CEO PERSPECTIVE: Integrated Transportation Services Fuel Growth

As part of a special series in Railway Age’s March 2021 issue, 11 North American railroad CEOs address the daunting challenges the freight rail industry faces as the 21st century enters its third decade—from operations and technology to marketing and growth. Here, Dan Smith, CEO of Watco, discusses how listening to customers, asking questions, and learning to solve their problems creates value.

If you ever wanted an example of why it is so important to stay focused on the ever-changing needs of your customers, I give you 2020. A year that brought us the first pandemic in 100 years and the worst financial crisis since the Great Depression, also created real challenges for many of the customers we serve. Times like these are when you build relationships, and at Watco, they vividly remind us of how we got to where we are today. 

We learned long ago that you should listen to your customer, ask questions, and learn how to solve their problems in a value-creating manner. If you do that every day, you will find you earn more of their business. And if you do it well enough for long enough, your customer will reward you with the right to perform new service offerings that you never dreamed you could provide, even in the most challenging of times. That is when integration and efficiency matter the most to our customers, when they need help. At Watco, we have always believed that some of the value created by a customer sharing more business with us should always be shared back with them. The approach has helped us go places we never imagined.

Watco has been blessed to follow our customers into many new areas of service. As a matter of fact, we can trace our roots back to the exact moments when customers invited us to integrate deeper into their supply chain by inviting us to take on new services for them. Those moments have formed the cornerstones of the services Watco provides today, underpinning the integrated transportation services platform that allows us to return more and more value to our customers.

— “We believe the future remains bright for those who create value for their customers and fairly share it with those who create it.” —

Watco got its start in Louisiana providing in-plant switching and car cleaning in 1983. A few years later, we started our first railcar repair facility in Kansas. That facility needed additional track and more frequent switches to serve our repair customers better, so we attempted to acquire three blocks of rail to switch ourselves. The only option we were given was to acquire all 100 miles of the SEK Railroad, which has now grown into a 400-mile line known as the South Kansas and Oklahoma Railroad, handling more than 70,000 carloads per year. 

We frequently like to remind ourselves that we were a customer of a railroad before we owned any railroads. Had things gone differently, we might have ended up with only those three short blocks of rail we wanted. But we said yes, and now we own or operate more than 7,000 miles of rail over 44 railroads, 35 industrial switching locations, and 15 shop and mobile repair facilities in the United States, Australia and Canada. We wouldn’t have any of them if we hadn’t said yes to a customer that invited us to take on a new service we hadn’t provided before, including when we needed to do it for our own shop. 

In the late 1990s and early 2000s, we were asked to begin loading railcars with various commodities within our growing network of short lines and switching sites. Also, we were fortunate to acquire an amazing multi-modal asset in Houston known as Greens Port Industrial Terminals on the Houston Ship Channel. The customers with us on this part of our journey helped us with our integration into transloading. Today, within our terminals and ports segment, we own or operate more than 80 terminals in the United States, Australia, Canada and Mexico. All of this was only possible because customers were looking for solutions, and we were looking to share value to those who asked us to help them.

In 2014, we started our logistics segment at Watco. We were approached by several customers to help with their transportation needs—not only using Watco assets, but even when we weren’t physically handling it ourselves. This made complete sense to us, because since the beginning, Watco has always believed the right solution is the one that creates the most value for the customer—even when it means they don’t use Watco’s services. It is all about delivering the most value, and if you can’t do that with what you have, you better just admit it. Because the truth will find you eventually.

— “What does service integration mean to Watco? It means survival. It means growth. It means always sharing value with your customers. It means continued success.” —

What does service integration mean to Watco? It means survival. It means growth. It means always sharing value with your customers. It means continued success. It is the single, biggest reason we have been able to grow into the team we are today—a team made up of nearly 5,000 amazing team members serving thousands of wonderful customers who have allowed us to reach levels of success that would have been impossible to imagine on that hot July day in Louisiana back in 1983.  

By focusing on integrating our services into our wonderful customers’ supply chains during the most trying time in over a century, our amazing team members gave us our most successful year ever in 2020. We believe the future remains bright for those who create value for their customers and fairly share it with those who create it. 

Read more of Railway Age’s special CEO Perspectives series:

• Ian Jefferies, Association of American Railroads: Sustainable Economic and Legislative Policies
• Katie Farmer, BNSF: Leveraging Advanced Technologies
• Keith Creel, Canadian Pacific: Growing the Top Line
• JJ Ruest, CN: Improving Customer Supply Chain Visibility
• Jim Foote, CSX: Railroads as a Sustainable Business
• Pat Ottensmeyer, Kansas City Southern: Maximizing USMCA for Cross-Border Growth
• Jim Squires, Norfolk Southern: Building the Digital Railroad of the Future
• Lance Fritz, Union Pacific: Smart Capital Investment Strategies
• Peter Gilbertson, Anacostia Rail Holdings: Providing Outstanding Customer Service
• Dean Piacente, OmniTRAX: Building Better Communities Through Industrial Development