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STRATEGY

Speed Demon

A look at how a courier company turned to technology to gain a competitive edge.
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There are two kinds of couriers: the quick and the defunct. Baron Messenger was determined to be very, very fast

Standing in a red suit and black boots on a 70-degree December morning, Larry Schwartz gears up to deliver the next package. This is a new gig for Schwartz; as president and co-owner of Miami-based courier Baron Messenger Service Inc., he has offered to personally deliver gifts in full St. Nick garb. As it turns out, Schwartz is a reasonably convincing, if unlikely, Santa, thanks to a round face, a gray-flecked beard, and a protruding midsection. He's reasonably jovial, too, despite the fact that this whole thing is, by his own admission, a pretty cheesy gimmick. "If it fails, so what?" he shrugs. "I've wasted $150 on a Santa suit. But if it succeeds, I'm buying more Santa suits for the drivers."

It's just the sort of friendly eccentric service you might expect from a small company like Baron Messenger, and it's something that giant couriers like FEDEX and United Parcel Service could never match. On the other hand, tiny Baron Messenger is probably no match for the giants' speed and reliability, right? Wrong.

Though its annual revenues of $1.5 million are appreciably less than FEDEX's annual revenues ($8.5 billion in 1994), Baron Messenger employs an array of computer systems that provide it with most of the same high-speed dispatching, tracking, customer response, and billing capabilities its much larger competitors enjoy. But where companies like FEDEX and UPS spend hundreds of millions of dollars on the information systems that make them fast, Baron Messenger has spent less than $100,000 over the past 12 years. And the system currently running the company's critical operations cost just $15,000. In fact, the company is still using obsolete 286-based PCs in critical roles. "I work close to the bone," says Schwartz.

Despite its limited resources -- the company has just nine full-time employees -- and a lack of in-house technical know-how, Baron Messenger is using automation to move more packages faster for more customers. The company boasts a 98% on-time rate and has grown sales by 30% over the past two years, with projected sales gains of 15% for 1996. And even with the growth, it's managed to maintain a healthy 17% profit margin. Along the way, Baron Messenger has proved that small companies can turn to inexpensive technology and shrewd decision making to wipe out the seemingly huge advantage large companies have by virtue of deep pockets and armies of technicians.

When Laurie Baron launched Baron Messenger Service from her father's transmission shop in North Miami in 1981, she didn't worry too much about tracking packages or monitoring drivers because there weren't enough of either to bother. Baron and Schwartz, long-time denizens of New York City, had packed their bags and followed the sun to Miami, where they married a short time later. Fresh out of college, Schwartz took a job peddling copiers for Minolta Corp. Baron, on the other hand, wanted to start something of her own. Miami was just entering its boom years, and more and more companies were heading south. But the city didn't have major messenger services for the growing population of corporations and law firms. So, with just a pad of paper, a 1972 Chevy Impala, and a handful of customers, Baron jumped headfirst into the local delivery business.

The start-up soon scratched out a modest foothold. During his sales calls for Minolta, Schwartz would pass out Baron's business cards, and within a year Laurie and Larry had signed up more than 100 customers. Schwartz even managed to snag Minolta itself, Baron Messenger's first big corporate account. It didn't take long for Schwartz to figure out his next career move: he joined his spouse full-time and took over sales. "I could walk into just about any building and walk out with a few customers," he says. By 1983 the company had close to 300 customers and more than 20 contract drivers. The good news was that money was starting to flow in. The bad news was that the processes of dispatching drivers and keeping track of customers' orders were becoming unwieldy.

The problem: Everything was put on paper. When a customer called for a delivery, the telephone operator would frantically spin through a Rolodex searching for the customer's name and address. The order was then taken down on a delivery slip and handed to one of the dispatchers, who kept lists of all of the jobs in progress. Drivers' locations were tracked through a system of cardboard boxes. Once a driver had been assigned a job, a copy of the delivery ticket would be deposited in his or her box. After the job had been completed, the dispatcher would remove the delivery slip. Theoretically, the dispatchers could glance at the boxes and tell which drivers were free; in practice, however, the crude system sometimes led to errors.

The biggest problem was responding to customers' complaints and inquiries. When a customer called with a problem from the previous week, it could take the company hours to sift through piles of pink delivery slips to find out what had gone wrong. "We were dealing with time-critical jobs, and things were falling between the cracks," says Schwartz. "We were just pushing paper." Billing was a crude affair as well: every Friday night a half-dozen employees would spend five hours or so, huddled around a couple of pizzas, poring over the slips and writing up bills for the company's customers.

Though few small businesses had computers at the time, Baron and Schwartz decided to take the plunge. They dropped $6,000 on a 286-based IBM PC so that they could automate the billing process -- only to find that the system actually created work for them.

But having glimpsed the promise of automation, Schwartz was hooked. Information technology became an obsession, and the dollars began to fly. Schwartz went on a spending spree, shelling out $60,000 for six 286 PCs, a Novell network built around a central file server, and a maintenance contract with a friend who had a knack for computers. Because buying the system outright would have eaten up 20% of the company's $300,000 in net sales in one pop, Schwartz bought the system on time, making payments of $1,000 a month over five years plus $375 a month for a maintenance contract. This time the company got not only an effective automated billing system but also speedier dispatching and complaint-handling capabilities (now that customers' records could be pulled up electronically). Nothing that would have blown away FEDEX, to be sure. On the other hand, no regional courier service could match Baron Messenger's speed and reliability.

Schwartz and Baron ended up divorcing in 1987, but they remained business partners and continued to rely on their 286-based system to keep the business running smoothly. It wasn't until the early 1990s, when Schwartz began to feel the need for more speed, that he set out to streamline communication between dispatcher and driver. At the time, the dispatcher radioed the drivers to relay delivery information, a process that often took a long time when there was radio interference or the driver was away from the van. Schwartz's idea: to transmit delivery information from the company's computers to alphanumeric pagers worn by the drivers. Unfortunately that was more than the company's Novell network and antiquated 286 computers could handle.

Instead of upgrading the system, Schwartz hired systems designer Sherri Steinhorn, owner of Unique Data Systems Inc. in West Palm Beach, Fla., for a complete makeover that would satisfy Schwartz's appetite for speed. In place of the Novell network, Baron Messenger opted for a UNIX-based system that ran on a central minicomputer hooked up to nine terminals with no processing capabilities of their own. Though that bucked the trend toward relying on Windows-based systems, it was in fact a shrewd move. Most of the large national couriers were moving toward the UNIX system because more sophisticated dispatching software was available on that platform. In fact, UNIX was the only platform at the time that could easily handle the paging features Schwartz wanted. UNIX systems were cheaper, too. Back then, Schwartz's PCs were costing him about $2,000 apiece; his used dumb terminals were just $150 ($300 new) each. Ultimately the company got its new networked system, including hardware and software, for a paltry $15,000.

Walk through Baron Messenger's offices today, and you won't find many Rolodexes or cardboard boxes. You also won't find the panicky hustle you might expect in such a small operation working on tight deadlines and with demanding customers. In fact, the offices, on a drab street in North Miami, are austere and quiet, with eight or nine people calmly tapping away on keyboards. There's almost no paper in sight. When a frenzied paralegal calls with an urgent request that court documents be delivered within the next hour, all the operator has to do is type the custom-er's name into the computer system. A moment later the customer's address and standard delivery requirements pop up on the screen, along with a list of all the deliveries Baron Messenger has made for that customer. Because the new delivery is going to a "regular" destination, the operator only has to type in the pickup time and deadline.

Seconds later the job shows up on William Bermudez's screen. Bermudez, Baron Messenger's operations manager, is working today as the company's lone dispatcher. On his screen, Bermudez calls up the location of some 40 drivers and quickly picks out the best one for this delivery. With a few keystrokes, the information is on its way to the driver's alphanumeric pager. Moments later the phone rings; the driver has called in on a cellular phone -- dispatcher and drivers can also communicate by radio -- to confirm receipt of the dispatch order. When the job is completed, the driver will call in again, allowing Bermudez to update the driver-tracking system.

Schwartz has considered letting the computer automatically select and page the driver closest to a pickup request, a function the system could easily perform. But Schwartz is convinced no computer can match Bermudez's knowledge and judgment in certain crucial respects. Bermudez was born and raised in Miami and knows just about every address in the city. So, for example, when a customer calls for a delivery to SE 40th Ave., Bermudez knows immediately that either the address is wrong or the customer wants a package delivered somewhere in the middle of the ocean. And a computer can't always take traffic patterns into consideration. For example, early in the morning, the traffic on I-95 northbound tends to be heavy; traffic on the southbound side usually runs more smoothly. If Bermudez is faced with a rush 8 a.m. delivery and has to choose between a driver on the north side and one coming up from Coral Gables, he knows which one will get there faster. And that small edge in speed can make all the difference. "Some attorneys get really angry if their documents don't get to the courthouse on time," says Bermudez.

Bermudez also knows when a certain driver might not be the right driver for a particular delivery for reasons beyond the grasp of any computer. Most of the company's drivers are independent contractors. The advantage of that is that the company doesn't have to pay employee payroll taxes or workers' compensation for them. The disadvantage is that Schwartz doesn't have much control over his drivers. He can't require them to wear the Baron Messenger blue-and-white uniform. And he can't force them to remove the lip rings they may be wearing or fix the dents in their vans. Instead, Schwartz says, Bermudez keeps tabs on which drivers are likely to go down well with which customers and which are likely to raise eyebrows.

Schwartz claims the company would need at least a third again as many full-time employees if it weren't for the computer systems. (Unfortunately, he recently had a chance to check his arithmetic when the computers crashed. Reverting to the old manual system, the company was forced to bring in four additional dispatchers to come close to its normal level of service.) As for the late-night pizza-and-billing parties on Fridays, they are now part of company history. Office manager Cherie Pidcoe prints out over 1,000 bills each month at the push of a button.

Also long gone are the days when Schwartz would walk from building to building handing out Baron Messenger business cards. Today his marketing efforts are almost completely automated. For example, he can produce the names of those customers who use the company's 911 service for emergency deliveries and then target them with mailers when he's running a special rate for that service. Because he captures not only the names and addresses of his customers but also information about where their packages are going, he now has a database of tens of thousands of potential clients in Miami.

Baron Messenger has left most of its competitors struggling to catch up. According to David Patterson, vice-president of Atlanta-based Datatrac Corp., a leading software developer for the delivery business, the courier industry hadn't considered investing in information technology until FEDEX and UPS heavily automated their services in the 1980s. Eventually customers used to dealing with the giant couriers started to expect services like on-line package tracking and computerized signature verification from the smaller delivery services, too. Even so, adds Patterson, some large regional couriers are still paper-based. Baron Messenger, meanwhile, has long been automating more or less in parallel with the state-of-the-art giants.

That commitment has paid off, not only in better service and reduced costs but also in the ability to jump in and seize unexpected, lucrative new markets. A case in point: critical-parts inventory. Typically, computer parts or copier parts must be in a certain place at a certain time in order for office equipment companies to meet demanding service contracts. IBM and Xerox, for example, have long carried the burden of managing their own critical-parts inventory, which was usually held on-site at field technicians' offices around the country. If an IBM technician was working on a customer's mainframe and suddenly realized that he needed a new part, he had to return to the office and then lug the part back to the work site.

Recently, however, in an effort to squeeze the last drops of inefficiency from their operations, office equipment companies have taken to outsourcing critical-parts inventory to third-party logistic companies like Associated Distribution Logistics and Choice Courier Systems, both headquartered in New York City. The logistic companies enlist small messenger services around the country to hold and manage their customers' inventory on-site at the couriers' locations and to deliver it on time as needed. Baron Messenger was one of many small regional couriers that were suddenly vying to secure plum contracts with third-party logistic firms. But the firms are very picky. According to Marvin Stone, vice-president of Choice Courier Systems, for a small courier to become a distributing agent, it must have a documented record of on-time delivery and a commitment to the sort of technology needed to track and deliver a wide assortment of inventory.

Baron Messenger was one of the few that made the cut in its territory. In 1991, Associated Distribution approved the courier service to manage and distribute critical parts for AT&T. About a year and a half later, Associated Distribution also began using Baron Messenger to distribute parts for Technology Service Solutions (TSS), which provided field service technicians in a then-joint venture between IBM and Eastman Kodak. At that point, Schwartz went out and rented 2,000 square feet of space next to his office. Because Kodak was responsible for inventory management for TSS, Schwartz committed to going on-line with Kodak's headquarters in Rochester, N.Y. To get hooked up, he just dusted off the company's original 286-based computer, attached a 9,600-bps modem to it, and loaded Kodak's proprietary inventory-management software. When TSS field technicians in Miami needed a part, they would call Rochester to verify that Baron Messenger had the part in stock and then call Baron Messenger for a delivery. "We didn't even know what the parts were," says Baron. "We just knew them by their shelf numbers."

Baron Messenger quickly impressed TSS with its fast delivery and reliability. In 1994, when TSS began to limit its relationship with Associated Distribution, TSS's field technicians in the South Florida office lobbied to keep Baron Messenger on to manage the inventory, says Baron. A TSS field technician says that Baron Messenger was crucial to TSS's ability to service its customers in Dade and Broward Counties. In addition, Marvin Stone says that as Choice Courier Systems gears up to expand into Miami, it, too, sees Baron Messenger as a leading candidate for parts distribution.

Needless to say, Baron Messenger Service doesn't have a lock on high-tech delivery. Competitors seem to be sprouting up everywhere, says Schwartz, noting that today's better technology and dropping prices allow just about anyone with a laptop, pager, and car to launch an effective courier operation. Meanwhile, the larger companies are getting better and better at using technology to provide more customized service.

But none of this deters Baron Messenger Service from pushing forward. The company's challenge today: to service the customer even faster. Schwartz is considering linking the phones and the computers electronically so that when a customer calls in for a delivery, the computer will display the customer's file before the operator even picks up the receiver. Schwartz is also looking into creating a Web site for customers who want to place delivery orders on-line. In the works, too, is a plan to replace the company's alphanumeric pagers with two-way wireless signature-verification pads so that drivers will no longer have to call in the name of the person who signs for a delivery. Instead, recipients will sign an electronic pad, and the signature will be transmitted back to the company's system and stored in the customer's file.

With those sorts of efficiencies, even Santa Claus might have trouble keeping up.

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Joshua Macht (josh_macht@incmag.com) is a reporter for Inc. Technology.




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