BNSF Logistics – Here They Grow Again

Springdale, AR Site Visit

March 28, 2006

By

Evan Armstrong

Key Personnel:

Eric Wolfe, Vice President & General Manager

Andy Cordischi, Director - Technology

Bob Henry, Account Manager – US Borax

Mark Richards, Controller

Mica Jordon, Director - Transportation Execution Services (TES)

Robert Sutton, Director - Supply Chain Services

Shannon Boyd, Director - Integration

Todd Hoyt, Director - Marketing & Business Development

Founded in 2002, rapidly growing BNSF Logistics (BNSFL) had gross revenues of $158.6 Million in 2005 and is on track to generate revenues of $190 million in 2006. While over half of its growth has been organic, BNSFL has used strategic acquisitions to build a North American network of 14 offices and increase the breath of its service offering. Today, BNSFL is positioned as a major North American transportation manager. With four successful acquisitions under its belt, it has additional acquisitions planned to close in 2006. Its acquisition history is detailed below.

 June 7, 2004 : Acquired Sumark Services

    • Non-asset based domestic transportation management company

    • 54 employees

    • Gross revenues of $40 million in 2003

 May 3, 2004: Acquired Rite Choice Transport

    • Small non-asset based domestic transportation management company

    • Est. $5 Million in Gross Revenues for 2003

 September 15, 2003: Acquired MRS Companies

    • Non-asset based domestic transportation management company

    • 34 employees

    • Est. $16 Million in Gross Revenues for 2002

 August 13, 2002: Burlington Northern Santa Fe Corporation (BNSF) announced the formation of BNSF Logistics, LLC.

    • BNSF Logistics acquired certain assets of Clicklogistics, Inc.

    • Clicklogistics was a non-asset based domestic transportation management company.

Much of BNSF Logistics organic growth comes from its ability to manage rail in addition to intermodal and truck transportation. It is one of a handful of US 3PLs who can effectively manage bulk rail transportation. This multi-modal competency coupled with value-added services and strong information technology provides BNSFL with a competitive advantage awarding it entree into large accounts with rail and truck transportation needs. Value-added services include: cross-docking, transloading, expedited truck/rail service, pool distribution, and supply chain network analysis and re-design. US Borax, Wal-Mart, Lowe’s, Louisiana Pacific and the Home Depot are major BNSF Logistics customers.

One of BNSF Logistics most significant supply chain operations is for US Borax. US Borax has an approximate annual transportation spend of $40 million and ships a mix of dry bulk and packaged products. BNSFL manages outbound rail and truck transportation from Borax’s facility in Boron, CA and outbound bulk rail moves from Borax’s facility in Wilmington, CA to the port of Long Beach. As a value-added service, BNSFL is also managing Borax’s fleet of 700 covered hopper railcars. Through process improvements and improved IT, BNSFL has provided US Borax with significant cost savings, improved rail transit times, increased rail car utilization, reduced lease expenses, and reduced exposure to demurrage charges.

For Louisiana Pacific, BNSFL has used its rail transportation management expertise to improve service levels and reduce transportation costs in one of its regional distribution operations. Using its IT supply chain modeling software, BNSF Logistics converted standard outbound truckload and intermodal moves to synchronized boxcar moves for delivery to forward inventory deployment sites and customer locations. The new operation has reduced customer order lead-times, reduced damages and delivered a 30% per ton cost reduction to Louisiana Pacific.

For the Home Depot, BNSF Logistics is managing intermodal and truck transportation of ceramic products to Home Depot international distribution centers strategically located in the U.S. In addition, BNSF delivers truck capacity to Home Depot for seasonal surge movements of lawn mowers and other products. Home Depot uses BNSFL to deliver store racks and other fixtures requiring flatbed service.

To support large contract logistics customers, BNSF Logistics is running version 6.1.8 of i2’s transportation management software suite. i2’s “Transportation Manager” is being used to support day-to-day transportation management operations; it’s primarily function is to consolidate less-than-truckload (LTL) shipments into rail, intermodal, and truckload shipments. i2 automatically tenders loads to carriers and provides supply chain visibility. It is also fully integrated with BNSF Logistics proprietary operations/dispatch system to share information with BNSFL’s Transportation Execution Services group (TES).

TES is the operational backbone for BNSF Logistics and performs multi-modal transportation management, freight brokerage, value-added transportation services, and transportation exception handling services. TES incorporates the acquired operations of the various acquisitions and operates out of 14 US offices.

Managing BNSF Logistics rapidly expanding operations is a strong operations team. Wolfe assembled a good portion of the team while at J.B. Hunt Logistics and Cardinal Logistics. This close knit group is long on logistics operating and engineering experience. Key people have also been added through acquisitions and from the railway further strengthening the organization and rounding out the team.

Wolfe and his team have generated strong revenues and solid margins over the past two years. Under their management, we expect BNSF Logistics to stay on track and become a top ten North American 3PL.