Decisions play key role in history of Linn Star Transfer

Sometimes personal decisions are as important corporate planning in the strategic direction, growth and ultimate success of a company. Ask Dennis Munson.

Faced with making a career move in 1991 to Washington, D.C., Munson chose to give up a $70,000-a-year position with MCI to keep his family in Cedar Rapids.

"My sons were fairly young at the time and I just felt that moving to Washington wasn't something we wanted to do," said Munson, president of Linn Star Transfer.

"I bought half of Linn Star Transfer from my brother, Steve, and went to work with him. After five years, I bought the other half of the company."

Steve Munson had purchased Linn Star Transfer from founder Sebert Cox in 1986, when the company was incorporated to facilitate the sale. Up to that time, Cox had operated the business as a sole proprietor, transporting mail between the Cedar Rapids Main Post Office and rural post offices.

"When my brother bought the company, it had three trucks," Dennis Munson said. "We hauled mail on the postal 'star routes,' which became the basis for the company's name.

"We picked up mail at the Cedar Rapids post office between 5 and 8 a.m. for delivery to the rural post offices. We brought mail back from the rural post offices in the late afternoon."

When Sears contacted Linn Star in 1991 about handling delivery and setup of appliances, Munson said using the trucks for deliveries during the mail hauling down time initially appeared to be a logical business decision.

"When it's 3 o'clock and you still have deliveries to do, but you need the same truck to run mail, something has to give," Munson recalled."Ultimately it ended up becoming two separate businesses with different trucks.

"We had to hire different drivers with primarily customer-service skills as well as installation skills. When they're going into someone's home, they're making a dozen first impressions all day long.

"They have to be clean cut, presentable and professional."

The transportation, warehousing and supply-chain management of goods represents an $8 trillion economic activity worldwide. Logistics in the United States totaled nearly $1.3 trillion last year, according to industry estimates compiled by Armstrong & Associates Inc. of Stoughton, Wis.

"It is a field that touches everything," said Jeff Zanarini, a managing partner at private equity firm HIG Capital LLC.

The third-party logistics market surpassed $133 billion in the United States in 2011. But it is still relatively in its infancy with only a 10 percent penetration of  only potential business, according to Armstrong & Associates.

Linn Star handles just about everything Sears offers for delivery, including the usual laundry and kitchen appliances as well as riding lawnmowers, humidifiers, treadmills, grills and other merchandise.

When General Electric wanted to switch so called last-mile logistics contractors for its appliances, Linn Star took on the additional business. The company later expanded into furniture delivery and some assembly for Ethan Allen Galleries and Lebeda Mattress.

"At this point, mail delivery is about 5 percent of our revenues," Munson said. "Appliance and furniture delivery accounts for most of our revenue, with furniture delivery pretty much based in Iowa."

Munson said 90 percent of Linn Star's revenue comes from outside the state. A small group of 'blue chip' customers have requested Linn Star to grow beyond Iowa.

"In 1996, GE asked us to handle their deliveries in Des Moines when they wanted to switch providers," Munson said. "In 1998, we entered Nebraska with appliance delivery in the Omaha market.

"The big move occurred in 2001 with Minneapolis. That was a large market and a culture change for us."

In a relatively short period of time, Linn Star expanded into Kansas City, Mo.; Denver, Colo.; St. Louis, Mo.; Wichita, Kan.; Little Rock, Ark., and Tulsa-Springdale, Okla. Another big step occurred when Munson decided to enter the San Francisco market, followed by Detroit and later Eureka in northern California.

Linn Star's Home Delivery division has up to 180 trucks on the road each day, handling about 6,000 home deliveries each week of household appliances and furniture.

"The business has morphed from all employees to using independent contractors, especially in the larger markets," Munson said. "The majority of our contractors lease their trucks from a truck-leasing subsidiary of Linn Star Transfer."

The Cedar Rapids company also recycles the appliances it hauls away after delivering new units, "de-manufacturing" them to eliminate waste going to a landfill. Munson said the decision to handle disassembly in-house grew out of his frustration with a third-party provider.

"I got tired of watching metal scrappers not properly disposing of appliances," he said. "When we first started handling it, there was an additional cost. Over time, the metal markets have changed, and there's an actual revenue stream from it."

Munson and Linn Star faced a major challenge when the company's office and warehouse was flooded in June 2008.

"We had been operating out of the old Farmstead meatpacking plant," he said. "In the flood of 1993, we had no water at all.

"We knew we would have access issues, so we planned to move out ahead of the flood crest. We moved our corporate office to our shop behind the Cedar Rapids Police Department and took out some merchandise."

He recalled the company wound up losing about 300 brand new appliances.

"Some of our employees kept going back in after the water went down to try and salvage some inventory, but it was impossible," Munson recalled.

"We sustained a loss of about $100,000 for inventory, but it could have been a lot worse."

On Wednesday, before the June 13, 2008, crest of the Cedar River, Munson had made the decision that Linn Star would never return to the Farmstead property, which was owned by the city.

"We forwarded nine inbound phone lines to two cell phones and that's how we operated for a month," he said. "All the dispatching for Denver, Detroit, St. Louis and other cities that we serve is handled from Cedar Rapids, and we never lost a delivery.

"We secured a year's lease on a building on Sixth Street SW, and that took care of our warehousing needs. On Sunday after the flood (in 2008), I noticed a vacant building off Seventh Street SW and we signed a lease for it as a temporary office without ever setting foot inside."

Knowing the company would eventually be forced to leave the Farmstead property, Munson had been looking before the June 2008 flood for land to build an office and warehouse facility. The flood and move to very temporary quarters accelerated those plans.

After securing land on Wright Brothers Court SW, Linn Star contracted with Hunter Companies for construction of an office and warehouse. The business occupied the building near The Eastern Iowa Airport in September 2010.

While agreeing that opportunities exist in additional markets, Munson has turned down expansions in Florida and Philadelphia.

"If it makes sense for us and it's a good fit, we will consider an expansion," he said. "We are looking for big box stores for future expansions. We're a Midwest company operating primarily in this part of the country.

"That has served us well over the years."