October 10, 2023. In the latest episode of the “Truck N’ Hustle” podcast, host Rahmel Wattley sits down with Michael Kraus, the CEO of Expak Logistics. With a deep dive into the intricacies of the logistics world, Rahmel expertly navigates the conversation, drawing insights and stories from Michael’s extensive experience in the industry. This interview promises an enlightening perspective on the challenges and triumphs of leading a logistics firm in today’s dynamic environment. The transcript has been edited for clarity.
RM: We are recording live from Brentwood, California. Michael, you know it’s Los Angeles but we are in the Brentwood area. I hear that Brentwood is famous for many things, but we won’t get into that. We’re here at the office of Expak Logistics with chairman and CEO Mr. MK. Michael, thank you for being on the show.
MK: Thank you for having me. It’s a pleasure to be here.
About Expak Logistics
RM: Michael, Expak Logistics, tell me what you guys do.
MK: Expak Logistics has been around in one form or another for over 50 years. We’ve got two core services today. One is our pool distribution business which we do nationwide, principally serving big retailers. We basically run milk runs, restocking pharmacies and some retailers. We also have a warehousing and fulfillment business serving mainly small-medium businesses.
Michael’s Entry into Logistics
RM: Talk to me about how you got into this space. What’s your background and education?
MK: It was a windy road into this space. Out of college, I was in a family office doing private equity. Through that role, I ventured into the printing industry. After a series of experiences there, within the organization, we had about a billion dollars of logistics revenue. This gave me exposure to the space, leading to my involvement with Expak Logistics in 2012.
Changes in Expak’s Business Model
RM: What was the business model of Expak when you joined? Was it similar to now?
MK: It was similar but a bit different. We were still doing business-to-business deliveries. However, we decided to move away from the asset-heavy model, focusing more on technology and customer service, leveraging the model we had in the eastern United States.
RM: How did you transition from an asset-heavy business?
MK: It was a combination of selling off parts of the business, transitioning others, or even walking away from some operations. The goal was a smoother, more efficient operation.
Efficiencies and Value Proposition
RM: What inefficiencies did you aim to change in the industry?
MK: A major catalyst was a realization that we needed to bring more value to our clients. We doubled down on enhancing customer service and building technology integrations. This gives clients a one-stop shop for service.
Changes in the 3PL Space
RM: How has the 3PL space evolved in the last three to five years?
MK: It’s been volatile. The supply chain surge combined with inflation posed challenges. A major shift was in driver retention. If drivers aren’t taken care of, it reflects poorly on us.
RM: We need more money.
MK: Back in 2021, we had to adjust to the market demands to ensure consistent service.
Approach to Partnerships
MK: If there was a logical, thoughtful approach from our partners, we pretty much just paid. We knew that if we don’t take care of the lifeblood of our organization, it’s not going to happen. Keeping the trains running on time was a real issue, even though we don’t run on trains, it’s mostly vans and trucks. The biggest issue was spending a lot of time and energy on keeping things moving consistently.
Client Relationships and Pricing
MK: We’re fortunate to have long-term relationships with many of our clients. In the early days, if we got a price increase from a vendor, our salespeople would directly inform the client. But now, we manage it and absorb some costs, knowing that clients will understand annual adjustments. If the service is there, they’ll pay us.
Fuel and Warehouse Challenges
MK: Fuel prices skyrocketed, but luckily we had fuel surcharges in many cases. On the warehouse side, we faced almost 0% capacity nationwide, especially in Southern California. We had challenges like space shortage and increased lease rates. Another issue was the lack of flex staff, which affected our operations, especially on peak days.
Client Acquisition Challenges
MK: It was challenging to acquire new business. Many potential clients who were doing well were reluctant to change their 3PL vendor, even if they were experiencing issues. They did not want to deal with the change management involved. Now, we’re seeing clients re-evaluating their vendor pool and seeking improvements.
Ideal Client Profile
MK: Our ideal client is someone who recognizes their problems and is open to solutions. We want to establish long-term relationships, not just short-term deals. We appreciate clients who are open-minded and willing to consider different processes and solutions.
MK: An interesting niche for us is the library business. We support libraries by managing interlibrary loans, distributing resources between libraries. This involves sorting and delivering books and other materials to the right libraries. The demand for library services has been growing, making it a valuable area for us.
Business Growth Plans
MK: Our primary focus for the next few years is growth. We have built a solid operational infrastructure and now we aim to see a return on our investment. We are focusing on national players and national retailers, building relationships with them. When we are in the room with a potential client, we aim to showcase our strengths and demonstrate that we can deliver on our promises.
Educating Customers on Efficiency
RM: I’m interested in that because it seems like you guys kind of like your approach is you’re going to educate your customers on how to do things more efficiently. So, what does a typical 3PL do that you guys don’t? What are you guys doing that others aren’t to bring value to customers from an educational standpoint?
MK: I think it’s probably a couple of things. Admittedly, some larger customers, like Walmart or Amazon, have specific ways they want things done. But I think we differentiate in our customer service model. We have a process in place for when mistakes happen, whether they’re our fault or the client’s, and we always aim to rectify and improve. Our emphasis is on consistency and discipline in our approach.
Warehouse Operations and Partnerships
RM: How many warehouses do you have and how do you choose your warehousing partners?
MK: We work with partners and have about 10 active warehouses across the country. Choosing a partner involves understanding a client’s needs and finding the right fit, both technically and geographically. Some warehouses are better for big retailers, others for direct-to-consumer shipping. We’re also focused on relationship building, ensuring our partners align with our values and processes.
Using Data for Business Decisions
RM: How do you use data in your business, especially when you have two different business sides?
MK: We focus a lot on trends. On the distribution side, we track issues like late deliveries or mis-sorted items. On the warehousing side, it’s more about volume and ensuring timely shipping. Our customer service team constantly analyzes data to ensure smooth operations and address any issues promptly.
Team Dynamics and Roles
RM: Can you tell us about your team and their roles?
MK: We have a mix of operations, sales, customer service, and IT teams. Everyone is focused on our company goals and driving results. Our operations team manages day-to-day vendor relationships, while our sales team is always looking for new opportunities. Our customer service team handles issues and ensures smooth communication with our partners.
Business Goals and Future Plans
RM: As the year comes to a close, have you met your revenue goals and what are your projections for the future?
MK: We haven’t met our targets yet, but it’s still in play. We set high goals for ourselves and plan to continue doing so in the future. Our focus is on long-term growth and success.
Personal Development and Leadership
RM: How do you focus on personal development as a leader?
MK: There’s probably an exit down the road, not to leave the business but to explore other opportunities. As for acquisitions, we’re considering it and have been looking at potential opportunities that align with our business model and values.
MK: Many of us don’t have everything figured out, and that’s okay. It’s important to believe in what you’re doing, be authentic, and forge your own path. Building strong relationships and focusing on integrity has been key to our success, and I believe it’s vital for anyone in business.