McKay TransCold, a logistics company in Edina, has hatched a plan with BNSF Railway Co. to ship eggs and other Midwest products to the West Coast in refrigerated boxcars that will then return with California produce.
The service, known as TransCold Express, is set to launch in April with 50 BNSF refrigerated cars running on lines between California's Central Valley and the Chicago area.
The trains will carry upward of 200 truckloads of fresh and frozen produce and consumer goods weekly, with one railcar equal to four truckloads, according to the company.
Regional truck carriers will extend distribution about 400 miles from McKay-managed hubs at each end, covering Minneapolis, and much of the Midwest and East and West coasts. Plans call for adding a second 50-car train as soon as possible. The service will accept smaller, or less-than-truckload, shipments, helping small companies get their products to new areas.
Identifying eggs and other finished goods for the train's return trips west likely helped McKay TransCold win the business with BNSF over several competitors, said Randy McKay, CEO and owner of McKay TransCold.
"We had freight going to the West Coast," McKay said. "That's probably the biggest differentiator. We could be more competitive because we could pay for the freight both ways."
Moving west, besides eggs, will be such products as frozen pizzas, Âcoffee creamer and cereal bars. Headed east will be produce including carrots, grapes and broccoli along with citrus, cheese and possibly California wine.
The companies behind the rail service seem an unlikely duo. McKay TransCold essentially is a two-year-old logistics start-up, while Fort Worth, Texas-based BNSF, a subsidiary of Berkshire Hathaway Inc., has 41,000 employees and reported nearly $21 billion in 2012 operating revenue.
McKay TransCold expects to have 27 employees when the service begins, planned for April 30. The company now has 13 employees and is largely divesting itself of its legacy truck brokering service, which last year generated $2.5 million.
That figure stands to grow rapidly, with TransCold Express projected to generate revenues of $65 million a year with one unit train operating weekly, according to Jason Spafford, the company's vice president of business development. That would double to $120 million annually once a second train goes into service.
Dave Garin, BNSF group vice president for industrial products, said in a statement that the TransCold Express "represents a new milestone in Ârefrigerated train service for our network."
The leadership team
McKay, who retired as president and co-owner of Frauenshuh Cos. in 2007, had invested in ventures with David Frauenshuh during his 30 years in commercial real estate.
Other company leaders include Craig Carlson, who previously ran Wal-Mart's produce business; Joe Lombardo, a veteran in transportation management at Nestlé USA and other companies; Frank Harness, who is a retired Navy rear admiral, and David Lair, whose 30 years in trucking included moving sensitive commodities such as eggs and ice cream.
Spafford has 25 years of high-tech and logistics experience. His brother had a small trucking brokerage in Iowa and began looking into transporting eggs to the West Coast several years ago after regulatory changes in California appeared likely to reduce production there. McKay acquired the Iowa business in 2011 and moved the Âheadquarters to Edina.
McKay's son, Andrew McKay, who serves as director of logistics, has six years of experience in supply chain management.
"It seemed like a really smart business thing to do," Randy McKay said. "And it also gave me the opportunity to work with my son. My role is to hire really good people and get the big pieces done."
The expert says: Peter Southard, associate professor of operations and supply chain management at the University of St. Thomas' Opus College of Business, said McKay TransCold appears positioned to take advantage of increasing rail efficiency.
"BNSF is always looking for additional sources of revenue," Southard said. "I'm sure they looked at the Âexperience and talent that's on ÂMcKay's management team and said we're willing to try this."
Smaller producers particularly stand to benefit from McKay's ability to ship less-than-truckload quantities, which otherwise could be cost-prohibitive, Southard said.
Todd Nelson is a freelance writer in Woodbury. His e-mail address is todd_nelson@mac.com
