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Supply Chain Strategy: How NFI Built a Global Logistics Empire · Industrial Advisors

• 0:00
  We have portfolio now about, uh, a little over 80 million feet.
• 0:03
  Wow.
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  Uh, of that we own about 17.
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  About 18,000 employees and 5,000 trucks, 14,000 trailers, and
• 0:12
  a non-asset business as well.
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  So d- service everything from goods manufactured from the ports in Asia all
• 0:18
  the way to delivered to, to your house.
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  Primarily we're in the US and Canada in terms of our footprint.
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  And, um, yeah, just a super dynamic place to be
• 0:43
  Welcome to IMC, uh, conference.
• 0:47
  We have our Industrial Advisors podcast.
• 0:49
  We're live here in Little Rock, uh, myself and Matt, and we have Michael Landsberg,
• 0:52
  who's at NFI, joining us this morning.
• 0:55
  So great to have you, and thanks for, thanks for being here.
• 0:57
  Sure.
• 0:57
  Industry legend.
• 0:58
  I don't know about that.
• 0:59
  But thrilled to be here this morning bright and early.
• 1:01
  That's right.
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  Thanks for joining us.
• 1:02
  That's right.
• 1:03
  That's right.
• 1:03
  So, um, why don't you tell us a little bit about NFI and how
• 1:07
  business is going and kind of your approach to the, you know, 3PL world?
• 1:10
  Sure.
• 1:11
  So NFI, we're, uh, the largest privately held, uh, family-owned, uh, supply
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  chain company, third-party logistics company, owned by, uh, the same family
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  for, uh, we're in our 94th year.
• 1:23
  Wow.
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  And yeah, it started in 1932.
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  It's now in the third generation of ownership.
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  Three brothers, uh, control the company today, and they have, uh,
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  each have three kids, and some of that generation is coming in, so
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  moving into what we like to call G4.
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  They survived the third generation.
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  They did.
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  Yeah.
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  Yeah, it's really impressive.
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  And, um, uh, I've been there for just about 21 years.
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  Unfortunately, it's not my family, but- Yeah.
• 1:47
  … uh, I've been there a long time.
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  Kind of, now.
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  Yeah.
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  And, and, yeah, yeah.
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  Uh, you know, they, they treat me like family, so that's, uh, uh, that's good.
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  And great place to be.
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  Super dynamic.
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  Fascinating to be… And my background's in, uh, finance and real estate- Oh
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  and fascinating to be kind of behind the scenes in a supply chain company,
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  seeing how goods move and why real estate and industrial logistics
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  decisions are, you know, made, you know, in this location or that location.
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  You know, we have portfolio now about, uh, a little over 80 million feet.
• 2:16
  Wow.
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  Uh, of that, we own about 17.
• 2:19
  About 18,000 employees and 5,000 trucks, 14,000 trailers, and
• 2:24
  a non-asset business as well.
• 2:26
  So d- service everything from goods manufactured from the ports in Asia, all
• 2:31
  the way to delivered to, to your house.
• 2:33
  Primarily, we're in the US and Canada in terms of our footprint.
• 2:37
  And, um, yeah, just a super dynamic place to be.
• 2:41
  And obviously since the pandemic, you know, we were growing pretty quickly-
• 2:45
  Yeah … before that, but supercharged growth, you know, since the pandemic.
• 2:49
  If you didn't know what logistics was, uh, before the pandemic, you
• 2:52
  certainly knew what it was afterwards.
• 2:54
  That's right.
• 2:55
  That's right.
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  So 80 million feet, and you mentioned you guys own 17 million
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  of that, uh, which is unique.
• 3:00
  So talk to us about when you look at owning an asset versus
• 3:04
  leasing an asset, and how you guys make the, those decisions.
• 3:07
  Sure, yeah, and I'll throw a third variable in, which is we also operate
• 3:11
  buildings on behalf of customers, so- That's outside of the 80 million.
• 3:15
  It's included in the- Oh, it's included.
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  Okay.
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  Yeah … we include it in the 80 because it's really, we have
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  influence into those decisions.
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  Yes.
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  And, uh, you know, it's all our people in those, in those buildings.
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  And so, uh, I'll start there.
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  So that's where on the leasing side, sometimes the customer wants to
• 3:30
  hold the lease, some- you know, for accounting reasons or other reasons,
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  and sometimes they want us to hold the lease, and we're fine either way.
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  And so that's on the leasing side, you know, a decision that gets
• 3:42
  made- Sure … early in the process.
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  Sometimes it's a dynamic in 3PLs, sometimes that happens later in the
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  process, which can be a challenge, where, you know, we've gone down the
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  road and sourced real estate, and then the, a customer comes in at the end and
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  says, "Well, we also went down the road.
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  We leased this building over here.
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  We still want you guys to operate it.
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  Don't worry about your real estate." So sometimes that happens.
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  Yeah.
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  Or sometimes they take on the real estate that, uh, that we source.
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  But in terms of the ownership side, 65 years ago, the father, so
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  grandfather started the business, passed away relatively young age.
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  The father, uh, started to build it up, and the three sons who w-
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  own it and run it today started coming in in the late '80s.
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  And the father, when, when he was running it, he saw our expansion out of, we
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  start, started in New Jersey, still headquartered in New Jersey, in Camden,
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  right over the river from Philadelphia.
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  And when he started to expand out of New Jersey, decided that, hey,
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  you know, there's an opportunity to own some real estate here, the
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  count- the country's expanding, and started to own some real estate.
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  We like that control sometimes.
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  Sure.
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  And so in markets, we don't wanna own in every market, and sometimes the speed of
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  the transaction doesn't allow us to own.
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  So those are some decisions that get made.
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  Yeah.
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  And then we also own, just as an investment for the family,
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  it's a way to diversify their portfolio, to own some real estate.
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  So o- of that 17, we only occupy and lease about a third, our sister companies.
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  Okay.
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  It varies between 30 and 40%, you know, depending on transactions.
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  But so that's a tool for the business to grow connectivity to customers,
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  diversify family, uh, investment, and, uh, really exciting, uh, to be able to be
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  on that side of the house, uh, as well.
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  Yeah.
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  On the percentage of ownership, what's the goal?
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  Where would you like to be if, if you own 17 million feet, like when did that growth
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  happen and what would you like it to be?
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  Good question.
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  So I started in, uh, '05, and at that point we owned about
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  four and a half million feet.
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  Portfolio was much smaller also.
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  So mostly under your watch.
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  Um, uh, a lot of it, and I mean, I've been there a long time.
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  Yeah.
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  Yeah.
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  Yeah.
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  Um, that's what happens.
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  It's not all 'cause of me.
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  A great team and- We give you all the credit.
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  And some of it is just the market, uh, frankly, and the family,
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  you know, willingness to invest.
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  So that was portfolios owned of about four and a half million feet
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  and total size of just under 20.
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  So similar ratio at that point.
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  And so both have kind of grown over that time.
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  But what happened in '08, when I started, uh, in '05, we were in most of that space
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  ourselves, leasing it to ourselves, right?
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  70% was leased to ourselves, and then the global financial crisis
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  happened and we said, "Hey, we love ourselves as a tenant," right?
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  Yeah.
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  Great tenant.
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  For sure.
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  Um, but this is a good way to diversify, and so we set out on a plan to really
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  diversify to lease to third parties because it creates another opportunity for
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  flexible solutions for customers, right?
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  Sometimes they wanna lease the building themselves, and we say, "Hey, we can be
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  your landlord- Yeah … and lease it to you." Or sometimes we get opportunities
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  on the supply chain side that turn into real estate transactions, and sometimes
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  we get real estate oppor- uh, we get opportunities on the real estate side
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  that turn into supply chain transactions.
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  So it's a great tool in our, uh, toolbox to be able to service our
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  customers and their solutions.
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  And so coming out of the global financial crisis, that started to grow.
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  We started to… We flipped that 180 degrees.
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  So we were in most of the portfolio, 70, 75%, and then fast-forward 10 years to
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  2018, we had almost tripled the portfolio.
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  And then since, we've had growth in the last seven years, eight years since then.
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  But- Really grew the portfolio and started leasing to others.
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  And so that's where that dynamic really started to change.
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  Yeah, that's, uh, that's been a probably a really good, uh, return for you
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  guys, an investment, given how great industrial real estate's been over the
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  past- Some of it was just the mar- Yeah
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  you know, we like to say it's better to be lucky than good sometimes.
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  You guys are one of the- And some of it just being in the
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  right place at the right time.
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  So, so, uh, you guys operate in a lot, you know, across the US and Canada.
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  The market's softened some on the industrial side over the
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  last, you know, 24 months or so.
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  Have you guys, when you're just looking at leasing specifically, tried to
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  take advantage of the fact that the market's softened a little bit and done
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  anything differently on your leases?
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  So I would say what's been fascinating, and you guys I'm sure have seen it
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  in the Pacific Northwest, what's been fascinating is, yes, there has been
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  softness in the market for sure, but it really more than any time over my
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  career, and I, I worked another smaller real estate company for about four or
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  five years before NFI, it's really been kinda sub-market to sub-market, building
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  by building, where other than in certain pockets, maybe Southern California as
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  one over the last, you know, 30 months where it's been more broad-based, the…
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  You know, it, it depends on your need.
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  Right.
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  So you could need 200,000 square feet in a market and there's two buildings,
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  and there isn't softness in that market.
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  Yeah.
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  Or you could need 500,000 feet in a market and there are 10 options, and so you can
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  kinda write whatever deal that you want.
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  Right.
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  So th- that dynamic of, like, it's a really a building by building circumstance
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  has been, you know, just fascinating to see over the last, uh, two years.
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  I will say this year, starting from the beginning of the year, you're starting
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  to see that turn a little bit- Yeah … unfortunately for the tenant side.
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  Right.
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  But in answer to the question of did we do anything different, not really.
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  I mean, what, what's been different for us, we've been relatively…
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  It's been good business for us, uh, the last couple years, but we had,
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  uh, '22 was our best year ever.
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  Mm-hmm.
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  Uh, '23 we're down about 12% or so.
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  Uh, 20- Way less than industry that time.
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  Way, way less than industry.
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  Yeah.
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  Yeah.
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  And we, and we were very- Rough year … yeah, really proud of kinda holding firm.
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  And we've been kind of flat, you know, up a couple points since then.
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  So we've been really proud of that kinda- Yeah
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  staying w- but that's resulted from a lot of churn, new customers, and,
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  you know, loss of some business.
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  And so we've been relatively flat from an o- a transactional st- lot
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  of transactions, but in terms of net absorption for ourselves- Yeah … it's
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  been relatively- Sure … uh, flat.
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  And so the challenge has been some of the decisions just have taken much
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  longer to make for companies w- you know, understandably so, with tariffs and- Yeah
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  geopolitical uncertainty and so forth.
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  So we've really just stayed the course.
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  It's not like we've said, "Hey, the market's soft, let's do
• 10:10
  10-year leases"- 10-year deals.
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  Yeah … and- Yeah, yeah, yeah … you know, we've tried to stay consistent,
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  and we've taken a little bit less risk than we have in prior years.
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  May- maybe that's a difference- Yeah
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  where previously maybe we would say, "Hey, customer wants a three-year
• 10:22
  contract"- Let's go sign up for five, or they want 200,000 feet,
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  let's go sign up for 400,000 feet.
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  We've, we've reduced taking some of those risks- Okay, yeah … and trying to match
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  up leases with contracts more in these last couple years than we have previously.
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  Yeah, and that's definitely consistent across the board with
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  what we're seeing in the- For sure … in the 3PL space, for sure.
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  Talk to us a little bit, if you can, without letting your competitive,
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  uh, advantage out to the market, talk to us about technology and
• 10:50
  maybe AI, what you guys are doing.
• 10:53
  I know that's a little bit outside of real estate, but what are you
• 10:55
  guys doing, if anything, in those spaces to give yourself an advantage?
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  You know, we have to mention AI, so then we'll get that,
• 11:01
  you got that many more hits.
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  Yeah.
• 11:03
  That's right.
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  Of course.
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  Use on strategy too.
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  I knew it.
• 11:05
  Look at that.
• 11:06
  I love it.
• 11:07
  I love it.
• 11:07
  Yeah.
• 11:07
  We just got, like, 10,000 more likes.
• 11:09
  Right.
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  We're just, we're just gonna embed, uh- Yeah.
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  Yeah.
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  Yeah.
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  AI into this.
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  Right.
• 11:14
  Exactly.
• 11:14
  Exactly.
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  Um, so we have really started a managing our data differently
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  a number of years ago.
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  And so, uh, that's, you know, when people talk about AI, you have to have the
• 11:26
  source data to be able to utilize it.
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  And so we started that process years ago, uh, or refined the, you know,
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  improved the, just the management and centralization of all the data.
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  As you can imagine, we have fantastic data across all the
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  business units, uh, transportation, warehousing, logistics, et cetera.
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  And so, so that was our first step.
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  And now, you know, being able to utilize that and leverage it in a way that makes
• 11:53
  everyone move faster, more efficient, and be able to, you know, just accentuate and,
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  and make what folks are doing before using tools that much better and faster- Mm-hmm
• 12:05
  after they're using tools.
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  So that's, you know, generally on the, on the data side.
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  And then in the buildings, just not necessarily AI, but the technology and
• 12:15
  the opportunities with automation and just managing our customer's business is
• 12:20
  fascinating and- Yeah … and incredible.
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  You know, we have operations with fully autonomous robots in them and- Fully?
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  Fully autonomous.
• 12:29
  Yeah.
• 12:29
  Wow.
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  Yeah, they're going out and picking product and- Wow … coming back.
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  They charge themselves.
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  I mean, it's- Yeah.
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  To think, like, when you got in the business in like 2005- Yeah.
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  Compared, like, if you would've thought, you know, 20 years later- Right
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  … there'd be robots running warehouses.
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  Yeah.
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  You'd, you'd- Incredible.
• 12:41
  Yeah, yeah.
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  Um, so that kind of stuff is, uh, super cool to see, and
• 12:46
  those are great tours to give.
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  Uh, and it, you know, all of it is not, it's to make our, you know, the
• 12:52
  team more efficient again and be able to service customers faster, better.
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  And so those are, uh, those are some of the things that we're doing.
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  And then that last question, uh, from me at least, Chinese 3PLs.
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  We saw a huge gross growth with them.
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  I think, like, 50% of the deals in the Inland Empire over the last several
• 13:09
  years have been the, uh, Chinese 3PLs, or I should say Asian 3PLs.
• 13:14
  How has that affected you guys?
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  Do you partner with them?
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  Is that just competition?
• 13:17
  And you know, where did that come from?
• 13:20
  Great question, and I was gonna mention something like this in the, you know,
• 13:23
  what has been different over the last- Yeah … two years question.
• 13:26
  Mm-hmm.
• 13:27
  So I think that was- We're still figuring it out, I'll say.
• 13:32
  They are, you know, some of them are very good operators.
• 13:35
  Uh, some of them are new entrants to the market.
• 13:38
  On our own portfolio, we have a couple tenants that are Asian-based
• 13:42
  3PLs, and it started as a way, we think, to, to get rid of some of the
• 13:50
  middle fulfillment, you know, whether it was in Asia or coming over here.
• 13:56
  And so, you know, one of the things, and I'm gonna ask a question back- Yes.
• 14:02
  Yeah … is it's not entirely clear to us if this is taking market share from us,
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  or if it's new business to the market.
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  In other words, are these manufacturers in Asia coming in with their own supply chain
• 14:16
  fulfillment providers- Correct … and they would've used us in years past,
• 14:20
  but they're just using themselves, so it's taking market share from us, but
• 14:23
  it's still new product, new space, new absorption in the market, versus this
• 14:29
  is product that we would've fulfilled previously, and now it's being fulfilled
• 14:34
  by someone else, and so they're, it's not net new product to the market.
• 14:38
  It's just we are not leasing the space, they are leasing the space,
• 14:41
  and so it's a re- actual reduction in absorption in the market.
• 14:45
  So I don't know if, if you guys see, you know, hey, w- you know,
• 14:49
  is this product like product that would've been a big retailer's
• 14:52
  product that maybe a domestic-based 3PL would've handled three years ago
• 14:58
  that now is being outsourced to Asia?
• 15:00
  And so it's the same footprint, it's just- Yes … being handled by someone
• 15:04
  different- Yeah, it's a great question.
• 15:05
  Yes … versus it's true new product to the market.
• 15:08
  Yeah.
• 15:08
  In, in our case, this is a great question, obviously, for, you know, the Steve
• 15:12
  Baletis and the Im- Inland Empire guys, 'cause that's where it's happening.
• 15:15
  Most, yeah.
• 15:15
  We see it in Jersey.
• 15:17
  Yeah.
• 15:17
  Uh, the Inland Empire.
• 15:18
  Savannah.
• 15:19
  Savannah- Yeah … it's been busy.
• 15:20
  And in, and in Texas they've started to pick up.
• 15:23
  We've seen, I believe, two deals, and both of them were brand new, so it wasn't
• 15:27
  like pull it out of somebody like NFI and suddenly it's operated by an Asian 3PL.
• 15:32
  So it was new to the market, and specific use.
• 15:36
  But to answer the question, I think it's both.
• 15:38
  It's new to the market, but a few years ago it would have
• 15:41
  gone to a company like NFI.
• 15:43
  Someone like us.
• 15:43
  For sure.
• 15:43
  Yeah.
• 15:43
  Yeah.
• 15:43
  And I, I think that as some of those, you mentioned some of those companies are new.
• 15:47
  As some of those firms get more established, maybe then they
• 15:51
  start trying to take market share from existing 3PL companies.
• 15:54
  Yeah.
• 15:54
  You know, after they get more established.
• 15:56
  Yeah.
• 15:56
  Yeah.
• 15:56
  Well, we have a, a full day ahead of us here.
• 16:00
  Okay.
• 16:00
  So- Always a good time at the IMC conference.
• 16:02
  That's right.
• 16:02
  Yeah, great way to kick it off with you, so appreciate you, you joining
• 16:05
  us and sharing- Sure … some in- insights on NFI, and, uh, have
• 16:08
  a great rest of your day here.
• 16:09
  Thanks.
• 16:09
  Thanks for having me, guys.
• 16:10
  Thanks so much.
• 16:10
  Yeah, sure.
• 16:10
  Always good to see you.
• 16:11
  Appreciate it.
• 16:11
  Yeah, appreciate it.