Jayne Gest

Wednesday, 09 April 2014 18:53

E-commerce: A sea change in retail

Columbus has been very attractive to many West Coast e-retailers that need a presence on the East Coast, like Seattle-based Zulily, says Kenny McDonald, CEO of Columbus 2020. As e-commerce grows, many companies are discovering Columbus works well for their fulfillment centers, even as they struggle to control supply chain costs.

“When you’re pulled to the Eastern market of the U.S. and Canada, Columbus makes an enormous amount of sense,” he says. “And what most people find once they get their boots on the ground is that the talent base is really pretty strong, from top to bottom, and it’s a good value to boot.”

The company doesn’t have to be headquartered on the West Coast, either. For example, New York City-based Gwynnie Bee recently chose the Columbus region for a new fulfillment center.

“Columbus is a centralized location that allows us to service our customer better from a shipping standpoint; customers receive their shipments faster and at a lower cost to execute,” says Robert Escobar, vice president of operations at Gwynnie Bee. “Second, Columbus’ overall infrastructure is geared towards fluid and just in time supply chains like ours. Although labor is getting tight as the economy improves, the Columbus talent pool is great, from senior managers to warehouse associates. The market is an epicenter for distribution and logistics companies.”

McDonald feels that e-commerce is more than just a trend.

“It’s really a sea change in corporate business models,” he says. “Companies like Zulily don’t even have storefronts, and those business models really didn’t exist in that fashion 10 years ago.”

 

Watching shipping costs

Keeping costs down is certainly something that is important to all retailers, but it can be particularly imperative for e-commerce companies.

Jeff Zimmerman, director of the Columbus Region Logistics Council, calls this the Amazon effect — where you need to deliver goods to the customer for free, unless they have expedited needs.

“More consumers are buying through e-retailers expecting access to product selection, a Web interface, that allows them to place an order and source goods without the cost of transportation,” Zimmerman says. “So, that e-retailer wants to be as close as they can.”

The natural location that Central Ohio has to reach dense population centers with a one-day truck drive means e-retailers want to use the Columbus area to reach customers east of the Mississippi.

“Retail doesn’t really have a rosy picture in general. I think we’re probably headed for another sub-standard year in terms of double-digit growth,” says Katy Keane, an adjunct logistics professor at The Ohio State University and president of Koncatenate. “That’s really going to be important as retailers, and all companies, look to control costs wherever they can. A lot of people are re-thinking their shipping strategy.”

 

A crisis in trucking

When any retailer does a market study, it’s easy to see that transportation costs are only going to go up, making it critical to manage them closely, Keane says.

“Where labor market and cheap land used to be the No. 1 guiding principle of the results of a network study, now it’s often transportation because diesel has gone up and we are in a crisis in terms of trucking,” she says.

The federal government recently put in new safety regulations, limiting truck drivers’ hours. This sounds good on paper but likely will have far-reaching consequences, Keane says.

It puts more traffic on the roads during the same hours as the rest of the population, as opposed to traveling a lot at night. This in turn could impact the road infrastructure and increase the need for construction — and some already call Columbus the Orange Barrel City.

It also creates some practical problems. For example, Keane says during the test phase of these new service hours several years ago, she received a phone call in the middle of the night.

“The store manager called me at three in the morning and said, ‘I can see the truck. I have my crew of 15 people here waiting to unload this truck and he refuses to back up.’

“And I said, “What do you mean ‘you can see the truck?’”

Keane learned from the president of the trucking company that the truck driver was in the parking lot but had run out of hours. He had an on-board recorder and didn’t want to start the truck and back up because he would be in violation of hours of service.

Keane says it was a ridiculous situation, but that’s how serious it was to violate the regulations.

 

Learn more about logistics with a related story: Playing on Columbus’ strengths — A focus on workforce is paying off in logistics, but more remains to be done

Many business leaders find themselves asking: “Why can’t it be easier? Why is it so hard for us to make decisions together and get some of the simplest things done?”

Whether your company is a professional firm, family-owned business or manufacturer, people with different communication styles can get tied into knots working together. That in turn challenges productivity and everyone’s desire for a harmonious environment.

“I’ve discovered that metaphors are an easier way to explain why people are having challenges working together,” says Ricci M. Victorio, CSP, CPCC, ACC, managing partner at Mosaic Family Business. “The metaphor creates an instant picture. I like to say it’s the difference between the language of the tiger and the swan.”

Smart Business spoke with Victorio about helping individuals in a business form a cohesive team.

Why use the metaphor of tigers and swans?

You may have heard of ‘hunters and gathers’ when describing workplace dynamics. However, people may not want to be known simply as an implementer, and others might say, ‘I’m not a hunter, I love my people. I have passion.’ The tiger and swan metaphor is one where no one feels diminished.

Swans are beautiful, elegant creatures that live in harmonious flocks. They don’t like change, but if challenged, they become fierce. Tigers love the thrill of conquest, and the strategy of tracking their prey. That’s how they measure their self-worth, so there’s bravado from the adrenaline of a challenge.

Often in business teams there is miscommunication between the entrepreneurs who grow the business and those who make the business run. With the metaphor of the tiger and swan, they start to understand each other better. A swan learns that when tigers write emails in all capital letters, for example, they are not criticizing, but naturally talk big and directly. A tiger learns if he or she doesn’t listen to the warnings of a swan, things could fall apart.

What’s the first step to getting teams to work better together?

People with different personalities must learn to communicate in a more collaborative and professional way. It’s hard to work when you feel you’re walking on eggshells or waiting for the next fire drill. If you understand the language being spoken by various personalities, then you can adjust your delivery so you are understood.

To establish trust between the two, there has to be a genuine curiosity in learning about each other. You want to create positive experiences of working together, where everyone is being acknowledged for their collective and individual contributions.

If your team is struggling to understand each other, an objective coach who sees all the nuances of the personalities can help guide them when they step on each other’s toes, to reframe the interaction so everyone understands the intention of the other player’s actions. It takes someone who can see the big picture and isn’t part of the ecosystem to help bridge the gap.

How can business leaders ensure they have the right team dynamics?

Some important dynamics are called for to ensure a team works together best. The five characteristics of a team are:

  • Character. Who are these people? Do they have integrity and do you trust them?
  • Competence. Without skill, it won’t matter how much integrity someone has.
  • Commitment. A team fails or succeeds based on its commitment to one another.
  • Consistency. The team has to have the confidence they can count on each other, day-in and day-out.
  • Cohesion. Even when it’s difficult, the team needs to function at a higher level and know that together it’s better than any individual.

These elements are foundational for a successful team. If team members don’t trust each other enough to have transparent, authentic conversations when facing difficulties, their differences will create a wedge, pushing them farther apart. It’s not the job of any one person to make all the accommodations. Everyone needs to step into the center and take the time to learn the differing languages being spoken within the group. Once this begins to happen, you will begin to enjoy the benefits of a ‘bilingual’ organization.

Ricci M. Victorio, CSP, CPCC, ACC, is managing partner at Mosaic Family Business Center. Reach her at (415) 788-1952 or ricci@mosaicfbc.com.

Insights Wealth Management & Finance is brought to you by Mosaic Financial Partners Inc.

Tax planning is a key component of mergers and acquisitions for both buyers and sellers. It can impact the deal price and play a role in the post-transaction integration.

Tax issues are probably more stressful for sellers, because if there are tax exposures they may need to make representations and warranties. It also can have a bigger impact on the seller’s individual taxes. However, from a buying standpoint, if you want management to stay on but there’s a tax problem, say with executive compensation plans, that can have an adverse effect on operations prospectively.

“It’s one of those things where lots of times people forget, and they bring tax in, in my mind, a little too late,” says Mark Reis, CPA, a tax partner in the Bay Area at Moss Adams LLP. “Or maybe they don’t have a clear understanding of how some of the tax considerations work because they are focused on operations or the deal, and then it can impact purchase price and the taxes of selling shareholders.

“Without the proper planning, you see a lot of things that do go wrong, versus go right,” he says.

Smart Business spoke with Reis about tax planning tips for M&A activity.

Why bring tax into a deal early?

It’s imperative to get all your advisers to the same table early, so they’re communicating throughout the process. If you’re worried about professional fees, remember with the size of these transactions, it’s a comparatively small cost to ensure everybody is on the same page. And many times you’ll end up spending more on professional fees than if you’d been proactive from the start.

Another problem with waiting is you may not get the maximum tax value or benefit. For example, on a recently closed deal, if the company had brought in experts six months earlier, it likely could have saved $1 million in California tax. It’s a matter of having the right people with the right expertise at the table together in order to plan versus react.

What’s important to know about the deal’s structure and its tax effects?

Often business leaders can be unclear on the differences between a stock transaction and an asset purchase, or a tax-free or partially tax-free transaction. Understanding available structures gives both buyers and sellers flexibility to maximize the benefits. For instance, one transaction started as a tax-free merger, but it became mutually beneficial to restructure it as an asset purchase.

Your advisers can help find the best and safest answer, looking at how to manage all the risks, including income tax. Getting a clear understanding of all issues both before and after a transaction closes helps eliminate unnecessary stress or surprises. There are a lot of traps for the unwary; take in as much as possible about the whole picture.

How should buyers attack tax exposures with the target business?

During the diligence process, look at all the exposures, including transactional taxes like sales and use tax, or income tax in other states where activities haven’t been reported. These liabilities may decrease your purchase price offer, or lead to requiring the seller to clean things up prior to doing the deal.

You want to know what you’re buying. With one transaction, the change-in-control agreements were drafted unclearly, which led to problems with the golden parachute rules and payroll taxes. Not only do you have to meet all compliance burdens, but also the last thing a buyer wants is to alienate a key employee who was part of the target.

Is there anything else to keep in mind?

When running projections, you need a solid understanding of the pro forma financial, the purchase accounting adjustments and what kind of resource strain the integration will put on your organization.

When budgeting, project out from both an EBITDA and tax standpoint. Do you have to do fair value accounting? Are you inheriting a liability or is it a true asset? If it’s an asset, what’s the value? How will you handle the transaction costs, which may or may not be deductible?

And the work isn’t done after the deal closes. Post-transaction actions can add value. Again, you need a strong relationship with your advisers, so everybody is talking as issues bubble up. Sometimes it can be a great tax answer, but it doesn’t make sense operationally — but at least you can make an informed decision.


Mark Reis
, CPA, is a tax partner in the Bay Area at Moss Adams LLP. Reach him at (415) 677-8323 or mark.reis@mossadams.com.

Insights Accounting & Consulting is brought to you by Moss Adams LLP

Companies update their systems to replace outdated software and to modernize or streamline supporting IT resources. They also implement new systems in hopes of benefitting from internal efficiencies through added features, better workflow, etc. The problem is most companies that implement a new system do not achieve all of their objectives, and many fail miserably.

“Ultimately, the new system may be better, but if executives listed the top things they wanted to accomplish by implementing the new system, many times they don’t achieve those things,” says Brian Thomas, partner in IT Advisory Services at Weaver.

Smart Business spoke with Thomas about how to buck the trend of frustrating and failed system implementations.

What pitfalls occur with new system implementations?

Most companies don’t do a detailed analysis of day-to-day operations and assess how that translates into new system requirements. Management must ask, ‘What are the requirements we, as a unique organization, have of a system that will make it successful?’

Midsize companies often don’t have the time and/or don’t feel the need to formulate detailed system requirements. Executives may operate off of a high-level understanding about improvements they want to see, while calling on people they know to get perspective on what comparable companies are doing.

Also, almost everyone takes for granted how software users have shaped internal business processes based on the reports they generate. New systems mean new reports. If the new system doesn’t consider reporting, as well as how much old data to bring over, it can create back-end challenges. Then, companies are forced to either reconfigure processes or scramble to build new reports.

What’s the potential cost of these issues?

A lack of attention can drag out a project and lead to cost overruns. Management may run blind for a period of time if reporting requirements are not properly addressed before go-live, which hampers business decisions and company performance. Top management may perceive the software vendor as not delivering as promised. Delays and problems cause system users to have a tarnished view of a system, and could lead to employees building system workarounds, such as spreadsheets or databases on the side.

What steps do you recommend instead?

A new software system can substantially impact your company. So, it’s crucial to do the initial due diligence to determine whether the new system is capable of doing what management needs it to do the day it goes live.

Appoint someone internally or externally to build out detailed system requirements by working with users in each department to understand how their processes work. You can then provide these requirements to prospective vendors in an RFP-type format.

Vendors should demonstrate to decision-makers how their software achieves the requirements as part of the proposal process. If any are not fulfilled, which usually is the case, they should be able to articulate their plan for resolving the gaps. Management needs to analyze, ‘If this software does 75 percent of what we need, are we comfortable with the vendor’s responses or plans for what it doesn’t do? And if we have concerns, do we want to change how we do things or look at a different software product?’

It’s logical to expect this process to take a few months unless the system being replaced is a standalone product used by one department for a specific need. There are multiple vendors for a reason; companies must figure out what works best for them.

What about monitoring risks during implementation?

Once a vendor is selected, don’t turn over the keys. If the vendor made promises about covering gaps, the internal stakeholders need to remain involved throughout the project’s life cycle to ensure those things are actually happening.
An objective third party can work between the company and vendor to ensure everyone is accountable. They can even assess the risks of going live on the new software and let the company know when those risks have been brought down to an acceptable level. This helps the company avoid a failed implementation and protects the vendor from having a dissatisfied client.

Brian Thomas, CISA, CISSP, is a partner in IT Advisory Services at Weaver. Reach him at (713) 800-1050 or brian.thomas@weaver.com.

Insights Accounting is brought to you by Weaver

More midsize companies are seeking to do something extra for a select group of employees, usually executive-level staff.

Nonqualified deferred compensation plans, which are not subject to the Employee Retirement Income Security Act of 1974, have no discrimination restrictions, so employers can choose to whom they offer the plan. The plans also have no restrictions on deferral amounts, unlike qualified retirement plans.

“The economy has been getting a little better, and top talent is very valuable,” says John Carey, CPA, J.D., associate director of tax at SS&G. “Companies want to take that extra step to keep people and offer them an incentive to stay a little longer.”

At the same time, participating employees can defer income tax. Although they are performing the service now, the compensation is not subject to tax until they are actually paid, which might not be until they retire and are in a lower tax bracket.

“The tax environment has become more complicated, and tax rates have gone up,” Carey says. “You can have a rate of more than 40 percent in just federal income tax. People are looking to cut that — if they defer some of the income that would otherwise be taxable now, it gets them into a lower bracket and they are not subject to some of these extra add-on taxes.”

Smart Business spoke with Carey about what to consider when setting up nonqualified deferred compensation plans.

How do these types of plans work?

A nonqualified deferred compensation plan is a contractual obligation between the employer and employee to defer the receipt of compensation until a time in the future. IRS code section 409A governs these plans. They should be in writing and entered into before any services are performed that the compensation is based upon.

There are two types of nonqualified plans — elective and nonelective. With an elective plan, the company tells the employee, ‘You have the option to defer up to X amount of your annual salary.’ Under a nonelective plan, the company offers X dollars in the future in addition to the employee’s salary. It can be tied to performance criteria or remaining with the company for a certain time period.

The company decides which plan type to offer, often with employee input. It’s critical, however, to have good advisers discussing and planning out strategically what you want to put into the plan, what you want to accomplish with it, and what it can and cannot do.

How can employees get the most benefit from nonqualified deferred compensation?

Compare your current income with where you could be in the future when getting paid the deferred compensation. Do you project that it will be to your benefit due to being in a lower tax bracket in the future?

It’s also important to pay attention to the Social Security tax. The government imposes Social Security taxes on deferred compensation when there’s no longer a substantial risk of forfeiture, or when a benefit vests. Although income taxes are not imposed on the deferred amount until paid, with elective and certain nonelective plans the benefits may become taxable for Social Security. So, it’s better for both the employer and employee if the benefits vest in periods when the employee is making more than the Social Security wage limit, which is $117,000 in 2014.

Nonqualified deferred compensation plans have to be unfunded. What does that mean for plan sponsors and participants?

As an unfunded plan, it’s subject to the risk of the company’s creditors. Even if an employee did his or her job very well, if the business gets sued and goes bankrupt, nonqualified deferred compensation funds would be available to pay creditors. It’s a risk that plan participants take, so they need to consider the company’s stability.

Many companies use an informal funding method, such as a rabbi trust. The plan sponsor sets up a trust to put the money aside, and it cannot arbitrarily grab the money, but the funds are still general assets of the company so creditors can get at the funds.

Even with the risks, more executives today are asking companies to look at nonqualified deferred compensation plans, which are an incentive to retain and attract talent in today’s tax environment.

John Carey, CPA, J.D. is associate director of tax at SS&G. Reach him at (330) 668-9696 or JCarey@SSandG.com.

Insights Accounting & Consulting is brought to you by SS&G


Gary Schottenstein learned from his father, Irving Schottenstein, to treat your customer right and fairly. And after more than 35 years in the real estate business, he still holds true to that — and tries to treat everyone that way, from customers to employees.

In fact, the chairman and CEO of Schottenstein Real Estate Group keeps a voicemail to remind him, and because it makes him feel good.

Bruce Heine was trying to buy one of the company’s condominiums for himself and his wife. The two had a lot of health problems.

Schottenstein says Heine couldn’t qualify for a mortgage. So, even though he didn’t know him very well, he told him to go ahead and move in, and pay what he could until he could buy it.

He got this call in August 2012:

I very sadly wanted to let you know that my wife died Friday night after six hours of open-heart surgery. I just want you to know that you allowing us to get into that beautiful place meant everything to her. She was the happiest I’ve seen her in years.

She saw me through five surgeries and some business setbacks, and she stuck with me with five IVs and I almost lost my leg. And it just — everything, she just willed me through it. And you making this, allowing this, to happen is immense.

I don’t — I know you’ve done hundreds of thousands of transactions, but you will never do a transaction where you have anyone more appreciative and grateful than myself and my wife.

Heine’s wife spent 10 days in the condo, and Heine himself died just over a year later in September 2013.

Schottenstein is very proud of the experience, but makes no brags about it: “I am not trying to toot my own horn. You’ve just got to feel for other people.”

Here’s how Schottenstein Real Estate, one of the largest developers and builders in the Midwest, focuses on customer satisfaction and team building.

A customer-centric culture

Schottenstein Real Estate strives to be open and forthright with customers. Management tries to get feedback from residents, so it throws different events and has staff mingle with residents.

“We’re a company that, if you want an appointment with the vice president, they’ll come to your home or business,” Schottenstein says. “We’re not some out-of-state company with ABC in the name that no one can figure out who they are.

“I think we were the first developer to implement a total satisfaction guarantee warranty for any resident.”

Schottenstein Real Estate’s first core value is to: “Build honest, open relationships with residents, customers, contractors, related parties and the public, so that our promises and integrity are unquestioned and reaffirmed to all.”

By striving to reinforce the customer’s trust and their decision to contract with Schottenstein Real Estate for one of the most important parts of their life — where they live, you build long-term relationships.

“When someone does business with you, they have confidence in you, and you want to try to, obviously, earn their confidence and trust ongoing in the future,” Schottenstein says.

Building the right team

Real estate, like many industries today, can be challenging, from locating and acquiring land to getting entitlement approvals. However, the right team is essential to success.

“We’ve been able to attract a very good team of associates, including vice presidents in charge of different divisions, and we’ve been able to maintain, for many years, great sub-contractors and suppliers and vendors, many of which have been doing business with us for almost 40 years,” Schottenstein says.

Even with the downturn in real estate over the past four to six years, Schottenstein Real Estate has still been able to grow and start a number of new projects, which is a testament to its employees.

Finding the right people to hire is a very important factor in any company, Schottenstein says. You need to spend a lot of time interviewing and ensuring someone is the right fit.

“You have to be very definite on the job description and what you expect out of someone, and you have to ask a lot of questions and make sure that they can meet those objectives,” he says.

Schottenstein Real Estate has found that a mix of internal promotions and recruiting talented people from competitors is a successful combination.

Once the employee has been hired, Schottenstein says, you should try to treat him or her as well and fairly and honestly as you can. By helping the employee grow and meet personal goals for success in their job, employees will want to stay with the organization for years.

You also need self-starters and self-motivators, who enjoy doing their work. They aren’t in it just for the money.

“You want people who enjoy getting up every day, going to work, that don’t clock-watch,” he says. “And, to me, no matter what position you’re in, you have to have good communication skills.

“Even people who are on the Internet and computer all day, I want them to be able to communicate with their co-workers and certainly with the public, the customers, anybody else. You have to be able to communicate and also, you have to realize that you’re part of the team,” Schottenstein says.

“Generally speaking, you have to really be sure that they like the industry that they’re in. You don’t want people just holding a place until retirement or just doing it for the money.”

Working smarter

Teamwork is very important in any company. Employees need to be able to understand how they fit in with their job duties as part of the whole organization.

One way to get associates to buy into the company’s mission and vision, Schottenstein says, is giving them freedom with their schedule, including the ability to take personal time off to participate in family and non-work events.

“We like to have them schedule their own time and meetings and not punch the clock. We don’t have a clock to be punched here,” he says.

The hours aren’t as important as the efficiency and performance.

“We don’t necessarily require someone to work a lot of long hours and overtime hours,” Schottenstein says. “We would rather have you work smarter and better; quality of time is more important than quantity of time on the job.”

So, how can you measure someone’s performance without just looking at the hours they put in?

If someone is in leasing or sales, Schottenstein says it’s pretty apparent by how much they are selling. Otherwise, working smarter means being focused, and not wasting time.

“When you’re at work, you have to be able to put your personal life behind you somewhat — you have to be able to focus,” he says, “and keep yourself aligned with what the company wants you to do.”

 

Takeaways:

  • Build honest, open relationships, so your integrity is unquestioned.
  • Hire people who have passion beyond the paycheck.
  • Encourage staff to work smarter, not longer.

 

The Schottenstein File:

Name: Gary Schottenstein

Title: Chairman and CEO

Company: Schottenstein Real Estate Group

Born: Columbus

Education: Bachelor of science in business administration with a concentration in accounting from The Ohio State University.

What was your first job, and what did you learn from it? My first job was really working construction and maintenance for apartment communities, and what I learned was to appreciate the hard work done by all the contractors and laborers. When you’re out there you can see how hard people work — and primarily working with their hands.

What’s the best business advice you’ve ever received? The best business advice I ever received was from my father, Irving Schottenstein. He said to always care about your customers and try to treat them fairly and honestly.

Who do you admire in business? I admire people who are able to be successful in business, but also successful in their family life and have time to give back to the community, the city and to charitable organizations.

What does business success mean to you? It’s not just one word or something. I would say: No. 1, enjoying your work and the people that you work with; No. 2, would be accomplishing project goals, including building households which can appeal to and satisfy the residents; and No. 3 would be to develop communities which enhance the overall city and state where it’s located.

 

Learn more about Schottenstein Real Estate Group at:

Facebook: www.facebook.com/LiveSREG
Twitter: @SRE_Group


How to Reach: Schottenstein Real Estate Group, (614) 418-8900 or www.schottensteinrealestate.com

We ♥ (heart) logistics.

The award-winning UPS ad campaign certainly strikes home for Columbus. The city is naturally attractive as a distribution and logistics hub for its geographic access to 46 percent of the U.S. population within a 10-hour drive, as well as strong supply chain talent and value.

In fact, the logistics industry employs 9 percent of Central Ohio’s workforce.

But just like with manufacturing, distribution and logistics jobs may not be the first thought of those entering the workforce, says Kenny McDonald, CEO of Columbus 2020.

“It’s still probably a misunderstood term and a misunderstood industry,” he says.

Jeff Zimmerman, director of the Columbus Region Logistics Council, says logistics is a term that has been around forever.

“But no one has ever really known what logistics was until UPS turned it into a little ad campaign,” he says. “And we heart logistics suddenly makes logistics a little bit chic, fashionable or at least visible.”

Although Columbus’ geography and a clustering effect allow the region to win some things, McDonald says there’s been an intentional effort on top of that by business, government and education.

“The industry itself — end users, shippers, as well as 3PLs [third-party logistics] and a variety of other service providers — has come together and really worked on the workforce,” he says.

Advocating on behalf of the industry

One focus of the Columbus Region Logistics Council is developing a skilled workforce with 21st century work skills as a competitive advantage.

“Business doesn’t have the opportunity to slow down to train an employee,” Zimmerman says. “They’ve got to come in with a prerequisite skill.”

The council advocates to both students and student’s parents at all levels — secondary, post-secondary and vocational/technical — so they are aware of not only jobs but also career opportunities in the logistics industry at-large, Zimmerman says.

“That’s been one of the things that the logistics council has done really successfully for our region: We’ve been good cheerleaders, good advocates and good stewards on behalf of the success and the ongoing growth of the industry,” he says.

By putting a focus on workforce, the industry has created better communication to the educational system, which has responded through curriculum and programs that allow students to matriculate into the workforce better equipped, better prepared and more successful.

Both The Ohio State University and Columbus State Community College have logistics degrees, and OSU has a master in business logistics engineering. The MLBE program focuses on supply chain optimization and technology, allowing students the rare opportunity for hands-on experience running a transportation management system.

“The industry is increasingly more sophisticated, and as a result of that we’ve got to work closely with education to make sure that we can make all of those pathways visible and keep the pipeline of talent flowing through the system into industries successfully,” Zimmerman says.


Being proactive for future growth

The traditional methods businesses use to seek logistics talent still work today, Zimmerman says, but they need to be a little more proactive with recruiting.

“Are they sponsors of programs, and do they have visibility?” he says “Are they actively engaged in the internship process to bring talent into their environment to create awareness — to educate and bring that student through a successful experience so that they can go out and be a mouthpiece for not only the business, but for the industry at-large?”

Katy Keane, an adjunct logistics professor at OSU and president of Koncatenate, a supply chain consulting practice, sees the industry changing.

“There’s a lot of automation that’s going on right now in terms of distribution centers,” she says. “Companies are spending millions of dollars in high-tech automation for automated sorting and retrieval systems or things like that.”

Employees no longer are just picking and packing boxes, and it takes a more tech-savvy labor force to handle high-tech equipment.

Keane also foresees a potential truck driver shortage, especially with the new hours of service rules and safety regulations that are weeding out drivers.

“We’re working on training those logistician leaders of the future with some excellent programs, incredible faculty and all of that, but again, my concern is the ones who actually have to execute the work,” she says. “We need to do a better job in educating the middle market, the middle labor pool.”

“We have worked and continue to work,” Zimmerman says. “As the pace quickens and growth increases, we’re going to need more people. And so we’ve got to be able to bring more people into the system, attracted to opportunities in the industry and then prepared with the right levels of training.”

 

Learn more about logistics with a related story: E-commerce — A sea change in retail

 

How to reach: Columbus 2020, (614) 225-6063 or www.columbusregion.com; Columbus Region Logistics Council, (614) 225-6086 or www.columbus.org/about/councils/columbus-region-logistics-council; The Ohio State University, Fisher College of Business, Department of Marketing & Logistics, (614) 292-8808 or www.fisher.osu.edu/departments/marketing-and-logistics.

Working together: LifeCare Alliance marries the needs of for-profits with its own

LifeCare Alliance would not be able to serve its 15,000 active clients without support from the corporate community — companies big and small deliver Meals-on-Wheels, work in its dining centers, deliver pet care, assist with numerous volunteer opportunities, and purchase catering and wellness services.

President and CEO Charles Gehring says he always hears how much corporate associates enjoy working with LifeCare’s clients, which in turn makes them appreciate their employer. However, building relationships between for-profit and nonprofits needs to go both ways.

Smart Business spoke with Gehring about how corporate partnerships are critical to LifeCare and its clients, and vise versa.


SB: How do strong relationships with for-profit companies help nonprofits like LifeCare Alliance?

CG: An association with a well-known company lends the “seal of approval” to what the nonprofit does and is. This association is critical to how LifeCare and its services are viewed by the community. Companies employ people who can be volunteers. LifeCare has more than 90 companies who “Adopt-a-Route,” which means they allow employees to deliver Meals-on-Wheels on a daily basis. This saves the cost of a paid driver, about $12,000 per route, per year.

Companies also provide subject matter experts to assist with numerous projects. For example, our IT committee has only two board members. The rest are volunteers who are experts in information technology. They provide the knowledge we lack as a not-for-profit with a small staff. This is an area not-for-profits do not use enough.

Perhaps most importantly, the relationship must go both ways. We must provide a benefit to the for-profit partner. That might include employee recruitment and retention programs, like our Adopt-a-Route program, ways to assist their community without large financial commitments, programming for their employees, programs which address the concerns of their employees, co-marketing efforts and others.


SB: What challenges have you faced when building these relationships?

CG: Often, for-profits feel we only want to meet with them in order to ask for money. Actually, LifeCare generally wants to provide them with something. Money is nice, but for-profit companies can do many other things.

I view our company partners as guardian angels. A for-profit will watch over us closely because they know they are assisting our community. For example, we purchase sandwich buns and dinner rolls for our Meals-on-Wheels from White Castle, one of our best community partners. While we pay retail price, White Castle insures we get outstanding products and services, while knowing their products are being consumed by, and benefitting, those most in need.

SB: What have you learned about how to better create these relationships?

CG: Start slow, and determine what the for-profit company wants and needs. Often, not-for-profits only tell a company what they need.

Instead, take the time to listen and ask questions of potential for-profit partners. What are their priorities for their business and community, and where are their associates’ interests? In this way, we can better match what we do to their needs, and most likely provide them with a service or program of interest.

In 2014, we need to create a strong ‘win-win,’ not a one-sided relationship.


SB: How would you advise nonprofits to create long-term ties with corporate America? Or, on the flip side, how can for-profit companies create stronger links to worthy causes?

CG: The relationship has to go both ways. And, I cannot stress enough that not-for-profits must listen to the priorities of the for-profit. Many not-for-profits continue to only ask for-profit partners for money.

It is critical to develop other partnership opportunities. As another example, LifeCare operates L.A. Catering as a social entrepreneurship venture, which helps generate revenue to serve more clients. A company could buy catering from us if it were going to purchase catering for an event anyway. It provides a social and community aspect to the event, and I guarantee the associates appreciate that community care.

These types of partnerships between for-profits and not-for-profits develop deeply, and on multiple levels, with both gaining tremendous knowledge about each other. Much like a marriage, isn’t it? Also, like a marriage, we need to make our work together fun.


How to reach: LifeCare Alliance, (614) 278-3130 or www.lifecarealliance.org

Learn more about LifeCare Alliance at:

Facebook: www.facebook.com/LifeCareAlliance
Twitter: @LifeCareAllianc

At the end of January, I received an email that Gwynnie Bee, an e-commerce retailer, was opening a flagship fulfillment center in the Columbus region, creating 400 jobs — and so began my research into Columbus as a distribution hub for this month’s feature story.

I’d always heard that Columbus is located in the perfect spot, accessible to most of the U.S. population within a day’s drive.

I knew it was basically the mini-New York with many fashion retailers headquartered in the area.

What I didn’t know was the deliberate effort on behalf of business and government leaders to turn a core competency into something stronger.


An intentional effort paying off

Within the past decade, Columbus has put together an intentional economic development effort on behalf of the region and community for distribution and logistics.

Kenny McDonald, CEO of Columbus 2020, told me that 50 percent of the industry’s growth has come from that effort.

He says they treat businesses that expand or relocate distribution centers to Columbus like customer accounts, periodically checking in with them.

Jeff Zimmerman, director of the Columbus Region Logistics Council, reports that there is a clustering effect in the city because people want access to intermodal terminals, air cargo freight, efficient roadways and transportation routes, and an educated workforce.

He called it somewhat of a self-fulfilling prophecy, where the council creates a visibility for the region’s capabilities, so people become more attracted to it, adding to the capabilities.

Katy Keane, an adjunct logistics professor at The Ohio State University, says that with transportation costs continuing to go up, Columbus’ proximity becomes even more important, but the outlook for logistics in Columbus is rosier than in many other cities because there’s such a great support system.

“All the plans that many people have worked on for years are coming to fruition,” she says.

Columbus has done a good job of building up its infrastructure — where Rickenbacker Inland Port is ground zero — “with the idea that if you build it, they will come,” Keane says. “And they are coming.”


Consciously, with purpose

This approach reminds us that there’s always room for improvement — a way to make something stronger. Successful businesses take what they do well and turn it into something great, and then strive for exceptional.

You need to find your strengths, and then create long-term plans to nurture, grow and cultivate those strengths into something more.

As a fan of Malcolm Gladwell, I like to think about the 10,000-hour-rule, where he says it takes roughly 10,000 hours of practice to achieve mastery in a field. Have you and your employees spent 10,000 hours on your core competencies?

And just like the city of Columbus and its fortuitous location, you can’t rest on your current success because then you’re in danger of being left behind.

For example, every person I talked to about Columbus’ logistics industry kept reminding me that it’s an ongoing effort. They aren’t done. In fact, they’re just getting started.


Jayne Gest is an associate editor at Smart Business Columbus. Jayne is interested in the people and businesses making a difference in Columbus.

How to reach: jgest@sbnonline.com, (800) 988-4726 ext. 281 or www.sbnonline.com.

Have an idea to share? Engage with us on Twitter @SmartBiz_COL

Charles “Chuck” Sanders, CEO and founder of Urban Lending Solutions, isn’t afraid to take chances when he sees an opportunity.

After a brief career in the National Football League, Sanders needed a job and started doing marketing for Pittsburgh real estate entrepreneur Robert Murphy Jr.’s golf course and semi-pro basketball team.

One day Sanders asked Murphy, “How do you get the money to buy basketball teams and golf courses?”

“I’m in the mortgage business,” Murphy replied.

“And I said, ‘That’s the business I want to get into,’” Sanders says.

So, he learned the real estate business working in operations and sales at Murphy’s company, ValuAmerica, becoming a nationally recognized vendor, recruiter and provider of real estate information, technology, products and services.

In 2000, he took everything he had learned from working for Murphy and started his own mortgage services company.

His confidence and make-it-work attitude have helped him succeed. For example, a few years in, Sanders found out through his connections that a particular bank in Georgia needed title and abstract work. So, he packed up his car and went down there, hitting courthouse after courthouse, hiring people.

“I came back to the bank and said, ‘Hey, look. I can provide property reports all throughout Georgia. I’ve got an abstractor in every county.’ And they gave me an opportunity, and it was our first big deal that launched us,” Sanders says.

Today, Urban Lending is a national company that generated $220 million in revenue in 2013 and employs about 2,400 permanent and temporary employees.

It’s about more than money for Sanders though, who says he got the bug to be an entrepreneur and just went for it.

“I think it’s the greatest thing in the world,” he says. “Sometimes it’s just your circumstances. I didn’t know what a mortgage was when I was in high school. I mean you know what a mortgage is, but I just needed a job and one thing lead to another. If you slow down every day and look around, you might see an opportunity.”  

And it was that same ability to see opportunities that helped him take his company to the next level in the mid-2000s.

 

An educated guess for a new direction

At that time, nearly everyone was doing well with mortgage originations in the booming housing market. But large title companies started to do their own processing work. With great relationships with banks, this fierce competition from the title companies put the squeeze on middle companies like Urban Lending, which specialized in mortgage origination, Sanders says.

“It really forced us to say, ‘Hey, where are we going to go next for this company to survive?’” he says. “We had to change directions and go somewhere where they weren’t fishing.”

Sanders and his management team watched the market and took an educated guess that the housing portion was going to crash and there was going to be a lot of defaults. That lead Urban Lending to became one of the first companies to concentrate on loan modifications for banks.

“Nowadays, everybody hears about loan modifications,” Sanders says. “You hear it all the time — commercials, TV, people talk about it. But back in 2005/2006, it wasn’t a big product or a big service.”

You can’t be scared to change, to go where the business is, he says.

“Sometimes you’re making widgets, you’re making widgets, you’re making widgets — and you go, ‘You know what, we’re not winning here. So, we’d better figure out what to do with the tools we have,’” Sanders says.

“Sometimes you’ve got to take that bold move, and say, ‘You know what? While everybody is playing over here, we’re going to go play over there and be the best at that.’”



Staying flexible for the right people

With a new direction, it was time to invest in the right intellectual capital. Sanders went out and found some of the best people.

“I learned to just really find some experts,” he says, “and let them come in and work on solutions with the banks — to whiteboard things, tailor-making solutions for our customers.”

One of those hires was Jim Smith, a known expert in loan modifications. There was one slight hiccup; Smith’s deal-breaker was that he wouldn’t move from Colorado.

Sanders says his business is so centered on people, he agreed to be flexible.

An office focused on loan modifications was opened in Bloomfield, Colo., which grew rapidly, drawing from the great talent base in the area. Today, with two Colorado offices, Urban Lending employees more people in The Centennial State than in the original Pittsburgh office, which continues to focus on mortgage originations.

Having multiple offices in different states might seem like a challenge, Sanders says, because you’d like to be the team leader every day, going in and keeping the troops charged up. But the key to multiple locations is putting great people in charge.

“I think in this day and age, with technology, and the way people move around and the great communication they have, it’s not the barrier it was years ago — even five years ago,” he says.

In fact, Sanders is looking to expand further with Urban Lending by setting up a brick-and-mortar presence on the West Coast, where the company is starting to work with some major banks and lenders.


Managing your workforce based on customer needs

Balancing changing customer needs can be challenging — and exhilarating, which keeps the business fresh, Sanders says, but one of the biggest parts to being profitable is correctly managing your workforce.

For Urban Lending, there are certain outside forces at play, like how much banks are outsourcing mortgage work, and the market’s balance between mortgage origination and default.

“In a perfect world, you’d love to have products and services on both sides that are equally good, but it’s always a balancing act to kind of see what’s coming and be heavy on one side, or be known to be an expert and market leader on the default side or origination side,” he says.

Right now, Urban Lending is about 60 percent focused on the default and loan modification side. In order to stay fluid, however, the company uses temporary employees for certain customer projects, allowing it to scale up and down as needed — running the numbers to see when it makes sense.

Finding the right mix of permanent and temporary employees comes down to knowing your industry, Sanders says.

“Don’t be afraid to use temp services,” he says. “There are a lot of specialty temp services out here. We work with some that are specialized in the mortgage industry.

“It keeps us flexible. We can get teams and attack certain projects.”

 

Takeaways:

  • Don’t be afraid to take a new business direction when necessary.
  • Trust yourself to invest in the right intellectual capital.
  • Being profitable means correctly managing your workforce.

 

The Sanders File:

Name: Charles “Chuck” Sanders
Title: CEO and founder
Company: Urban Lending Solutions

Born: Pittsburgh

Education: Bachelor’s degree in marketing from Slippery Rock University of Pennsylvania.

What was your first job and what did you learn from it? Throughout high school, I worked for my father. He had a trucking company, Sanders Trucking, in Pittsburgh. That’s where I got my entrepreneurial spirit. I watched my dad be that guy in the community who provided the jobs. He was a giant of a man to me. I always wanted to be like my dad.

What is the best business advice you ever received? You’ve got to feel special about yourself. One time, Mr. Murphy [my mentor] told me, ‘You know, only 5 percent of the people in the world really get it.’ And he said, ‘Chuck, you’re one of those 5 percent.’ That really changed my whole life. Not to sound cocky or anything, but it made me confident to go out there and just go for it.
You have to have confidence in yourself. That doesn’t mean you’ve got to be the smartest, or the slickest or the most inventive, but you’ve just got to have an overriding confidence in yourself that you’re going to make it happen.

You played in the NFL for three years — two years with the Pittsburgh Steelers and one year with the San Diego Chargers. Do you use anything you learned playing professional football in your corporate career now? Absolutely. Football teaches you teamwork. It teaches you how to be around successful people and be articulate. I would go to all the meet-and-greets and be around the owners and all those things.

 

Learn more about Urban Lending Solutions at:

Facebook: www.facebook.com/Urban.Lending.Solutions
Twitter: @UrbanLending

 

How to reach: Urban Lending Solutions, (412) 325-7046 or www.urban-ls.com.

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