Q&A: Doug Waggoner, Chief Executive Officer of Echo Global Logistics
LM Group News Editor recently spoke with Doug Waggoner, CEO of Echo Global Logistics, a non-asset based freight brokerage company and a provider of technology-enabled transportation and supply chain management services about how 2016 ended up in the freight transportation and logistics sectors and various…
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LM Group News Editor recently spoke with Doug Waggoner, CEO of Echo Global Logistics, a non-asset based freight brokerage company and a provider of technology-enabled transportation and supply chain management services about how 2016 ended up in the freight transportation and logistics sectors and various related topics. A transcript of the conversation between Berman and Waggoner is below.
Logistics Management (LM): How do you view the current state of the freight economy as it relates to macroeconomic conditions?
Doug Waggoner: The first quarter is always tough, because usually it’s the slowest quarter of the year. I don’t feel like you start to get a read on the year until the second half of March and into April, which is when you are more able to appreciate whatever it is the economy is going to have to give you. We are not quite there yet. 2016 was anemic at best in terms of the freight economy, and it was for pretty much everybody I talked to. But I think we are all bullish for 2017 in that it is going to be better based on the general mood of the stock market, and companies looking forward and being optimistic. That is half the battle. Consumer confidence is looking better, and I think we will see it pick up in the second half of the year, if not sooner. I think capacity will tighten later this year, as it will be somewhat exacerbated by the ELD ruling taking effect, which will probably also cause pricing to go up.
LM: Shifting back to capacity and pricing, how are Echo’s truckload brokerage operations doing now that your acquisition of Command has been official for a while?
Waggoner: The brokerage business is going great since the integration was completed in October 2016. On the truckload brokerage side, we have the best of the two networks, so there were some lanes where Command has access to more capacity and competitive pricing and in some lanes Echo had it. We can now pick the best of both, and what that means is we can be more competitive in more lanes for our customers, and the way that manifests itself is that we are able to take more lanes from customers looking for help, whether it is a committed routing guide or the spot market, and also makes us a more efficient source of capacity for our transportation management customers. We also have new technology that is a result of the merger of the Echo and Command systems that makes us more efficient so we can book more loads per person so to speak. I don’t think we will see the benefits of that, though, until, we are in a little bit of a hotter market with more spot distance, but we are excited about that.
LM: What about on the LTL side?
Waggoner: Command had a customer base that was predominantly truckload, and we have been able to approach a lot of those customers ands start selling them LTL and partial truckload services. That is good for our carriers, and us as it gives us more volume and we are able to do more for those customers than just be a truckload broker. I think it is good on all those fronts. And the final front is intermodal between the two companies, with a lot of truckload than can potentially be converted to intermodal at their customers’ option. We like the idea of being able to give a customer a truckload option or an intermodal option, which might be a little slower but also a little bit less money. Between the two companies being together now, I think we are a more meaningful customer to the railroads, and we have more competitive rates there, as well as a better network. I think we are going to be able to do a lot more with intermodal options for truckload shippers that maybe don’t have a lot of experience with intermodal.
LM: What about intermodal pricing? In the past you have said that intermodal rates are always looking to match up with truckload and that makes sense, given length of haul.
Waggoner: I would say at this moment intermodal is not as competitive with truckload as it is at other points of the economic cycle for a couple of reasons. One is that truckload pricing right now is pretty cheap and another is that fuel is relatively low. When you add that up, intermodal prices can only drop so much, making truckload more attractive on a relative basis, especially with the speed component. It is a cyclical market; things can change with the market getting tight and prices going up, with fuel also going up at some other point, which make intermodal a more attractive option.
LM: From a service perspective are shippers getting what they need, given that truckload rates are low and there is a decent amount of available capacity? And is that translating into margin gains?
Waggoner: I don’t know that service necessarily translates into margins directly. But I think what you see in times of slack capacity in softer markets is that service is generally pretty good, so trucks should show up on time as they are definitely looking for miles and they get there on time so they can get to the next load. We are seeing pretty good service levels, and I think that is true for the industry.
LM: Looking at IT, there is a lot going on as usual with an eye on the next big thing, whether it be IoT, block chain technology, and other things, What is the current state of IT for Echo and also from an industry perspective?
Waggoner: IT is somewhat of a commodity in that it is fairly easy to build now. More important, though, is the data and analytics. Companies like Echo have massive amounts of data, and we have started to employ data scientists to help us work smarter and more efficiently, understand the market better, as well as better understand customer and carrier behavior. And those things combined with good technology that automates an optimized workflow is what can get companies like Echo an advantage.
LM: How do you view NAFTA, as it relates to the potential wall and proposed import border tax?
Waggoner: I would just say that Mexico and Canada are both important trading partners for the United States. Tax or not tax, those trade lanes are not going to go away overnight, and I think the political process will work itself out one way or the other. The way Echo thinks about Mexico and Canada is that those are important markets we want to get bigger in, and we want to have more capabilities and more coverage so we look at those two markets as a growth opportunity for Echo, regardless of import duties and taxes.
LM: There is a fair amount of talk about big plans to improve U.S. infrastructure. What needs to happen?
Waggoner: In the downtown Chicago area, the potholes are maddening. As that extends to the interstate infrastructure, we have failed to invest in the fixes. It is cheaper to do it now than it is to do it later and we have to do it eventually. It is also a good source of jobs, which are needed to help boost the economy. The question is how do we pay for it, which remains to be seen. There are a lot of infrastructure problems. And down the road there may be autonomous vehicles, which may or may not have certain infrastructure requirements, and it will be interesting to see how that plays out on the safety front. Does that require some sort of investment in specific infrastructure for sensors or some embedded electronic monitoring system to make those vehicles safe?
LM: With ELDs becoming law, what is your sense of preparedness among your carrier base?
Waggoner: I think if they are not already compliant they are thinking about it, then they are doing the work and the studies to figure out the approach they are going to take to become compliant. It is not really all that difficult to be compliant; there are some pretty inexpensive technologies that are available so a small fleet needs to figure out which one works best for them, and we don’t get any sense it will drive people out of business or prohibit anyone from operating. Many carriers will likely out it off until the last minute, but I don’t think they will have any difficulty complying with the regulations.
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman