COVER STORY – All Wrapped Up

Posted on May 1, 2012 :: Cover Story
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Posted by , Insight on Business Staff Writer

Walking through a WOW Logistics warehouse stacked high with hundreds of wooden crates of cheese is somewhat dizzying – rather reminiscent of the iconic ending of a famous Steven Spielberg film.

“It’s like Raiders of the Lost Ark of cheese,” says Howard Kamerer, the new president and CEO of WOW, indicating the endless crates containing 640-pound blocks of cheddar at the company’s warehouse in Little Chute. “As far as you can see, there’s cheese. I had no idea America ate so much cheese. And it continues to grow.”

The company now has 23 buildings and more than 7 million square feet of warehousing space, including 21 facilities in Wisconsin (Green Bay, Little Chute, Appleton, Menasha and Oshkosh) and one each in Illinois and Idaho. If you’ve ever driven past a WOW warehouse and wondered what’s in there, it could be just about anything: big rolls of paper, sometimes 6,200 pounds a roll. Food ingredients, sugar and beverages. Machinery. Wood products. Plastics and retail merchandise.

And there is cheese. The company handles 500 million pounds of cheese annually. That’s 250,000 tons, more than the total gross tonnage of the largest cruise ship in the world, Royal Caribbean’s 225,000-ton Allure of the Seas.

But the cheese is just one of the cool things about WOW – growing with its clients is another. That’s how the company got started in 1977, when Harold Schiferl, Don Utschig and two minority partners built the first warehouse in Wisconsin Rapids – a 108,000-square-foot warehouse to accommodate the paper industry’s need for storage. Back then the company was known as Warehousing of Wisconsin. But in 2000, company leaders shortened the name to the punchier acronym, WOW Logistics, which made more sense when they expanded into Idaho in 2002 and into Illinois in 2006.

“The first facility was a dream come true for me, and it just kept growing,” Schiferl says. The paper industry in the 70s and 80s was quite strong, he says, and whenever WOW’s paper company clients would do an expansion, so would WOW.

“If they expanded to a different location, they asked us if we would be interested in going to another location,” Schiferl says. “That’s like what happened with the dairy industry – we expanded into cheese storage, and that’s what got us into Idaho.”

What else WOW does

It’s not just a lot of big warehouses. WOW offers four primary services that have blossomed out of what customers need: The commercial public storage, of course – and from that, build-to-suit warehousing (yes, if they don’t already have what you want, they will build a warehouse for you). It also is a transportation brokerage, working with about 50 local, family-owned trucking companies that typically have fleets of five to 15 semitrailers. And WOW has a financing program that’s currently focused on the dairy industry – “cheese financing,” they call it.

How does it work?

Say a cheese producer is making a hard cheese like a Parmesan or a Romano, or a super-aged cheddar. Some of those cheeses need to sit for months or years. WOW has some 13-year-old cheese in its facilities. (“I have some in my fridge,” jokes Jamie Wally, WOW’s vice president of sales and marketing.)

“Think about the money that it takes to tie that inventory up,” Kamerer says.

“So the service that we provide is we actually buy that cheese from that particular producer or brokerage facility, and they get the money for the cheese up front. We actually own the cheese, but then they do all the services with it and they agree to buy the cheese back from us.”

“In the past you would spend millions of dollars while holding that cheese on your own books,” says Wally. “And when the real business is producing or processing cheese, that’s tying up millions of dollars, so they move that out and they focus on their core business. We take care of all that for them. We build a nice matrix for them so they know their total cost per pound at the end.”

Meantime, if a cheese producer goes under while WOW owns its cheese, WOW can just sell the product – it’s one of those things that go up in value.

The company recently expanded the program with dry milk powder (financing 22 million pounds of it) and may eventually expand into other products as well, Kamerer says.

“If it’s a stable product and it’s something that ties up capital, then it’s something that we’re interested in exploring,” he says.

Because the warehouse is dealing with food – and Wisconsin cheese in particular – it has a multitude of safety processes and procedures that it must follow when the cheese arrives, while it’s there and when it leaves.

“One of the key differentiators is our leadership in food-grade safety,” Kamerer says. “We are the industry leader in both cooled refrigerated storage as well as what you could consider to be ambient – or what some industry insiders call ‘dry space.’ The market in general has changed quite a bit and the level of expectation from the government and from a USDA perspective for food safety standards has increased exponentially in the last 10 years.”

In addition to following its own self-imposed standards, the company goes through “a pretty extensive third-party audit once a year,” says Greg Solcz, distribution center manager for the Little Chute facility, which has 160,000 square feet of refrigerated space. “It’s very, very thorough. We have a lot of housekeeping things we have to do on a daily basis and monthly basis. It’s got to be done to keep the product safe for everybody.”

“Pest control is huge, especially with the summer months coming up. The building always has to be shut down. We can’t leave doors open because we don’t want bugs in here, we don’t want birds in here. We don’t have those things because we’re really strict with our food safety – we take it very seriously as a company.”

“The cheese requires specific temperature controls to facilitate the aging process. The long-hold cheese that we store in our facilities is constantly changing its flavor profile and as a result, the state technically considers cheese storage a manufacturing process,” Wally says.

The Wisconsin Cheese Makers Association chose WOW to help with its World Championship Cheese Contest in Madison this spring in part because it specializes in cheese and understands those necessary aspects such as humidity and temperature, says John Umhoefer, executive director of the association.

The Little Chute facility handled 60,000 pounds of cheese from 24 countries, volunteering its staff and about 20,000 square feet of warehouse space for the arrival and sorting of cheese from all those countries, says Umhoefer. “It’s all a gift they give back to the cheese industry.” The relationship with WOW goes back to 2002 when the contest grew to a capacity where it needed some assistance.

“Frankly, we needed a major warehouse,” Umhoefer says. “We partnered with WOW because we needed professional service and a controlled environment for these cheeses. They know what they’re doing.”

Pat Lovesee, supply chain manager for Great Northern Corporation, says WOW has been a longtime supplier for the company in its Chippewa Falls and Fox Cities markets. “They’ve done a great job supporting our endeavors in both of those locations with warehousing services,” Lovesee says. “We recently started doing business with the Schofield facility in support of a major company in the Wausau area and have gotten the same high level of support and service that we’ve come to expect in other locations. It’s just a well-oiled machine when it comes to warehousing and third-party logistics (3PL).”

Lovesee was impressed that the company developed an electronic data interface (EDI) that allowed GNC to meet the requirements of specific customers, critical to keeping those clients.

“They’re not afraid to develop a customized solution that is specific to your needs,” Lovesee says. “They’re not trying to fit you into a model that may work for another industry or another customer.”

That’s clear when you learn that WOW will build you a warehouse if they don’t already have one that fits your needs, helping with design, consulting, construction and financing. The company also will customize billing dependent on what a client wants to store and how – perhaps charging by square foot, by pallet or by hundredweight.

“Industries vary in how they measure and operate so we work with them to provide the storage and handling costs using their own terminology and best methods per the industry they represent or product they are storing,” says Chad Collett, vice president of marketing.

That customization applies to keeping track of inventory through those customized EDI systems like the one WOW developed for GNC. So even though it seems like a crate could become the Lost Ark in the vastness of a WOW warehouse, the company has meticulous electronic systems to keep track of specific items. Bar codes hanging from the impossibly high ceilings label the specific area and can be scanned right from the floor.

“All the processes are pushed toward technology in these distribution centers, and that’s really to streamline, create efficiency, eliminate paper, eliminate error, eliminate potential human error, really, and to help the operations run more effectively and efficiently for ultimately our customers’ benefits,” Wally says.

WOW Logistics forecasts a 15 percent growth rate in the second quarter of 2012 over the second quarter of 2011. In the past 10 years, WOW revenue growth has doubled, Collett said. During the past 20 years it has increased nearly 700 percent. Multi-tenant public warehousing facilities space use was 70 percent at the start of 2011 and is now more than 85 percent. In March, WOW officials said they had about 150 employees, give or take. In April the company employed 168.

During the economic downturn of 2008, warehousing as a whole was negatively impacted by the recession, Kamerer said. But WOW weathered the turmoil, dipping about 10 percent in revenue but holding profitability steady. The cost of cheese wasn’t really impacted by the economy, so WOW’s refrigeration storage – its most profitable portion of the business – wasn’t hit too hard.

“Because of our customer mix, and our reliance on food storage, we had a little bit of a buffer between the downturn of the economy and our opportunities,” Kamerer said. “I think the company did a very good job of being very fiscally conservative and being prudent in its management as far as its finances were concerned, so WOW Logistics did very well during the recession because of those two factors.”

New directions

WOW, which is owned by Schiferl, Utschig and Tom Oswald, was run by its partners or family members of partners until 2011, when Matt Oswald relocated to the East Coast to be closer to his wife’s family. He is continuing on the board of directors. After a nationwide search, WOW chose 44-year-old Howard Kamerer to take over as president and CEO last July. Kamerer had led three other companies previously: Redeye Networks, which he founded and eventually sold to Allied Telesis of Bothell, Wash., where he became COO and president; and Startec Global Communications of Rockville, Maryland. He also ran his own consulting company for four years.

“We were looking for someone that had strong business background and was familiar with mergers and acquisitions and in dealing with the financial world,” Harold Schiferl said. “And our new president Howard had the very qualities that we were looking for.”

The company seems all about adapting to change, and a lot of the WOW employees have been doing it for a long time. The nine executive staff members have an average nine-year tenure, and the distribution center managers like Stolz have an average 11 years.

“It makes it easier for them to understand our customers because they’ve been doing it longer,” Kamerer says. “They understand our processes, our policies and procedures better, and they understand the industry very well, so when we want to do something different, it’s easier for them to respond.”

Kamerer’s leadership has mainly been in the high-tech field. So he’ll be the first to tell you that his expertise is not in logistics, but in managing companies – and he prefers to turn the spotlight the other executive staff at WOW. When he does talk about himself it’s in the context of his management style, which aims to let the executive staff use its experience and expertise to the utmost.

Kamerer says there are two kinds of managers: One who operates on a “consolidated model,” making decisions for the company based on the information his or her employees bring them, or those who work on a “distribution model,” setting goals and directions for the company and allowing the executive staff to use their expertise to make decisions.

“If you allow those people at the edge – I’m talking about the executive staff – rather than the CEO making every decision and micromanaging, the organization scales better,” he said. “The organization is faster and more efficient by giving autonomy to those people at the edge. In order to create a great company, you really have to unleash a company’s collective talent and passion. It’s not about me – it’s about them unleashing that talent and passion.”

“People have to feel self-worth, they have to feel empowered, and you can’t achieve that in a consolidated model,” Kamerer said. “I never met anyone who said, ‘I feel valued, empowered and respected when you make every decision on my behalf.’”

Jamie Wally said Kamerer views his executive staff as experts in their given departments and relies on them in most situations to make the right decisions.

“It really opens people’s creativity and gets our team more involved with the decision – you take more ownership and then you have more accountability and responsibility,” Wally said. “It’s just a very effective model.”

“I’ve seen people kind of come into their own in a short period of time,” Kamerer says. “I’ve seen people taking on more, wanting to take on more, willing to take on more, and being accountable for it. And I’ve seen already a 12 percent growth rate in this quarter alone. Some of it has to do with the economy picking up, but it’s not all about the economy picking up. It’s about our folks picking up – and building confidence, and having goals they want to achieve, and being given accountability to do it.”

Kamerer and his wife, Laura, were looking for a like-minded community and a situation in which he could spend more time at home (rather than living out of apartments in places as far as Italy or Japan), he says. But he also wanted a position in which he could lead and help others to become stronger leaders.

“Now you know why this Silicon Valley kid came to Wisconsin,” Kamerer says. “That’s the stuff that drives me, is watching that executive staff grow – when those light bulbs come on, and they get to believing in themselves as a group, that’s what juices me. This gives me the opportunity to do that. And I still get to see my kids.”