September 2006 Kenco’s Crossroads A post “mom-and-pop” logistics operation decides to go it alone By Allison Gorman
Jim Kennedy III
Last year, Jim Kennedy III found
his family-owned logistics business
at a crossroads: The middle tier of third-party logistics providers it had for years successfully occupied, somewhere between “mom-and-pop” warehouses and industry giants like UPS, was shrinking—and staying the course wasn’t an option.
Kenco Group itself had grown through the years from mom-and-pop roots: Two Chattanooga warehouses purchased in 1950 proved an opportune investment in an embryonic industry now constituting over 10% of the U.S. gross domestic product. “We just happened to be entrepreneurs who tried to reinvent ourselves to meet the market’s needs,” Kennedy says.
That reinvention mirrored the evolution of logistics, as warehousing became inventory and transportation management. By the 1960s, Kenco led trends like contract warehousing and multi-city operations, winning bids with major manufacturers. It built properties in 20 states, developed proprietary warehouse management software, and offered value-added services like packaging and light manufacturing. Outstripping its regional status, Kenco became a $250 million company operating throughout the United States and Canada.
Meanwhile, the industry went global.
“Logistics is extremely asset-intensive,” explains Ted Stank, professor of logistics at UT-Knoxville. “To be a full-service provider, you’ve got to have the capital available to invest in buildings all over your market area, and increasingly, your market area has to be the world.”
Now Kenco competes against both small warehouses and the global giants that are hungrily acquiring them. Kennedy has fielded near-constant buyout offers and watched friendly competitor Ozburn-Hessey, a Brentwood company that had long paralleled Kenco’s trajectory, accept the advances of a New York investment firm.
Kennedy knew he had to make a decision.
“I told my guys, ‘We have two ways to go. We’re a family company. We can sell it, or we can stay with it. I’m just crazy enough to think we can do something most people can’t: We can grow this business, and we can be a player.”
After a year of planning and with new talent on board, Kenco is determined to double sales within five years, less through acquisition than organic growth—increasing efficiency and reaching further into the supply chain for existing customers. And with fledgling partnerships in Europe and Asia, and newly incorporated in Hong Kong, Kenco now boasts global capability.
It’s a bold strategy, Stank says, and perhaps the only viable course for a logistics company determined to hold an eroding middle ground.
Kennedy says he’s willing to take the chance. “There’s something about being in a family business that you can’t put a price on,” he says. “We’re going to grow it or blow it, one of the two.”
feedback: gorman@businesstn.com
Email to a Friend
Print-Friendly Format