February 15, 2008

Carrying the Freight

CH Robinson Worldwide (CHRW), a transportation logistics provider, was up almost 4 % in January. CHRW is a Minnesota-based freight forwarder that offers third-party logistics solutions and supply chain management. With 214 branch offices spread across Europe, Asia and North and South America, the transportation broker connected over 25,000 shipping customers with 45,000 different carriers in 2006. And unlike many asset-based trucking companies, which have seen revenues drop with declines in freight shipping, CHRW has actually kept its revenue growing at double-digit rates as demand for its brokerage services has kept its margins strong.

About 87% of the company's net income is generated by pairing shipping demanders with carriers looking to utilize excess supply. C.H. Robinson buys cargo space from freight carriers in bulk and provides customs brokerage. CHRW focuses primarily on ground shipping. Motor freight accounts for around 90% of its profits while its intermodal, air and ocean freight businesses each account for about 2% to 4% of gross profits annually. Beyond plain brokerage services, its margins have gained strength through its supply chain management business, which helps companies create a seamless customized distribution process for each client.

In addition, produce sourcing and delivery makes up about 9% of CHRW's consolidated revenues. This is the business that got the firm started in 1905, and it has continued to grow its operations steadily while brokerage services have taken over as the star earnings driver. After acquiring the FoodSource group entities in 2005, CHRW had increased its sourcing capabilities and gained a renewed focus in transporting the fresh produce it buys. Its branded produce, labeled The Fresh 1, is sold to large multi-store grocery retailers, restaurant chains, produce wholesalers and foodservice distributors.

The remaining 4% of revenues come from the company's T-Chek Systems subsidiary, which provides information services for trucking companies. Larger carriers and truck stop chains pay to access the proprietary information system for management information, sales and fuel cost data, fund transfers, and invoicing of fuel, cash advances and other fees. Fuel cards correlate with T-Chek's expansive network to connect truckers and their managers with C.H. Robinson's routing services and provide an integrated business operation on the road.