I have worked at a third-party logistics company for the past two summers in downtown Chicago. The basic organization structure is pretty simple, essentially dividing the company in half. The way third party logistics companies work is that there are customer reps and carrier reps. The customer reps can either be vetting new leads/ small customers or they can be doing the day to day operations for large account such as Pepsi (scheduling appointments, tracking shipments, communicating with facilities, issue resolution, etc.). The carrier reps have a sole responsibility and that is to leave every night with zero loads left on the open board on our company software. Meaning that they are making sales calls to either new carrier (trucking) companies to start doing business with them or they are calling on carriers who they have been working with for a long time offering them up loads. The carrier reps are assigned 'conferences' that they work in and they try to cover freight in a specific area, such as the west coast. This is because most carrier companies like to work regionally and usually try and take consistent loads from the same cities on the same day per week; like clockwork. So the customer reps and carrier reps collaborate through our company software to simultaneously service our customers and correctly build and cover their shipments then we broker the load out to carrier companies to physically transport the shipment from point A to point B.
*Note: third party logistics means the company I work for are essentially freight salesmen or brokers and this is so because our company owns no trucks and employs no drivers, we just make deals.*
Both the customer and carrier reps on a covered load (meaning it has been sold to a carrier) make commission, but the motivations from either party may not always align. The customer reps main focus is to service the customer and hope they can get the cheapest price possible on one of their loads. However, the carrier reps main focus is to service the carrier company and usually the reps have very good relationships with these carrier companies, so they are trying to get them as much money as they can. So there is sometimes a thin line being walked where the carrier rep needs to find the perfect price that makes him and the customer rep commission, but also pays a good price to his carrier company. At the end of the day however my company would rather take a loss on 100 loads in a row for a bad price then to not cover it and service it for the customer. My companies main focus is in providing un matchable service to our customers. There are dozens of other freight brokerages in Chicago doing the exact same thing as us so it is our mission to win customers loyalty through service at any cost.
At the end of summer 2015 the fist time I was working here the company was bought out by UPS for 2 billion dollars. When I came back to work there this previous summer I was very surprised to see that almost nothing had changed about the day to day operations of an employee. UPS takes a very hands off approach and bought us as a subsidiary to help firm up their own supply chain with our software and logistic experience. Since UPS is such a large company their supply chain is very fragmented and sometimes hard to navigate, and their main goal for us is to fill their trucks 'backauls'.
Imagine a UPS facility in Chicago, they have a truck that drives down to St Louis every other day with ___X___ shipment of whatever. The truck is going to drive back to Chicago regardless if it is empty or full after dropping off X product in St Louis --> this is where we come in for UPS. We use our system to find that UPS driver another load in St Louis on the day he is delivering X product so he can drive back to Chicago headquarters (which he is going to do regardless) but also while making money doing it. If anything UPS has only strengthened our companies potential market cap by giving us name recognition and access to all their equipment.
The main transaction cost I endured while working here was definitely driving from the suburbs to downtown. It is slightly unfortunate I could not take the train as the office was in Logan Square and not downtown in the Loop. So I had to endure 1.5 hours of traffic driving to and from work everyday and in logistics we work on eastern time meaning I had to be there at 7am everyday. Although I was willing to endure because 1) they were paying me 2) you have to do what you have to do to get that resume looking good. It was super annoying to wake up that early and I was constantly tired but I'm hoping my experiences there and the traffic I had to endure will pay future dividends for my career.
Coincidentally, when I was in college I spent one summer and the following winter break working for a ship brokerage. This was in New York pretty close to ground zero. I was a teletype operator, mainly distributing incoming messages to the brokers. This was pre-Internet and pre-desktop computer. So much of the brokerage work then was done on the phone.
ReplyDeleteGiven that background I have some sense of what your company did, though I gather that because you were matching cargoes to trucks: (1) the loads were generally smaller than in shipping and (2) that brokerage activity has to happen much faster.
Mainly you described how your company went about doing the work, which is not bad, but I'd like to have seen more about what it is that you did at the company. Also, was this just a summer job or is it possibly something you might do after graduation? So you could have given more information about your own experience and perspective.
Last let me note that your commuting to and from work isn not a transaction cost in the sense of how we will discuss transaction costs in class. I hope within the next week or so you understand why that is.
Prof. Arvan,
DeleteThis was more than a summer job I had interned there for two separate summers. I will say the company culture and the people that work there are awesome but the job is slightly a grind. My perspective on my experiences here were that it definitely allowed me to get my feet wet in the corporate world working for a legitimate business (rather than just in food service or lifeguarding as my previous jobs were) which will help me in my future career.
Also I did not elaborate as well about the transaction costs- I had multiple offers from different companies for the first summer I was looking for an internship. Two of those companies located in the Loop of Chicago which would have made my commute much easier as there is a metra stop in my hometown that takes me to Union Station right across the river. What I was trying to highlight is that I chose this job that had the arduous commute but better company/ culture vs a a job with similar responsibilities and much easier commute but for a company I did not prefer as much. I am still not quite sure if that addresses the definition you were looking for but hopefully I have elaborated a little better.
Ben,
ReplyDeleteI also have had a summer internship with a logistics company so I can relate to your blog. I also wrote about my logistics internship and can relate to the experiences with customers and different carrier-freight companies. Regarding transaction costs I understand what you meant by sacrificing the easier commute and work day for a more rigorous but rewarding job that will reward you more in the long run than the short run. Although, I do agree with professor Arvan that your commute is not the definition of the transaction cost the prompt was talking about.