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April 2013
— by Angela Cotey, associate editor
As a young child, Dave Fellon spent a lot of time in the passengers' seat of a pick-up truck visiting development sites with his father, an industrial property manager. Fellon's dad showed his son the ins and outs of the sites and the younger Fellon, who developed an interest in railroads at an early age, would always ask where the trains were. Often, there were none.
"My dad would say that railroads had lost a lot of that business, and those conversations left an impression on me at a very young age," says Fellon, now president of Progressive Rail Inc.
He figured there had to be a way to make a living by combining his two interests — railroading and industrial development. More than two decades later, Fellon put that idea to the test when he founded Progressive Rail in 1996. Since then, the company has since grown from a three-mile short line serving a Minnesota industrial park to a railroad operating more than 100 miles of mainline track in Minnesota, Wisconsin, Illinois and Iowa.
Fellon's eye for industrial development opportunities has contributed to the company's success. So have custom marketing efforts, personalized service and a do-whatever-it-takes approach from Fellon and his 100 or so team members to ensure customers — and, by extension, the railroad — thrive.
"It's all about the customer, and that's not just a tired sound bite. If they need something, we're like the Marines — we will do it," says Fellon. "And our team gets that. This isn't just a job, it's a mission."
It's a mission Fellon started considering during the 1980s, as the owner of Landscape Junction, a railroad contracting firm he founded when he was 18 years old. Fellon graduated from high school early by writing a term paper on the need for railroad consolidation on the East Coast in order to "bring the system back to a healthy state," says Fellon.
"I still remember [my teacher] saying, 'I have no idea what you are talking about, but I do know you need to get out of here,'" Fellon recalls.
He self-financed the business as best he could and relied on a local bank to help fund the businesses' big-ticket items. Landscape Junction delivered materials to job sites, cleaned up sites and repurposed surplus materials such as ties and bridge timbers. With customers such as the Milwaukee Road, Soo Line and Rock Island railroads, Fellon witnessed rail lines with "so much potential" being abandoned.
"I thought there had to be a better way for railroads to go after some of this business, even though it didn't fit the model at the time for big railroads," he says.
Fellon continued his career at Landscape Junction, but began searching for the right opportunity to own a railroad focused on industrial development. He found it in the Air Lake Industrial Park in Lakeville, Minn.
The park was the largest I-1 zoned industrial park in the state that had land available for development. The three-mile railroad running through the park was a Canadian Pacific-owned branch line the Class I was looking to offload.
"These little industrial parks were popping up that were one, two, three acres, which is fine for maybe a small tool-and-die company, but if you're a distribution company, you're going to need a five-, 10-, 15-acre site," says Fellon. "We felt [Lakeville] had been overlooked and we had an opportunity here in the Twin Cities ... for some real potential."
Fellon and a handful of employees worked hard to realize that potential. He and now-Vice President of Customer Service Duane Jenkins would spend mornings switching rail cars, then head to the office in the afternoon. Fellon would devote hours to marketing and Jenkins, to paperwork. Fellon continued to operate Landscape Junction, as well, but sold the firm about five years ago when it became too much to manage both businesses.
As Progressive Rail added customers in the Air Lake Industrial Park, CP and Union Pacific Railroad officials invited Fellon to look at other branch lines running to the Twin Cities from Bloomington, Rosemount and Eagan, Minn. Eventually, Progressive Rail purchased or acquired operating rights on other lines from the Class Is in other parts of Minnesota, as well as northwestern Wisconsin and northwestern Illinois.
"It's not necessarily that Class I railroads don't want this business," says Fellon. "For us, it's about making it work with what the Class Is want to do, and helping to grow corridors where they want to grow them. It's about understanding how we can be of value to our partner there and serve the customer really well."
The acquisitions made Progressive Rail a "much different railroad in a few years," says Fellon. In its first year of business, the short line handled 500 carloads. Today, Progressive Rail serves more than 200 shippers and receivers, and handles about 48,000 carloads. The company expects to surpass 55,000 carloads by 2014, says Vice President of Customer Solutions James Mattsen.
But the railroad's philosophy hasn't changed: Serve customers, and serve them well. Make sure they are successful, and they'll never have a reason to leave.
And at Progressive Rail, service begins years before a customer even begins shipping or receiving products.
"We have to get the customer, define rates, build the supply chain," says Fellon.
To land customers, Progressive Rail officials rely heavily on their industrial development know-how.
"A lot of people say they do industrial development, but we live it. It's about getting engaged and knowing every piece of property up and down our line. It's about knowing who's getting ready to sell property but hasn't listed it yet," says Fellon. "It's about going that much deeper, looking into the story behind the property. Is this a good site for a customer? Are there additional sources for products you didn't think of? Is the customer aware of every possible resource?"
Officials at The Kinnix Group, for one, have benefitted from that knowledge. The company is in the process of opening a plastic film manufacturing plant in Bloomington, Minn. Officials were seeking a site on a rail line so they could have plastic resin pellets shipped to their facility. Kinnix officials learned of Progressive Rail after getting in touch with an economic development group in the region, which recommended Fellon and his team to help Kinnix find an appropriate site.
Within a couple of days, Fellon provided Kinnix officials with a half-dozen buildings on Progressive Rail's line that met the company's specifications. Fellon then met with Kinnix's owners and spent half a day touring the facilities, says Kinnix Vice President of Corporate Development Jared Hummel.
"Just to be safe, we called another railroad to ask about properties and they told us to go on their website to see what was available and call them if we ended up there," he says. "When I hung up the phone, I knew we would never go anywhere off the Progressive Rail line."
Once Kinnix selected the Bloomington site, Fellon helped the firm sort out property insurance issues and recommended banks that would help finance the Kinnix project.
"What we've done so far has had very little do with rail, yet Dave has had a connection for everything," says Hummel. "He's been side by side with us, working to help get us up and running. When you're starting a new business, there are a million things that have to line up and with his support and his connections, our ability to succeed has increased tenfold."
Kinnix plans to have its first production line up and running later this month. Hummel expects about five or six rail cars to deliver the resin pellets each month. Kinnix will use those pellets to make pre-stretched hand wrap, among other materials. The company plans to open up a second and third production line within the next year.
Once it does, Hummel has no doubt Progressive Rail will continue to provide the company with top-notch customer service. The short line does whatever is needed to make sure their customers are happy and successful, whether it's switching cars on a Sunday, providing multiple switches a day at no additional cost, addressing rail transportation issues that don't occur on Progressive Rail's line, helping to resolve a customer's billing issue with a Class I or storing a customer's excess cars, Mattsen.
"As a short line, we're often the ones who are called if something is going wrong and we understand if it's going wrong on another carrier, that business may be in jeopardy," he says. "If they decide not to ship by rail, then we've lost that revenue."
Progressive Rail will help market their customers' services, too. It's not uncommon for a Progressive Rail official to help represent a customer at a trade show. To help the shipper network with potential customers and make a sale, Fellon or another railroad representative will be on hand to address transportation-related questions.
"You can help assure them that the supply chain is solid, and to have a railroad representative there to do that adds so much credibility," says Fellon. "We will do whatever we need to do to make sure our customers are not missing a sale."
They'll also do whatever's needed to make sure Progressive Rail isn't missing out on any potential business.
Several years ago, the railroad leased a line from UP in northwestern Wisconsin, running from Chippewa Falls to Cameron. The area used to be home to a lot of mining, forestry and logging business, but changing regulations and depleted resources took their toll on the industries. Just a few customers with a trickle of business remained on the line.
Fellon assigned a skeleton crew to run rail operations and began promoting economic development. He hired a geologist to analyze the corridor and found a premium frac sand deposit beneath the rail line. A $50 million frac sand plant eventually was built on the line and another five plants have been constructed since. In addition, a steel fabrication customer has located on the line and some smaller companies are inquiring about doing so, as well. In the past 12 to 18 months, traffic has skyrocketed.
Building a thriving railroad and with thriving customers requires effort from all of Progressive Rail's 100 employees. Railroad officials are "fussy" about who they hire, says Fellon, and they try to make sure all workers understand the critical role they play in carrying our Progressive Rail's mission.
"This isn't a job where you come in, put in your time and we'll see you again on Monday," he says.
While it might not be uncommon for Fellon to call one of his crew members on a weekend to ask him to switch a car, it's also not uncommon for him to take an interest in his team members' lives and make them feel like part of the organization rather than someone who simply works for it.
"It's my job to create an environment where they want to work, where they get what we're doing, where they are part of the story and they're proud of it," he says. "I want everyone to know they are noticed, appreciated and valued."
Fellon's hard work sets an example for other workers, Jenkins says.
"We see how long it takes to acquire a customer — Dave will sometimes work on it for two, three years — so we want to make sure we do our part to keep them," says Jenkins.
Keeping customers and helping them grow business is only one part of the growth equation. In October 2012, Progressive Rail acquired the Iowa Traction Railroad, which operates 11 track miles between Mason City and Clear Lake, Iowa. Not that the short line plans to grow solely through acquisitions.
"Growth is going to get more complex because, in this economy, not a lot of companies are willing to invest in new plants. And while many companies do grow by acquisition, it's harder to grow the stores once they've been up for a year or two," says Fellon. "So for us to organically keep growing our core, we have to be aggressive with emerging markets."
Jenkins has no doubt the company will remain successful, regardless of the challenges.
"That's where Dave excels — he's always looking for new business," he says.
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