Eliminating Empty Miles

CHEP buys LeanLogistics with an eye toward reducing supply-chain costs.

Brambles, the parent company of pallet and container pooling services provider CHEP, is buying transportation management systems vendor LeanLogistics for $45 million.

Through the acquisition, announced March 3, CHEP is looking to get a top-down view of how pallets move through the supply chain.

"LeanLogistics has a tremendous backbone that many of our customers utilize," said Brian Beattie, senior vice president of marketing for CHEP.

Beattie said that by combining the capabilities of the LeanLogistics transportation management backbone with its data on pallet and container pooling, CHEP will be able to target unnecessary empty miles in its customers' supply chains.

"Customers report pallet movements as a part of our infrastructure," he said. "We get a report of pallets moving from point A to point B. We also know at point B if there are other customers reporting a reverse flow of pallets."

Beattie said that aided by LeanLogistics' Web-based transportation network and managed transportation services, CHEP will be able to work with carriers to take this information on pallet movements and create continuous moves that eliminate empty miles from the supply chain.

"This will reduce our customers' carbon footprint as well as fuel requirements," he said. "Ultimately, our goal is to help customers reduce their supply chain costs."

Adrian Gonzalez, director of research firm ARC Advisory Group, said LeanLogistics' network provides the "hidden value" that makes the deal worthwhile for CHEP.

"The two questions are, why pay such a hefty valuation for a company with 50 employees, and what will a pallet company do with a software company?" Gonzalez said. "The answer to both questions is the value of the network that is inherent when you create an on-demand solution."

He said LeanLogistics has data from shippers, suppliers and carriers flowing into a common system, which can be used to perform network-level benchmarking and create more efficient business processes that extend across different companies. Combined with CHEP's visibility to millions of equipment moves each day, he said LeanLogistics' supply chain data becomes even more valuable.

"CHEP's main asset is its 200 million pallets and containers," Gonzalez said. "They had information, but not the technical assets or infrastructure to leverage that data to create services."

He said LeanLogistics, which will continue to function as a division of CHEP, will be able to increase the scale and level of data it uses to continue providing managed services. He also said that in the longer term, LeanLogistics will be able to expand to Europe more quickly than it could have on its own.

"This supercharges what LeanLogistics was doing," Gonzalez said. "They will have a broader, richer set of data."

Dan Berthiaume covers technology in retail for eWEEK. For more industry news, visit eWEEK.com's Retail Site.