Transportation is about much more than ships, trucks, trains and airplanes.

Just ask Claude Germain.

The chief operating officer for Mississauga-based logistics firm Schenker of Canada Ltd. (who heads the Canadian operation of DB Schenker) generates annual revenue of $1 billion, sees the movement of goods from a very different perspective than most people.

As business becomes more global and competitive, he says, supply-chain management has come out of the shadows and into the spotlight.

Brennan O'Connor, Business Edge
Claude Germain left his job as a nuclear engineer in in the petroleum industry to focus on an entrepreneurial path before joining Schenker.

And in Germain's view, the logistics sector is about to get a whole lot bigger.

"The game, in my opinion, has just begun," says Germain, whose firm is celebrating its 50th anniversary this year. "The logistics industry has been around for a long time, but it's going to continue to become more strategic. Just wait and see. The good times will continue."

1. What did your parents do?

"My dad is an entrepreneur in the construction industry and my mom was an interior decorator. They're both living in Montreal. They're semi-retired, so they still retain interests in many different businesses."

2. What was your boyhood dream?

"As silly as it sounds, to have my own company - to do like my father did and to get into something that was industrial-related, where I had a great deal of control over what I did. Secondarily, I'd say politics. I have a great deal of fascination and interest and passion for (federal Conservative) politics. Whether or not I capture that passion later in life remains to be seen."

3. Who were your early mentors?

"Without a doubt, on the business side, my father. It seems like, whatever situation you're in, there will be a chance for people to mentor you ... the most influential figure tends to be an over-arching person that instills values and integrity in what you do. Throughout all these adventures, I had my parents."

4. How did you get into nuclear physics?

"Oddly enough, I was interested in civil engineering, which is what my father's in. However, I have a great deal of interest in physics. In my first year of engineering, what was available to me in the physics curriculum was far more interesting than civil engineering. It seemed like civil engineering had been combed over a million ways to Sunday. The research at that time was really on the finer aspects of asphalt, whereas in physics it seemed like anything was possible. There were so many unanswered questions. I love math, and there's a tremendous amount of math involved in physics. Math, I find, is the purest language. Physics is considered to be the most challenging engineering degree at our university. I also played varsity rugby at Queen's. We won three (Ontario Universities Athletic Association) titles in the four years I was there."

Claude Germain

5. How did you go from studying engineering to serving as a nuclear engineer in the petroleum industry to getting an MBA?

"I spent three years as an engineer in the remotest corners of Africa. There was a tipping point - and I remember the night explicitly when the tipping point occurred. You say to yourself, 'This is an unbelievable life.' You're getting paid crazy amounts of money to go to the most exotic locations in the world, and you're putting yourself in fairly dangerous situations to do this work. There's a complete appeal to that. If I didn't make a move at that age (23), I was thinking to myself that I would become a global traveller in the oil industry. The other side of the tipping point would be to say, 'Hey, I'm going to follow through on my childhood dream of being an entrepreneur and running my own business.' I decided to apply (to get an MBA). I only applied to Harvard."

6. What business cases did you study at Harvard?

"Everything you do at Harvard has got a case study to it. The case studies would range from organizational development to strategy to operations to finance to accounting. The industries we covered were as wide as you could imagine, from the forestry industry, like Weyerhauser, through to startups like Staples Business Depot through to finance on Disney. It's also international. You'd cover businesses in Russia, India and even communist countries at that time."

7. How was Cube Route formed?

"When I joined the logistics firm (Dallas-based Pallet Exchange Pool, more commonly known as PEP) after Boston Consulting, it was largely a turnaround. The business wasn't performing that well and the opportunity was there to reshape the business. In a way, you'd like to make mistakes with other people's money first. That was the logic there. It was 1995 and I was 27 or 28 years old. It was a $100-million business. So it was really a good size to cut your teeth on how to run a business. We made a ton of mistakes, but at the end it finished quite well and we sold it off. Then, in '99, with a couple of other buddies, we co-founded a company called Grocery Gateway, which was a combination of an online-delivery company for groceries as well as a third-party consumer-direct fulfilment shop. There was a fellow called Bill Dinardo who had started it from his garage and really done just an amazing job of getting the concept up and running. There were five or six employees, but he really needed to take it up to the next level. So a couple of us hopped on and raised the capital with him. We raised $110 million, actually. We would do direct-to-home deliveries for other companies as well, to leverage our logistics capabilities. The grocery business never made money and, ultimately, although a consumer success and an operational success, was a financial failure. The logistics piece of our business was a financial success and an operational success. We sold both separately. I took the technology that came out of Grocery Gateway, added a few things to it and turned it into a web service (Cube Route). We raised some money for that, and eventually it was sold to Descartes Systems Group."

8. How did you end up going to Schenker?

"When the opportunity at Schenker came about (through a phone call from a corporate recruiter), I jumped at it.

"I knew the industry pretty well, so I knew what I was getting myself into. In the world of logistics and supply chain (management), Schenker is like the BMW of the industry. It's quite entrepreneurial. You get a great deal of latitude ... and you get the benefit of being global."

9. What makes the industry so fascinating?

"Never before has the value of the supply chain been so important to so many companies. As people now are low-cost country sourcing, they really need to make sure that their supply chain is working effectively. Often, they don't have the skill or the purchasing power to make that happen by themselves, so they'll seek out people like us. All of a sudden, our industry is being thrust into the limelight. Stuff that was being done behind the scenes for so long is now becoming much more important to so many companies. Which makes it even more interesting. The second reason is, you're never just dealing with one thing. We deal with every conceivable industry - from aerospace to automotive to consumer packaged goods to agriculture. Every industry has to move stuff. There's never a dull moment."

10. What do you see as the major challenges facing the industry?

"One is the hunt for talent. Our clients are also becoming much more sophisticated - for obvious reasons. The stuff is more important to them, so they are requiring us to be more sophisticated in turn. It used to be that our industry was categorized much like a travel agent moving freight from point A to point B.

Now, we're much more like a tour operator, being responsible for putting together all of the various activities in a package and, in some cases actually, taking a principal position in the outcome of that experience."

11. Many people may see logistics and transportation as being the same thing. How do you define logistics?

"Logistics is more than transportation because transportation implies the movement of physical goods. The movement of information, or managing of information, is as important as the movement of physical goods. Also, the breadth of services we offer is far more than transportation. We get involved in everything transportation and all of its various modes as you can imagine - ocean, air, rail, ground. Logistics also includes customs clearance, warehousing, light-industrial work like kitting, labelling, returns processing, co-packing, getting clearance insurance, consolidation services (and) global sports events. Transportation is a significant part of it, but it's much more than transportation."

12. What is the range of technologies you use?

"Our industry is migrating very quickly to web services, so that you can have ubiquitous access to information - whether you're in Vietnam or whether you're in Paris. The range of technology is very broad.

"It includes everything from warehouse-management systems to transportation-management systems, visibility applications (and) financial systems. We're a huge consumer of data. You'll find that we've got very sophisticated networks and server farms and data-storage solutions. Our industry really has two assets - people and technology. We have to take both very seriously."

13. How does RFID (radio frequency identification) figure into your business?

"You can think of RFID kind of like the barcode. The same way the barcode helped rip out costs in the supply chain, RFID will eventually do the same, because it's like a barcode that can store information. Whereas with a barcode, you can just read it and it gives you information for that (stock-keeping unit), RFID can give you a lot more information. For sure it's going to have improvement in certain industries - particularly retail fulfilment."

14. Considering everything that's involved with logistics, do you lose sleep at night thinking about security?

"Security and environmental concerns are aspects to consider today, much more than they used to be. (They) will fundamentally alter the way we execute our business day to day. There's just an added dimension of things that you consider when you're actually out there bidding and/or executing your work. Security manifests itself in those kinds of ways, (but) I wouldn't say it keeps us up at night. The single most important factor is to make sure that you're competitive in the marketplace. Cost still is the No. 1 driver for people's decision-making."

15. Is your company now looking at the evolution of the carbon offset market and participating in that market?

"Not at all. It's quite far removed from our strategic and tactical decision-making right now."

16. Do you see yourselves as eventually having to get involved with that market, or is that more from your clients' point of view?

"It's more from our clients' point of view. It's an interesting question actually. I have as much knowledge as I've picked up in the odd newspaper article. That's about it. I'm pretty sure no one within our company actually talks about it. No one within our industry. Will it ever hit our industry? At this point, I can't comment. But I can tell you, when new things hit our industry, typically, everyone falls in line pretty quickly."

17. What's your view on secure identification systems that would allow goods to pass through borders more quickly?

"The broader question is what can we do with government regulations within Canada in order to position ourselves to capture more value in the supply chain. The first step about the supply chain is that it's global, and being global is not necessarily something Canada does particularly well.

"We are taking small-to-modest steps - even though they seem big to us - to position Canada as a leader in global logistics. I like what's going on with the corridor initiatives, both in the Pacific Gateway and in the St. Lawrence Seaway. There's a lot of gateway strategy there as it relates to streamlining the flow of goods. Prince Rupert is coming online. We're a country that talks a lot about what it's going to do, as opposed to just going ahead and doing it. We don't think big enough."

18. What do you see as the growth areas for your company and the industry as a whole?

"We are very much, especially in Canada, on an organic growth mode. You're seeing consolidations in the industry right now. In fact, we just finished an integration. Our parent company bought Bax Global, which we merged into Schenker. You're going to see a lot of consolidations, really, for three reasons. One is purchasing power. The bigger you are, the more effectively you can purchase. Let's not forget that part of our value proposition is the arbitrage (or price differential) rates. We can buy better than you can. We can buy more freight than you do. So you want to do business with us. Two is breadth of services. You want to offer as many tools in the toolbox as you can. Three is talent. That's why you're seeing a lot of these consolidations happen."

19. Considering your personal experience in Africa, what do you think about the situation in Darfur?

"That speaks to a broader question of corporate responsibility. There are companies who lack, to some extent, the integrity that especially their shareholders should hold them accountable to, especially when it comes to extracting profits from areas like that. There's something to be said about shareholder activism to prevent companies from actually profiting from situations like that. I was quite glad to see that some Canadian companies were forced out, in order not to continue to fund these kinds of issues. Another thing is, it creates destabilization as it relates to global trade patterns ... There's a huge premium to pay for doing business in some of these countries."

20. If you weren't running Schenker's operations anymore, what would you be doing?

"I couldn't think of what I'd rather be doing right now. There will come a time when it's time to move on, but right now this is a great industry - and this is a great firm. (A possible political career) will be in another 10-15 years."

Claude Germain

* Title: Chief operating officer, Schenker of Canada.
* Born/raised/age: Montreal/Montreal/41.
* Education: Germain holds an MBA from Harvard Business School and a bachelor of engineering in
nuclear physics from Queen’s University.
* Family: Married to Dr. Karen Thompson. They have two children, Logan, 9, and Ryder, 6.
* Career: Germain joined Schenker in 2005 after serving as CEO and founder of Cube Route, a logistics firm that was sold to Descartes Systems Group. Germain also co-founded online grocery distributor Grocery Gateway Inc., which was split into two companies, one of which became Cube Route Inc. In 2002, Grocery Gateway garnered the Top Logistics Company in Canada Award. He has also served as president of Dallas-based Pallet Exchange Pool, a third-party logistics firm, and as a management consultant, specializing in distribution, for the Boston Consulting Group. Before obtaining his MBA, he served as a nuclear engineer, analysing oil and gas reservoirs with international petroleum giant Schlumberger, and worked in several African countries.
* Moonlighting: Germain sits on the boards of the Supply Chain and
Logistics Association of Canada, Young President’s Association and
Council of Supply Chain Management Professionals.
* Passions: Rugby, windsurfing, canoe camping.

(Monte Stewart can be reached at monte@businessedge.ca)