to do.

“We set out that year and decided we wanted to be a global midsized company. We wanted to be multimodal and we wanted to be diversified in the verticals we handle.

“We wanted to be able to go in and talk to some of the Fortune 1000 companies but we also did not want to be everything to them.

“I believe the larger you are, the harder it is to be great at what you do, although it is not impossible.”

Magee says that in the late 1990s the freight forwarding industry began to split into three distinct groups — the top tier, the midsized companies and the niche players.

He says the top tier companies today have an annual turnover of $5bn and upwards, while the niche players bring in a maximum of $700m and the midsize players cover the gulf in between.

The largest companies face the challenge of maintaining service standards across a variety of verticals and geographies, while the smaller players struggle to provide global scale.

The midsized companies, of which Magee says there are not that many, should be able to offer the best of both worlds.

“There are some large companies that are really good, but if I look at many of them, in our industry or any other industry, I tend to find problems,” he says.

“So we have always wanted to be a global midsize that focuses on high-touch, high-value or high-service supply chain solutions.

“We are not trying to be a high-volume provider. We are very proud of what we have done and I do not think we are flying under the radar as much as we would like any more.”

Over the last ten years the company has seen its revenues increase to around $900m as it has expanded to 120 offices in 29 countries, placing it firmly in Magee’s midsize bracket.

It is also a top 25 airfreight forwarder — analyst Armstrong and Associates placing it as the world’s 21st largest in terms of air cargo volumes with 281,083 tonnes transported in 2017.

To put that into context, the number one airfreight forwarder, DHL, recorded volumes of 2.5m tonnes last year.

However, the company has plans for further growth and has set itself the target of doubling in size every five years. If it achieves this, revenues will reach more than $3bn in 2027.

Does this mean the company is running the risk of growing so fast that it could become one of the top-tier players and lose its ability to offer high levels of customer service?

Magee is not concerned as he reasons that industry consolidation will continue, pushing the revenues of the top tier players to at least $10bn in ten years.

Magee says: “While the hardest work is probably behind us, the most important work is probably in front of us.

“Becoming a company with revenues of just under $1bn this year, and well over $1bn next year, we are now playing at a higher level and we are getting asked to come and do work with more Fortune 500 clients.

“Ten years from now, if we are a $3bn company, I think that we will still be a midsized,” he says.

Magee adds that how the company grows will depend on the needs of its clients and the risk and reward of opening up in a new location.

Risk versus reward

He gives the example of West Africa, where the company, given its Houston headquarters and its resulting presence in the energy market, has considered opening an office on a few occasions at the request of customers.

“We do business in lots of countries where we don’t have offices. If our clients are struggling with their supply chain in a certain part of the world they may ask if we plan to open an office there.

“We will then take a look at the risk versus reward of opening that office and the return on investment.

“I am not opening an office just to put a flag on a map because lots of companies are always going to have more flags on the map.

“So we are not chasing a number, we are not trying to be really big. We just look at each individual decision.

“The first conversation we had about West Africa lasted for about 30 seconds, it was a no. But then we had another conversation a few years ago and I actually sent some of the leadership team to talk to some of our agents. We considered whether we wanted to recruit some of them or pay some money and make some of them a Crane office. In the end the risk versus reward and the return on investment did not make sense.”

On the other hand, Crane Worldwide took the decision to open an office in Saudi Arabia this year.

Magee explains that the company is already the number one US IATA airfreight provider into the country but reforms aimed at diversifying Saudi Arabia’s economy mean the forwarder’s clients are expecting to see export volumes increase.

This gave the forwarder the return on investment needed to justify opening an office in Dammam.

As well as investments in offices and staff, the company has also put a lot of effort into developing its software offering.

Crane Worldwide appointed Adel Chaveleh, who previously worked in the gaming industry, as its chief information officer in 2015, while in December 2017 it recruited Larry Hack from the retail industry to become its senior vice president of technology.

“Both of them had some understanding of supply chain but they did not understand freight and that was important to me,” says Magee.

“I wanted to find people who are technology driven leaders, who understand what technology can do and are not hamstrung by the limitations of our industry.

Impressive technology

“I recently said to our sales team that if you want to impress potential customers, pull out your phone, pull out your laptop and show customers the live data in our system and show them what they can do and how they can use that data to minimise risk.”

Magee says that the company uses predictive analytics to warn customers as early as possible when there is potential disruption to supply chains, rather than having them find out only when the shipment fails to turn up on time.

For instance, customers will instantly be warned of potential disruption through an alert if there is a customs strike, port congestion or a cyber attack on an ocean carrier on which a shipment is booked, allowing them to make changes to their supply chain if it is deemed necessary.

However, one trend that Magee believes will not be adopted across the supply chain for some time is blockchain technology.

“Are we watching blockchain? Does our team go to blockchain conferences? Absolutely,” he says.

“But do I think that blockchain is going to become predominant in our industry in the next five years? No.”

Looking forward

Overall, Magee says that the last 10 years have been fun, but he adds that he is probably more excited about the next ten years.

“I consider myself extremely fortunate to be able to work with the team that we have assembled and continue to assemble,” he says.

“There are great people at all of our competitors, we just work really hard so that as a whole unit we continue to attract and ultimately retain the best people.

“I am also fortunate to have a chairman of the board like Jim Crane who has a legacy in this industry.

“We do know we are not flying under the radar any more, but we are excited about where we are headed.

“The 10-year celebration was a lot of fun and we really enjoyed looking back on everything we have achieved, but when I look forward, I am even more excited about the future.”