COVER STORY – Shipping cost shoot-out – Breakthrough Fuel’s innovative approach take aim at transportation costs
Craig Dickman understands that asking the right questions can lead to one hell of an idea. He recalls a time years ago, when he was working at a trucking company and encountered a client who was less than happy to see him.
“He had just come out of a meeting with his boss, and his boss had read him the riot act and said, ‘You’re missing your budget!’” Dickman told an audience he addressed at a recent St. Norbert College CEO breakfast. “And he looked at me and said, ‘Well, the reason I’m missing my budget is because fuel costs are up, I can’t do anything about that, so I’m getting beaten up for something I can’t do anything about.’
“There’s nothing in the world worse than being held accountable for something that you don’t control or even have influence over.”
Dickman says moments like that can lead to innovation and change in the marketplace: How do you solve this problem? Why can’t he have influence over fuel costs? It was one of many questions that led Dickman to create his company, Breakthrough Fuel, which confronts the fuel pricing challenge and blows away the notion that those costs can’t be controlled.
Since the company launched in September 2005, Breakthrough Fuel has saved its clients more than $300 million.
How? It’s easy (sort of). Dickman says even his close friends get confused about what his company does. It’s an easy idea – though the patented formulas and algorithms behind it are complex.
In a nutshell, the company saves shippers money by figuring out the exact cost of fuel for transporting a load from one point to another, offering alternative routes and shipping methods to help a company be more fuel efficient. It also helps them determine their carbon footprint and finds options for alternative fuels, such as natural gas.
“They revolutionized our business and our way of thinking – we’re a conservative company within and Breakthrough helped to guide our learning process,” says Vahan Badalow, director of corporate transportation for Andersen Windows & Doors, Bayport, Minn.
“Andersen managed fuel like all other shippers, but by partnering with Breakthrough Fuel we have been able to develop a comprehensive fuel strategy and process.”
How it works
Breakthrough Fuel has a jaunty, fun-to-watch video on its home page that will walk you through exactly how it works. But basically, it’s this: Say a company wants to ship a load of products from Point A to Point B. Usually what happens is the company calls a carrier, such as a trucking company. The trucking company calculates a fuel surcharge to deliver the product.
The problem is the fuel surcharge. Historically, the surcharges have been based on weekly indexes released by the Department of Energy, which are simply an average cost of fuel regionally or nationally. The prices usually miss the mark, sometimes in favor of the carrier, sometimes not, and too often the company shipping the products gets the short end.
The indexes don’t take into account things like the average daily cost of fuel and taxes along a particular route, the fuel efficiency of the vehicle, or discounts at fueling stations along the way. Breakthrough does – for each and every individual shipment. And when clients have thousands of deliveries a week (or a day) the savings add up – quickly. Considering that energy is 35 percent to 40 percent of the total cost of moving products to market, it’s a significant fiscal impact.
“There are very different prices in different parts of the country, and they can change daily and their relationship changes daily and seasonally,” Dickman says. “They have very different fuel tax requirements, so you’ve got states that are 18 cents a gallon in state tax, and states that are over 60 cents a gallon in state tax. All that created distortion makes this a very imprecise transaction for both parties, so there’s always a winner and a loser.”
Breakthrough Fuel not only figures out exactly how much the fuel should cost for each shipment, it also has negotiated discounts for its shippers at 560 fuel locations nationwide. Dickman says his company’s clients lower their fuel costs about 8 percent or 9 percent by using his company to find the best rates. They can save about 20 to 22 cents a gallon to begin with.
Breakthrough Fuel, which charges a per-gallon fee for its services, will usually work with all of a company’s suppliers and carriers to help them implement a fuel management strategy.
The company now processes about 7 million freight movements per year, managing 750 million gallons of diesel for companies that include Procter & Gamble, John Deere, Kraft, Whirlpool and Shopko. Breakthrough became profitable in 2009 and grew 115 percent in 2011, Dickman says.
Breakthrough Fuel also finds the best, most efficient (or fuel-efficient) ways to move the product, using trucks, trains or a combination (intermodal transportation). The natural side effect is a boost in sustainability.
“We focus on how can we reduce energy costs, how can we reduce the emissions associated with moving products to market, and ultimately allow our clients to get their products to market in a more efficient manner,” Dickman says.
How it started
Dickman has a clear view of the fuel surcharge issue from both sides. He’s worked for the carrier side – both for Schneider National and Paper Transport, and for the shipper side, at the former Green Bay printing company Shade Information Systems.
“I had spent half my career on the shipper’s side where I was responsible for getting products to market, and I spent the other half of my career on the carrier side, moving other people’s products, and the world of energy looked totally different depending on where you were,” Dickman says.
Dickman recalls a carrier in Idaho telling him an anecdote that illustrates the impact of fuel surcharges on trucking companies:
“They recall on one week their owner was kind of dancing through the office saying, ‘Boy, we’re making lots of money this week,’” Dickman says. “Two weeks later, he’s kicking chairs over saying, ‘We’re losing money this week!’ And the only thing that was different is where they happen to fall within the traditional fuel surcharge mechanism.”
So he had this idea.
Dickman approached his high school buddy from Green Bay Southwest High School, Al Zeise, owner of Green Bay-based IT services company Zyquest, to help him develop software to help calculate true fuel prices.
“As soon as he approached me with the idea, I thought, ‘It’s just a no-brainer kind of idea’ when you realize what the current model is,” Zeise says, who became an angel investor for the company.
“It’s a very disruptive idea,” he adds. “He’s catering to a major market: shipping.” The company’s beginnings had timing on its side: Hurricanes Katrina and Rita caused turmoil with gas prices, giving Breakthrough the chance to showcase what it could really do. By 2008, things went totally crazy.
The culture of change
That’s about the time that Andersen Corp. got connected with Breakthrough Fuel through a mutual friend. Andersen – which today has 17,500 to 20,000 shipments of windows and doors weekly – was looking for something that could help alleviate the stress of the financial nightmare of soaring fuel costs in 2008, Badalow says. But it’s not just about the savings, he says – it’s how Breakthrough helped position the company for the future.
Andersen’s work with Breakthrough led to research and discussions about alternative fuels, which led to a partnership with Dart Transport, Cenex and U.S. Venture on a new compressed natural gas (CNG) facility in Menomonie, Badalow says. Andersen is starting to convert its fleet to CNG fuel. The company says conversion of its first seven trucks will cut emissions by 28 percent a year.
Whirlpool also came on board during that volatile year, says Kevin O’Meara, Whirlpool’s head of logistics in Benton Harbor, Mich., and a former Schneider coworker of Dickman’s. Whirlpool, which also is starting to work with CNG, ships at least 3,000 truckloads a week and has saved between 5 percent and 10 percent on fuel costs using Breakthrough’s services. But like Badalow, O’Meara says it’s not just about the savings.
“If someone said, ‘Kevin, if you knew you’d save no money, would you still want to do this today?’ And the answer is absolutely yes. The reason is this gives me visibility into my fuel usage, and I can now manage it. It’s about transparency.
Like Zeise, O’Meara calls Breakthrough’s concept a disruptive idea. It’s not always easy to get people on board with something so new and different – and some aren’t keen on changing the way they do things.
“The biggest challenge is education – when we first started talking about it with carriers, they said, ‘What are you talking about?’” O’Meara says. “When PCs first got dropped on people’s desks, they said, ‘What am I gonna do with this?’ That’s exactly what happened with Breakthrough.”
Within the shipping world, what Breakthrough does is that radical of a change.
“I hesitate to compare him to Steve Jobs, because everyone gets compared with Steve Jobs,” O’Meara says. “But if there’s a local, Green Bay-Wisconsin Steve Jobs, it’s Craig Dickman. He comes up with ideas nobody would’ve dreamed of.”
“Craig’s an interesting guy,” says Zeise. “He does so many things well.” He’s both an entrepreneur and good at managing his business, not a combination that always goes together, Zeise says. “He even has a personality,” he quips.
Dickman is a Green Bay native and a sports fan. He served as chairman of the Wisconsin Timber Rattlers, and is still involved with sports, acting as president of the Bay Valley Lacrosse Association. He’s held elected roles in the community and is now on the Brown County Harbor Commission.
He and his wife Karen like to travel. He’s been to 48 of the 50 states (he’s missing Hawaii and Vermont). He likes to go to Europe and he brings his kids, who are both students at UW-Madison and both fluent in several languages that will help get the family pretty much around the globe.
Dickman has carried his innovative spirit into Breakthrough’s new office space – a renovated historic Milwaukee Road train depot on Washington Street in downtown Green Bay, where he moved his business in 2011. The building was gutted and refurbished, adding modern features like skylights, decks, a glass staircase, historic barn beams from the same era as the 1898 structure.
It’s a comfortable building to work in, accommodating 23 employees, including mathematicians, economists and environmental scientists. Many of them are graduates of St. Norbert College (Dickman likes to say, “31.82 percent”), including Jennifer Brice, who started with the company as an intern from its inception and is now its director of client services.
“Every day is different and that’s what I really enjoy about my job – there’s always new and innovative things,” Brice says. “We always joke around that change is normal here, which is fun.
Roads to the future
Breakthrough has another one of those St. Norbert interns working with the company’s business development leader on a model for airline cargo, which the company hopes to have up and running within a year. The company is also working on models for marine cargo, which Dickman says should be available in 2014.
“Ultimately, we want to have a fuel solution for any product regardless of how it moves, if it moves on truck or train or vessel or air, and so we really want to be the experts when it comes to mobile energy,” he says. “And then I see us really continuing to develop the alternative fuel and sustainability areas, and moving more dramatically into low carbon solutions.”
The company recently collaborated on two new compressed natural gas facilities, including the one that Andersen recently dedicated, and there are plans for more.
And though Breakthrough is already international in the North American sense, providing services to shippers into Canada and Mexico, there are inklings about going farther.
“We have clients currently who would like us to provide solutions for Europe, and so we’ve done a few projects over in Europe and have an individual in the Netherlands who’s doing some work with us, but it’s too early to tell yet,” Dickman says.
Breakthrough has already internationalized its technology to handle monetary conversions and metric weights and measures – but there are differences in business practices and cultural, social and regulatory issues that the company is working through, Dickman says.
What’s the future hold?
“I really, really envision 10 years from now we’ll be in downtown Green Bay, still an independent company, and we hope to be larger, covering more parts of the mobile supply chain and more geography,” Dickman says. “We’re trying to build something that’s going to have some value and keep competitive and keep defining market space in this area.”