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Tanner Montague came to town from Seattle having never owned his own music venue before. He’s a musician himself, so he has a pretty good sense of good music, but he also wandered into a crowded music scene filled with concert venues large and small.But the owner of Green Room thinks he found a void in the market. It’s lacking, he says, in places serving between 200 and 500 people, a sweet spot he thinks could be a draw for both some national acts not quite big enough yet for arena gigs and local acts looking for a launching pad.“I felt that size would do well in the city to offer more options,” he says. “My goal was to A, bring another option for national acts but then, B, have a great spot for local bands to start.”Right or wrong, something seems to be working, he says. He’s got a full calendar of concerts booked out several months. How did he, as a newcomer to the market in an industry filled with competition, get the attention of the local concertgoer?

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by Andrew Tellijohn
August 2005

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Upside down


Upside down

How Anderson Cargo owners overhauled their company

by Liz Wolf   Brian and Kathy Anderson were set to move their company into a brand-new facility, happy with their year in which Anderson Cargo Services Inc. neared $4 million in revenue. Then came September 11, 2001, and their air-shipping business dropped to maybe four shipments a day from 50.

“Our simple world got turned on its head,” recalls Brian Anderson, CEO. They scrambled to find other business: over land, over sea, taking loads that huge carriers didn’t want. A chance use of the word “boutique” resonated with customers, who needed someone to handle unusual cargo with awkward logistics.

 “Who we were is not who we are today. We restructured after 9/11 to survive,” Brian Anderson says.

The story starts in 1990, when husband-and-wife team launched their international freight shipping company, originally named Anderson Air Cargo, in the basement of their Owatonna home. They were armed with experience having worked together at another Twin Cities’ freight company. In fact, that’s where they met. She worked in auditing and he headed up sales and marketing. They grew tired of working for others and decided to go out on their own.

“We borrowed $20,000 from my father-in-law and had $10,000 in equity from the sale of our first house,” says Kathy Anderson, 45, president. “We were very fortunate. We started out with a substantial account with Zeos, and were debt-free within months.” Zeos was a computer company later bought out by Micron. They paid Brian’s father back in six months with interest.

In hindsight, Kathy Anderson says it was a pretty big leap of faith. “We were just having a baby,” she says. “I delivered the day after we started our business. It was scary, but I have a real belief in my husband. He did research on what it would take to initially start a business. We had a client base. We had the knowledge. We knew we had the finances to get it started.”

“But you look back and go, ‘Was I out of my mind?’ ” adds Brian Anderson, 48. “My logic was, ‘Well, we can run this thing for 90 days and we’ll still be in good shape, and we’ll have some more business by then.’ We had a house and two car payments and two kids. And then the U.S. hit Kuwait for the first time in 1990, and the economy dipped with the war, and it was like, ‘Wow.’ ”

Anderson Cargo grew steadily over the next decade. It specialized in providing expedited domestic and international freight shipping services, moving the bulk of its goods on passenger airplanes. As a broker only, the company owned no planes. By 1999, sales averaged $3.5 million, and the company was leasing space in Bloomington.

Anderson Cargo also developed comprehensive e-commerce capabilities for clients through its Web site in early 2000, which allowed the company to grow without adding employees. Clients can place shipping orders on the Web site, track packages, access waybills and send notification e-mails to relevant parties, including the recipient and co-workers. Clients also can follow activity on their account through the site.

Things were looking good — so good that their next move was to purchase a 35,000-square-foot building in Eagan. They were scheduled to move in September 2001. Within days of their move, however, the unexpected happened:  the tragedies of Sept. 11. And while the effects of Sept. 11 touched virtually every industry, it was felt substantially in businesses that dealt with transportation and logistics across U.S. borders.

“We were moving into our new building on Friday and it hit on Tuesday,” says Brian Anderson. “Business dropped. We were moving just three or four shipments a day right after that juncture.” He says that was compared to an average of 50 shipments a day.

Many clients stopped or slowed down doing airfreight. “Many quit doing direct delivery. Also, expedited stuff disappeared,” he says. “Slow business means everyone was watching their pennies, and airfreight, which is a premium service, was not authorized. Our business dropped 20 to 30 percent and it stayed there. It didn’t move. And there was no warning or planning possible. The result: We were hit with a bad economy, no budgets, little business and less capacity.”

He also says because they transported the bulk of their cargo on passenger airplanes, they lost a tremendous amount of options to move cargo via air after Sept. 11. He says passenger airlines quickly moved away from larger and less fuel-efficient aircraft because there were fewer passengers. “Virtually every major trunk passenger airline had empty seats, so they were cutting the last bank of flights, and our capacity and availability was cut,” he explains. “Then the regulators moved in with security programs of all kinds limiting the movement of freight on passenger airlines.”

The Andersons had to make a move.

“First, I’m a conservative guy, so the impact as severe as it was, was manageable,” Brian Anderson says. “We weren’t a company living on a borrowed dime. We had no debt except the building we just bought. We had a cushion. We didn’t panic. We didn’t lay off a lot of people, but nobody got raises either.”

After Sept. 11, the Andersons considered their options and decided to morph into a transportation service company dealing in specialty handling via air, but in a smaller context, and also diversifying into trucking and shipping via ocean. However, they needed a strong niche.

“We tried different messages to customers. We tried a total e-business process exclaiming the benefits,” Brian Anderson says, “but it was too early and didn’t work. We broadened our service offerings with ocean and trucking and still little worked.

“Until one day, we happened to use the word ‘boutique.’ We worked the personalized service angle — high touch, customer care — aided by process and technology to service the needs that the bigger players don’t handle well. Our business took off. We learned to keep trying until it works.”

They refocused their marketing to push priority services that most carriers avoid. “We add value somewhere in the supply chain,” Brian Anderson says. “This generally means the required service falls outside the norm of a standard shipment.

“For example, it has to be delivered at midnight or 2 a.m. or it requires a telephone call 24, 48 or 72 hours prior for a delivery appointment. Or maybe it’s a two-man, inside pickup on the fourth floor. Or it may be where we collect goods from multiple vendor locations and deliver as one shipment.

“Many carriers don’t want this high-touch business. It’s too labor-intensive, and they generally do a poor job of it or will not perform these services period. It takes a lot of communication.”

To reflect these changes, they changed their name from Anderson Air Cargo to Anderson Cargo Services Inc. They also continued to upgrade their Internet platform, which is crucial for these high communication-type services. It was a three- to four-year process to transform the company. They also hired a marketing director to spread the word of the company’s new direction.

“We learned several lessons through this process: Just hang on and make the adjustments as quickly as possible,” Brian Anderson says. “We learned to follow our customers’ needs, develop products or services they want and service the blazes out of existing customers.”

Today, Anderson Cargo specializes in the expedited movement of time-sensitive commodities across air, ocean and ground and pushes its “Nordstrom-like personal service.” The company often is called upon to coordinate the logistics for the transport of high-value, high-urgency and high-security commodities including artwork, personal effects, business records and business furnishings.

Examples of their specialty handling include transporting sharks from Florida to the Underwater World at Mall of America, shipping perishable medical supplies for Novartis to hundreds of salespeople in the field (and calling ahead to make sure reps were home for residential deliveries), and delivering camera gear for the Formula One auto race in Sao Paulo, Brazil.

The company also handled the logistics and transportation of 1,000 laptop computers with photo scanning and fingerprint recognition software donated in January to the United Nations Disaster Relief fund to aid tsunami victims in Southeast Asia.

Anderson Cargo provides same-day service, overnight, second-day and deferred shipping. Its business is divided about 80 percent domestic, and 20 percent international. On the domestic side, 80 percent is truck freight and 20 percent is airfreight. On the international side, 80 percent is airfreight and 20 percent is sea freight. Ninety percent of the company’s business is done online. Big clients include Novartis Nutrition Corp., Medtronic Inc., UnitedHealth Group, Deluxe Corp., 3M, Target Corp., Tires Plus and Wells Fargo.

Michael Regan, chairman of the American Society of Transportation and Logistics, says it appears that the Andersons made a smart, strategic move. “It looks like after 9/11, they found some opportunity to do garbage work that no one else is willing to do,” says Regan. “There are hundreds of small carriers like that out there, but it looks like they have a custom level of service that’s attractive to some companies.

“Somebody like that better be real focused on a niche that provides a solid value, because you have to realize that they’re not going to be a core provider simply because they don’t have the capacity. They have to figure out a spot where they can fly under the radar screen.”

Pat Siebenaler, director of business development for St. Louis Park-based Parallel Technologies Inc., a voice and data networking company, appreciates Anderson Cargo’s dedication to customer service. “We work with them to pick up servers in one location and bring them to a consolidated data center for our clients,” he says. “We’ve been working with them exclusively for six to eight months. The customer service was the biggest thing that drew and kept us. We were working with another vendor who we were unhappy with because of a lack of customer service.”

Siebenaler says it’s crucial that his company’s valuable shipments are sent and received on time. “These servers range in price from $4,000 up to $250,000,” he says. “It’s a coordinated effort between us and Anderson Cargo.” The company has provided everything from overnight airfreight to transporting servers in vans, and most are weekend deliveries.

Parallel Technologies does its scheduling online. “Their software product is a nice tool,” Siebenaler says. “It creates a nice waybill and information for the move. Plus, their staff follows up and confirms things if we need it. We’re in a high consolidation mode, and we use Anderson Cargo two to three times a week.”

Gregg Voight, fulfillment manager at Minneapolis-based American Financial Printing Inc., has been doing business with Anderson Cargo for two years. “They get the job done,” he says. “We ship some time-sensitive materials and they always make sure they get where they’re supposed to be. They’re easy to do business with. Brian is a personable guy. He’s a regular guy, and I like that. There’s no pretense.”

David Hawley, SmartMusic product specialist at Eden Prairie-based MakeMusic! Inc., a music technology company, says Anderson Cargo is efficient with its trade show deliveries. “We do about 25 trade shows a year, and oftentimes, we send out one, two or three booths and once they leave the Twin Cities they hopscotch all over the country. These folks have been extremely reliable in cases where we’ve had to adjust things at the last minute. We never worry about it, and theoretically, making sure we get things there on time could be one of our problem areas.”

With its clear, new focus, things are looking up for Anderson Cargo. “Business is really just starting to pick up again,” Kathy Anderson says. Revenue is steady between $3 million and $4 million and they employ 15 people.

However, she says the industry is still feeling the aftermath of Sept. 11. “The post-9/11 regulatory environment has added numerous levels of compliance.”

The security-related initiatives post-Sept. 11 are in the neighborhood of 1,000 pages of regulatory documents, and numerous bills are pending hearings and approval, Brian Anderson adds. “The most recent I reviewed was a 75-page addendum that says it’s likely that everyone in our industry is going to have to be tagged and badged and background-checked. It’s an ongoing challenge.”

The Andersons say shipping freight is a competitive business. “And what people forget is it’s not just about price,” Kathy Anderson says. “If your product doesn’t make it to where it’s being delivered, you may have saved a few dollars but you’ve lost a customer.”

The recipient “views the person delivering the freight as an extension of that company, and that’s what companies forget. They don’t look and go, ‘Oh, so-and-so is shipping this.’ They look and say, ‘I purchased from this company and they screwed up on the shipment.’ You worked hard to sell that product, which you believe greatly in, and you need to make sure you follow it all the way through. I think more people are realizing that freight can make or break a company.”

Kathy Anderson owns 51 percent of the company, and Anderson Cargo is leveraging its woman-owned status to take advantage of the fact that some corporations want to find more diverse vendors.

“We’re taking the opportunity to make our customers aware of the fact that we’re woman-owned,” Brian Anderson says. “Medtronic is a good example. We had been doing business with them, but they didn’t know we qualified.” After finding out, he says his company met their criteria and became a certified Medtronic vendor.

“However, we don’t run around and say, ‘Give us the business because,’ ” he adds. “We earned our way into Medtronic. Just because you’re certified, you still have to earn it.” He says less than 5 percent of Anderson Cargo’s business is a result of its woman-owned status.  “In some cases, it may help get a foot in the door but in a salesman’s bag of tricks it’s just one small opportunity.”

The Andersons, who’ve been married 18 years and have four children, say they complement each other in business. Kathy Anderson’s role is introducing the company and finding new business. Brian Anderson is detailed and analytical with a technical background, and he structures the deals.

“We’re very lucky because very few couples can work together,” Kathy Anderson says, “and for the most part, we really like each other.”

Of course, there are challenges. “As a husband-and-wife team, if you have a difference of opinion you can send mixed signals,” Brian Anderson says. “The challenge is not to do it in an outward fashion with 20 people staring at you and asking, ‘Who’s really in charge?’ It takes compromise.”

He also says they’re pretty good at not taking work home. “You’ve gotta leave it here. Otherwise, it’ll eat you up. You have to be very protective of your time away.”

What motivates Kathy Anderson in the business is the people and the opportunity to learn about other businesses.

“For me,” Brian Anderson says, “It’s what can we do to do our business better, do it smarter, do it more efficiently. Also, this business changes every day. The challenge keeps me motivated.”

Joyce Kohorst, vice president at US Bank, is impressed with the company. She’s been the Andersons’ banker for six years. “Brian knows his business,” she says. “He’s knowledgeable and he knows what he needs to do to grow. He also runs things conservatively. He never takes on more than he can handle. It’s quality growth. In addition, he has the ability to react quickly to different situations, because he has a large line of credit.” (Kohorst says he never uses it, though.)

“But Brian always tells me that one day he may have to rent a Boeing 707 to pick up a basketball team,” she says. “He wants to be ready for any situation. He has positioned himself that if the business needs something, he doesn’t have to scramble. He’ll be ready.”

[contact] Brian Anderson, Anderson Cargo Services: 612.727.3461; banderson@andersoncargo.com; www.andersoncargo.com. Kathy Anderson, Anderson Cargo Services: 612.743.2601; kanderson@andersoncargo.com. David Hawley, MakeMusic! Inc.: 952.906.3620; dhawley@makemusic.com. Joyce Kohorst, US Bank: 952.540.8306; joyce.kohorst@usbank.com. Michael Regan, American Society of Transportation and Logistics: 630.530.6190; astl@nitl.org. Pat Siebenaler, Parallel Technologies Inc.: 952.278.0329; psiebenaler@ptnet.com. Gregg Voight, American Financial Printing Inc.: 612.617.3170; g.voight@afpi.com