A Hundred Years Old
and Still Growing
By David Sparkman
Tradition, quality and innovation are the three building blocks that have served as the strong foundation upon which Allied Logistics has built a century of success.
It’s been a long road for the company, from its origins as a chain of retail furniture stores in West Virginia and the surrounding area, to becoming today’s regional logistics powerhouse for the chemical industry with a foot in the global marketplace, now under the fourth generation of family leadership.
Allied Founder Walter Lewis Sr. started the company as a regional furniture chain 101 years ago. His strategy was to build up the operation and then, in a move reminiscent of what Ben Franklin did with his printing business in the 18th century, sell the stores to their managers. He simultaneously invested in real estate, primarily in West Virginia.
In the mid-1970s, he was succeeded by his son-in-law, Lake Polan Jr., who further developed and expanded the real-estate company that was then known as Allied Realty.
During the recession of the early 1970s, Polan acquired a four-story warehouse facility in Huntington, West Virginia comprising 100,000 square feet of storage space. He acquired some customers for that space and soon discovered that he was running a warehouse company, which would later become known as Allied Warehousing Services.
Several years earlier, Mr. Polan had hired a local man to work in a related company, Polan Industries. Dick Smith had an engineering degree and proved to be a shrewd businessman. After Polan Industries was sold off, Smith had a career helping other companies turn around their failing operations.
Eventually finding himself stuck on the West Coast, Dick Smith grew homesick for the hills and people of West Virginia and accepted Polan’s offer to run the warehouse. At that time, the only other staff worked in the office and the company boasted exactly one forklift – and a single customer account. Smith became the company’s first forklift operator and they were in business.
Shortly after this, Lake Polan III took over the direction of the warehouse company. It was his knowledge, skill, imagination and leadership that would fuel the company’s growth over the next several decades. He saw the potential of the warehousing business, refocused the business on regional grocery distribution and made additional investments in warehouse and distribution facilities. Allied Warehousing managed to accumulate more and different customers, along with about another 300,000 square feet of space.
That business thrived and by the mid-1980s, Allied Warehousing had also acquired several pharmaceutical-company customers. Those customers needed to get their products delivered to their customers on a timely basis – a need that was not being met by their current transportation service providers. This set the stage for Allied Warehousing entering the transportation business. In 1986, it established a trucking company called Allied Transportation Services.
That company did well, and gained Proctor & Gamble as a major pool distribution customer, serving it in West Virginia. It turned out that P&G was not getting good service out of its then trucking provider into the eastern Virginia and Washington, DC, markets, and Allied started looking into ways to set up an operation in Virginia to help them out.
That led to the company’s next major acquisition in 1989 – Reo Distribution Services, headquartered in Waynesboro, VA. The owner, Reo B. Hatfield, continues to serve as head of Reo and President of Allied’s Virginia operations.
Allied Logistics’ current President, Jeff Smith (no relation to Dick Smith, but the nephew of Lake Polan Jr.), said that, not only did the purchase of Reo Distribution help them create their customer’s solution for pool distribution in eastern Virginia and the DC area, but it also ended up being a key purchase that helped lay the groundwork for Allied’s next period of growth.
“Over the years, Reo Distribution has developed into a point where, in terms of revenue, it is our largest single operating entity,” Jeff Smith said. “They provide global logistics services with a highly qualified staff of transportation specialists.”
Today, Reo Distribution operates in Virginia and Minnesota, controls more than $60 million worth of freight and has developed a significant warehousing business. Allied Transportation continues to operate primarily as a cartage transportation service provider with the warehouse operation’s chemical-company customers in West Virginia.
In the early 1990s, Allied Warehousing saw a key shift in food distribution patterns that resulted in the loss of the bulk of its customer base. We set out in a new direction,” Smith said. Because West Virginia is a resource-rich state, several chemical companies have operations there. “That’s what we targeted and, to this day, it remains the core of Allied’s West Virginia business. We’ve been very successful in developing accounts with several major customers and have been able to expand very significantly as a result.”
At the same time, Dick Smith became president of Allied Warehousing, and his background in engineering allowed him to recognize and begin to develop a new opportunity for the company. He realized that, while most chemical companies are commodity-driven in their operational focus, their customer base frequently needs some sort of specialized processing and packaging.
Dick Smith saw the warehouse operation storing product that was being shipped to facilities in other states to receive value-added services, then often being returned to Allied because it was the distribution point for the chemical company.
“Because of his engineering background, Dick was comfortable getting us into the chemical-processing business,” Jeff Smith noted. “In 1989, working with one of our key customers, he put into place our first packaging line. That established another core part of our business. Now we are in warehousing, transportation and value-added services with our real cornerstone being chemical-processing.”
“We try to engage in as much discussion as we can with our customers to determine their needs and build relationships,” Jeff Smith said. “I think all warehousing companies are like that today. Value-added services are a big thing.”
Dick Smith saw how Allied could eliminate transportation costs, shorted the supply chain and reduce processing costs. “Our people are used to doing a lot of different things. We had personnel who were capable of designing systems and equipment to ensure we could deliver the end-result product at the level of quality our customer requires,” Jeff Smith said. “That’s the key – we had to be able to deliver a quality product.”
Allied Logistics is proof that you can create your own success by delivering quality services. “It started off small and it grew,” Jeff Smith explained. “As we did more, the chemical companies came to recognize what we brought to the table and they began to come to us with other projects. We would deal with them in one small area of production and then get introduced into another.”
He added, “We were able to achieve a lot of organic growth from those developing relationships and throughout the distribution chain – it led to more warehousing, which led to more processing, which led to more transportation.”
Chemical-processing projects often require a substantial capital investment, which means Allied needs a long-term commitment from the customer to justify the outlay. As a result, the customer must have enough confidence in the company to agree to partner on a project that may be four or six years’ duration at minimum, Jeff Smith noted.
Part of the confidence stems from Allied’s expertise in the Food and Drug Administration’s Current Good Manufacturing Practices (cGMP) program, which applies to the portion of the company’s business that deals with pharmaceutical-grade chemicals.
To meet cGMP requirements, the company has had to develop quality-management systems and strong work procedures, and ensure that the maintenance and design of facilities and equipment meet certain standards and that it maintains hygiene at required levels. Also important are strong traceability and documentation of product as it moves through the warehouse and processing programs.
“It brings a lot of discipline to your programs,” Jeff Smith said. “We saw the advantages and expanded that compliance program throughout our warehousing operation, not just restricting it to what we do with pharmaceutical products that we warehouse. We just made cGMP our standard of operation. It improves our quality, safety, accuracy.”
The program is also good for employee morale, because of the training requirements and level of communication it calls for, he added. “We consider our people very important to our organization, but under cGMP, you can make them more a part of the day-to-day management and keep them up to speed.” Today the average length of time an employee has been with the company is 12 years.
It also strengthens the company’s relationships with its customers’ customers, because, in addition to Allied’s internal auditing, both the customer companies and their customers who receive the products conduct their own cGMP audits of Allied’s operations. “It really draws you closer to your customer and creates a real bond there,” Jeff Smith said.
In 2001, the company spun off Allied Processing Services as a separate operating unit, which operates 13 chemical-processing lines that provide grinding, screening, blending and several other chemical-related processing and packaging services.
Today, the original commercial real-estate business is thriving, along with the four businesses operating in the logistics sphere: Allied Logistics (formerly Allied Warehousing), Reo Distribution Services, Allied Transportation Services and Allied Processing Services. Among the customers using these services are Dow Chemical Co. (the company’s largest single account) and Calgon Carbon Corp.
Lake Polan III continues to serve as CEO of the parent company, Allied Realty, and his daughter Rebecca Polan, the fourth generation, recently became its president.
Allied Logistics President Jeff Smith believes his company’s future is bright. “We don’t have a crystal ball, but we are optimistic about the way things are going. Most people agree that the past four years have been pretty difficult, but we have been successful at growing our business, expanding opportunities not only with our existing customer base but with new customers as well,” he observed.
“We see the opportunity for the expansion into other areas. We think that globalixation has opened up new opportunities for everyone in the logistics business. There is not just the opportunity for increased distribution into our region, but also to move product manufactured in our region out into the world.”
David Sparkman is an associate editor with 3PL Americas and director of media and industry relations for IWLA.