After nearly a decade of working in the shadows of its more visible railroad parent, BNSF Logistics is preparing a coming out party of its own.
The Fort Worth, Texas-based third-party logistics service provider, an independent, wholly owned subsidiary of BNSF Railway, is embarking on an aggressive strategy of organic growth and acquisitions that its chief predicted will catapult it from a company with about $350 million in revenues to one whose top-line is measured in the billions.
"I will be disappointed if we can't turn this into a billion dollar company, and something well beyond that," said Raymond B. Greer, a logistics industry veteran who held top jobs at FedEx Corp. and Ryder Integrated Logistics and served as CEO of 3PL and contract carriage provider Greatwide Logistics Services until February 2010. Greer was named in mid-February 2011 to be BNSF Logistics' first president in its nine-year history.
In a July 26 interview with DC Velocity, Greer said one of BNSF Logistics' key objectives will be to integrate all types of rail service—not just intermodal—into its value proposition for customers. "Anyone can talk about doing import and export, or do truckload and LTL. But few have developed a core competency of incorporating [all] rail as an alternative mode in the solution. That's our core competency," he said.
Greer said one of BNSF's target markets will be customers who spend broadly across the transport modes but don't have an intimate knowledge of how to work with the rail infrastructure to get the most out of rail service. The unit's acquisition strategy is designed in part to beef up its rail capabilities, which, to this point, have not been developed to levels Greer said are needed to accommodate future demand for the company's services.
Greer would not comment on specific acquisitions but said the railroad and ocean sectors would be the likely focal points of any buy-out activity. Toward that end, BNSF Logistics has hired Richard M. Metzler, another long-time transport logistics executive, who will serve as a consultant and oversee M&A matters along with Greer and the three other members of BNSF Logistics' board.
Despite its ownership structure, BNSF Logistics is and will remain "rail-neutral," Greer said. It relies on all of the country's railroads because a customer's situation may demand a national solution and there is no national railroad, Greer added.
BNSF is a privately owned operating unit of Berkshire Hathaway Corp., the Omaha, Neb.-based conglomerate controlled by the legendary multi-billionaire investor Warren E. Buffett. Greer said his unit, which he described as "profitable and self-sufficient," will still be able to turn to its parent for any capital that it can't generate out of revenue or cash flow.
However, he said BNSF Logistics will still need to compete for capital with other of the company's operations. "It's not like I am out on my own with a free checkbook," he said.
Greer admitted that BNSF Logistics' revenue is equivalent to a "rounding error" on its rail parent's overall balance sheet. However, he disagreed that the division meant little to the railway until Berkshire's late 2009 acquisition and his hiring roughly 18 months later. The increased focus on the unit is not due to any ownership change but is "being driven by BNSF Railway's desire to have logistics [become] an increasing and relevant part of its overall business over the long term," he said.