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Why 1 Plus 1 Equals 6: Breaking Down the Tompkins Companies' New Era · Beyond Fulfillment Podcast

• 0:00
  Foreign.
• 0:07
  Dave Goulas back again on the Beyond Fulfillment podcast with my good friend Jim Tompkins.
• 0:12
  Hello, Jim.
• 0:13
  Hi, Dave.
• 0:14
  Good to see you.
• 0:15
  Good to see you again.
• 0:17
  Normally, we have this ongoing series where we talk about the tariffs and the impact on supply chain, and that will certainly come back again in the near future.
• 0:28
  But today is something different where we've got some very exciting news we're talking about with a couple of your companies.
• 0:35
  So we'll.
• 0:36
  We'll get into that.
• 0:37
  And just help me understand, Jim, what's the difference between Tompkins Associates, Tompkins International, Tompkins Robotics, Tompkins Solutions, and Tompkins Ventures?
• 0:50
  Okay, and we got this tape for about four and a half hours, right?
• 0:53
  And.
• 0:54
  No, no, no, no.
• 0:55
  Okay, so let me give you the.
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  The thumbnail pitch.
• 1:01
  In 1975, obviously, I was a young, young man at that time.
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  I started a company called Tompkins Associates.
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  And what we did was warehouse consulting, and then we added transportation consulting, and then we added inventory.
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  Then we added network planning.
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  And then in 1978, we added some technology.
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  WMS was starting to be around, and we grew the practice and things went well.
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  We opened the company Tompkins Associates in Canada and Tompkins Associates in Mexico.
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  But we learned that the word associates, especially in Mexico and Canada, gave off a image of that we weren't a real company.
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  We just had some people that we worked with from time to time.
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  So we changed in Canada and Mexico the name to Tompkins International.
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  And so now we had, in 1980, we had Tompkins International of Canada, Tompkins International of Mexico, and Tompkins Associates of the United States.
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  We then added Brazil.
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  And then around, I don't know, 20 years later, we added the UK Germany, China, and Australia.
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  And at that point, the Tompkins International and the Tompkins Associates was confusing people that we were two separate companies.
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  And it was cheaper to change the Tompkins Associates to international than it was to change all the internationals to associates.
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  And so we picked up the name Tompkins International, and Tompkins Associates is actually the holding company that holds it all, but it's no longer a, quote, active business to the public.
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  So Tompkins Associates went away and Tompkins International came to the forefront.
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  Along the way, in 2015, we started a company that was separate from Tompkins International.
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  Tompkins International in 2007 was a supply chain consulting.
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  We did end to end supply chain.
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  We did implementation of technology related to supply chain, and we did material handling integration.
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  And that was what Tompkins International was in, say, 2008, nine, 10, like that.
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  In 2015, we started a Separate company called Tompkins Robotics.
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  And Tompkins Robotics is a company still exists today.
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  It's very successful.
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  And what they do is they implement robotic solutions for each picking.
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  It's a very unique type of technology, and it's doing very well on a global basis.
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  And then in 2020, when Covid hit.
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  And so there essentially we had Tompkins International, and we had Tompkins Robotics.
• 4:02
  When Covid hit, there was a change in that.
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  I left the business and they took Tompkins International and broke it up into the material handling group, the consulting group, which they called Tompkins Solutions, and then Tompkins Robotics.
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  So as of 2020, there was two companies, Tompkins Robotics and Tompkins Solutions.
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  And so that's where we were in 2020.
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  When I left the Tompkins International Associates Robotics Solutions business, I went and I started a company called Tompkins ventures.
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  So by mid 2020, there was Tompkins Ventures and Tompkins Solutions and Tompkins Robotics, three separate companies with separate ownerships.
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  And at that point, I was only really engaged with Tompkins Ventures.
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  What's occurred recently is the Tompkins Solutions portion of that envelope has been purchased by a US Private equity company.
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  And they came back to us and said, we would like to recreate the heyday of Tompkins International.
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  It's now being called Tompkins Solutions.
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  Would you be our chairman?
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  And I looked at the interaction between Tompkins Solutions and Tompkins Ventures, and I said, absolutely, I would be happy to be chairman.
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  And so that's the news of the day.
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  So today there's a company, Tompkins Robotics, which I own about 20% of.
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  And then there's a company called Tompkins Solutions, which I.
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  I have only options there.
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  And.
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  But that's.
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  I'm chairman of that company.
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  And then there's Tompkins Ventures, which I own 96% of, and that business is thriving.
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  So Solutions, which is a business that were re starting, re reinvigorating Tompkins Ventures, which is going 1,000 miles an hour.
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  And then Tompkins Robotics, which is doing well, but independent.
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  Okay, so you're the chairman of both Tompkins Solutions and Tompkins Ventures.
• 6:23
  Yes, I am.
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  And that's interesting.
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  One thing that's kind of good is those two guys get along well.
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  So I don't have any fights with the chairman between ventures and solutions.
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  But it's really interesting because they both are so complementary in what they do that it's really one plus one equals six.
• 6:44
  Okay, and what's the relationship between Tompkins Ventures and Tompkins Solutions?
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  So they are what we call dual commercial partners.
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  So what that means is Tompkins Solutions is a partner of Tompkins Ventures, and it brings Tompkins Ventures work.
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  And Tompkins Ventures is a commercial partner of Tompkins Solutions, and it brings them work.
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  Okay, now what types of work transfer back and forth is where it gets really interesting when you unpeel the onion.
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  And so what Tompkins Solutions is really, really, really good at is network planning.
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  They're really good at warehouse design, and they're really good at material handling integration.
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  Those are the three things that Tompkins Solutions does well.
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  And so those are things that Tompkins Ventures would find opportunities and bring them to them for their execute and for them to please those clients.
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  Tompkins Ventures, however, is in a much broader business.
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  Tompkins Ventures, we have a very strong supply chain and logistics business.
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  We have a very strong digital enablement business.
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  We have very strong procurement business.
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  We have a very strong entrepreneurial growth business.
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  And then we have a very strong and developing organizational development business.
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  So Tompkins Ventures is global, very broad.
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  Tompkins Solutions is primarily us doing network planning, warehouse design, and material handling integration.
• 8:38
  Okay, and I heard you say you're not headed back to Tompkins Solutions.
• 8:44
  So what does that mean?
• 8:47
  Yeah, so when.
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  When this got kind of broadcast to some of the people at Tompkins Solutions, there was people that were doing the Arnold Schwarzenegger thing and saying, jim's Bach, and.
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  And I says, no, I'm not buck.
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  Because the fact of the matter is, last time I worked at Tompkins Solutions was in 2020.
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  And if we went back to 2020, I would have to take Tompkins Solutions and dial them backwards.
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  And I would have to take everything we've all learned since 2020 and throw it out the window.
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  And so we don't want to go back to what we were in 2020, and we don't want Jim to come back with what he was thinking in 2020.
• 9:37
  My goodness sakes.
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  If we look at AI, if we look at technology, if we look at material handling systems, if we look at the sophistication of the supply chain, if we look at the global trade and the tariffs that you and
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  I have been spending time on, oh, my goodness, about 80% of what I knew in 2020 is irrelevant today.
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  And so what we need to do is not try to go back with these businesses.
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  What we have to do is we have to go forward.
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  And so we need to take the businesses that are here and saying, these businesses have great reputation, have great capability, but now what we need to do is supercharge these things and take it to 2027, 2029.
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  And let's move forward.
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  Let's not even begin a discussion on I'm back, because I'm not back, I'm forward.
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  And that's what we're doing, and that's where we're heading.
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  So it's very cool.
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  Okay, so not going back, but going forward.
• 10:33
  Can you give us an example of what that looks like?
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  Well, so I mentioned we started at Tompkins Associates in 1977, network planning.
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  Back then, we did it on a little trash 80, on a program we developed.
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  It was a version of a linear program.
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  When we did network plan planning, we would get one run a night, and then we would, you know, say, oh, the printer jammed overnight, so we got to make that run again.
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  And all sorts of interesting technology problems.
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  But then we evolved at Tompkins Associates, became Tompkins International into using the CAPS modeling, and then we moved into Llama Soft.
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  And then just in the last two years, Tompkins Solutions moved into a use of Cosmic Frog, which is the world's greatest tool for network planning.
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  It does things that are so far beyond what we did even say in 2022.
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  Okay.
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  And so what we're doing is we're able to take this new technology, and that changes the field.
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  If you look at what back was, what we tried to say is we have inventory costs, we have warehousing costs, we have transportation cost.
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  How many warehouses, distribution centers, fulfillment centers should we have and where should they be?
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  That allows us to minimize cost.
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  And what we did is recently as five years ago is we would determine what was the average requirement and what was the 85% requirement for the amount of incoming, amount of outgoing, the amount of transportation.
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  And we would develop a model, and we'd say we need to be able to hit the 85% volume level to allow us to handle this amount of product through the warehouses and get it to the customer, meeting the
• 12:36
  customer requirements.
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  Time.
• 12:38
  Well, we.
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  When we did that, that was really interesting.
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  But who said the 85% was relevant?
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  Hey, we have seasons.
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  You know, some garment has 14 seasons in the year, and you need to look at the different seasons.
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  You have E Commerce season, you have in store seasons.
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  You have all sorts of variability going on.
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  And so an example is we need to look at the real flows and not just add some 85% number.
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  It's 85% of what?
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  I mean, we need to look at each month and say, what is the best network for July?
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  What's the best network in June?
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  Maybe we do what's the best network?
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  And we find the 85% number is some number between Thanksgiving and Christmas.
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  And that's the period we model for.
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  But what we find out is we're going to have cost in that model for an extra DC or two extra DCs that aren't needed the rest of the year.
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  And so what we need to do is we need to alter the way we think about demand fluctuations and what impact that has on the network.
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  Another thing that's huge.
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  In fact, a lot of firms still don't do this, right?
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  They begin the network analysis with a series of transportation rates.
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  And they look at those transportation rates and want to look at the cost of moving stuff around the network.
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  Well, guess what?
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  Transportation networks, the transportation rates are tied to the network.
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  If you change the network, the rates are going to change.
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  Here's an example that we did, which had resulted in a major change in the solution.
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  We did a network analysis for client and it said you should have six distribution centers.
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  That was the optimal for this particular client.
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  Six distribution centers across the United States.
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  We then looked at that and said, okay, what if we went to 5?
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  The 5, the cost went up.
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  What if we went to 4?
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  Up, the cost went up.
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  And I got analyzing that and I looked at it, and when we went from six to five and five to four, we didn't increase our consolidation of less than truckloads.
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  We still had the same amount of less than truckloads going when there was four distribution centers as when there was six.
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  No, no, no.
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  If you're going to go from six to four, your LTL consolidation is going to wind up with a bigger load and therefore the cost per pallet or cost per packet is going to be cheaper.
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  But they didn't change the transportation rates.
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  So we redid that, looking at what the LTL rates would be if it was 6, what the LTO rates would be 5, what the LTO rates are for.
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  And what we found in IS4 was superior to 6 because that gave us greater opportunities to consolidate our LTL and it resulted in two fewer facilities, which mean less inventory.
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  It was a huge win by just changing the transportation rates.
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  So if you have a consultant that's designing your network based on fixed transportation rates, that's a bogus study.
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  Because the transportation rates change as the network changes.
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  You can't use the same number.
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  So there's an example of, holy cow, we need to make this happen in a much more intelligent way to get the correct answer.
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  To deal with the realities of the demand fluctuation, the transportation fluctuation which, my goodness sakes alive, we all know are huge in the last three, four years and continuing to be huge going forward.
• 16:17
  Yeah, makes sense.
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  Okay.
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  And Jim, can you like compare the business model of Tompkins Ventures and Tompkins Solutions and like when you would use each company?
• 16:29
  Yeah.
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  So they're, they're, they're totally different.
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  Tompkins Solutions is a traditional company company that has employees that work on projects.
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  So they are a consulting firm that implements the solutions they design.
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  And so it's a traditional company.
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  It's got a lot of payroll.
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  So it's asset heavy in that it has people, a lot of people, a lot of expensive people.
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  And cash flow is based on projects.
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  So you have a project income, you win a project, you do it, and then you go to the next client, you do a project and you do it and you get paid and so forth.
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  To the contrary, Tompkins Ventures is a unique company in that it's really not.
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  Although it is a company, it has an organization structure, it has a balance sheet and has a P and L.
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  It is asset light in that we have over 250 business partners around the world who are extremely experienced, 30, 40, 50 years in the business, people that have large networks.
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  And what the business partners do is they find opportunities, they bring those opportunities to Tompkins Ventures.
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  And then what we do is we play matchmaker.
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  We say, oh, this is a great job for a material handling integration firm that has these capabilities.
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  Aha.
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  Tompkins Solutions has that capabilities.
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  And so we take that business partner opportunity, we give it to the best material handling integration firm we have, they do the work.
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  And now we have a very satisfied client because we have a very deep bench.
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  We have over 200 commercial partners.
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  These are people that do services and products for the supply chain industry.
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  So three PLs, ocean freight, air freight, truck, flight, parcel, three PLs, technology providers, people that build building, people that install material handling systems, those are commercial partners.
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  And we take this opportunity, we match it with the right commercial partner and they get to john them.
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  We also have consulting partners.
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  We have over 100 consulting partners.
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  We also have capital partners.
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  We had over 400,000 capital partners in our database.
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  And so business partners bring us opportunities.
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  We will partner them with a commercial partner, a capital partner or consulting partner to get the job done using the best possible team.
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  So although Tompkins Ventures only has three employees, we have a marketing person, we have a publication person, and we have a project Manager.
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  We have three employees.
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  We have more capability than Deloitte, IBM and McKinsey combined because we have all those things in our ecosystem as partners, and we don't pay them until they go to work.
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  And so they are.
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  We become asset light.
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  And we're not only working on a project income basis, but we're also working on a recurring revenue basis.
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  So Tompkins Ventures, asset light, recurring revenue, Tompkins Solutions, asset heavy project revenue.
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  But they work together to provide great solutions for our clients while not bringing with us that big overhead of having people sitting on the bench waiting for their next assignment.
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  So it's a very interesting mix where we're able to play the benefits of Tompkins Solutions, the benefits for Tompkin Ventures and who wins.
• 20:17
  Who wins is the client, because they get a specific focused solution with experts that really do this specific thing, and they wind up paying less money for it.
• 20:30
  Okay.
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  All right.
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  And Jim, if people are out here hearing this and they have a potential need within supply chain, or they want to learn more about either company, Tompkins Solutions or Tompkins Ventures, what's the best way people can.
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  Can reach out and learn more?
• 20:43
  The best thing is just.
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  Just write me.
• 20:45
  And you can write me at jtomkins tompkins international.com or you can write me at j tompkinsomkins ventures.com I both emails I every four minutes on my computer.
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  I'm checking back and forth between the two accounts because the activity is so high.
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  And.
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  And then I'll get you hooked up with the proper portion of the company that can allow.
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  You can do great.
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  The thing that's really interesting about us is we come out and we will collect the data, we will do the analysis.
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  We'll tell you this is the best approach that you should take.
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  It might be a consulting approach.
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  It might be a new 3PL, it might be new transportation.
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  But here's the approach you should take.
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  And we won't charge them for that proposal.
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  That proposal is free.
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  And now the client has a choice of saying yes or no.
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  If they say no, no harm, no foul.
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  If they say yes, all they need to do now is pay for the transportation or pay for the 3 PL or pay for the technology.
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  And.
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  And there's no other fees associated.
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  So the client gets a better solution that's customized to their specific needs at lower cost and no risk.
• 21:55
  Okay, sounds great.
• 21:58
  All right, well, Jim, thank you so much for taking the time to be here, sharing all this, this exciting news and these developments with our audience and continued success that we wish in the future.
• 22:09
  Thank you.
• 22:10
  Going forward.
• 22:11
  Yes.