Contract logistics pays off for Gebrüder Weiss in US

Three years ago, Gebrüder Weiss bet on contract logistics service offerings to small and mid-sized consumer products importers as its way forward in the U.S. market, and that calculated move is now paying off.

The family-owned Austrian company, with 500 years of freight transportation experience on the European continent and overseas, prefers to pick logistics niches where it can stand out. Since 2003, Gebrüder Weiss had operated in the U.S. through a 50/50 joint venture, and in 2017 set up its own operations in the country.

“We realized if we just based our business model on ocean and air freight rates, which are largely commoditized, our margins would suffer,” Mark McCullough, CEO of Gebrüder Weiss USA, told American Shipper in a telephone interview on Wednesday, April 22, from his home office in Chicago.

McCullough, who has 25 years of industry experience, said most shippers today have access to indices and benchmarks to make informative transportation decisions. “We realized that our focus should be on adding value to the supply chain, namely end-to-end solutions to importers,” he said.

The company’s American management also believed customer service should not be commoditized. “We do things differently than your big box forwarders,” McCullough said. “We don’t run an assembly line of people – one person controls the customer’s shipment from A to Z.”

Based in Chicago, Gebrüder Weiss USA grew its contract logistics services by leasing warehouse space throughout the country, including in Atlanta, Chicago and Los Angeles. These facilities allow the third-party logistics provider (3PL) to receive import containers, deconsolidate them, and inventory the goods until the importer directs their delivery to the retailer.

McCullough said Gebrüder Weiss USA’s contract logistics services on the West Coast have been particularly attractive to importers of beauty products, home goods and cookware, which are sourced throughout Asia.

On April 21, the company announced the opening of a new warehouse location in California’s Inland Empire, which will offer customers another 100,000 square feet of space in addition to its 50,000-square-foot facility in Torrance, which McCullough said is at capacity.

While the coronavirus pandemic has turned global supply chains of many shippers’ upside down, McCullough said the opening of the new Southern California warehouse in Jurupa Valley could not be timelier for its contract logistics service offerings.

The new warehouse is expected to be in full operation by the end of this week, including a starting staff of about 20 workers equipped with personal protective gear and offering “contactless delivery” of shipments to truckers. Two importers have already contracted with Gebrüder Weiss for space in the new facility.

“Many of Gebrüder Weiss’ customers are already starting to look closely at nearshoring supply chains and increasing safety stock levels of critical materials and products,” McCullough said.

Despite the COVID-19 pandemic’s supply chain impacts, McCullough does not anticipate nearshoring by shippers to mean a wholesale return of manufacturing to the U.S. or Mexico from Asia.

“While you may see some of that, we expect that more shippers will shift from just-in-time supply chains to just-in-case supply chains,” he said. “This means keeping a portion of shelf-stable products in inventory in markets to better respond when portions of the global supply chain collapse.”

He also sees more U.S. importers considering increased storage of certain products –  from two months of inventory instead of two weeks.

“We’re pushing the margins of storage again, and perhaps it will swing away from this once the coronavirus passes, but for now I believe this supply chain strategy will stay with companies for a long time,” McCullough said.

Gebrüder Weiss is maintaining its original U.S. growth strategy and is expected to add warehouse capacity in the Chicago area before the end of the year, he said.