Dunavant Touts Direct Sales
By Bill Dries for Memphis Daily News
Woodson Dunavant and Don Lake are used to the question now that Dunavant Enterprises is through its non-compete with Dreyfus Commodities, the company that bought its global cotton operation in 2010.
And the answer is no, Dunavant is not getting back into commodities after its conversion to a logistics company.
“Have we given it thought? The answer is no,” said Dunavant, vice president and director of business development. “The risk is off the table. We are a provider now. We are not a shipper. We are a logistics provider.”
Lake, the vice president of global operations, said the company’s transition to logistics, and agriculture in particular, has turned another corner in the last four years to two-party commodity sales for international nonstop transportation of commodities from farmers to foreign buyers.
“The hard part is getting it from point A to point B and all of the compliance and regulatory issues that you have to navigate,” Lake said. “They don’t know how to do that. We know exactly what has to be done to move it from point A to point B and not break any laws in between. They don’t have that knowledge. And oh, by the way, it’s less expensive.”
Dunavant Enterprises is reacting to a change in the last five years that involves the post-recession global economy as well as changing prices in ocean containers. Those and other factors have prompted foreign buyers to seek to buy in a more direct way from suppliers with better control of when and where it arrives.
“He gets the full visibility in terms of shipment, meaning he can see where that container is through our system, when we pick the container up. He gets to cut the middle man out. He’s paying us to handle the freight for him,” Dunavant said. “We are working with the ocean carriers, doing the ocean freight in some respects. We are doing the documentation with the U.S. government, filing the necessary paperwork that you have to do on his behalf. And we are providing him basically a landing cost for us to perform all of those services for him.”
The alternative has been to buy on a cost, insurance and freight – or CIF – basis. That means the seller has to handle the shipment and the regulatory hoops to jump through.
“He wouldn’t have the visibility,” Dunavant said of the CIF method. “He just knew that he was due to land there sometime in a month or a week.”
Two-party commodity sales are also a function of ocean-going containers being more affordable.
“In the ocean market for containers, it has been a steady decline in prices,” Lake said. “A container is just much more doable than shipping in bulk. It’s cyclical though.”
And the days of buying 10,000 tons in bulk – the kind of deals that Dunavant pioneered in its cotton days – are gone since 2008 when the recession landed.
“Now the bank won’t finance it,” Dunavant said. “So he can only buy 1,000 tons, but he can buy it in containers. The timing of the shipment is going to be a lot smoother.”
Dunavant’s logistics customers began approaching them at trade shows and on overseas trips about the new direction, Lake said. The company was about two years into logistics and out of the cotton business, which it sold to Allenberg Cotton Co. operating in the transaction as Dreyfus.
Woodson Dunavant said it evolved as part of the back and forth of making sales.
“It was part of our sales tactic to say, ‘We can introduce you to some farmers that are farming rice or alfalfa. You then discuss the purchase of what you need with them and you tell us when you’ve made a purchase,’” he said.
Since then, Dunavant has beefed up its infrastructure for the new direction with 13 drayage terminals in the Southeast and 300 trucks. The company also is adding more warehouses, with a recent signing in Dallas adding to capacity in Memphis and Houston.
All of them bear the Dunavant name, which is a brand Lake and Dunavant say resonates with customers who know the company’s past navigating the same hoops they face in moving what they’ve bought and what they are selling.
Some of the early customers were familiar.
“We went to our old competition and said, ‘Can we help you?’ The answer was yes,” Dunavant said.
Cotton is about 20 percent of Dunavant’s business. They also do lumber and logs.
“It took some learning and getting used to just to understand the terminology,” Dunavant said. “We’re doing quite a lot of volume there.”
Lake said the transition was difficult at first.
“We were big. We had a lot of power,” Lake said of the move from cotton to logistics. “I had to think about it in different terms. I went from, ‘I say jump and you say how high,’ to vice-versa. … Doing what we do now is driven by customer service.”
See original article here: http://www.memphisdailynews.com/news/2015/oct/16/dunavant-touts-direct-sales/.