Werner Enterprises – Laying the Groundwork to $3 Billion
Omaha, Nebraska USA Site Visit
June 15, 2018
Marty Nordlund – Sr. EVP and COO
Craig Callahan – EVP and CCO
Nathan Johnson – SVP and CIO
Matt Parry – SVP of Logistics
Craig Stoffel – Vice President of Global Logistics
Ronnie Thomas – Director of Information Technology Services
Fred Thayer – Director of Corporate Communications
Founded in 1956, Werner Enterprises has grown from a small trucking company into a large, multifaceted transportation and third-party logistics (3PL) provider. Its 2017 revenues were $2.1 billion and net income was $92 million. Werner Enterprises’ service offering is split between truckload transportation, dedicated contract carriage, cross-border Mexico and Canada services, and non-asset based international and domestic transportation management. Werner Enterprises has more than 14,000 associates (including over 3,000 non-driver associates) and trucking assets of 7,435 tractors and 22,900 trailers.
Of its $2.1 billion in 2017 revenues, $805 million (38%) was from one-way truckload transportation services (TL), $830 million (39%) was from dedicated contract carriage (DCC), non-asset based third-party logistics operations (Logistics) accounted for $418 million (20%) and Werner’s driving schools and other accounted for $64 million, or 3% of total revenues. Werner’s long-term goal is to have its three main business units (TL, DCC and Logistics) generate approximately $1 billion in revenues apiece.
Forty-nine percent of Werner’s 2017 revenues came from retail and consumer products customers. This was up slightly from 2016 due to increased e-commerce business from its core big-box and expedited shipping customers. Grocery products customers accounted for 27% of 2017 revenues, manufacturing and industrial customers were 13% of revenues and Logistics and other customers accounted for 11% of revenues. While 75% of its revenues came from its top 50 customers, no single customer represented more than 8% of total revenues.
From a commercial development standpoint, Werner works with its core customers and potential new customers to understand their changing transportation needs and uses a prescriptive approach through Werner’s various service offerings.
Werner Enterprises has invested aggressively in its Werner Logistics non-asset based 3PL operations to expand beyond its core North American trucking operations. Werner Logistics is the new name for Werner’s prior value-added services (VAS). It provides non-asset based domestic transportation management 3PL services including freight brokerage, intermodal rail, power-only and less-than-truckload (LTL) transportation. Werner Logistics also includes Werner Global Logistics (WGL) with its international 3PL operations, and Werner Final Mile which provides last-mile delivery solutions.
Werner Logistics has increased its investment in technology to over $10 million a year to maintain its reputation as an industry leader in technology. Werner’s proprietary “SMART” transportation management system is utilized for its operations. It is web-based and has both transportation planning and execution functionality. For freight brokerage, it has lane pricing benchmarks and carrier capacity monitoring. During our visit, we were able to review the results of new algorithms developed to help freight brokers more easily find the best carrier for a load. It uses known carrier capacity needs and historical lane pricing information to prioritize potential carrier matches for a load and provides the freight broker with a sorted list of recommended carriers. In addition, Werner interfaces with MacroPoint and a handful of electronic logging device (ELD) providers for carrier/shipment status updates.
Approximately two-thirds of Werner Logistics’ revenue is generated by its domestic transportation management and freight brokerage operations. Brokerage has grown revenues in excess of 25% since 2016. Around 70% of the brokered loads and 40% of the managed transportation business, are sourced on a spot-market pricing basis. With a focus on maintaining highly efficient and diverse operations, Werner arranges transportation for over 200,000 loads per year from a carrier base of over 18,000 in the following modes: dry van, refrigerated, flatbed and bulk.
Werner Logistics’ intermodal operation works with all Class 1 railroads and has access to nearly 85,000 rail-owned containers. Werner Intermodal utilizes the CSX and Norfolk Southern railroads in the East and Union Pacific in the West. For cross-border Mexico loads, it contracts with Kansas City Southern and Ferromex. Werner Intermodal manages hundreds of cross-border containers each week and has contracts with drayage carriers along with its own dray fleet to provide an end-to-end offering.
Werner Global Logistics
Werner Global Logistics (International) was founded in 2006 and is made up of three separate legal entities: Werner Global Logistics U.S., LLC, Werner Global Logistics (Shanghai) Co. Ltd. and Werner Global Logistics Mexico. These operations provide international transportation management (ITM) services to and from 130 countries globally. WGL’s key ITM services include air and ocean transportation management, purchase order/vendor management, customs brokerage and compliance consulting, with coordinated customer service support utilizing WGL’s proprietary “SMART” transportation management system platform.
Werner Global Logistics U.S. is a licensed U.S. NVOCC (non-vessel operating common carrier), a U.S. Customs Broker, TSA-approved Indirect Air Carrier, ITAR Certified Air Carrier and IATA Accredited Cargo Agent. In 2014, Werner Global Logistics’ Shanghai subsidiary made an equity investment in Hercules Logistics Co. Ltd., a solid domestic China third-party logistics and asset-based transportation provider with its corporate headquarters in Shenzhen, China. Hercules’ main operational capabilities include: LTL and TL transportation, intermodal drayage, warehousing and customs clearance. Hercules is listed on the Chinese NEEQ stock exchange.
In addition to China and North America, WGL has operations in Australia, Canada and the Netherlands. It has also established an agent network in Africa, Europe, Central and South America, Russia, India and the Caribbean. WGL’s largest NVOCC/freight forwarding trade lanes are from Asia to North America and Mexico to Latin America.
Werner Final Mile
Forty-nine percent of Werner Enterprises’ revenue is from retail customers. This retail business is driving significant e-commerce related growth at Werner for its final-mile transportation management services. To meet this demand, Werner spent the last year and a half developing a new service line, Werner Final Mile, for its Werner Logistics offering. It has developed an agent network of 168 final-mile terminals within the U.S. specializing in the delivery of large e-commerce shipments. Services range from appointed inside deliveries to full “white glove” delivery, including two-person delivery to a consignee’s room of choice, unpacking, debris removal and even set-up/installation. Each agent is utilizing Werner’s final-mile transportation management system and delivery crew smartphone mobile application to manage the deliveries and obtain proofs of deliveries.
Werner Enterprises has redesigned its operating model for growth. Its vision is squarely set on strategically developing complementary non-asset based 3PL operations and transportation services to meet customers’ global supply chain needs. As it expands, it will continue to leverage its corporate culture and long-term focused values in developing relationships providing Werner Enterprises with significant competitive advantages.
Sources: A&A Primary Research, http://www.werner.com/