This week we kickoff an exciting new series for the Be Epic Podcast, the CEO Series, where Matt sits down with top CEOs to discuss their companies, how they came to be CEO, innovation and more.
To kickoff the series, this week Matt sat down with John Roberts, chief executive officer of J.B. Hunt Transport Services, Inc.
In the episode, John and Matt to touch on a variety of topics including how John came to the position he is in today and past, current and future initiatives of the company. John starts off with an incredible story highlighting the importance of family while in positions of leadership and then moves into strategy from a portfolio management perspective.
The conversation then moves onto the expansion of supply chain as an industry, the importance of logistics, and the advances made in leaving a better impact on the environment. Matt then inquires about John’s intermodal business and the way these companies are making a larger impact on the environment.
The conversation closes with a discussion around the impact that a healthy work culture can have on individuals as well as the company.
Episode Transcript
John Roberts 0:00
That can take pain that's associated with being a truckload shipper and make it go
away because you move to an intermodal position. We have a train, we have the great
truck. Oh, by the way, you're gonna do a wonderful thing for your environment there.
There's not doesn't take very long to get there.
Matt Waller 0:19
Excellence, professionalism, innovation, and collegiality. These are the values the
Sam M. Walton College of Business explores in education, business and the lives of
people we meet every day, I'm Matt Waller, Dean of the Walton College and welcome
to the be epic podcast. For the next few episodes, I will share conversations with
top CEOs about the future of the workplace. The pandemic has transformed the way that
we work, and we discuss their predictions for the future. I have with me today, John
Roberts, who is chief executive officer of JB Hunt Transport Services, Inc. And he's
also of course, on the board of directors. He is an alum of our college. We're very,
very proud of him and his accomplishments. Thank you so much for joining me today.
John.
John Roberts 1:14
Glad to be here, Matt. Thank you.
Matt Waller 1:17
I, like I say I'm, I just remember meeting you a long time ago. And I don't remember
what your title was a time I think was 1995, you came to one of our first meetings.
It was before we had the Supply Chain Management Research Center, it was when we were
first talking about creating it. And you came to a meeting. And I remember being very
impressed with you as it was first time I'd met you. What were you doing back then
what was your title back then?
John Roberts 1:44
At that point, I was vice president of marketing strategy for the company, which was
a role that we created coming out of an exercise we had done between Procter and Gamble
and Warehouser in a joint bid, kind of consolidation of raw materials, packaging materials,
and then outbound finished product and the work we had done really tied engineering,
and sales and pricing, and our design teams together. And we like to work. So we kind
of that was a project that ended up being a permanent job or somewhat permanent job
for me in 95.
Matt Waller 2:28
I want to I want to talk with you, John, about strategy about leadership. But before
we get into that, I want to start with a story that I'll never forget. And part of
the reason I remember it so well is because I know you and I thought this, I can see
how this would happen. But also I wrote, I co-authored that book with Kirk Thompson,
purple on the inside, which was a book about strategy and used JB Hunt's history as
an example of applying strategic thinking to a company. But I remember this story.
And I'd like you to tell it a bit because it's so interesting, a great way to start
because actually, it does incorporate strategy and leadership concepts as well. But
it occurred and if I get any fact wrong, tell me. But it occurred back in 1997. And
you were on vacation with your wife and two young kids. And JB Hunt had acquired a
group a segment that basically was a combination of dedicated contract services, and
final mile. And it was doing about 150 million at the time, I believe. And, and the
top people in the company of that of that dedicated contract services division segment,
I should say segment moved, they left. And if I remember this correctly, Kirk and
some other people called you and said, hey, they were doing a field promotion basically,
hey, guess what? You're going to need to leave your vacation and you need to run this
new segment. Is that right?
John Roberts 4:39
Yes, it is back in the day, the time before 95 that we talked about just a minute
ago I was a field salesperson and dedicated and had a fair amount of success in not
only selling but running parts of that business before that, moved to the vice president
of marketing strategy. And what happened while I was actually down there with my wife
and two kids, but also my my brothers and my my dad, and stepmom, it was an annual
trip to Gulf Shores, Alabama, we made it many, many years, it was a pretty simple
trip. And it was actually before the days of cell phones. So actually, dad and I were
sitting on the beach, having a beer talking about baseball, and I went in to freshen
up our beers, maybe grab some lunch and check my voicemail. And really literally about
12 or 14 people were all signing off this group that you talked about that we had
brought in saying goodbye. And I looked at that and said, something's up something
weird is happening. One of the voicemails was from Kirk Thompson, and Wayne Garrison,
then the chair that you need to call us right away. And so I called in thinking that
I might be moving into VP of sales or some role like that. And they said, hey, you're
gonna be the next president of DCS. I was 32 years old. And by the way, the company
plane is on the way to get you. And I said, Kurt, Wayne, I, with all due respect,
I'm not making this decision in this vacuum, I really need to talk to my wife. And
so with air of surprise, I hung up and went to what was actually a little fun park
where Tamra, my wife had the kids, they were four and two. And she, of course, was
shocked to see me. And we went, they took the kids back to dad's house. And we went
to a little crab shack. And she and I sat at a table with a napkin. And we listed
the pros and cons of me taking this job. And we together agreed that it was a good
decision for our family, knowing that it was probably going to be pretty challenging
with 12, or 14 of the top people leaving, and I'm going to be the only guy there.
And I really don't have any experience running a $150 million division. But together,
we decided that was a good move. And the reason that story has has held so much value
for me over the years is Tamra and I have never really had any stress in our work
together because we make decisions together. And, you know, we we started in 97, at
150 million, we ran the company to through 2010, where we got real close to a billion
dollars in revenue. And then as you know, I took a different job starting January
one 2011.
Matt Waller 7:59
Well, that's, that's a remarkable, it says a lot about you, and how you operate as
a person that you brought your family into this before just making your own decision.
Leadership, you know, when one of the a lot of research shows that a key characteristic
of leaders is they're good at gaining alignment, and that is getting other people
on board. And a key part of that is getting people involved in the decision process.
John Roberts 8:31
That's right.
Matt Waller 8:32
And so you by sitting down with your wife at the Crab Shack and going through the
advantages and disadvantages. You know, you you were you're really even though I know
you were your purpose in doing that was you really wanted your wife's input, you wanted
to make the decision together, but in effect that also, you were both on board with
whatever decision you came up with.
John Roberts 8:58
That's exactly right. I didn't know I didn't know as much about that then as I do
now, Matt, I just it felt like it was important not to go off on such a meaningful
decision without really her understanding and being able to say, I really don't want
you to do that if she did, didn't tell her the plane was already in the air, any of
that stuff. But you know, it did it did serve us well. And it taught me a lot about
gaining alignment. It's a great observation.
Matt Waller 9:32
Well, you also, you're involved in all kinds of things outside of JB Hunt as well.
Of course, you're on my Executive Advisory Board, but you're also on the Arkansas
Children's Board, and you're on the Federal Reserve of, the Bank of St. Louis audit
committee. So you, you, you pay attention to your family, you give back to the community.
And of course recently, the Walton College was named the JB Hunt, Transport Department
of Supply Chain Management, thanks to generous gifts of the company. The gift, the
$5 million gift of course endowed the department but you all have given many millions
more than that recently and over the years. So you you really have a broad perspective
and when I when I think about the different segments of JB Hunt, like intermodal,
dedicated contract services, integrated capacity solutions truckload, and and final
mile, and just how they have grown so much over the years, but they've also played
an important role from a portfolio management perspective. Would you mind speaking
to that, from a strategic perspective?
John Roberts 11:05
We are great students of history, Matt. And when I ran DCS, dedicated contract services,
I learned different aspects of this industry that we serve in terms of resiliency,
differentiation, difficulty, capital intensity. And it really informs where we make
our investments based on what our customers desire and need from us that we can achieve
a ecosystem like return. So a return on that investment to reinvest. And those channels,
those segments that you mentioned are all not necessarily sequence to mean, supply
chain management happens. But that as we as we learned at DCS, if we focused on really
generic business, it would be a lot more volatile, than when we focused on more difficult
business that had higher service requirements that solved more complex problems for
customers. And over the years, we learned that we need the different segments available
and growing and healthy, to facilitate the solution to those problems. But where we
had challenges for instance, in irregular route truckload, which we started out as
an irregular route truckload company, we there were, there were real high highs and
really low lows. And that's a real capital intensive business. And over the years,
we look at something like intermodal and see that it wasn't as volatile. And it didn't
present us with the same sort of sort of unpredictability that we were living with
in our truck load. But so you'll notice that we've migrated a lot of the capital intensity
out of our trucking business, because that's a better way for us to respond, still
serving the customer's needs. But doing it in a way that creates a more healthy ecosystem,
dedicated, proved to us that it can be extraordinarily resilient, doesn't present
us with the highs and lows, answers real important questions for our customers, because
dedicated lives real close to our customer's customer. So their dollars their purchase,
and they will behave and respond differently when we're solving a problem that is
creating a cash register event. So we really pay attention to that with final mile.
And with ICS. We've got some work going on right now. And transloading, you've probably
read about that is a continuation of that understanding the needs of the customer
appreciating whether or not we can compete and generate that return. And are we continuing
to sort of elongate our our positioning in supply chain services. Last thing I'll
say is, you know, we we've paid a lot of attention to the what we call induction of
inventory, either from production or from import through the supply chain through
distribution and consolidation channels. So you think about intermodal and highway
services, really providing a holistic answer to inventory movement, all the way to
a place where it's ready to be positioned for sale or consumption. That's really where
the most youngest division segment that we have is final mile, which is not point
of purchase, but point of consumption. And so you can sort of look back at that sequence
and see, we can handle inventory from, if I may soup to nuts. And where else can we
add on and think strategically about what's missing from that, which I think will
be a lifelong journey. Honestly.
Matt Waller 15:23
When you keep, I mean, I've I've been following JB Hunt since 1994, when I moved here.
And it's been remarkable to see, I remember, in the newspaper, one of the trade rags
or the newspaper was criticizing JB Hunt, at one point for investing so much in containers.
I don't know if you remember that. Of course, that was it's funny in hindsight, to
think that they thought you were buying too many containers. But, you know, it's also
interesting to see how you all continued to expand your intermodal offerings. And
you mentioned a minute ago, the transloading network. And if I remember correctly,
you- I think you added locations in Washington and Texas,
John Roberts 16:20
Yes just recently Laredo, and Seattle. And then we have Southern Cal and in New Jersey,
so we got a pretty good look we're considering what to do in the southeast. But those
are key points of entry.
Matt Waller 16:35
Well, you know, this idea of, you know, transferring international ocean freight into
53 foot containers for rail or road makes a lot of sense. It's expanding your supply
chain as a company.
John Roberts 16:56
Yes it is.
Matt Waller 16:56
And the portfolio of what, and being able to provide drainage as well. This is something
that the country needs, it's like a, it's clearly a win-win for both the company and
the country. It's so critical right now, how- would you mind sharing just a little
bit about your decision to get further into that area?
John Roberts 17:21
Yeah, I'm happy to Matt, we we're always looking at data. One of the things that I
think we're all very proud of is we're very objective. When we make decisions, it's
it makes life simpler. And it gives us a trail to understand how we got where we are
and how we're doing as we go forward. So we look at the data of demand that is that
could sit on our current and potential intermodal networks, we see two key opportunities.
One is the freight that moves on the highway systems today, in truckload, one truck
one trailer, generally speaking, if we get up around a 100 to 1,000 miles and beyond,
we have a very compelling economic discussion. And that's really because it's just
physics, right? I mean, a train can handle 400 boxes, it uses a third of the fuel
or half the fuel, friction levels are incredibly low. The networks are, even though
today we have some challenges in service, the networks can be very reliable. So that's
a source for us and really been the primary source for our growth today, we still
see a lot of opportunity in conversion. And also, by the way, think with the movement
of environmental awareness that we feel and see, intermodal continues to be a very
current part of the discussion. There's a different sort of element today that we
believe is positive and will help drive that conversion from highway to rail. But
we also study a lot of data on market share. And something that revealed itself years
ago, is the number of containers that come in that don't transload and it's a staggering
number. It's it's equal to approximately the number of domestic 53s that move on a
monthly basis, hundreds of 1000s of containers. And in a 40 foot container. We're
dealing with incredible inefficiency there. We're taking up space on trains, we're
moving containers that are way too small for the infrastructure that they could operate
on. They do not have a natural networking backhaul system. So when we come in to the
central US, there's nothing going back so we got to take up another spot on a train,
we got to have drape to do work that isn't generating anything productive, on and
on, you know, the dynamics here. And so we kept looking for had anybody been successful
transloading? Who are they? What are they? Again, back to the data. Who does this?
Do they have an ecosystem that's healthy in terms of generating proper returns on
investment that they can put back into the business? And we haven't really found a
lot of positivity there. So we stayed back. until just recently, when I think the
big change was the ship lines sort of changed their perspective on their their 40
foot container and whether they really wanted to go in for 2, 3, 4 weeks at a time?
Or would they rather have it empty at the port, so they can go ahead and get it back
where it's going. That's helped us. Additionally, the ESG dynamics will also play
a role here. But we opened a test facility in New Jersey, really with just the the
intent to learn, what does this feel and look like? Where are the shortfalls? Could
we bring something to the table that isn't there. And we and we found some pretty
good developments pretty early that you mentioned Dre. Chassis management is a real
shortfall and international. We're real good at Dre. And we're really good at chassis
management. So we start to apply that thinking we get more comfortable with it. Same
same approach happened with final mile, we opened a facility in Tulsa, we opened the
facility in Little Rock, we learn the business, were we good at it, could we be better
than others? Could it be meaningful in scale? And because the raw material, if you
will, the the conversion potential is in the hundreds of 1000s of loads every month,
we know we're dealing with a large addressable market. So you know, we use a term
around here called logical adjacency. And what that means is how much of what we think
we want to go do is logically adjacent to what we already know how to do. I'll give
you a kind of an offline example. We started getting into the agricultural delivery
business and dedicated years ago, it was met with a lot of resistance internally from
the older management folks that had either worked on the farm or had to do maintenance
on farm equipment and had to do pretty good sell job inside that get that going. But
the argument was, look, it's a truck, it's a trailer, it's maintenance of driver safety,
fuel, sprouting, scheduling, the things we don't know are how to offload grain into
a feed silo. But 80%, 85% of what we need to know how to do we already know how to
do and that really opened up the door for us, as we looked at doing restaurant delivery,
because we really like that economic strength that we find in agriculture that we
find in food and grocery. And so that logical adjacency was applied again here with
the Crosstown transloading facility. And with with progress in New Jersey, we opened
a facility in Southern Cal, and it was it was sold before we even advertised it. So
we know we're doing something here that is needed. We think we're pretty good at it
with Seattle and Laredo. We've got to really sit back and say now, okay, this this
model, this test seems to be working. Now, talk to me about what we want to see this
be in the next three, five and 10 years, and how does it affect the rest of the lines
that that we're we're hoping to feed into?
Matt Waller 23:57
Wow, the adjacency approach to strategy makes a lot of sense. And you all have clearly
executed on that profitably. So back to you mentioned something about ESG one of our
several of our professors, but one of them in particular Dr. Mark Scott is really
an expert on sustainability and supply chain and logistics. And he, we were talking
not too long ago and he said you know, if you look at the sustainability, impact of
intermodal it probably dwarfs anything that could be done in electric or hydrogen
or anything else and it's very calculable. You know, it's a it's a it's you can calculate
how much benefit and it really you know, if you become familiar with with intermodal
it it makes sense. It's not hard to understand, but I think the general public and
even a lot of shippers probably don't realize that, you know, if they really wanted
to improve sustainable in logistics, they could use more. Intermodal, have you- am
I right about that? Or is that-
John Roberts 25:17
Oh yea, you and Mark are to- completely right. We are limited today. By the lack of
understanding, you mentioned, particularly with shippers, probably a weaker than needed
calculation system, which we're working on, and informing our customers and shippers
about those two things that it's real. And we can show you the data. We've had some
real service problems with railroads over the last several years, three, four years
with PSR. And other things that I'm very hopeful, and we put our money where our mouths
are, and our hope is that we will see those challenges resolved in service and reliability.
Thus, the reason in March, we announced a 40% increase in the size of our container
fleet over the next three to five years. I absolutely think that we can position our
intermodal services as the most impactful ESG effort until we understand electric
vehicles, or natural gas vehicles or hybrid vehicles and Matt, realize that we stand
ready to take on any type of reliable electric vehicle. They don't exist today.
Matt Waller 26:45
Right.
John Roberts 26:45
So while we're waiting, why don't we load up the trains, you know, do some math on
carbon emissions. And we were gonna, we're in a very opportunistic point here. And
we totally plan to take advantage of it. You're exactly right, that
Matt Waller 27:03
You know, your investment in the container fleet. You say, did you say like 250,000
units?
John Roberts 27:11
150,000 units is our first stop.
Matt Waller 27:15
That's a big, isn't that a pretty good size? Growth?
John Roberts 27:19
Yeah, we when we made that announcement, we were at about 100,000.
Matt Waller 27:23
Okay. Yeah. So that's a lot of containers.
John Roberts 27:25
Yeah, yeah, yeah, but the math again, the data helps inform pretty easily, not not
without deep thought and good debate. But if you look at the addressable market between
the organic highway conversion, and what we think we can do with transloading, the
demand with the right service level and the right economics, the demand will be there.
And the desire to take out the one to one relationship, even past the sustainability
question, when you're a shipper, and you need a tractor and trailer for every single
load, versus having a relationship with us where we can provide the scale of trailing
equipment in the container and take care of the tractor aspects. Remember, the turnover
rate in irregular route trucking is probably three to four times the turnover in intermodal
trucking, which is again back to the point of adjusting in the segments we've been
migrating to the higher quality better paying lower turnover driving jobs very, very
intentionally. But but that what that yields is experience and the fleet and a driver
force that can take pain that's associated with being a truckload shipper and make
it go away because you move to an intermodal position. We have a train we have the
great truck, oh, by the way, you're going to do a wonderful thing for your environment.
There's not doesn't take very long to get there.
Matt Waller 29:16
Well you're, you're giving them a career path,
John Roberts 29:19
Yeah
Matt Waller 29:19
which has not been provided historically.
John Roberts 29:24
And those drivers are, you know, we'd probably have today Matt a few 100 truckload
drivers left and we have over 25,000 drivers. Okay, dedicated and intermodal and their
turnover rate is markably less, they actually also make a much better wage, because
the work is much more forcastable and planable, if you will, so we get better utilization.
So they, you know, drivers get paid by their activity, but when they don't have good
activity, doesn't matter what's paying per mile, if you don't give them the miles
and these businesses, we have a better line of sight to that.
Matt Waller 30:07
Yeah, one of the things and I've followed your intermodal business since I moved here,
because it's been so interesting. But the other thing I always think of is, yes, it
helps with sustainability. It creates a career path for drivers as you've lined it
out. But it also addresses traffic congestion.
John Roberts 30:28
Totally. Totally right. If there's an article today or yesterday, Matt, I'll send
you a link actually have it on the Barstow facility that BNSF is bringing online this
is going to be a departure from coast facilities. We have we have Hobart, and then
there's Sanburn, and Colton, those are all a little bit more close to the edge, Barstow
is out. And it's 4,100 acres. But in that article, it speaks about the impact that
Barstow can have on Los Angeles traffic, I mean, it's a called out element, that if
we can migrate into use of better rail, we get trucks off the road. And by the way,
there's congestion, there's safety, there's, you know, all kinds of relief, really,
that are presented when we can get on trains.
Matt Waller 31:32
One thing I love about the story, too, is this is an example of how business makes
society better. This story, right, by by JB Hunt, seeking to make money in this business,
right? You're making drivers better off, the environment better off, and traffic congestion
better. And, and I see this a lot, a lot of times, I don't think people I of course,
I'm Dean of a business school. So I'm constantly paying attention to all kinds of
business. But that is something we should celebrate more. It's, it's, it's something
that no bureaucrat, or politician could figure out. Yet it happens.
John Roberts 32:19
Yes, yes, happens naturally, it happens without subsidy. It happens through the natural
course of capitalism and providing service to customers that they need that they're
willing to pay for that generate the proper return. And it is very self sustaining.
Matt Waller 32:41
It's so amazing. How many seriously, as you know, I've done this every week for four
years. And I've heard so many examples of this. And I think again, intermodal is something
unfortunately, a lot of people don't understand that man, this is addressing these
social problems in many different ways that no one would be smart enough to figure
out but but the market really figured it out. So, so John, one thing that came up
a lot when I was writing the book, Purple on the Inside, was the culture of JB Hunt,
because a lot of companies were around at the same time JB Hunt was around, and yet
JB Hunt has done a lot of things that are remarkable. And it it's, of course, a big
part of that is because of the culture. And a lot of times we define culture as shared
beliefs, you know, shared beliefs about what's important, what our priorities are,
where we're going, et cetera, et cetera. But, but I've noticed that this is a strength
of the company, would you mind speaking to a healthy culture
John Roberts 33:59
Yeah the beginnings, I think, having been here almost 35 years myself, I got to see
a lot of the early stages of the company. And we were very, very involved with the
family, particularly Mr. And Mrs. Hunt. And well, we sort of saw a dynamic we actually
just celebrated this last week, in our visionaries and our trailblazers, and we sort
of looked at Mr. Hunt as a visionary and we just spoke a lot about intermodal, that
that was a very visionary idea. We were sort of looked upon as as maybe foolish, maybe
we weren't right. But, you know, Mr. Hunt had great entrepreneurial charge that we
have nurtured and is very much a part of our culture. When when I ran dedicated I
was encouraged to be creative. I wasn't held down or held back I, Kirk always said,
hey, you do whatever you think will work. And then if we don't like it, we'll talk
about it, not bring that stuff to me and let me approve it. And that's a big deal
because that really permeates, I think the story we talked about, with with my decision
making and counseling with my wife is a result of being from a family oriented business.
And we've tried to promote that. I've often asked people about what else you're doing
and how your kids? Are you coaching, are you going into your dance recitals? Are you
making sure because Matt, I believe that if you're happy at home, you're gonna be
able to do better work for us here. Frankly, if homes not super happy, it's probably
going to translate. So let's, let's embrace that. So we have kind of this entrepreneurial,
free think, make sure you kind of figure out how to do that, but it's okay to dream.
And then the Trailblazer is the Mrs. Hunt side of things. In fact, when she came to
see us, she wore a black cowboy hat. And we gave her a microphone. And she said, to
the group we had gathered, she said, I want you to understand that JB was a visionary,
and he wore a white hat. But there's somebody that has to wear a black hat. But you
know, we still enjoy her. We bring her in every chance we can, we know that our culture,
which they built with Wayne and Kirk nurtured and guys like Paul Burgess, and Bob
Ralston all helped us continue to develop is a source of energy for us that we have
to be very careful with. Driver appreciation month we go all out to let our drivers
and their families know how much we appreciate them. We had Mrs. Hunt comment last
week, and Shelley Simpson asked her what do you want to say to the drivers and she
got almost solemn. And she said, I know how hard your job is. And I know what sacrifices
you're making and your family's making. And I want you to know, we respect that, we
we can hear that still today ringing through our culture. And we've added to that
COVID was a great test, Matt. But we've added to that everybody here needs to be appreciated.
And with COVID. When that hit in 2020, we gathered in our boardroom right behind me
here and we said okay, we got to go home, and our priorities, the health and well
being of our people. And honoring the commitments we've made to our customers. If
we can do those two things, we will be successful. And I just see it continue to grow
and build. I hear it we just did a an engagement survey with every single employee,
89% participation rate. We're just way in the details doing every roundtable we can
get our hands on and I'm convinced today that that that origination of entrepreneurialism,
visionary thinking, trailblazing management, and sort of a family orientation has
has thrived has grown and is at the center of all that we are doing that is bringing
successes right.
Matt Waller 38:30
John, thank you so much for taking time to share with us. Really appreciate it.
John Roberts 38:38
Glad to be here, Matt. Always good to see you.
Matt Waller 38:39
On behalf of the Sam M. Walton College of Business. I want to thank everyone for spending
time with us for another engaging conversation. You can subscribe by going to your
favorite podcast service and searching be epic. B E E P I C.
