The Logisyn Analysis: What Will Reshape Freight Sectors Next with John Manners-Bell

[00:00:00] Hello, friends. Welcome to Logistics of Logistics. My name is Joe Lynch. Thank you so much for joining us today. Today’s topic is the Logisin analysis, what will reshape freight sectors next, with my friend, John Manners-Bell.

John, please introduce yourself and your company and where you’re based. W- well, thanks very much, Joe, and it’s wonderful to be here. Thank you very much for the invitation. Yeah, my name’s John Manners-Bell. I’ve had about 40, 45 years in the industry. Last [00:00:30] 25 years of that I’ve been running Transport Intelligence, or TI Insight, as we have, were rebranded a few years ago.

For those of you that don’t know, for those of you who don’t know we are a market research and analysis company. We are based in the UK. We provide a, a range of strategic analysis and market data services to just about the wh- the whole industry, from logistics companies to supply chain companies, manufacturers, retailers, banks, [00:01:00] consultancies governments.

And we provide them with sort of data, market sizing, market shares, market for- forecasts, analysis of all the different logistics sectors providing them with the details and with the capabilities to be able to support their strategic development of their companies. And for the last few years, we’ve also partnered with Logisim as well, so thank you very much indeed.

We just renewed our contract for another year, so that’s amazing. Really pleased to be here to [00:01:30] play golf as well. We’re not quite as big as as Logisim. We’re, we have about 15 to 20 people based not only in the UK, but around, around the world. And we publish reports. We have a online knowledge portal increasingly using AI and we undertake bespoke consultancy as well.

We get very much involved in mergers and acquisitions. But it’s providing companies with the data which allows them to make those strategic decisions. So [00:02:00] that, in a nutshell, Joe, is TI. Was that longer than you expected? The… Nope, that’s fine. That’s all right then. John, I know that’s not a Chicago accent.

Where are you from, and where’s your company based? Okay. I come from England, as many of you might have noticed. Yeah. And the, my company is based in London as well. Very nice. Very nice. Today we’re gonna talk about a whole bunch of these trends that are transforming the industry, and I talk to a lot of people on my podcast, and everyone has a little piece of it.

But when I saw you pres- shared a presentation [00:02:30] the other day with us, and you have this global view of what’s happening, and it’s crazy. Every single sector, and we’re gonna talk about the five big sectors, we’ll get into that in a minute, but give us just the high level, the 30,000-foot level.

What’s going on with the supply chains that’s driving all of this change? You’re so right, Joe. There’s so much that’s happening within the industry. It might be useful just to take a, a step back and provide a bit of [00:03:00] context to that. When I started in the in the industry working for a freight forwarding company, s- my family freight forwarding company, 40 years or so, probably even longer than that there was

Everything was so ve- very stable. Things in the shipping industry hadn’t changed for probably centuries. Yeah, cargo industry everyone knew what to expect f- from that. But over the years, things changed, and a couple of years ago, I set down my thoughts of [00:03:30] retrospective of how we ended up where we were where we are.

And we look back over those 34, four decades or so, and we see that the world has really transformed from one which was on this trajectory, as I like to say, towards the freer markets, freer trade, more alliances, trade partnerships into one which has become very much more protectionist, really returning back to where we were in the [00:04:00] 1950s or even the ’60s.

And along the way, we had for example, th- many of you will have known the book a couple of books, which are The, The End of History and the, The World is Flat. But those were the sort of zeitgeists of the time. Everybody thought that if we just traded with countries like China, like with Russia, for example, they would adopt all these all the, the models which we we accepted.

We saw that the US was [00:04:30] leading the world in, on this trajectory. But since about 2011 or so, which is when I … 20- 2009, 2010, around that sort of time, we are seeing the, the world has changed, and in my mind, that’s come about due to the global recession that we saw then, when emerging markets throughout the world saw that there are actually

That the, the Western financial model had failed them, and countries like [00:05:00] China were able to step into that, the, the vacuum which had been created and build alternative mechanisms such as BRICS, for example. And now we’re seeing that the world is fragmenting. We’re seeing we no longer have the US leadership in, in, in large parts of the, the world.

We have China who is leading the way in terms of investment with the Belt and Road inf Initiative, for example. We’re seeing other countries grow, such as [00:05:30] Saudi Arabia and Turkey. They’ve all benefited from globalization, from global markets, but they are investing those benefits, the money that they’ve, that’s come their way, into the systems and the political models which they themselves are devising, which are v- very much not our Western models, and that is where the tensions are rising.

That is why we’re getting fragm- fragmentation. We’re seeing other domestic pressures [00:06:00] as well, where we’ve seen several decades of offshoring, of outsourcing, of manufacturing, for example, to China. And now that the democratic deficit is leading to huge amounts of tensions, which is leading to shall I say in the US to the election of President Trump two terms ago.

We’re seeing in the UK Brexit, which was leadi- leaving the EU. And throughout Europe, we’re seeing a whole range of different parties, such as [00:06:30] AFD in Germany, such as the, the far right in, in France, and et cetera. And that is due to the democratic deficit the growth of rust belts, the dearth of good jobs which have been exported to China.

So that’s just a, a couple of the reasons for it. Add on to that the sustainability issues. Add on to that the fourth industrial revolution technologies, and we have created a sort of, a melting pot where we have [00:07:00] volatility, uncertainty, complexity, and ambiguity. I love it. I love it. We’ll get more into detail in a minute, but John, first tell us a little bit about you.

Where’d you grow up? Where’d you go to school? Some career highlights before you started TI, and why did you start TI? Yeah. I grew up in the family business, so there was actually no real option to do anything else than logistics. And which was amazing. Having the [00:07:30] opportunity to see every part of a business when you’re a teenager, loading trucks when you’re 13, 14, working in wa- customs warehouse warehouses, and doing… Y- you, that s- rapidly gives you such a, a great understanding of the industry. Cutting documents and so on. And I stayed with the, the family business for quite some time, through my 20s. I went back to university and undertook a, a master’s in supply chain and logistics i- in London.

[00:08:00] And after a little bit more time with the family business I felt I wanted to spread my wings. I then worked for UPS Worldwide Logistics, as it was then. I think we’re looking at about mid, late ’90s. That was rebranded, which I was part of it, into UPS Supply Chain Solutions.

And after a number of years looking after their European marketing, PR and and some of their feeding into the strategy and some of their mergers and acquisitions [00:08:30] activity then I set up TI, Senior Transport Intelligence, in around 2002. So 25 years on. Very nice. Very nice. So who are your customers?

They… Anyone who has an interest in logistics and supply chains. Manufacturers and retailers will use our products in order to shortlist, Excellent … find out more about the logistics companies which are- So who’s your favorite customer? They’re all lovely, but the one which pays the most money-

Is the [00:09:00] loveliest. What about these guys? Y- yeah they’re our third loveliest. So Anyway we’re gonna go sector by sector and talk about the big drivers, what’s changing. So the first sector I wanna talk to you about is freight forwarding, ocean, air, and all the intermediaries.

And y- boy, I talked to a lot of these guys in the last few years, and it is crazy. Now, let me throw one thing in there. I know you’re gonna talk about some of these global trends. I’m gonna talk about one of the trends I see all the time is- [00:09:30] The expectations from customers, like all of us when we order on Amazon, we want same day, next day, we want really fast.

And all of a sudden, the idea that it can take an extra week at the port or an extra week on the ocean is yesterday’s news. I feel like customer expectations have suddenly gone sky high, and then all of a sudden, especially during COVID, we realized those expectations can’t be met [00:10:00] from the other side of the world.

So talk about some of the trends like that one that are changing this business I’ve always believed that the logistics business when it works best is invisible. Nobody sees it. Usually… But I, and I’ll give you a, a quick story on that. Before COVID the, the pandemic, I would go to dinner parties with my wife who’s a vet.

She’s a specialist oncologist. And people would come up to us and say, “Oh, what do you do?” And I say “I [00:10:30] work in logistics.” And they say, “Oh, that’s interesting.” And then they’ll talk to my wife and she’ll tell, say, “What do you…” “She’s a vet.” “Oh, that’s really interesting. Okay, my dog, my cat, et cetera, has got this problem with it.

Can you tell me about that also?” Since COVID, I always say to my wife, it’s turned round. Now people have an understanding of what logistics is because they know what happens if it goes wrong. And of course, that’s exactly what we saw during the the COVID pandemic and afterwards not least on the West [00:11:00] Coast when the containers just piled up con- continuously.

And that really just destroyed the ecosystem, showed the sh- the, the… how, politics and trade is really in- interconnected. If you have a, if you send checks to all your population and those people spend money, that’s obviously gonna have an enormous impact on the, the volumes which are flowing in from- Right

fr- from Asia. And that’s just a really [00:11:30] good- … a good example of how getting politics wrong means you, that you get- … y- you get the, the transportation wrong, yeah. I grew up in Michigan and I’m, I, my, first part of my career, I was an engineer in automotive. And we had NAFTA, and we thought this is the greatest thing ever, like, ’cause we’re gonna get this trade across North America.

It didn’t ef- impact me. It impacted, though, a lot of manufacturing guys. Now we see that sort of unraveling. At the same time, I spent a lot of time [00:12:00] in Thailand and China moving manufacturing stuff over there, teaching our Chinese partners how to build cars. And now at the end of my career, we’re bringing all that back.

So I feel like what we, as you said at the beginning, we started all this and now thought better of it. And I believe- There’s a lot of towns in the Midwest, in particular the Rust Belt, where they had good manufacturing [00:12:30] jobs and suddenly they’re gone, and they’re beginning to look and say, this isn’t the dream.”

And by the way, I’m just speaking about the US. I’m sure the same could be said for- It’s exactly the same in, in Europe … for Germany and England. Yeah. Absolutely. And so it seems as we, we thought we were doing the right thing by moving everything to low-cost countries. I’ve spent a lot of time in Mexico, a lot of time in Thailand and China, only to say, “Okay let’s rethink this.”

It’s exactly right, and it’s the same in Europe, [00:13:00] everybody all of us have benefited from globalization in this room, but the benefits of globalization are really patchy. They’re not every part of the society have benefited. And certainly, and I won’t comment on, on, on this on the US, but i- in our country, what I always believe is that we had a great opportunity throughout the 2000s and 2010s to [00:13:30] really invest in the parts of society which were losing out through globalization.

And we as a, a country, the UK, but throughout Europe, we failed. We failed to deliver the right education and training to move those people into other jobs. Yeah. And, we have s- got s- huge issues in the UK at the moment, where we have a generation of people who are not in education they’re not in training, they’re not in employment.

And, I [00:14:00] really fear for the coming few decades if they are never able to find a job. So when I look at this, this sector, the first sector we’re talking about, which is, Freight forwarding, whether it’s air or ocean, and all the intermediaries. The stuff that we’ve traditionally gotten from China, some of it’s gonna s- stay there, for the short run at least, or maybe even for the long run, but a lot of it’s gonna move to Mexico or to Canada or to the US.

So suddenly these [00:14:30] businesses are gonna have to rethink what they’re doing, and I don’t think they’re going out of business, of course. We still need that trade, but it’s gonna be very different. What’s that gonna look like? Yeah. And trade in Asia is absolutely booming at the moment. Yeah, you’re right.

It is moving out of China. China is investing really heavily in the ASEAN countries such as Indonesia, for example, Vietnam and so on throughout that, and they are really benefiting from the- … th- from this investment. [00:15:00] There’s a great statistic from last year that the trade from China to the US, I think, dropped it’s something like 25, 30% to the West Coast.

At the same time as that, trade from the ASEAN actually increased by 25, 30%. And so a- and I think that’s probably has set alarm bells ringing that a lot of that trade is not necessarily trade which is Chinese country, companies or [00:15:30] US companies setting up or shore- reshoring or f- nearshoring or whatever from Asia.

Yeah. It’s absolute… It’s a circumvention of the, the tariffs which are being set up. It’s not all circumvention, but it is- … quite a big- Yeah, I… By the way, I should mention you guys all have a piece of paper in front of you. If you have questions, we’re gonna do some questions and answers at the end.

Up, there’s a question. Okay. Anyway, getting back to it we’re gonna be seeing some big changes, and I [00:16:00] s- I just spoke to somebody not so long ago in Mexico, and they said there’s tons of Chinese companies moving operations to Mexico.

Now it’s not a massive trend, but they said, “If we’re gonna lose the business to our, because we’re in China, we’ll move.” And I think part of it’s getting the bag out of China, too. Yeah, that’s… it’s a huge trend. I think China, Chinese investment in, in, in Mexico is massive. And there are huge flows.

The flows going cross border flows, which but also there are a lot of [00:16:30] south southbound flows going on as well. Maybe we’ll get to that a, a little bit later. But certainly I’ve, I was spent a bit of time in Mexico over the last two or three years, and the industry down there is really booming.

However, having said that, there are, is, there’s, there are huge issues in Mexico. It’s not just a, gonna be a success story. Yeah. There’s, the infrastructure in Mexico is very weak in parts of the- Yeah … security as well. I just had that. I was down at Laredo, [00:17:00] and we went, we’re going to Nuevo Laredo, over the border, and I remember thinking, “This is a top-notch organization.”

And they said, “Our facility’s only 20 minutes from the border, but we’re gonna take the long way today. It’s gonna be 40 minutes.” And I was like, “Why are we taking the long way?” And they go the, the military doesn’t control this part of the country.” I go, “Oh, you mean the police?” They go, “No, the military.”

And I was like, “Oh, boy.” So there is a, there’s a little bit of a price to be paid for that kind of [00:17:30] work. But anyway, I wanna get to the next sector. God, we could spend all day on each one of these. The next sector I wanna talk to you about is over the road and the intermodal business. So that’s, I guess we’ll, I guess we can also talk about the freight bro- well we’ll talk about freight brokerages separately.

So all of a sudden we have all sorts of new business coming back here, and what’s gonna happen to first of, what’s gonna happen to these trucking [00:18:00] companies? What do you envision for that industry, and what do you see for intermodal? I think c- certainly if, going back maybe to talking about Mexico as, as well I’ve seen that’s, there is a big opportunity there for cross-b- border for i- intermodal, and I’m sure that’s m- possibly something that you’ve seen down when you were visiting down there.

There’s some challenges, though. I work f- I advised a trucking company, and I remember they said, “We have operations in El Paso.” And they said, “We won’t let our trucks go into Mexico.” And I [00:18:30] said why not?” And they said- ‘Cause sometimes they go there and they come back with a different set of tires that are much older, and we’re afraid that’s gonna happen again, and we’re afraid of some of the issues down there.

So we tend to do that transloading there. But big opportunities for these trucking companies. It’s just gonna be a little different. And of course, one of the, the, the big headwinds that we’re seeing is the price of diesel, and that’s for sure. And that, that will aid the intermodal sector in comparison with the, in con- [00:19:00] contrast with the over-the-road.

I think you probably all saw the the news, I think was it CH Robinson, I think was talking about some of those issues which were affecting them through through the price of diesel- … at the moment, which is a massive headwind, Oh, absolutely. And I think when we talk about over the road, now we had what, 30,000 drivers, non-domiciled drivers leave the market.

And when we get into… Every time I talk to somebody, and I’m sure I have this conversation 10 times while we’re [00:19:30] here, I hope, about freight fraud, and I feel like all these trucking companies, we’ve always had a very, I’m not gonna s- it’s not unprofessional, but it’s been casual, and suddenly we have fraud everywhere.

And now I’m s- hearing people say, “If you don’t have cybersecurity, you don’t have cargo security.” So these issues are really blowing up, and I think, you tell me, I think the biggest companies are gonna be the ones that are gonna benefit from that because we’re all gonna flee [00:20:00] to the bigger and better.

Yeah, and I think some of the, the acquisitions we’ve seen recently I think it was, again, C- CH Robinson who’ve bought an, an, an escort company with just to deal with security. Yeah. So talk about what that escort company is for people who are saying, “What the hell is that?” It’s not what you think, guys.

Sorry, forgive. It’s a cultural thing. O- okay. What I meant was escort- It’s okay in Europe- … in terms of security … it’s not okay here. Yeah. No, I haven’t, I don’t think they’re getting into that sort of business, but it’s probably gonna be very high m- [00:20:30] margin if they did. But yeah. So in over the, across cross border, and again, we go back to the security issues in Mexico.

Obv- obviously, there is huge opportunities for criminal elements to hijack and to steal. Cargo crime is massive, not just in this country, but ar- around the world, and especially when times get harder as for high value products, pharmaceuticals, for example. I heard somebody recently said this in my podcast that some of the pharma companies that have been [00:21:00] ripped off multiple times now are getting three trucks and loading one truck with their cargo, and the other two are just decoys.

So it tells you how bad it’s gotten for them. So they’re willing to spend a lot more on logistics just to avoid the theft. And there’s lots that companies can do to to mitigate the impact, to mis- mitigate these risks. But they need to keep, the main thing is they need to keep the, the trucks rolling.

As, [00:21:30] as the more that they are moving, the less chance that they will be sti- hijacked or what we call in Europe curtain slashing crime. As soon as they come, they have a break then, And the other thing, of course, is to stop them stop people following them.

So consequently, a lot of people will, the, the criminals will wait for a truck to leave a compound and follow them. You know You might as well get a job if you’re gonna work that hard. One of the things I’ve learned also is that this cargo [00:22:00] theft used to be somewhat opportunistic.

Some guy’s walking by and go, “Hey, what if there’s Xboxes in there? Let’s break into that truck.” Now they’re picking it up at the port, recognizing that’s high value, and then to your point, following, waiting for the driver to get out of the truck, and then breaking in. It’s much more sophisticated than it ever was before.

Yeah, ab- absolutely. It’s a real issue and as you said before, the cyber element is very much aligned with the physical element. You hack into a system. You [00:22:30] f- find out the details of when a container, where a container is. You find out how you can get into a port, what’s required.

You come in, you pick it up- Yeah … and you take it. There’s a kind of a famous story that’s been circulating for the last year or two. Guy Fieri, who’s do- do diners’ drive-ins and dives. He’s a chef and celebrity. And Sammy Hagar, the rock star, they started a tequila company, not ’cause they wanted to, but because they’re celebrities they had to.

So they [00:23:00] had a million dollars worth of tequila stolen, and it was one of these deals where the drivers picked it up, took it to the location they were supposed to take it, or so they thought, dropped it off, thought, “We did a great job,” only to find out they stole a million dollars worth of… Somebody snuck into their system and stole a million dollars worth of tequila.

Yeah. And we had the same, very similar th- three s- semi-tray loads of Guinness was stolen only a couple of weeks ago in the UK. Serious business. Serious business. Yeah, really serious. [00:23:30] So I know we’ll, there’s a lot of other things going on with over-the-road, but I wanna hit on intermodal for a second.

I’ve talked to people about intermodal over the last couple years as a way to achieve not only some cost savings, but also sustainability. Are you hearing customers talk about that? Not so much an- anymore. I think it’s it certainly was something which was the top of agenda maybe a couple of years or so ago.

I think since we had the [00:24:00] conflict in, in the Gulf I th- and a whole range of other economic and disruptive forces, I think sustainability has really dropped down the corporate agenda. Rightly or wrongly, people are really focusing on what they think is number one priority for their business- Right

which is, making money. And in my mind- You need, it’s a three-legged stool. You need to have economic [00:24:30] stability, sustainability. You need to have the the environmental mitigate the environmental impact as well as the societal side, … as well. You nee- and if you’re gonna have a successful business, you need to look at each the, of those three.

And I think over the last 10 years or so, the environmental side has taken too high a priority at the expense- Yes … of maybe the, the economic. And now because we are in a, a much tougher time [00:25:00] economically that I think companies are really doubling down on the fact that they need to make profits if they’re able to prosper in this really difficult environment.

And actually then they can deliver the benefits for sustainability and the societal side of things. Yes. And the nature of our business is you’re never going to be able to convince a company that, “Hey, this is really good for the planet, it’s only 10% more.” It’s it’s gotta first off save me some money or make me some money, and then [00:25:30] the, the, the other consequences, yeah, and it’s also good for the environment.

And I think I still hear people say the largest brands have sustainability goals, but it’s not gonna be easy to deliver those all the time. And I always say, if you’re Starbucks and you’re selling a $7 coffee for, that’ll cost you 40 cents, you can roll around in sustainability all you want. We’re not making that big fat margin in this business.

And I think it’s, what it comes from the top as well, when you see politicians are, yeah, either in the US but also [00:26:00] elsewhere, say we said 2035 was gonna be this real c- … but actually it might be, like, 2040 or 2045, or let’s push it back a little bit to 2050.” Because if politicians, of course, work on a different cycle than business.

They work on a, maybe on a four-year or five-year cycle. And as long as they’re out of politics in, in, in that time, then they don’t have to have responsibility for the decisions which they are making. I came from automotive, and every [00:26:30] year they would just keep adjusting the the f- fuel economy, and they just kept saying higher.”

And I remember some of it’s good. You’re like, “Yeah, we can meet that. We can get better. We can be greener and cleaner, and we’re happy to do it.” But some of it just got that’s not possible. And right now with the electric vehicles, I’m, I was listening to a book about Brad Jacobs from, founder of XPO and many other companies, and boy, he goes off on that.

A- and by the way, he wrote a book called How to Make a Few Billion Dollars. We should all read it. [00:27:00] But next I wanna talk to you about warehousing and fulfillment. So we all are consumers of e-commerce, and we love it, and we are expecting more and more of it, but the business has gotten very difficult, and I imagine it’s gonna get a li- little more difficult.

So talk about what you’re seeing, some of the macro trends impacting that space. Yeah. There’s a lot going on in the warehousing real estate sector. Th- that’s for sure. It g- goes back to some of the [00:27:30] things we were talking about, w- where are the, the real hotspots at the moment. Anywhere close to a border, for example.

That you- Yeah … you mentioned that you were down at Le- Laredo, was it? El Paso. Yeah. That… Yeah. Okay. So there’s y- a huge demand down there. We also… Going back into the flows of g- goods, because so much more now is coming from across the whole of Asia into the, into the US, then [00:28:00] that means that actually the port of of import is changing.

It’s not all port of, you know- … Los Angeles and Long Beach or whatever. It’s coming in ev- on a different, on the East Coast as well as the West Coast. And of course, when it comes in, then it needs the warehousing before its onward distribution. So we’re s- we’re seeing many parts of the of the US have shortages at the moment because th- they haven’t caught up, managed to catch up with the actual changing flows, the [00:28:30] changing structures.

So I think that’s a hugely important trend. And then of course we have the couldn’t get through today without talking about data centers. You, because the data centers are also competing with warehouse, commoditized warehouse, for space as, as well as all the materials, which is making things a lot a lot more expensive.

Oh, yeah. M- for sure, and they’re also competing for headcount. So- Here in the United States, every time I talk to someone from [00:29:00] warehousing, they say labor is a problem for us.” It’s not a job that is easy, and I think the only way out of it is technology, ro- robots or whatever, drones, whatever you’ve got in that warehouse.

And I think it makes it a better job for one. I came from automotive, and I saw when I first started my career a lot of people lifting with their back and walking long distances, doing jobs that were difficult. At the end of the day, they were dirty, sweaty, tired, maybe even injured. Same thing’s happening in our warehouses right now, and [00:29:30] I think the s- the things we saw in the auto factories over the last generation have to happen in the warehousing.

‘Cause, right now if anybody here says, “Oh, I kn- I have a young person in my life and they don’t wanna go to school,” you say, “Hey, you gotta get yourself into a warehouse.” It’s like, it’s a tough job. I think we can make it better with tech, where you’re not killing yourself and you think, “Maybe there’s a career here.”

That’s very interesting on several different levels. Yes, you’re absolutely right. [00:30:00] Automation can better, lead to the better utilization of space. Something like four or five times better utilization, which is hugely important. And of course, then the productivity of the people, the, within that space w- is also, if you, if you put robotics in as well as the as fill the space with with mechanical equipment, which which is very important when you are competing for labor as, as well as the space [00:30:30] itself.

Yeah, it’s gotten very tough. Also, I heard somebody say this, “To do same day, next day, we’ve gotta get our inventory really close to the consumer.” So let’s just say you’re downtown Chicago. Somewhere there’s warehouses that can get deliver. Downtown Chicago is still pretty expensive, and to have warehouse space is very expensive.

And somebody said the warehousing is very expensive, but go ahead and find yourself an experienced warehouse manager. One of the things [00:31:00] which, We really need to think about is the future of work, and you touched on it there. Y- yes it’s, it would be good to, to have more automation for, especially from a profitability perspective.

But actually, if you’re employing less people in warehouses, when those jobs are very much the entry into the industry, what’s gonna happen in 5 or 10 years later if suddenly you’ve gone from a, a warehouse employing 500 people down to a handful of [00:31:30] computer technicians?

You haven’t got those people who would’ve gone from, who’ve joined as a w- a warehouse operative, who’ve moved up to become a manager of a particular line or, and then moved on to the contract m- the manager, and then moved up to the actual warehouse manager. You’ll stop, you’re a- it’s taking that continual flow and churn of people a- away.

Yeah. I’ve s- I’ve seen it in the automotive ware- the ware- automotive facilities where fewer and fewer employees, but [00:32:00] everyone who was still there had a much better job. And they were actually more s- like a, more of a skilled worker as opposed to just a, a strong back who can walk around all day.

Yeah. M- last point on this is that, of course, a, a lot of companies get big subsidies. I’m thinking about we- Amazon, come to our state, come to our city because we will build a a, a huge warehouse which will employ, 1,000, 1,500 people more or so. Of course, [00:32:30] if you get there, then you build something with a dark warehouse with, which actually then has probably, I don’t know, 100 people running, a hu- massive, I d- 10,000 square meter or 100,000 square foot, pr- facility.

Then, they might want to s- start thinking about getting their money back. Yeah. It’s a difficult thing. And again, I always see these Amazon people, they run from their truck to put it on my porch. And I keep thinking, they’re doing that not ’cause they enjoy [00:33:00] running all day long. I think they have some really high expectations for these guys.

It’s y- there’s a whole bunch of issues we have to figure out on this. But the next topic is waiting, and it’s f- the freight brokerage business. And before we got up here, we were talking about the freight brokerage business. There’s 25,000 freight brokers. I think at the height of COVID, we had 31,000.

But- 50% of it, of the volume, is in the top 20 [00:33:30] companies that we all know. What do you see happening? What’s gonna change this industry? I think we’re already seeing it, and most of the people in this room will have read what’s going on at CH Robinson and Expeditors is a slightly different sector.

But it, it’s, it was all related to AI. I was… Y- you, you probably have a better idea of the margins involved, but, I was reading that y- you need, if you’re a freight broker, you need a margin of about 15% or something like that. Now, after, after [00:34:00] AI implementation, that’s coming down.

The, the best freight brokers are working on gross margins of about half that, and they can do that because they don’t have the head count. And that’s what we’re seeing. The, those freight brokers who have invested in AI already are the ones that are the most competitive, and those are the ones that are winning out.

Yes. And I totally agree with what you… We talked about this before, but I think there’s another issue that, that sticks in my mind. [00:34:30] We talked about the f- cargo theft and the freight fraud. I keep thinking if I, you and I were responsible for picking a 3PL or a freight brokerage for our very large shipper, we would be timing out that first.

And that would, might lead us to saying, “Hey, these guys are big and they spend $100 million a year on p- preventative measures. These little guys who are our buddies, who we have a relationship with, they can’t do that for us.” Yeah, and I think we’ll probably [00:35:00] see that that trend of consolidation r- really gathering pace as, as we go on.

Yeah, we’ve seen a lot of tho- these guys know it. These are the ones who probably did those deals. But there has been a lot on LinkedIn as of late, and I think it’s just gonna continue. And, one of the other things I think we’re seeing is- Now there’s th- this idea of, “I want transparency.

Tell me what the rate for the truck is. Tell me what your fee was. I wanna understand how you make money. I don’t want, I don’t wanna take your money away, I just wanna understand what you’re [00:35:30] making and how you’re making it.” Now, in the past, you might’ve had one of those freight brokers who made $1,000 and went and rang the bell, and a whole bunch of guys got up and did a victory dance like they scored a touchdown.

That’s yesterday’s news. I don’t think we’re gonna see that anymore. I I to- totally agree. And I think, y- the, the future of the industry will become one which is focused on capability technological i- investment, and that’s always going to I think, at the [00:36:00] moment, support the growth of the larger freight brokers in the year.

So the last segment I wanna talk to you about, and it’s last but certainly not least, it’s the freight tech and supply chain software. I’ve seen on LinkedIn all sorts of consolidation happening in that space, and then other people saying, “Go ahead and consolidate, ’cause AI’s gonna wipe these things out.”

I have no idea if th- that’s true or not. What do you see happening with this? And no one has all the answers on this, but what do you see? W- well, there’s no [00:36:30] doubt there’s a lot of consolidation going on. There’s a lot of acquisitions going on as, as companies such as Descartes are adding capabilities all, all the time.

And that, I think they’re the, the biggest at the moment. There are difficulties and challenges with that in as much as y- you are, you do, you run the risk of ending up with something really clumsy difficult to use, one which has a difficult customer experience. And in the end, you may well be really vulnerable to [00:37:00] companies who are AI natives to be able to build something in competition for a lot less of the price.

Yeah, the… I saw somebody in, who knows, it could be one of the AI wrapper companies, but they were saying “You don’t need a TMS. We’re your TMS,” meaning AI. But having heard that, two people recently have said to me, “Don’t be surprised if we see on-premise systems come back,” just because the idea [00:37:30] of connecting everything I have to AI And knowing that maybe there’s some breach potential, or maybe that AI company’s gonna compete against me.

Yeah. And a lot, in a lot of cases, these acquisitions are not to add scale, they are to add capabilities. Are we good, Ron? Are we, We’re good. I got questions for you. Excellent. So how much has the Trump tariffs impacted the sales away [00:38:00] from the US, meaning foreign to foreign? What has that done to availability of products?

Th- they’ve had a massive impact, absolute massive impact on the rest of the world because obviously Chinese companies, Chinese exporters needed to find new markets. And obviously China’s going through a, a major issue in terms of economic growth itself. Chinese eco- manufacturing has [00:38:30] huge overcapacity.

And so if the US market became shut, then they need to look around the world. And so the, the Chinese manufacturers have been dumping goods on the rest of the world, not only in Europe, which, who is obviously a market I know particularly well, but also in Mexico, for example. And that is really consolidating

I like it, and that- that’s really [00:39:00] causing huge problems. And it’s creating tariff i- issues. The EU is putting tariffs on many of these goods. We’re in a cycle, which is gonna be really tough to get out of. Yeah, I recently saw that the German automakers are, who traditionally sold a ton in China, aren’t selling anything in China right now.

Sales are way down. But on top of that, Germany’s accepting these EVs from China, and suddenly the [00:39:30] crown jewels of the German auto industry are struggling. And I can’t imagine they’re gonna continue taking EVs from China that are subsidized. Yeah. The EU have put tariffs on Chinese EVs. I don’t think the UK has yet, and the, the UK’s been taken over by electric vehicles may made in China.

But, that’s having, it will have a, an enormous impact on the the manufacturing industries- Yep … in these countries. By the way, some of the discussions from what I understand [00:40:00] with US and Canada relate to automotive. And I think some of it is, I can say this ’cause I worked on China programs, they’re going to try and bring Chinese parts in through Canada and pass them through.

And they’re in Canadian boxes, so it looks like they’re Canadian, but they won’t be. It’s difficult to see. I hear that a lot, Joe, there are already quite stringent rules in place for the in terms of origins, of, the, the proportion of g- goods- Right

which needs to [00:40:30] be made. I’m not entirely sure, unless people at companies are doing it illegally. Yeah. It is illegally. It’s China. So there’s another good question here. Talk to the recent nuclear verdicts and how brokers, forwarders will be impacted even with airtight SOPs that are rigu- rigorously followed.

You’re gonna have to explain what the, the nuclear… So nuclear verdicts were these, where there’d be like a, an accident a truck accident, and a [00:41:00] judge or a jury rewards a plaintiff Millions and millions of doll– or tens of millions of dollars where, or hundreds of millions of dollars. And it’s gotten to a point where s- insurance companies are saying, how can I insure a company like that, that’s gonna get a nuclear verdict for killing one person?”

That sounds a very good answer to me. I’m afraid my my knowledge does not go that, that deep in there. So apologies to whoever asked that question. But Joe what was your think- thinking on [00:41:30] that? I don’t know that I have any answers for it. I know it’s a big issue, and I think one of the challenges you have with the trucking business is they go back and say, “Can you prove that you did this training and that you’ve followed all this paperwork?”

And it’s a business that requires quite a bit of paperwork, quite a bit of compliance, and if a j- a lawyer can point out that you did this sloppy, then all of a sudden it just seems like by extension, that accident, that’s just the nature of your business [00:42:00] when it might not be.

Again, this is a lean business. There’s not a lot of margins. There’s not a lot of people sitting in the office doing compliance for the smaller companies. And I guess just broadening that out a l- a little bit I guess new technologies and including AI will, once they are democratized, once they become really cheap, they’re going to allow smaller companies to be able to deal- Oh, that’s a good point

with that reg- regulation. That’s a good point. Yeah, that’d be nice. Yeah, and I th- I imagine it would also be nice if we could [00:42:30] cut down on some of the paperwork, ’cause it- we’ve made it almost impossible to be completely compliant. So how do you anticipate the AI technology will advance the logistics industry?

I think you just told us. Yeah I think it’s going to move very much from one which is labor intensive to one which is focused around software i- for the logistics industry. I think it’s will mean in the warehousing industry that it will move from one which is being very labor [00:43:00] intensive to one which is very capital intensive.

And I think that’s gonna have a massive impact on how logistics companies, contract logistics, 3PLs, actually think and run. For many decades it was all about the providing outsourced services for manufacturers and retailers who didn’t want the hassle of looking after thousands of thousands of people.

Now it’s gonna be a case of providing, say, r- robots, a automation in a warehouse. And that’s gonna mean, [00:43:30] that’s gonna mean a big change in actually culture and business thinking because will a logistics company be able to provide that level of automation which their customers want?

Or will that customer think to themselves actually, I’ve got bet- I’ve got better access to capital than this particular logistics provider. I can invest in it myself.” Yeah. I think we’ve seen a lot of kind of touchless freight where it’s completely automated where it says, “Hey this is a [00:44:00] load,” and a, a driver in a truck gets assigned, and that’s great.

It takes out the middleman. The problem we’ve run into is we used to make phone calls, and I got to know my freight broker or my carrier a little better, and I think it’s led to some of that freight fraud. And so I think it’s a good thing. We’re not gonna c- we’re not gonna cut back on that auto- automation, but we have to somehow get back the trust.

Yeah and just to, last point on that, going back to what I was talking about a little bit earlier on the [00:44:30] future of work, I think again, that I’d really want to flag that the issue that if freight forwarders if customs brokers are moving to a, a completely automated model where AI does really a large amount of the, the job for them, okay, where are our leaders of the future gonna come from?

Because we’re just getting rid of all the entry level, all the auto- all the administrative jobs, which used to be our first [00:45:00] jobs coming in into the industry. They’re not going to exist anymore, so where are our new managers gonna come from with the experience that we have today? Yes. I love it.

I love it. So the next question is, can you address the driver shortage in the US? Personally, I think I the driver shortage in the US is no different from the driver shortage in the rest of the world, and this is something that I’ve been t- talking about for quite a s- [00:45:30] significant amount of time.

We, as an industry, need to make a, a, a better job at attracting new people in into the industry. It needs to be better conditions. It probably needs to be better, better paid. It needs to offer more career opportunities. It needs to be more gender diverse, if that’s the right way of putting it.

We need more women in the industry. F- one, you could say obviously you do, but there are [00:46:00] really good economic reasons why we need more women drivers. Because, th- they make up half the population, but I think something like f- two, 3%? Yeah, that’s it. I was gonna say 4%, so it’s low.

Yeah, it is. Now, so why aren’t we attracting new pe- new young people and women into the industry? It’s because the, the conditions suck in many c- Yeah … in many cases. There are not p- proper truck stops. There’s no security, and s- [00:46:30] and so on. You can go on and on. That’s one of the big reasons women don’t do it isn’t a secure job in many cases, where they, where you’re gonna spend the night.

I think, there’s another angle to this, and I didn’t make this. I didn’t come up with this. People have said on my podcast over the last couple years We might have a driver shortage, but we train lots of drivers. We bring drivers in, they get in the job, and they find out they don’t like it, it’s hard.

And if you’re willing to drive a truck all day, you’re willing to put in a, a, an honest [00:47:00] day’s work, you’re needed in warehouses, you’re needed on construction sites. And those data centers you talked about, if you’re a truck driver, I think a lot of them are gonna say, I used to be a contractor.

I’m gonna go work at a data center.” And there’s just better jobs out there. And there are other things that we can do in terms of changing the, the, the business model. A, a lot of people these days do not want to spend a, a night away from home for… so what do you do? So you maybe train, change the way that you [00:47:30] structure your, the runs on a for each day, which ensures that people can get back to spend a, a night back at home.

So it’s ch- it’s changing stru- it’s think- new thinking. Yes. And there’s another angle to this, which is two I’m gonna mention. There’s a company, I think it’s nonprofit, called Project 61, and it’s called Project 61 ’cause the average truck driver dies at 61 years old. And which is scary for some of us who are older than 61 years [00:48:00] old.

But it’s a tough job and it’s, you’re eating probably improperly. I also heard in the same interview that the average truck driver, when he sleeps in his truck, sleeps about five hours, and then drives all day. It’s ridiculous. You mentioned that y- this, this is 11:00 at night for you.

Imagine you have to be really tired and get in and drive a very big, dangerous truck. We gotta do, we gotta do better. One other angle. The average [00:48:30] truck driver can drive 11 hours a day, only driving about four and a half or five hours. So we have a utilization problem as much as we have a d- a shortage.

And by the way, if you’re standing around, they don’t get paid. They get paid to drive. So you can imagine these guys saying, “What the hell am I doing? S- I’m walking around this warehouse all day waiting to get loaded.” We gotta do better. And of course, we, eventually we will have the automation. [00:49:00] We will have driverless vehicles, which, when’s that coming?

It’s al- already being introduced in some, on some routes in this country. Five years, 10 y- years before it’s fully- I think we’re starting to see it, and I think it’s gonna start. I just talked to the guys from Humble Robotics. They have the Humble Hauler. They’re out of Silicon Valley, and they said, “We’re gonna end up doing regional stuff, 250 miles and less.”

And, Yeah, I think we’re gonna start seeing it, but we’re not quite all the way there. And I always say the same thing when it comes to [00:49:30] a driverless truck. If a driverless truck was in an accident today, it would be front page news worldwide for a week, and all sorts of politicians would say, “We have to ban this.”

But meanwhile, we have human drivers crashing every day, unfortunately. And you almost have to be perfect, you almost have to be perfect to get to that next inflection point. I think we have Ron there in my eye line with a big hook [00:50:00] to

I think, John, you’ll like this question

What is your perspective on Canada becoming an associate EU member, and what does that mean for NAFTA? Yeah, that’s a really interesting question, isn’t it? I don’t think… from what I understand, and I was reading about this today, I don’t think the EU wants [00:50:30] Canada as a- Aw, come on now … as a partner.

No. I, I think there’s been a lot of pushback. So- Yeah … given Canada’s agricultural industry and sector, I think the, the EU farmers will say, “No, thank you very much. That’s not gonna happen.” However, I do think that the UK and Canada, given our very, very strong links and all being part of the same family, I think that is probably going to be something which will move ahead, and I think there’s already talks about a [00:51:00] defense more collaboration investment between the UK and Canada.

So I think we’ll probably see a, a transatlantic partnership, but it will be between UK and Canada rather than the EU and Canada. I like it. I like it. John, thank you so much. I could talk to you all day.

Thank you.