A glut of returned merchandise at doomed discount drug chain Phar-Mor Inc. provided inspiration for an O'Hara-based company that it used to become industry leader in "reverse logistics" services it sells to Fortune 500 retailers.
"I think we're one of the only businesses that benefitted from Phar-Mor," said Herb Shear, third-generation owner, president and CEO of GENCO ATC, a family-owned business that Shear's grandfather started more than a century ago as a wagon delivery service.
Last year, the company generated revenue of $1.5 billion. It has become the second-largest third-party logistics provider in North America and one of the top 25 such providers in the world.
"They are always adapting and looking for ways to serve customers better," said Gailen Vick, executive director of the Reverse Logistics Association, a Lehi, Utah-based trade group that in February presented Shear with its first lifetime-achievement award for his industry contributions.
"I don't really know how Herb has done it -- a company that size that's privately owned. It's amazing."
GENCO's turning point came in 1988, four years before Youngstown-based Phar-Mor collapsed into bankruptcy and investor losses estimated at more than $1 billion.
Shear says the retailer needed help with returned products at its distribution centers. GENCO built a software-based system to process Phar-Mor's returns. That revolutionized what now is called reverse logistics and paved the way for much of GENCO's success.
Reverse logistics involves returning to suppliers the products that customers return or retailers don't sell. Some are returned for credit and some are placed in secondary markets, such as outlet retailers, Internet businesses or overseas.
In 2002, Target bought into the service, quickly followed by Sears, Kmart and Wal-mart, among others. The service saved Sears nine figures on its bottom line, said Shear, 64, of Shadyside.
"That's what really propelled us," he said. "We went from our work regionally to doing work across the United States and Canada."
Hyman Shear, Herb Shear's grandfather, started the H. Shear Trucking Co. with a blind horse and a wagon in 1898. He delivered bales of raw leather from railroad freight cars to merchants on lower Fifth Avenue, Downtown. He bought his first gas-powered truck in 1917.
Sam Shear sold his Hill District pharmacy following the Great Depression and joined his father's business in the early 1940s. He increased the company's truck fleet and added regional warehousing and distribution operations for clients such as Kaufmann's and Gimbels department stores, Mattel toys and Copperweld Steel.
The company operated within a 50-mile radius of Pittsburgh and owned two warehouses when Herb Shear, then 22, joined the company in 1970. The company had 15 employees, which it refers to as teammates.
Herb Shear said he focused on the warehouse side of the business -- General Commodities Warehouse & Distributing Co. later was shortened to GENCO.
By the end of the 1980s, GENCO had amassed more than 2 million square feet of warehouse space in six Pennsylvania facilities.
The company grew from a $1 million trucking business in 1980 to a $10 million warehouse and distribution operation in 1990. By its 100th anniversary in 1998, GENCO had 1,000 employees and annual revenue of $100 million. Revenue grew to $300 million by 2003, largely because of the reverse logistics business.
Acquisitions and developments since allowed GENCO to expand its logistics services.
In 2010, GENCO paid $512.6 million to buy ATC Technology Corp., a Chicago-area forwarding and reverse logistics company in consumer electronics, wireless technology and automobile parts. The deal took the publicly traded company private and the company became GENCO ATC.
GENCO offers packaging, warehousing and distribution, transportation logistics, freight management, parcel negotiations and a government business unit. It sells products through the website, www.NoBetterDeal.com, and GENCO Marketplace.
Today, the company has more than 10,000 employees across 127 operations in the United States, Canada and Mexico. It manages more than 37 million square feet of warehouse space, handles more than $1.5 billion in freight managed annually and daily liquidates more than $5 million in returns and excess inventory.
Its list of more than 150 customers reads like a Who's Who of the Fortune 500 and includes many Western Pennsylvania business giants -- PPG, Heinz and Dick's Sporting Goods among them. In addition to other retailers, GENCO clients include Levi's, Nike, Dell, CVS and Harley-Davidson.
Though the company has changed, three tenets at the heart of the family business have not, Shear said. They are to provide exceptional customer service, value employees and turn a profit.
"Today, we continue those values," said Shear, who serves as operating partner for Cambridge Capital Partners, a private equity firm in Palm Beach, Fla., and this year was appointed commonwealth trustee on the University of Pittsburgh's board of trustees.
The company does not plan to go public, but Shear said that is among strategic options GENCO officials address every few years. For now, GENCO is concentrating on transitioning to a market-based organizational structure by the end of 2013. The company wants to strengthen its position in markets such as technology, health care and retail, Shear said.
He thinks his late grandfather and father would be proud of how GENCO reinvents itself as markets change.
"If they're looking down, they are smiling," Shear said.
Additional Information:About the company
GENCO ATC
What : An O'Hara-based third-party logistics provider, specializing in offering warehousing, distribution, transportation, parcel negotiation and other services to Fortune 500 companies and the United States government. It has 10,000 employees at nearly 130 facilities across the United States, Canada and Mexico, including more than 200 workers at its Western Pennsylvania headquarters.
Founded: In 1898 as H. Shear Trucking Co. Name changed in 1980s to GENCO, a shortened form of General Commodities Warehouse & Distributing Company. It became GENCO ATC in 2010 after acquiring ATC Technology Corp.
Headquarters: 100 Papercraft Park, O'Hara. Formerly based in the North Side, Strip District, West Mifflin, Harmarville and Cranberry over its history.
CEO: Herb Shear
Employees : More than 10,000 across the continent.
Revenue : $1.5 billion in 2011
