Mushrooms spring up overnight. RLS Logistics has taken somewhat longer, but still has mushroomed from a small family business in rural New Jersey southeast of Philadelphia into a true logistics services company with four operating divisions.

In fact, the company was founded in 1968 as R Leo & Son to grow mushrooms. At the height of that part of its history, it had four buildings for indoor cultivation of mushrooms. Indoor farming remained the backbone of the company until 1988, when the Leos, a family of Italian immigrants branched out into public cold storage with 10,000 sq ft of temperature-controlled space as R Leo & Son Freezer Storage. Today, warehousing has grown to 150,000 sq ft of frozen, chilled, and dry space on the original property in Malaga, New Jersey. Including short-term storage on the LTL dock, the property has space for 12,000 pallet positions. The four mushroom buildings still are used as additional dry storage space. In addition to the headquarters facilities, RLS leases 50,000 sq ft of frozen space in nearby Vineland, New Jersey.

The third generation of the Leo family now handles day-to-day operations with the second generation intimately involved. Anthony Leo, son of the founder as noted in the original company name, is president. Russell Leo, named for his grandfather, is vice-president — transportation and distribution; and Anthony M Leo, named for his father, is vice-president — warehousing.

Asset-based logistics provider

RLS is a true logistics company with no concentration on either warehousing or transportation, the Leo brothers say. However, unlike some third party logistics providers, RLS has assets in the form of real estate, buildings, and a fleet. In practice, transportation generates about half the company's $12- million annual revenue with the remainder provided by warehousing and distribution. Until recently, the company operated with three branches — RLS Cold Storage handling warehousing; RLS Transport running a company-owned LTL motor carrier within a 300-mile radius of Malaga; and RLS Distribution to procure third party motor carriers for nationwide LTL and truckload service.

Starting in December 2002, the company added another division — RLS Packaging for home delivery of small shipments sold by vendors such as the QVC cable television network. In its primary role as an order fulfillment service, RLS Packaging selects individual orders from warehouse inventory, packages them in insulated containers for shipment with dry ice or refrigerated gel packs, and arranges for shipment by carriers such as UPS or FedEx. A five-pound block of dry ice is sufficient to hold product in an insulated foam container at 0° F for up to 48 hours. The new business has proved successful, because RLS doesn't have a lot of competition in the field, Anthony M Leo says.

Until recently, the Leo family companies operated under two names: the original R Leo & Son Freezer Storage name and Quick Frozen Transport, the freight brokerage purchased in 1993, when the company entered the distribution arena. In 1995, a company-owned fleet was added to Quick Frozen, because the family wanted access to a constant, reliable source of transportation instead of having to rely always on third party carriers. In January 2002, the names of all the operating divisions were changed to carry the RLS label. “We just got tired of explaining to potential customers that the names were different, but that we really were a single company with a wide range of services,” says Anthony M Leo. “With our new, single identity, we can promote the company as a whole and offer customers a wide choice of services from an extensive menu.”

Customers order combinations

Choosing from that menu, some customers use only trucking while other ask only for warehousing. Others want only warehousing with inbound transportation provided by their private fleet or a third party carrier and outbound delivery on a for-hire carrier. However, most want a combination of services. Many, in fact most, Russell Leo says, want a turnkey logistics solution that includes trucking, warehousing, freight consolidation, and distribution. “We handle about 150 loads a week in total with our internal fleet handling an average of two loads per week per trailer,” he says. “Our company fleet consists of 12 tractors and 26 refrigerated trailers.”

To maintain control and efficiency in a multi-stop LTL operation, RLS strives to keep the fleet a regional operation. The pick-up and delivery has a radius of roughly 300 miles, covering Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, and Virginia with Boston, Norfolk, and Pittsburgh at the edges. The warehousing business receives more freight than the transportation division can handle, both in terms of volume and in terms of the origin. For that reason more than 60% of inbound freight arrives by third party carriers. Outbound from Malaga, the receiving area is more concentrated with RLS Transport handling about two-thirds of the loads. Obviously, freight destined to receivers outside the 300-mile radius is contracted to other carriers. These carriers include Arctic Express from Hilliard, Ohio, and Southern Refrigerated Transport from Ashdown, Arkansas. The list of third party carriers contains numerous recognizable names such as Westway Express and Dick Simon Trucking from recent history.

All outbound freight is tendered by RLS Distribution. “RLS Transport only has one customer,” says Russell Leo. “Transport handles the technical side of trucking such as hiring drivers and mechanics and performing maintenance on tractors and trailers. All the administrative work is done by RLS Distribution. They deal with shippers and receivers and make all delivery appointments — both for RLS Transport and for third party carriers hauling contract freight. Appointments are necessary, because all outbound freight delivers at grocery or foodservice warehouses or at large warehouse club stores. We don't do any store-door delivery.”

High volume cross-dock

Outbound freight comes from two sources. Some of it comes out of long-term storage in the warehouse. The rest is part of a cross-dock operation. Some of the cross-dock freight moves back out within a day or so of arrival in Malaga. This is limited to shipments with receivers within 100 miles of the terminal. Routes with overnight shipments are dispatched Mondays through Thursdays. Freight for the Midwest leaves Malaga on Tuesday night. However, most freight is held for several days for dispatch when the majority of outbound loads are built and sent out on Saturdays.

This delivery schedule results in freight being delivered in morning hours with pick-up scheduled for afternoons. Loads contain five to 10 shipments when delivery is handled with the company fleet. A system average puts eight stops on a load. With most freight scheduled for shipment on Saturday, Friday afternoon is the heaviest day for pick-ups.

The cross-dock operation uses a 25,000-sq-ft building refrigerated to 38° F. It is served by 26 loading doors and contains 300 pallet positions for freight that stays in the building longer than overnight. The cross-dock and the refrigerated warehouse are separate buildings. Orders from the warehouse are selected and moved across the company yard for consolidation into loads on the cross-dock.

All LTL freight is handled through the Malaga terminal. That includes shipments that conceivably originate in Harrisburg, Pennsylvania, destined to a receiver in Pittsburgh. “Moving all LTL freight through the terminal allows us to consolidate loads in the most efficient way,” Russell Leo says. “We can pull that shipment from Harrisburg into the terminal and consolidate it into a truckload that all delivers to receivers in the Pittsburgh area.

Truckload freight is a different matter. Amounting to only 10% to 15% of the company's total, truckload freight moves directly from shipper to receiver.

Products handled by RLS Transport are a mirror of the goods in RLS Cold Storage. Both companies handle a lot of frozen vegetables along with deli meats, poultry, and bakery goods. However, they draw the line at some commodities. Neither RLS division will take on ice cream or seafood storage or distribution. The risks are just too high compared to the potential revenue, Russell Leo says.

With its small fleet and regional trade area, RLS Transport faces few of the driver turnover problems that plague most truckload carriers. Drivers work a four-day week for an hourly wage and are out only one or two nights a week. Another factor in driver retention is the repetitive nature of the work. Drivers are given a general area to cover rather than being asked to cover random routes. Tractors are assigned, but are used by more than one driver to keep the fleet moving when the assigned driver is not working. Some drivers have been with the fleet since its founding.

Although the RLS fleet is small, it is not lacking for technological advantages. All 12 Kenworth T800 tractors are equipped with a tracking system from AirLink Systems. The tracking system uses global positioning to locate equipment and notes tractor activity with colored icons. A tractor in route shows on the computer screen in green. Icons change color when vehicles stop and change again when they remain stopped beyond a predetermined amount of time.

The tracking system was installed in response to customer requests. They wanted more information about the location and timing of their shipments, Russell Leo says. In addition to providing shipment tracking, AirLink helps control driver activity, reduces out-of-route miles, and gives operations managers an accurate picture of fleet deployment when route changes need to be made to accommodate late orders.

AirLink is for tracking only. RLS communicates with its drivers using Nextel cellular phones with two-way radio capability.

RLS makes a concerted effort to extend the latest technology throughout the company. “For a small company, we are trying to be as advanced with our use of technology as possible,” says Anthony M Leo. “For instance, within the past six months, we have installed a radio frequency warehouse management system that is much more accurate than the process we used previously. Whenever we identify a potential problem, we look to new technology for the solution.”

Keeping track of warehouse inventory, always a high priority, is especially so at RLS, because of rapid product turnover. Some 50 to 60 loads come into the system every week on RLS Distribution alone. More than 90% of warehouse inventory arrives in Malaga as full truckloads.

Bar-coded warehouse tracking

The warehouse system is built around bar code readers from Telxon (now a part of Symbol Technologies). All incoming product is bar-coded when received into the warehouse. The management system then assigns a storage slot for each pallet. During order selection, bar codes are scanned, and the product is assigned to a route. The last part in the process is scanning each outbound pallet and scanning the bar code on the loading door to verify that each shipment is staged as a part of the correct load.

Another recent technological addition is a document imaging system. Obviously, the system reduces administrative burden inside the company, giving access to a single document to multiple users at the same time. In addition, the system makes documents immediately available to customers who need copies of receipts or other verification documents. “A customer using any web browser can enter our system with a user name and password and receive instant access to the requested document,” says Anthony M Leo.

Like the mushrooms at the company's founding, when time comes to expand, RLS will propagate in a circle. In the past year, the company grew by 40%, an expansion that required the construction of a new building to house administrative offices. Such rapid growth is not anticipated every year, but the company still wants to see an improvement of 10% to 20% in volume annually. The next logical step, Russell Leo says is to acquire another terminal location. Ideally, that location would be near the edge of the current trade area, giving RLS the capacity to reach out in another 300-mile circle beyond the edges of the present distribution zone.