PLM Trailer Leasing
U.S. Refrigerated Trailer Leasing Firm PLM Freezes Out Rivals
By James Simms
Don Durm is an investigator.
He won’t fine you, cuff you or put you in jail. But he could prevent that from happening – and save your company serious time and money in the process.
Frost on food cartons, soggy cardboard boxes and liquids of unknown origin puddling on the floor. In the chilled-food delivery business, you never want to see that in your warehouse or trailer – let alone a customer at her local grocery or favorite restaurant.
Spotting existing and potential problems and finding fixes for them falls to Don Durm, vice president of customer solutions at PLM. Providing fleet consulting and management services, the Newark, New Jersey--based company is the largest lessor of refrigerated and frozen-food trailers in the U.S. with over 9,000 units.
Not resolving or preventing problems could hurt already slim margins for food producers, shippers, distributors and retailers. The Food and Drug Administration’s Food Safety Modernization Act (FSMA) ushered in the most drastic, new U.S. regulations on food production and handling in nearly eight decades. With enforcement starting this year, running afoul of them could entail being shut down, conducting product recalls, paying steep fines – or even going to prison.
Helping to drive change in the refrigerated distribution sector’s growth today, FSMA, especially the chilled-food transportation and handling rules finalized in 2017, calls for new risk and hazard analysis, record keeping, procedures and technology to ensure compliance.
Some startling statistics drove those changes. Annually in the U.S., some 48 million are sickened – roughly one in six Americans, while another 128,000 are hospitalized and 3,000 die from foodborne illnesses, like salmonella, according the U.S. Centers for Disease Control and Prevention. Causes include improper processing and refrigeration, and cross contamination.
“A game changer,” says Andy Bailey of KeHE Foods, when describing the impact of the new Federal rules. Bailey, director of transportation for Texas for the food distributor, says PLM’s Cold Link telematics system, which enables control, monitoring and documentation of trailer temperatures throughout deliveries, is one key to following them.
“PLM has truly been a great partner in helping us, assist at putting together a FSMA program. They’ve helped provide us information, provide us data and provide us recordkeeping information, so we can stay ahead of the game and be in compliance,” he says.
Another, likely larger, factor for sector growth is the increased demand for edibles requiring refrigeration like organic, fresh and ready-to-eat food. According to the American Trucking Associations, refrigerated freight revenue from shipping fresh, frozen and processed food totaled $14.3 billion in 2015.
PLM Faced Crisis But Turned Around
PLM, helped by those consumer and regulatory shifts, has been able to post double-digit revenue growth over the past four years. In the fiscal year through March 2017, that was $117 million.
But more importantly, Keith Shipp took over as CEO in 2011. He executed strategy changes that set PLM up for four straight years of record profit and look to drive future growth. Before the executive shift, however, the road ahead looked bleak.
After the 2008 U.S. financial crisis-induced recession, PLM, which Marubeni Corporation had acquired in 2000, faced the chopping block. PLM had fallen into the red. Lackluster trailer-utilization rates walloping revenue and write-downs on trailer assets had taken their toll.
Rentals, which were more profitable than leases, made up 60% of revenue then. But they were more susceptible to downturns, unlike leases, which were for periods of up to seven years, rather than the days, weeks or months for rentals.
Never Want to Say “No” to a Customer
Some of Shipp’s key steps were to implement a strategy focusing on customer needs and leveraging PLM’s core strengths as well as to improve communication within the company. Looking at the expertise within the firm and requirements of clients, PLM decided to focus on eight core areas that would help customers increase efficiency and cut costs while also bolstering its bottom line, he says. Involving staff in developing new processes to improve the business and the customer experience has helped employee retention and motivation, creating a winning culture, he adds.
These eight areas, which Shipp has built out as part of a longer-term strategy, include: Financial and leasing policy; trailer application and design;
maintenance including on-site service for customers; and safety and compliance including telematics for tracking food safety.
One major impact is that PLM’s lease ratio for trailers units has jumped to about 65% today from around 35% before 2011, increasing financial stability and making credit easier to secure.
“Since 2011, we have worked on solutions to be able to grow the company and move it from the short-term rental into a fleet solutions company. We’ve been able to grow 11% to 12% each year – double-digit growth each year, and our goal is to continue that,” Shipp says. “We transitioned to really looking at what our customers needed (and) how we could drive success and build a business model to meet those customer needs.”
For a sector built on slim margins, a leasing firm focused on client needs – not just its own – is critical. The International Foodservice Distributors’ Association says, for example, margins are less than 2% for distributors.
Where does that focus start? How about the deep freeze.
At KeHE’s Dallas distribution center, PLM’s Durm, seemingly unfazed in a freezer ten degrees below zero, describes PLM’s signature Field Trailer Needs Analysis.
Over a couple of days, Durm says a PLM employee watches trailer loading at warehouses and unloading at retailers and restaurants and rides along on the distribution route. He takes temperatures, notes and photos and clocks the time for each task. That’s translated into a detailed report to help clients solve and prevent problems, like those that might invite regulatory scrutiny, and improve their bottom line. Considered an expert on the new Federal rules, Durm helped draft a best practice guide on them for the International Transportation Refrigeration Association (IRTA).
“We try to learn our customers’ business in order to properly plan and design the refrigerated trailer for them,” Durm says. “What PLM does is unique to this industry.”
Recently, that kind of singular expertise enabled it to hit the bull’s eye.
After three years of effort, PLM beat much larger competitors, including big banks and lessors, to win two leasing contracts from a major U.S. retailer, who had previously focused on trailer ownership, worth tens of millions of dollars. The critical difference wasn’t financing but the seemingly mundane – yet critical – task of trailer application and design, says Mark Domzalski, PLM’s senior vice president.
In addition to such knowledge, the company offers, customer-focused and flexible lease terms, which rivals don’t provide. That reduces costs for clients. Examples are lease periods based solely on the length of a customer’s delivery contract or the ability to change trailer sizes during a lease.
Jerry Biediger, chief financial officer of Dallas-based trucking firm K. L. Breeden & Sons, says: “We’re willing to pay a little more for trailers for a period of time, knowing that the flexibility they provide saves us money in the long term.”
Domzalski sums up the company’s client culture the best, “We never want to tell a customer ‘No.’”