I have a deep appreciation for family owned businesses. Mostly because I came from one myself. I remember spending many a summer pushing wheelbarrows loaded full of concrete and dirt while setting tombstones in the rural communities of Lafayette County with my dad. It wasn’t glamorous by any means, but it taught me craftsmanship and honest, hard work.
Nostalgia for family owned business is part of the reason Murphy Logistics caught my eye, but I would also tell you that Murphy is doing a lot of little things right that will continue to pay dividends. I expect Murphy Logistics will be a company to watch over the next several years.
In this post I’m going to break down some of Murphy’s practices regarding asset allocation strategy (lease vs. own), sustainability efforts and location strategy that have been critical to Murphy’s longstanding run as a third party logistics firm (3PL).
I was fortunate enough to have an opportunity to interview Richard T. Murphy Jr., President and CEO of Murphy Logistics. Richard is the fourth generation leader of Murphy Logistics based in Minneapolis, MN.
Murphy’s core services include warehousing, transportation, fulfillment, international services, rigging and millwright and customized business logistics. Founded in 1904, Murphy currently employs approx. 180 employees throughout its 14 locations in Minnesota and Missouri.
Leased versus owned and Richard’s “Onion Strategy”
Murphy Logistics is an asset based 3PL firm whereby a large portion of their buildings and equipment are owned. Richard explained that Murphy leverages its core group of owned operations in a way that allows them to expand into new markets on a leased basis. This strategy allows for expansion into other markets while protecting the company’s fundamental operations.
Building out from the “core of the onion,” Murphy has most recently added operations in Kansas City, Missouri, which brings their total portfolio of owned and leased properties to approx. 3 million square feet. The “outer layers of the onion” come in the form of leased properties that can be added or peeled back without affecting the core owned real estate.
Richard estimated that their current portfolio consists of 40% owned sites and the remaining 60% are leased. He went on to explain that it would be unlikely for the company to ever get above 60% owned.
Murphy is particular about the types of buildings they lease/own and highly adept at identifying opportunities to turn a “dog” building into a profitable operation. Richard used Murphy’s Eagan, MN location as a prime example of how they were able to transform a functionally obsolescent space into a building that is more on par with customer demand. Richard continued…
“After we purchased the 350,000 SF space in Eagan about five years ago with subsequent modernization, we upgraded sprinklers to ESFR at 30 feet tall and designed the LED lighting to easily adapt to a taller ceiling. The building today sits with 20-22 foot high ceilings. Before any roof-lifting project is undertaken the sprinkler and lighting work is upgraded at the old height because the people-lifts various contractors use are less expensive and not as heavy duty at lower heights.”
Preferred Building Infrastructure
Before listing out Murphy’s preferred building specs, it helps to understand the types of products Murphy deals with, which include but are not limited to paper products, food products, packaging and building materials.
Rail Access is a must for Murphy as well, but they approach rail in a unique manner. Instead of utilizing exterior rail access, Murphy will go out of its way to create interior rail. In addition to employee safety, Richard explained Murphy’s thought process in more detail…
“The interior, close clearance siding allows the railroad to bring an entire 12 rail car delivery with only one movement. With exterior, rail door serviced buildings, the railroad has to individually spot a car at each rail door, a time-consuming process. Upon retrieval of the cars, the interior set-up allows one movement while an exterior set-up requires each car to be connected to its neighboring cars before they can be pulled back to the yard.”
Murphy has gone out of their way to operate sustainable sites that serve as a benefit to the surrounding community, employees and customers. Several of Murphy’s owned buildings utilize solar power to subsidize utility costs. Murphy was an early adopter of energy efficient LED lighting.
All of Murphy’s owned sites are Certified LEED Gold and Energy Star (99/100 points), which is well beyond the base requirements for typical industrial warehouse/distribution sites. Native prairie grass and flowers are planted near the buildings. The grass and flowers have much lower maintenance costs and create better water retention for drainage.
On the flip side, neighboring communities love the visually aesthetic value created by the unique landscape and seem to be much easier to deal with from a political perspective. In one particular case, Murphy added motion sensors to its exterior lights so that the lights would not disturb the adjacent neighborhood. Richard added…
“The lights run at 20% during downtime, reducing energy costs and acting as a pseudo security system response when someone drives near the building; the lights brighten to 100%. There’s no sense blinding nearby residents as they drive near the building. We think it’s important to blend into the community as best we can. Changing the lights to accommodate was a no-brainer. Our next step is reducing to 10% at downtime.”
Location, Location, Logistics
Richard has coined the mantra of, “location, location, logistics” at his firm, but I think his point rings true. Location is vital to any organization, but it’s not just about location anymore for 3PLs.
The logistics of the site have to work efficiently to allow the organization to take advantage of the location itself. This includes appropriate infrastructure, rail access and proximity to highways.
When opening a new site, Richard will focus on identifying a site that is at bare minimum close to the ring road within the metro area adding that locations outside the ring road are more difficult to make work due to added shuttling and transportation costs. Richard goes on to say…
“To the traditional real estate market, location is generally the one critical factor. In our logistics world, location is critical but if we can’t also get good logistics access to highways, rail lines, etc. the location doesn’t matter anymore. We need a good balance of location and logistics to have a successful supply chain logistics real estate site.”
In conclusion, I think we can all take a page from the incremental steps Murphy Logistics has taken to support its conservative business strategy, employee base and surrounding communities.
As companies become more conscious of sustainability practices, employee wellness and community integration, I expect these small steps will create huge benefits in the long term.
Thanks for reading!