Watco: Aligning business expectations with accurate and timely financial data

Founded in 1983, Watco Companies LLC grew from one locomotive into a leading cargo and commodity transportation, supply chain, and logistics services provider. Present throughout North America and Australia, the company owns and operates a diverse network of 42 short line railroads. It has 92 terminal and port locations for intermodal handover and an international brokerage business for highway, truck, and barge transport. The company’s dramatic 12% to 15% growth over the past 15 years is due to Watco’s investment in areas such as rail tracks, warehouses, and conveyor systems. Combining its stable core business with this high-growth side created unique challenges, such as IT system lag. This was particularly challenging in the face of the desired continuous improvement in safety, customer service, and profitability. Another issue was having too many data sources, with their loose integration impacting data accuracy and time to make decisions.

Watco was measuring and evaluating financial performance in almost 200 separate profit centers with stand-alone systems, management teams, and income statements. The planning, tracking, reporting, and forecasting processes for revenue and day-to-day operating expenses were based on Microsoft Excel spreadsheets. Field team members had to manually update templates with hierarchy changes or new profit centers, and there was no bandwidth to review and include each location’s historical growth rates. Team members needed to upload planning data by hand, often sequentially inputting information into spreadsheets with more than 200 tabs. These processes were cumbersome and time consuming, while the typically large and complex spreadsheets were difficult to consolidate, maintain, and validate and were prone to human error. This led to challenges with data accuracy, consistency, refreshability, and reportability. It was hard for team members to gauge the impact of their financial information on budgets in a timely way, and the accounting team lacked the capabilities to plan and report capital expenditures. Ultimately, the manual tracking and forecasting of operating expenses was not keeping up with revenue growth.

Watco wanted the ability to deep dive into the budgeting process in the 20 to 30 profit centers comprising 80% of the company’s cash flow. For the remaining 180 or so centers, it sought a higher-level planning process to focus more on trends and utilization of general growth rates and operational-expense-increase rates. The business pursued the flexibility to manage the planning process from these two distinct angles. And due to its long-term focus, Watco needed processes to allow it to potentially scale from 200 to 500 locations.