Kenan Advantage Grouprsquos Specialty Products Group wasted no time in beginning the process of absorbing the Enterprise Transport chemical hauling operations that were acquired at the end of January This photo was shot at the former Enterprise terminal and wash rack in Freeport TX The acquisition brought the Specialty Products Group 21 terminals 13 of them with maintenance shops and wash racks

Kenan Advantage Group’s Specialty Products Group wasted no time in beginning the process of absorbing the Enterprise Transport chemical hauling operations that were acquired at the end of January. This photo was shot at the former Enterprise terminal and wash rack in Freeport TX. The acquisition brought the Specialty Products Group 21 terminals, 13 of them with maintenance shops and wash racks.

Key acquisition strengthens KAG Specialty Products Group

Almost overnight, Kenan Advantage Group (KAG) became a top-three chemical hauler. In addition, the company extended its position as a $1-billion-plus trucking company.

A key factor in both developments was the acquisition of Enterprise Transportation Co's chemical hauling operation. Along with significant fleet assets, the deal that closed January 31 included 21 terminal locations (13 with maintenance and tank cleaning facilities).

The Enterprise chemical fleet and terminal infrastructure are being incorporated into Transport Service Co, which is part of KAG's Specialty Products Group. Senior managers of the Specialty Products Group recently sat down with Bulk Transporter for an exclusive interview to discuss what this acquisition means for KAG and its customers.

“We believe we can now offer a more diversified range of transport services than any other major chemical carrier,” says Robert A Schurer, executive vice-president of the Specialty Products Group. “We provide common carriage, dedicated carriage, and dedicated contract carriage for chemical shipments. We also offer foodgrade capabilities, and we recently launched a range of logistics services.

“Among other benefits, the Enterprise chemical fleet acquisition gave us a stronger presence in the marketplace, especially in the northeastern and southeastern United States. We've doubled the size of our chemical operations, and we gained access to new customers and new product lines.

“We believe it is important to point out that we brought over all of the company drivers, owner-operators, dispatchers, terminal managers and support staff, mechanics, and wash rack personnel with this acquisition. We also kept key managers, including John Boncosky, Tim Hatfield, Jim Thompson, Audie Culley, and Ray Pope. These people are critical to our effort to provide customers with best-in-class services.”

Moving fast

The Specialty Products Group wasted no time in reaching out to Enterprise Transportation's chemical shipper customers. “We scheduled customer visits as soon as the deal closed, and we got an enthusiastic response,” says John Miskimen, vice-president of operations for Transport Service Company's chemical division. “When we walked in, they very much wanted to hear about the broader range of services in our portfolio. In addition, many chemical companies realize that trucking capacity will continue to shrink, and they want to build strong partnerships with carriers that have a solid market presence.”

KAG's Specialty Products Group does indeed offer broad capabilities for chemical and foodgrade hauling. On a larger scale, the group is part of an even more diversified organization.

Four distinct operating groups make up the KAG organization — Fuels Delivery, Specialty Products, Merchant Gas, and KAG Logistics. Based in Canton, Ohio, the company achieved revenues of $1.1 billion in 2012 and is on track to reach $1.5 billion this year.

“It's no accident that this company has become North America's largest bulk transporter and logistics provider to petroleum, specialty products, and merchant gas industries,” Schurer says. “We offer a very complete transportation solution to our customers. Much of the credit goes to Dennis (Nash, KAG chief executive officer) and the KAG executive management team who had the vision to diversify from primarily petroleum into other major tank hauling specialties.

Petroleum hauling was the primary business when the company that became KAG was formed in 1991. Today, the Fuels Delivery Group hauls 25 billion gallons of refined fuels annually and has become North America's largest, most geographically diverse, and only nationwide transporter of fuels.

While fuels are the primary focus, the group has added oilfield operations. Products handled include crude oil, condensate, process water, and drilling mud.

Operating from 125 fixed-base terminals and more than 175 satellite locations, the fleet can serve customers in all 48 Continental US states, Canada, and Mexico. The group employs 3,964 drivers and operates 3,096 tractors and 3,353 trailers.

Formed in 2011, the Merchant Gas Group includes Cryogenic Transportation Inc and Jack B Kelley Inc. The operation runs the largest for-hire cryogenic trailer fleet in the industry and handles nitrogen, oxygen, argon, helium, CO2, liquefied natural gas, liquid ethylene, and various industrial gases. The two fleets have 405 tractors and 403 trailers.

Chemical focus

While chemicals were a part of the KAG operation almost from the outset, the Specialty Products Group really started when Transport Service Co was acquired in 2008. DistTech Inc was added in 2010. With the addition of the Enterprise chemical fleet, the Specialty Products Group now accounts for about a third of the overall KAG operation.

“Most importantly, this group offers a great portfolio of complementary services,” Miskimen says. “It's no accident that KAG acquired these carriers. All of them offer best-of-class services.

“Through TSC we offer pure chemical and foodgrade transport capability. Foodgrade accounts for about 20% of the TSC activity. The focus at DistTech is on dedicated contract carriage.”

John Rakoczy, DistTech president and chief operating officer, adds that DistTech developed a dedicated contract carriage model that clearly sets the company apart from competitors. “We are a valuable partner to chemical manufacturers that require specialized transport equipment and unique delivery specifications.”

DistTech forms close partnerships with its customers and provides guaranteed capacity and reliable, accurate, and secure deliveries of inbound raw materials and outbound product shipments at a fixed cost. Customers are assured of having the right resources in the right place at the right time. DistTech customizes and consistently measures those key performance indicators (KPIs) that are critical to each customer's business, and the carrier provides real-time data about every facet of the transport activity enabling customers to identify expenditures and areas of opportunity.

DistTech hauls concrete admixtures, molded products, automotive products, castings, water treatment chemicals, and various industrial products. Transport Service handles liquid and dry bulk chemicals, sweeteners, glycerin, juices, molasses, vegetable oil, and beverage alcohols.

Finding synergies

Including the Enterprise assets, the Specialty Products Group now operates 1,817 tractors (including owner-operator units), 3,225 chemical trailers, and 440 foodgrade trailers. Operations are conducted out of 89 terminal locations.

“With the Enterprise acquisition, we got some overlap in products and depot locations, but it was very small,” Schurer says. “The Specialty Products Group is building the same sort of national network that KAG assembled in the fuels sector, and the Enterprise assets are a critical part of that.

“We have no immediate plans to eliminate any of the Enterprise locations, and we have no preconceived plan for combining any of the operations. We're looking for synergies and best-in-class practices across the entire Specialty Products Group. We're going to keep what works, and we definitely are not going to change anything that customers specifically want.”

Miskimen adds that the former Enterprise fleet assets will continue to be dispatched from Houston. Dispatch control for the rest of the Specialty Products Group resides with main office in Canton. Former Enterprise facilities and operations will be moved to the TMW fleet management system that is in place across the rest of the KAG system, but it probably will be a gradual process to minimize disruption of operations.

Schurer stressed the importance of building and maintaining a best-in-class organization. Best-in-class factors include a passionate commitment to safety and security, a modern and well-maintained fleet, geographically diverse operations and substantial resources, extensive liability insurance coverage, industry-leading technology and full logistics capabilities, strong financial backing, an experienced management team, and outstanding drivers.

Logistics capabilities got a boost in 2012 when the KAG Logistics Group began developing specific transportation management and technology solutions for the Specialty Products Group. KAG Logistics was launched in 2005 with a specific on KAG's fuel and ethanol transport and management operations.

“Our objective is to help the Specialty Products Group develop value-added services,” says Kevin Spencer, KAG Logistics executive vice-president. “We help solve transport and logistics challenges for existing Specialty Products Group customers. We support customer campaigns on a load-by-load or project-by-project basis. We can draw from a large carrier base to create additional transport capacity.”

KAG Logistics manages customer operations from its logistics control center in Canton. The logistics team provides inventory management and demand forecasting; supply chain visibility; order management and sourcing optimization; transportation management; shipment planning, tracking, and verification; consolidated freight bill audit and payment; carrier management and procurement; and performance reporting.

Transloading has become an important part of the KAG Logistics portfolio. Six US locations are operating, and all of them are unit-train capable.

“Our transload facilities can handle liquid and dry cargoes,” Spencer says. “Going forward, we believe we may be able to expand our intermodal activities to include ISO tank containers. We already do a little bit with tank containers, and we believe that is an underserved sector. We see opportunities in storage, handling, and regional distribution of tank containers.”

The expanded logistics management capability gives the Specialty Products Group a greater opportunity to leverage the entire KAG organization when developing products and services for its customers. This is a key competitive advantage, according to Schurer.

“With our chemical, petroleum, industrial gases, and technical infrastructure assets, we can provide comprehensive transportation and logistics solutions to our customers,” Schurer says. “We're going to continue growing internally and through acquisition of best-in-class chemical and foodgrade carriers.” n

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