School Closings Today's Paper Obits Today's Photos Food Opinion: Bleepin’ ’bout my generation Weather NWADG Redesign Puzzles NWA Basketball 2018

When Wal-Mart Stores and J.B. Hunt Transportation Services committed last month to buying and testing some of Tesla's new electric trucks, the Arkansas companies underscored how vital it is for logistics professionals to connect with companies serving up new technology for the industry.

Innovations in supply chain management -- the coordinated movement of goods from suppliers to consumers -- are not coming from Northwest Arkansas, and major corporations in Arkansas are looking outside the state for solutions.

To help in its competition with Amazon and Amazon's fast-paced e-commerce deliveries, Wal-Mart bought Brooklyn-based Parcel, a company that specializes in delivering goods to homes.

James Reed, the chief executive of USA Truck -- the Fort Smith-based company trying to rebuild itself from the inside out -- noted how there were no logistics innovators in Northwest Arkansas of interest to his company.

State officials have been working to position Northwest Arkansas as a magnet for startup technology companies, but many have been attracted to hot spots like New York, Chicago, California's Silicon Valley and Austin, Texas.

There are several reasons for the dearth of innovative supply chain companies in Arkansas, industry experts say. They include an anemic flow of venture capital and the conservative nature of the industry and region. But a key reason, people interviewed say, is that corporate employees aren't mixing with the region's entrepreneurial community, so there has not been an exchange of supply chain ideas.

"For as much transportation and logistics that we have in Northwest Arkansas, we are not doing a great job as a startup ecosystem," said Joe Saumweber, who started the 479 Founders Forum, a peer mentoring group based in Fayetteville.

By most accounts, Northwest Arkansas has the base necessary to help small businesses thrive: a research university producing talent, robust corporations and wealthy potential investors. But there's a consensus that corporate employees have little involvement with the startup community. The size and internal structure of larger companies make it difficult for such relationships to form.

"These organizations are so big that it's hard to find someone," in a position to adopt a new product or service, said Justin Urso, the chief executive officer of online seller Skosay and a Tyson Foods alumnus.

It's also difficult to find a venture capital firm or group that has added a startup Arkansas transportation or logistics company to its portfolio. Some of the bigger players -- New Road Capital Ventures, Hayseed Ventures, Fund for Arkansas' Future, Cadron Capital Partners -- have zero logistics companies in their portfolios.

McLarty Capital Partners has invested in some Arkansas companies, but none are in logistics. The firm did help fund Tulsa-based logistics company Logistyx Technologies.

Co-founder and co-president Franklin McLarty, who is from Arkansas and is a board member of P.A.M. Transportation Services, said technology companies are highly sought after right now, and without providing any specifics, McLarty said his group pursued investments in a couple of companies in this space. He joins a chorus of industry leaders who say supply chain management -- warehousing, shipping, transportation -- is "asset-intensive," and requires strong cash flow to get going. And that's not very attractive to investors looking for returns.

"We like the state," McLarty said, "but there is a clear advantage with established [supply chain] firms."

Randy May, the chairman and CEO of Fayetteville-based Ecoark, a company with some interest in supply chain work, said another challenge for startups is that investors and corporate buyers are sophisticated in their industry knowledge.

"You're going to deal with experts," he said. "You'll get your clock cleaned. I was fortunate to have enough high net-worth individuals to believe in what I was doing, but that is unique."

A spokesman for Wal-Mart said it is difficult to find new companies that can handle its product volume and overall robust global supply chain operations. J.B. Hunt declined to comment for this article.


In the new year, local entrepreneur Jennifer Adair will open PrepMyShipment, a small warehousing company in Fayetteville. She started the business, which is self-funded, in part to give small and medium-size companies that can't afford expensive warehouse rates cheaper and more fluid storage options. Adair describes it as the "Airbnb of warehousing."

"There aren't many places up here that will do a short-term lease when you're trying to get started," she said of the warehouse market.

Leaders in the startup scene say Northwest Arkansas is built to cater to the larger companies and Adair's view of the warehousing market illustrates this.

Mike Smith of Innovate Arkansas described the logistics industry as conservative, and said a great deal of innovation remains within the companies. Jeff Amerine, a founder of Startup Junkie Consulting and a former managing director within FedEx Freight, said the ground is beginning to shift.

Clint Elcan left a 12-year career at J.B. Hunt in 2012 to co-found a logistics company called CrossFleet. By 2015, the company was sold "to a California technology investment group." He went back to corporate work, at P.A.M. Transportation, before returning to J.B. Hunt. He is currently the vice president of J.B. Hunt 360 Marketplace, the company's mobile app competing among the "disruptors." He declined to comment on the record about CrossFleet's sale, and he did not speak at all about J.B. Hunt's business.

CaseStack, a California-based company, is considered by many to be an example of an innovative logistics firm. What started from about eight employees just celebrated a decade operating in Fayetteville.

Looking back, Dan Sanker, the company's CEO, recounted how doubtful people were of the services CaseStack provided to supply chain professionals. He challenges the notion that it requires millions of dollars to run a logistics company, and said that as the industry is digitized, the skills necessary to do the work will continue to change.

Steve Clark is a homegrown success story. For the past 20 years, his company, Propak, has operated in the logistics space. He said the corporate route makes sense for people early in their entrepreneurial careers.

"They are able to be around people with extended experience that they can learn from," Clark said. "I think there's value to be had working at an established organization before moving onto the startup scene. They all play a role, and to say one is better than the other would be misleading. It's just different."


Two years ago, Rick Webb left his job at Wal-Mart and started working with entrepreneurs in the community. He helped form Grit Studios in Bentonville, with Jeannette Balleza Collins, to help startup businesses connect with potential investors.

He said he didn't realize how walled-in he had been at Wal-Mart until he stepped out from behind it.

To convince startups from elsewhere to come to Northwest Arkansas and grow, he too pitches the area's reputation as a center for logistics to attract new talent. The lack of cutting edge companies intensifies the challenge, he said.

"They limit the number of opportunities for young people," Webb said. So the question remains, "How do we build on that heritage?" he said.

Chicago-based project44, a company making technological strides in supply chain management, moved into Northwest Arkansas to take advantage of the region's opportunities. They recently rented space with Grit Studios. Both sides say they met via an investor in Chicago.

The founder and chief executive of project44, Jett McCandless, once worked at Wal-Mart headquarters in Bentonville. During his time working for the world's largest shipper, he grew bogged down by the paperwork required to keep a fleet of trucks running on time. It was all spreadsheets and telephone calls. So he set out to change it.

"It's tedious work that should have been able to be automated," he said. "It put the burning passion in me to digitalize the trucking and logistics industry."

McCandless has kept his sights on Northwest Arkansas. His company also works with ABF Freight, the truckload segment of ArcBest and FedEx Freight, and is also in talks to do logistics business with Wal-Mart.

"The companies that are winning realize they can't build it all themselves," he said.

SundayMonday Business on 12/24/2017

Print Headline: Arkansas firms look elsewhere for supply chain, logistics ideas

Sponsor Content