Optimizing Operations and Profitability for Cannabis Businesses

This case study examines the journey of AFN Logistics, a company that, in just seven years, transformed itself into an attractive acquisition target by focusing on operational excellence, internal technology development, and strategic execution.

Phase 1: Building a Foundation (2003-2010)

• AFN Logistics was founded in 2003, aiming to provide freight brokerage, third-party logistics, and transportation management services. The company started small with a handful of employees and a limited client base. However, it had ambitious goals and a clear vision of what it wanted to achieve in the logistics industry.
• During this initial phase, AFN focused on building a solid foundation by developing a strong reputation for customer service and adding value in niche areas such as high risk and high value freight. It also focused on building relationships with clients and carriers, understanding their needs, and providing them with reliable and cost-effective solutions.
• The company implemented a basic Transportation Management System (TMS) to manage its operations during this period. This included using spreadsheets, email, and other tools to track shipments, communicate with clients and carriers, and manage invoices and payments. While these tools were not sophisticated, they helped AFN to manage its day-to-day operations and provide its clients with basic levels of service.

Phase 2: “Life of a Load” – A Catalyst for Transformation (2010-2014)

• Recognizing the need for continuous improvement and scalability, AFN launched the “Life of a Load” project in 2015. This project was a major turning point in the company’s history, as it marked a shift towards a more data-driven and process-oriented approach to operations. The company realized that in order to grow and compete in the fast-paced logistics industry, it needed to optimize its operations, eliminate inefficiencies, and improve its overall performance.
• This initiative aimed to map the entire operational process flow of a load, identifying bottlenecks, inefficiencies, and areas for improvement. This involved winning the business and then tracking a shipment from the moment it was picked up to the moment it was delivered, and analyzing every step of the process in detail. By doing so, AFN was able to identify areas where it could improve its efficiency, reduce its costs, and improve its service levels.
• The project involved a multi-phased approach, including:
• • Process Mapping: Diagramming the flow of operations at both organizational and departmental levels. This involved creating detailed flowcharts and diagrams that showed how work was performed, who was responsible for each task, and how information flowed through the organization.
  • Standardization: Documenting standard operating procedures (SOPs) to ensure consistency and reduce errors. This involved creating detailed instructions for each task, specifying the steps involved, the tools and equipment required, and the expected outcomes.
  • Metrics-Driven Analysis: Gathering data on time, labor, and costs associated with each process to identify areas for optimization and link operational performance to financial outcomes. This involved tracking key performance indicators (KPIs) such as shipment time, cost per shipment, and customer satisfaction, and using this data to identify areas where AFN could improve its performance.

Phase 3: Developing AFNgine – A Proprietary Solution (2014-2017)

• Based on the insights derived from the “Life of a Load” project, AFN recognized the need for a more sophisticated technology solution. The company realized that its existing technology tools were not sufficient to support its growing operations and increasingly complex requirements. It needed a more advanced system that could automate tasks, streamline workflows, and provide real-time visibility into its operations.
• The company chose to develop its proprietary system, AFNgine, rather than relying on third-party software. This was a bold move, as it required significant investment in time, resources, and expertise. However, AFN believed that developing its own system would give it a competitive advantage in the marketplace, as it would allow the company to tailor the system to its specific needs and requirements.
• AFNgine was designed as a system-agnostic platform, allowing for seamless integration with various systems used by carriers and logistics providers. This was a key feature of the system, as it allowed AFN to connect with a wide range of partners and exchange data seamlessly. This enabled the company to optimize its routing and scheduling, track shipments in real-time, and provide its clients with up-to-date information about their shipments.
• This strategic decision provided AFN with a significant competitive advantage:
• • Customization: AFNgine was tailored precisely to AFN’s specific needs and operational workflows. This allowed the company to optimize its operations and eliminate inefficiencies, as the system was designed to support its unique business processes.
  • Data Control: Owning the technology platform allowed AFN to maintain complete control over its data, a valuable asset in the data-driven logistics industry. This gave the company a significant advantage, as it could use its data to analyze trends, identify opportunities, and make informed decisions about its operations and factoring solution.
  • Differentiation: AFNgine’s unique capabilities enabled AFN to stand out in the marketplace and offer specialized services, such as securing semi-dedicated capacity on major lanes. This allowed the company to attract new clients and grow its business, as it could offer services that its competitors could not.

Phase 4: Reaping the Rewards – Increased Revenue and Acquisition (2017-2018)

• AFN’s strategic focus on operational excellence and technology development yielded significant results:
  • Revenue Growth: By 2018, AFN was estimated to be on a $210 million revenue run rate (a low estimate). This was a remarkable achievement, as the company had grown from a small startup to a major player in the logistics industry in such a short period.
  • Attractive Acquisition Target: The company’s strong financial performance, coupled with its proprietary technology, made it a desirable target for potential buyers. AFN had demonstrated that it had a successful business model, a talented team, and a valuable technology platform. This made it an attractive acquisition target for larger companies that were looking to expand their presence in the logistics industry.
• In 2018, GlobalTranz, a leading technology-driven 3PL solutions provider, acquired AFN Logistics. This acquisition was a major milestone for both companies, as it created a combined entity with significant capabilities and resources.
• The acquisition was driven by several factors:
  • AFN’s Technology: GlobalTranz recognized the value of AFNgine and its potential to enhance their data analytics capabilities. The AFNgine platform was a key asset for AFN, and GlobalTranz saw the potential to leverage this technology to improve its own operations and offer new services to its clients.
  • Complementary Services: AFN’s strength in truckload brokerage complemented GlobalTranz’s expertise in LTL brokerage. The two companies had complementary strengths and capabilities, and by combining their resources, they could offer a wider range of services to their clients.
  • Customer Relationships: AFN had developed strong relationships with major manufacturers, top retailers, and leading carriers, further enhancing GlobalTranz’s market presence. AFN had a strong reputation in the marketplace and had built valuable relationships with key clients and partners. By acquiring AFN, GlobalTranz could expand its customer base and strengthen its market position.

Key Takeaways:

AFN Logistics’ journey exemplifies the transformative power of focusing on operational excellence, leveraging technology, and building a strong financial track record. The company’s success was not accidental, but rather the result of a deliberate and focused strategy that emphasized continuous improvement, innovation, and customer service.

The company’s strategic decision to develop its proprietary technology platform, AFNgine, proved to be a critical differentiator, enabling it to achieve significant growth and ultimately secure a successful acquisition. The AFNgine platform was a key asset for AFN, as it allowed the company to optimize its operations, differentiate itself in the marketplace, and create significant value for its clients.

This case study highlights the importance of a data-driven approach to process improvement, a commitment to innovation, and a customer-centric mindset in achieving business success in the competitive logistics industry.