Q&A: Echo Global Logistics CEO Doug Waggoner

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LM Group News Editor Jeff Berman recently caught up with Doug Waggoner, CEO of Chicago-based non asset-based 3PL Echo Global Logistics. A transcript of the interview is below.

LM: How do you view the freight transportation and logistics market?

Waggoner: Capacity is remaining tight. There had been a question of whether the hurricane effect let up, but the combination of resolving carrier network imbalances along with an improving economy and maybe some seasonal surge we have not seen in a few years has led to things being pretty strong.

LM: What are some other factors?

Waggoner: There is the ELD (electronic logging device) impact…and the uncertainty of how it will impact market conditions, as well as how that will ramp up between now and April, when the enforcement kicks in completely. But I do think there is going to be continued tightness, despite the fact that we are going to enter the softest part of the year, which is typically late December, January and February. With ELD, drivers may not get pulled out of service but they may get tickets and that could discourage them from breaking HOS rules. Nobody really knows for sure how that is going to play out.

LM: On the brokerage side, things like spot market rates and volumes are doing well. How do you view that situation?

Waggoner: There is a shortage of both trucks and drivers right now. So, when shippers have to move their freight, event though they may have contractual rates, sometimes the people they have contracts with divert that capacity to other customers that are willing to pay more or they just don’t have the capacity to go around when demand increases. Given those factors, it forces shippers to have to move freight in the spot market, where prices are considerably higher. A re-pricing starts to take place…and shippers weigh how much they are paying in the spot market versus freight they cannot move under their contractual rates. And there comes a kind of mathematical point where they realize it is cheaper to renegotiate their contract rates rather than pay exorbitant spot rates. This on a shipper-by-shipper basis, but it is happening more and more. We try to read the minds of the shippers based on how they are handling their RFPs. It seems like about half of the shippers out there feel like pricing is at a peak and should come down, and they want to wait and negotiate later. Then there is the other half of shippers that think prices are going to keep going up and they better renegotiate as quickly as they can.

LM: There has been a lot of talk about how tight the market has been, especially in recent years. Is that accurate?

Waggoner: Yes, I agree with that. If you look back at 2014, we had the “Polar Vortex,” which led to a pickup in demand with a crimp on supply and there instantaneously had tight market conditions. Right now, things feel like 2014.

LM: Does that type of situation, or environment, present good business opportunities?

Waggoner: Yes, it does, because at the end of the day, shippers have to move freight. If their current providers cannot help them, they call others. We see lots of opportunities to help people out that are having trouble moving their freight. One of the things a broker has to offer is a big virtual Rolodex with lots of carriers in our network. And we know where those carriers tend to run back haul and we can match supply and demand pretty efficiently using our technology and our algorithms. In these market conditions, people need us more than ever.  

LM: What are your thoughts on the economy heading into 2018?

Waggoner: We have been in a very long and anemic recovery since 2008, and it has been sub-2 GDP, so to be at 3% GDP feels more normalized and healthy. That is contributing to the tightness of the market, and I don’t see why it won’t continue, as it has been trending this way, albeit in a shallow way, for a while, and now it is picking up. With corporate tax reform, companies will have more dollars that they can reinvest in their business and in growth, which will have a multiplier effect, as will tax breaks for individuals. It could have a positive effect on the economy and be a factor. The driver shortage also continues to be an issue, so it will be an interesting market in 2018.

LM: Looking at technology, there are a lot of things going on like AI, blockchain, driverless trucks, and others, too. What is your take on all of this?

Waggoner:  With AI, there are a lot of opportunities to make processes more efficient. It is being done now for things like digesting e-mails and turning them into data. It means different things for different people, like speech recognition or optical character recognition years back. Now, the umbrella for all things AI continues to expand, with things like using algorithms to learn pricing in the market and start to predict and make decisions for you and you can measure the accuracy of those decisions. We have a data science team working on different things and outside vendors that help us. We think we can out our data to work and be smarter and more efficient and offer better service to our customer.

LM: What about blockchain?

Waggoner: Echo is a member of the Blockchain in Trucking Alliance. I would say it is in the forming stage at the moment in terms of creating standards and norms and lots of ideas on how it can be used. There are not any true products yet that have ubiquitous acceptance but over time some concepts will be grown that some people will buy into and some people won’t. Hopefully it will become a standard that will make our industry more efficient. We think there is room for it, which is why we joined the group and get in on the ground floor. 

LM: Looking at the e-commerce impact on supply chains, what do you think about related things like last mile delivery and regional distribution related to it?

Waggoner: The thing is there are so many permutations of what is currently going on with the changing of supply chains, such as the Amazon effect and retailers wanting to compete with Amazon and are carrying less inventory and doing more online. Every possible scenario that is happening is happening simultaneously, and it is hard to spot, or declare, any overall trend, when anything you can imagine is probably happening. This applies to things like more consolidation, different routes, shorter lengths of haul, more regionalization, more final mile, less inventory, and other things. I think we are going through a transformational period where people are asking questions, like is there less LTL or TL freight, that there are not quick answers for. Over time, the data will reveal that the market is different now.

About the Author

Jeff Berman, Group News Editor

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

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