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Chief risk officers’ presence in corporate C-suites, along with boardlevel attention to risks, has been a subject of continual — and overdue — chatter in recent years. CROs increasingly belong, particularly in finance, after the battering of the 2008 crisis. But their membership was hard-won, and they are still relatively junior among the upper echelon.

Not so chief financial officers. They have been wearing senior-level stripes for years. As they have refined their roles and mastered their businesses’ complexities, they have only risen in importance and stature. They have proclaimed as much each November for almost a decade, when they have gathered for the CFO Summit of Massachusetts Institute of Technology’s Sloan School of Management. They have celebrated their accomplishments as executive leaders and spokespeople, as their CEOs’ right hands and honest brokers. Their accounting and administrative purview encompassed risk management before CROs became their C-suite peers. As strategists, dealmakers and change agents, CFOs today are “at the nucleus of the organization, see[ing] everything that is going on,” Bruce Besanko, CFO of OfficeMax, said at the most recent MIT Sloan summit.

That holds as true for OfficeMax, a publicly traded, global business-supplies and retailing company with a 99- year heritage and $7.1 billion in annual sales, as it does for BirdDog Solutions, a 14-year-old, technology- focused provider of transportation logistics services. Also with sidelights in finance and compliance, BirdDog is privately held, with revenue in the $50 million range, and there is no chief risk officer among its approximately 240 employees. Risk management falls under Chris Beck, vice president of finance and administration, but it does not get short shrift.

“The risk and finance functions grew up in tandem,” says Beck, another MIT Sloan panelist last year, who joined Andover, Massachusetts-based BirdDog in 2008.

A certified public accountant with a BA in business economics from the University of California at Santa Barbara, Beck started out with Deloitte & Touche. He went on to be CFO of Alper Ink Group, a $170 million private-equity-funded company, where he led acquisition activity and participated in closing seven deals in a four-year span. Before BirdDog, Beck was CFO of a $60 million division of the publicly held recruitment and staffing company Hudson Highland Group.

Beck notes that he has “worked in both the public and private environment,” experiences that influence his approaches and BirdDog’s business disciplines, which, as Beck tells Risk Professional, conform to many public-company standards.

Are there advantages to private versus public ownership?

There are pros and cons on both sides. While there is an intense focus on earnings [in a privately held company], it is a longerterm view. You don’t live quarter to quarter, and the decisionmaking process is quicker.

How is BirdDog structured?

BirdDog is a transportation services company with two business units. BirdDog Solutions is a 3PL [third-party logistics] provider of Fortune-500-type solutions to middle-market shippers. The Foley Carrier Services division provides compliance and financial services to small and mid-size carriers. In the supply chain, our company is in two spaces, bridging the actual shipment of goods and the carriers that do the shipping.

Foley Services, acquired in 2010, was a Department-of-Transportation-compliance business — drug and alcohol testing for small carriers — along with a factoring service, where we will buy carriers’ receivables to accelerate their cash flow. We have been focused on building out a host of services for these small carriers. Because of increased regulation and population dynamics, we believe that truckload capacity will become increasingly constrained. That creates an opportunity for us either to be a source of transportation or to help the carriers make sure they have done the compliance to operate in that environment.

Doesn’t factoring make it a financial company too?

The factoring piece of our business is not huge, but it is growing rapidly. We do have a long-term vision of providing more services, acting as a primary resource to small carriers on the compliance side: not just drug and alcohol testing, but also driver qualification files and keeping driver logs. On the financial side, we can provide capital and, potentially down the road, insurance products and other services of that nature.;;

Where does BirdDog mitigate risks?

On the shipper side, we are a 3PL, non-asset-based, so we don’t have our own trucks. As a broker, we will place truckload capacity for our customers. When hitting capacity constraints, people will look to fill their needs in the spot market rather than in-house or with their traditional providers. As that spot-market need grows, so does the need for a 3PL. We help mitigate the capacity risk in terms of giving those who do not already outsource their transportation a reliable means of finding capacity. Longer term, because of the capacity issue, shippers will have less ability to control carrier prices, and the way to keep prices down will be to partner with an expert in the field. You will want to look at the whole supply chain and its design, what you are moving from point A to point B and how – really reengineering the whole process.

Does your company have a discrete or dedicated risk management function?

We are not big enough – at around $50 million in revenue – to have a segregated risk department. It all falls under my team. I have overall responsibility for risk management. Having said that, although it is centralized with me to make sure we are in compliance with controls and operating procedures, a lot is pushed to the functional leaders – IT being a major part of it, along with human resources, operations and quality control. Everybody “owns” their own piece of the risk pie.

As an outsource provider, we had a SAS 70 [Statement of Auditing Standards] Type II certification, which required us to do a report, which is now turning into a SSAE [Statement on Standards for Attestation Engagements] report. My team makes sure that we are on target to deliver that, and that all the controls are in place and operating — though it is often the people within the business functions who own the actual control procedures.

Is that approach typical for a company this size?

It is driven by the financials. An audit is done, and you have to be able to prove it is free of material misstatements. Then we got the SAS 70 report going, and so much flows from that and is interwoven with it. Finance seems to be the most logical place for risk management responsibility. If you look at whose signature is on these reports, that is where it generally lands.

What is your history with SAS 70?

Three years after we got our first SAS certification, we went into the new SSAE 16 report. We always had a Type II report, because one of our services is freight bill audit and payment. We process a heavy dollar volume of freight bills on behalf of our customers, and they wanted assurance that we do that in an accurate and timely fashion. The Type II report seemed to be best for giving them the desired comfort level.

How important is the IT function?

We are not a technology company, but we absolutely deliver our services through technology, so it is very important to us. We have about 18 people in our IT department. We have a separate development, technical operations and network operating group to keep a concentrated focus on systems development.

Isn’t BirdDog’s footprint, or business impact, big for its size?

Although we are small in terms of revenue, we process about $400 million in payments on behalf of our clients, and about $2.5 billion is being processed through our auditing systems. A lot of that is done completely hands-off in a closed-loop fashion, where we will audit bills on a line-item basis, identify discrepancies, report back to the carriers and be able to deliver a net, corrected invoice bill. Because it is hands-free, knowing that the system is proven out and tested is extraordinarily important to what we are doing for our customers.

We may only make pennies per transaction, but when processing billions of dollars in transactions, it adds up.

Whom do you report to, and what is the management committee structure?

I report to the president and CEO, Joel Sitak. The vice president of each function area – human resources, IT, service delivery, sales – the CEO, chairman [and former Iron Mountain COO] David Wendell and myself comprise the management team. There is also a four-member board of directors, including Joel and David, that meets regularly and focuses on the business. We are not structured to have separate audit or compensation committees; the board is small enough that they are essentially all committees.

Does that structure and simplicity lend itself to agility?

We are not formally Sarbanes-Oxley compliant, but we still go through a lot of those steps. In compensation, for example, we draw up plans and run it by the board, but it does not have to be as formal a process.

When do you talk to the board?

We do presentations at quarterly meetings, and more often as needed. I will present on financial and administrative aspects.;;

Has growth affected your approach to systems and controls?

As we have grown from the venture stage into a more traditional company, we have put in place the level of professionalism you are more likely to see at a larger organization. One reason is that we are processing so much more than our revenue size would indicate. For example, we have moved to a shared service environment. We recently moved the accounting of our two business units, which had been separate, into Andover. We have adopted the same shared service approach with HR and IT. We are building this to be scalable as we grow both organically and through acquisitions. On the IT side, we have invested significant dollars to make sure we are on one, unified platform, standardized on SQL and .Net, making it easier for maintenance and scaling.

Have you been active with acquisitions?

We have done six acquisitions since 2003. I have been here for three of those [since 2008]. Each acquisition had its own accounting function, and we pulled all of those together.

Does BirdDog get vetted by users for operational reliability and financial stability?

We do, but it is surprising how infrequently. Sometimes people don’t do all the homework they should on a vendor. We are very rigid with our controls, and we have had customers that are Fortune 500 companies and Sarbanes-Oxleycompliant sending internal audit teams to do on-site visits, asking us to explain our SAS 70 reporting. We absolutely have to live up to a high degree of scrutiny. But, to be honest, it doesn’t happen all that frequently.

Is the due diligence a function of customer size?

Definitely, though even some of the bigger names don’t do all of the homework that they probably should. Not that they would find anything with us. But I am not sure of the reason, whether it is a matter of trust in an outsource partner’s technical excellence or lack of resources on the client’s part.

Your company’s track record and reputation must make a statement.

Absolutely. I just don’t know that companies are putting their outsource providers through the scrutiny that they should. As an example, we often didn’t get asked for our SAS 70 report. That should be something people look at. Not that they would find anything missing. It is for their own internal control process.

What is the difference with SSAE 16?

For reporting periods after May 2011, everything that was subject to SAS 70 reporting moved to SSAE 16. It increases the level of assertion in the report to include the control environment at the beginning of the period, through the year to the end of the period. The old report only addressed the control environment at the end of the period. In SAS 70 Type II, you could include that controls were in place throughout the year, but it did not address the control environment all the way through the year. SSAE 16 also requires some additional management assertions as to what the controls are.

Do you bird-dog this process, so to speak?

We are responsible for it and projectmanage it. A lot of the specific requirements fall within my department and team, such as testing, similar to an audit, to actively review who has access to bank statements, for example. A lot of it is also about operational processes, testing and proving, for example, that controls are in place around claims processing on behalf of customers, paying freight bills on a timely basis, and how the quality control department functions. So it is more operationally than financial-statement driven. But, of course, there are overlaps.

With growth and complexity in the business, have you had to staff up in the finance area?

Staffing up has been a challenge. In the shared service environment, our plan is to over-staff each function according to where we think we will be in a couple of years. We have invested in senior-level hires throughout the management chain – not just at the executive level, but also mid-managers who have the background and bandwidth to scale with the business.

Is that excess capacity an advantage?

It is. Shareholders are committed to the growth plan, everyone is on the same page about making those investments, and we don’t have that quarter-to-quarter, earnings-per-share demand.

Is being privately held and in the Boston region helpful in attracting talent?

Attracting talent is always tough, in good and bad markets. We have a lot of success in doing so, in that we have a great story. Our motto is that you need to be flexible as BirdDog grows, and you can hopefully grow into more senior roles. We have a track record of high growth, acquisitions and promotions, and we pay accordingly. We are not a splashy, Fortune 500 company that has brand recognition outside select areas. But we have been on the Inc. 5000 for four or five years, the Deloitte Fast 500 for three straight years, so there is some buzz about what we are doing and where we are going.

By Dave Sullivan, Senior Consultant, Professional Services with Alex Rose.

Fill up your car lately? How much did you pay? $40? $50? $60? All over the country, the price of fuel is skyrocketing. Some analysts are predicting that the national average will be above $5 a gallon before Memorial Day. There is a perfect storm brewing, with closing refineries, Wall Street speculation, and Middle-Eastern turmoil causing the price of fuel — and especially diesel — to go through the roof.

This shouldn’t come as too much of a surprise; a similar scenario has played out over the last few summers. Like many shippers, you may have resigned yourself to the idea that, like death and taxes, fuel increases are just another cost you will have absorb. If you’re smart, however, you will act to mitigate fuel cost increases in other ways.

Here are five fundamental rules that every shipper should follow:

1. Does It Have To Be There So Soon?

Does the package have to be there right away? Are you sure? There are plenty of shippers that “have” to ship express or overnight. Through either a misplaced sense of urgency or a sales/marketing department that has made some crazy promises, the shipper is spending a fortune sending packages at the fastest rate possible. There are a couple of possible savings to be implemented here. To begin, there is a significant savings to be had between shipping via 2 or 3 day services as opposed to more speedy methods. Then there is the fact that shipping at a lower rate will mean a smaller fuel surcharge —fuel charges are calculated as a percentage of the base price. As fuel prices (and thereby surcharges) increase this summer, you’ll find the benefits of shipping at more sensible service levels grow and grow.

2. Airplanes are Great, Now Put It In the Truck

Similarly, you’ll find significant savings if you ship via Ground as opposed to Air. Ground rates are almost always less than air rates anyway. When factoring in the price of fuel, however, there are even greater savings to be had. Historically, the Air fuel rate is between 50 – 75% more than the Ground fuel rate. While it is common to assume that air is the fastest method to ship a package (planes are cool!) the reality is, for lower zoned destinations, it may not actually make a difference at all. Ensuring that all lower zoned destination volume is sent via Ground will save on fuel without sacrificing time in transit.

3. Negotiate, Negotiate, Negotiate

An important factor to consider is that when it comes to carriers, you are the customer and it is up to them to suit your needs. With that in mind, in all matters carrier, you should negotiate, negotiate, negotiate. Remember, all rates and charges are up for grabs. If you have a carrier that won’t negotiate over fuel, dump them; go and talk with another carrier that is worth your time and business. Freight shippers (LTL and Truckload) in particular benefit from massive carrier markets. Make a willingness to negotiate over fuel one of the key attributes to look for when you are shopping for carriers.

Directly negotiating over fuel isn’t the only way to save, however. There are plenty of other areas where you can improve the base price, knowing that these tweaks will impact your fuel surcharge as well.  Any time you discuss fuel surcharges and contracts you should also be hunting for savings on accessorials and in the terms and conditions in your agreement.

Need Help with Negotiations? Click Here to Learn More.

4. Send it Downstream

If you can’t gain enough traction with options 1, 2 or 3 (and have leveraged all available resources like our Professional Services team) it may be time to try something a little more radical. Fuel prices go up so what do the carriers do? They pass them along to you. So what do you do? Sit there and fume? Of course not, where appropriate, you can always pass the cost along to your customers. Now, most of you work in competitive markets and would probably balk at such as suggestion. Remember, though, especially for retail shippers, what’s true for you is true for your competitors. Look to see what your rivals are doing and react accordingly. If they are raising prices it may be a sign that you need to as well. Even if you don’t recoup the total increase in shipping costs, you can offset a great deal of pain by passing it along to consumers.

5. Spread Out to Stay Afloat

If all else fails, consider going ‘big’ in your efforts to isolate yourself from the fuel crisis. Many shippers get into trouble when they expand into markets far away from their traditional distribution center. While a company may be founded in New England, when its business grows to a nationwide market, it will find it is hugely expensive to remain in that traditional hub. Instead, shippers should look to spread out to smaller regional distribution centers. Case in point; shipping from Boston to Sacramento, Phoenix or Denver can be very expensive; especially if that shipment has to be sent express or overnight. However, shipping from Salt-Lake City to Sacramento or Phoenix to Denver is far cheaper. Beyond that, even if the shipment needs to travel quickly, with the shorter distances, there will be better, cheaper options than the premium express or air methods.

To underline the leverage an MDI of over 14 provides trucking companies, consider that the market equilibrium resides at an MDI of 7.0. Essentially, Shippers take control when MDI dips below 7.0, and carriers have the upper hand when MDI is above 7.0.

Although the carrier industry as a whole is doing well, companies are still trying to work with a number of serious problems. The volatility of the price of fuel has been causing problems for years and continues to affect transportation pricing. So too does a harsh regulatory environment, including the new CSA compliance monitoring system and restrictive hours-of-service proposals. Perhaps worst of all, the perennial truck driver shortage: A problem that seems to disappear when the economy is on the downfall, then rise again as soon as volumes begin to pick up.

As a shipper, the best way to stay ahead of the game is to manage your transportation budget more effectively. BirdDog offers a completely outsourced transportation management solution combining our best-in-class managed services and our proprietary, online transportation management tools. This combination helps your organization manage each phase of the transportation life cycle while maximizing operational efficiencies.

BirdDog Solutions and our Foley Carrier Services division have worked very hard over the years to develop a group of preferred carriers we can count on when capacity in the market is tight.  These companies are all compliant with the new CSA regulations as well as BirdDog’s strict qualification standards for safety, insurance, maintenance and service. BirdDog’s team of logistics specialists, dispatchers and engineers assist with planning and tactical execution support. With one-stop accountability, we can collectively reduce your shipping expenses by 10% to 20%.

Mollie Campbell

With input from Rich Clark, Lead Logistics Specialist at BirdDog Solutions, Inc, Neil Skea, Customer Logistics Manager, at BirdDog Solutions, Inc. and Alex Rose, Technical and Marketing Writer at Foley Carrier Services, LLC – A BirdDog Company.

Going back to the procurement framework, outlined in the first Stop Buying Transportation. Procure It! article: the first aspect to consider is your shipping profile.  How much will you be shipping  and when will you be shipping it?, Where is it going, how much does it weigh, and what type of freight— all these items and more dramatically affect your negotiation leverage. For example, if you only have the occasional LTL shipment, chances are, you’ll be better off with a third party logistics provider. 3PLs have the volume to negotiate better deals with the carriers as well as the resources to help coordinate your shipments. In addition, determining when to use LTL can be tricky: The general rule of thumb is that if it has to go on a pallet — and you take up less than 25% of the truck — LTL is the way to go. If, however, you find yourself shipping pallets with less than 30 cartons, be aware that parcel hundredweight may prove a much better, less costly alternative. Similarly, if you exceed 10 pallets or 12,000 lbs. you should consider truckload as an alternative mode. Keeping a close eye on shipping trends is also a must, as consolidating LTL shipments into a multi-stop TL may be feasible and considerably more cost effective.

Once you have identified the portion of your shipping volume that can be allocated to LTL, and that the volume is meaningful, the next step is to secure competitive rates. The carriers use highly complex pricing structures, or tariffs, that take into account weight, distance, and the type of freight that you’re moving. The base price for each shipment is established on each of these variables, then a discount is applied. To obtain a competitive discount, you’ll need to show the carriers why your freight is attractive to them (volume, pick up locations, type of freight, etc.) and you’ll need to know what negotiation leverage you have, as discounts vary widely from customer to customer. This makes analyzing carrier bids a daunting challenge, as each carrier prefers to use their own tariff. You have the option to ask the carriers to bid on a standardized tariff, such as SMC³’s CzarLite Tariff, but you will have to give a few inches on price for that convenience. To achieve maximum results, tailored analytical software and deep domain expertise is required.

Finally, you must consider how LTL fits into your overall business objectives and capabilities. Despite the obvious benefits of not having to “rent” a full truck, some inherent drawbacks with LTL can still cause you headaches. You are sharing the truck with others, therefore your shipment will get transferred at terminals,  increasing the risk of damaged pallets, delays in transit, and difficulty pinpointing exact delivery times. To minimize damages, pay careful attention to packaging and how you stack your pallets. To minimize delays, clearly mark not only the Bill-of-Lading, but also the pallets with instructions. For example, we’ve been working with a customer who has time sensitive shipments — delivery has to occur on a specific day of the week between 8am and noon. Delivering a load a day early or a day late has equal negative financial consequences to that customer. Most shippersfear such a project because of the lack of control over the actual delivery timeframe, but it can be done with the proper resources and communication. By working closely with the customer and the carriers, on time delivery is at over 95%.

With the right procurement strategy and the resources to manage your shipments, LTL is a great option that should be part of your overall transportation procurement strategy. If you’re looking for advice on how to structure your program, we’re always here to help.

Raymond Nieuwenhuizen

With input from Todd Benge, Managing Partner of BirdDog’s Professional Services Team, and Elizabeth Hamm, Dispatch and LTL Specialist.