With a great deal being written about changes within the supply chain, we felt it timely to sit down with Dan Martin, CEO of Xpress Global Systems, a major provider of shipping and distribution services to the floor covering industry owned by private investment firm Aterian Investment Partners. The following are excerpts from that conversation. You can listen to this conversation it its entirety here.
TF: You recently acquired Delta Distribution/Michigan Carpet. Talk about this acquisition.
Martin: I think a while ago we looked at our network and our footprint across the U.S. We are based in North Georgia and have locations all over the map, however there are several regions where we really could use some support in bolstering our footprint. Michigan Carpet is one of the best service providers in the industry. They have a great reputation for customer service, were a great fit for us to partner with. We are going to be able to leverage and grow with at least eight facilities within our network and take on an amazing group of people. As you know, it is very hard to resource people — drivers, dock workers, and they have some really brilliant people at their headquarters — and take on the additional network, which is part of our growth strategy.
TF: How large is your network?
Martin: At the beginning of this year, we had 30 locations. We are currently in the process of greenfielding in new cities, but with the acquisitions of Michigan Carpet and 7 Hills Transport earlier in the year, we are now going to be pushing close to 40 locations by the end of this calendar year. We are really proud of that. We service about 92% of the U.S. zip codes and we operate in every state. We also operate warehouse management services, obviously LTL shipments, to every retailer and we ship to over 41,000 locations today. The network is expansive, and we provide a variety of services for our customers.
TF: An important element of the trucking business in this industry is the relationship a trucking company has with industry suppliers and the services that are offered to them. Talk about this.
Martin: A great deal has happened since COVID, but unfortunately a lot of the supply base has dried up. We have been very lucky over the last 18 months to build very strong relationships with our supply network, our mill partners and our retailers. We are in a very strong position to be able to add value and provide them service. It has taken us a long time to get here, but we are really happy to be in our current position.
TF: It sounds as though the company has been in a growth mode.
Martin: The market is ripe for growth. As the largest service provider in the flooring transport industry, we feel we can keep on going. We have seen a number of conventional flooring suppliers in the transport sector shift to general commodities because it is easier. It is much easier for us to make our case because we have specialty equipment and specialty trailers. Our facilities do not look like a lot of the general warehouse space out there, because we can accommodate both palletized loads and carpet rolls. Our facilities just look and feel different. We have the resources and the technology needed to supply the industry. It really does differentiate us. As a result, we are growing within the industry.
TF: What kind of change are you seeing as a result of the decreased market share of roll goods? I suspect that is a sizable change for you.
Martin: In the last year, we have seen carpet actually pick up. We do a lot of turf, which has really blown up over the last 18 months. The good news is that the other parts of the flooring business will continue to grow as the commercial market comes back. We haven't seen that come back to the extent we have seen the retail market come back. We are looking forward to a lot of that growth in 2022.
TF: What has happened to the ratio of floor covering products shipped via mill-owned transportation versus third-party carriers?
Martin: I think we have seen a bigger shift towards third-party carriers mainly because of the growth and the inability of mill providers to handle all of the volume. We have seen a shift — whether it's a permanent shift or not, I'm not sure — but we have been able to fill a huge void. The acquisitions are really helping as well, because when you pull two fleets together, you find a lot of efficiency. Rather than park units or selling them, we've been able to use them to fill the void of the growth.
I also think the trend of pushing the mill-owned fleets and the independent fleets closer together to service the bigger customers is going to continue. There's a great deal of collaboration left to be done.
TF: Sounds like the name of the game is filling trailers, no matter who owns them.
Martin: It's interesting that you say that. We do somewhere around 15,000 stops a day and ironically, at a lot of the big retailers we visit, there are four or five trucks with the same type of product in them sitting, waiting to unload. And, every single time someone unloads and picks up, there is a cost to serve there. We are all going there and we're not all full. We have a big LTL fleet as do others. There is so much to be gained in leveraging and pulling these fleets together and looking at ways to collaborate more. And the cost savings will go right to the retailer and the consumer. So, I think there is a lot more to be done in this area.
TF: Going forward, then, to have closer relationships between mills and transportation companies, I suspect some of the technology that is available will perhaps be the tools to be able to solve some of those problems.
Martin: Many are concerned about the transparency of their fleet, into their inventories. We have installed state-of-the-art warehouse management systems and transport management systems that are actually still being rolled out in our network. That is really going to help us provide a better and higher level of service for some of those guys who have been concerned. I think some of the mills look at it as a competitive advantage, and we are hoping that we can show that our system and our network can really help them leverage their spend and improve their costs.
TF: Ecommerce in the floor covering business is going to be more prominent in this industry as we go forward. What are your thoughts?
Martin: I do not think any of us thought five years ago that we'd be spending a great deal of our money online. I think things will continue to transition and change. We are going to be exploring last-mile deliveries right down to the consumer. And hopefully the industry will follow suit, but we are hoping that maybe it's not next year, but in the next three to four years. I do believe we'll see a pickup here.
TF: How about autonomous vehicles? Is that something you see in your future?
Martin: I do not see autonomous vehicles in the next few years, but I do think, with all the regulatory requirements we have seen over the last five years related to drivers and the massive driver shortfall, I think we will see more of that being introduced into the market.
There are a lot of companies out there investing their future on this concept. And they are starting to partner with the big guys. I think it's a wait-and-see—I don't think we'll see a lot of this in the next two to three years, but especially in the line haul business where trucks are leaving Dalton and ending up in, say, Dallas, I do think that will be the first place we see this thing take off, but probably not for another four or five years.