3PL Q&A with Doug Waggoner, CEO of Echo Global Logistics
Logistics Management Group News Editor recently caught up with Doug Waggoner, CEO of Echo Global Logistics, at last week’s eyefortransport 3PL Summit in Chicago. The wide-ranging conversation covered myriad topics impacting shippers and 3PL’s alike, including capacity, rates, and technology, among others. A transcript of the conversation is below.
Logistics Management (LM): What is your take on the current state of trucking capacity?
Waggoner: Things vary geographically. Things are tightening up in southern California, as well as the other sunshine states like Arizona, Texas and down in the southeast with some seasonality due to produce goods. If you subtract that seasonality, things are relatively manageable but still tightening. We are also still dealing with the well-publicized driver shortage, which is a challenge everyone is figuring out how to deal with, and the same goes for the regulatory challenges that impact capacity, which is very real. Right now in 2012, things are not too bad.
LM: The tighter capacity is, the more advantageous it is for carriers with pricing, margins, and rates. How long do you see these current market fundamentals remaining intact?
Waggoner: I see it continuing with pricing continuing to go up. If you think about it, we have not really had any significant economic recovery so things are tightening up without that. If anything, the economy has probably softened in recent months. Should there suddenly be 5-to-6 percent GDP growth, it would be brutal out there. Someday we are going to get back into that robust recovery mode. Between regulations, the driver shortage, an anemic economic recovery, and aging equipment, there is a “perfect storm” that is going to continue to give carriers pricing power. And when prices go up higher, they will add capacity; they always do. It is supply and demand. At a high enough price, you are going to create additional supply.
LM: This is occurring at a time when the economy is bumping along with flattish retail sales growth and trucking tonnage.
Waggoner: It is true. Both the economy and consumer prices are flat and in some case deflationary, yet transportation prices are going to be highly inflationary. As a component of overall prices and the cost of goods, you are going to see the transportation component go up quite a bit. It is good for the carriers, because it is going to get them healthy at a time when they have been charging non-sustaining prices for a long time. We need healthy asset-based carriers. It is also going to be good for companies like Echo because one of our strengths is the ability to find capacity in a tight market. If you are a shipper and need to move your goods but cannot find trucks, yes, you might have to pay more but you need to find a truck. If you cannot find a truck, who are you going to call? Hopefully, it is Echo.
LM: As we head into the second half of the year, are you seeing a normal seasonal build-up as we get closer to the August through October Peak Season timeframe?
Waggoner: No. The normal seasonal trends you would expect are hard to forecast, and it seems volatile right now. There have been some strong weeks, and there have been some weak weeks, whereas normally it is just continuously building at this time of year. At Echo, we get our growth by taking market share, but on a same-store sales basis, I think we are just bumping along. Things can change quickly though.
LM: How do you think the freight market is compared to a year ago?
Waggoner: We were up 31 percent in the first quarter annually so we would say it is better. The reason we were up is because we went out and got a bunch of new business. But for actual existing customers—in terms of what they did last year and what they are doing now—it is still pretty flat.
LM: How much has your customer base grown in that time?
Waggoner: We have added about 25 new contractual customers, which represents about 18 percent growth in that area. If you look at our transactional-brokerage customers, it grew 22.8 percent annually, and our enterprise clients grew by about 20 percent. Our business is set up pretty well in the sense that we should be able to continue scaling up in the future. We are aggressively selling and bringing on new carriers and partners, and expanding into new markets.
LM: Shifting to a more mainstream subject, things continue to worsen on the economic front in Europe. Many reports suggest that could trickle into depressed economic activity here. What is your take on that?
Waggoner: We really don’t worry about that, because we are more focused on North America. In the sense that we would be impacted in our day-to-day business in Europe, it would likely be a small blip that we could power through with other business.
LM: What are you seeing is shippers’ approaches to leveraging technology? Are they viewing it as more of a core function than in the past?
Waggoner: We are seeing a lot of interest and excitement about it, but at the same time companies are slow to act upon it. We are talking to a number of companies right now that want to implement technology, but they have a lot of other issues to deal with so it takes longer to adopt it, despite a high interest level.
LM: Echo recently acquired Purple Plum LLC, a Purple Plum Logistics LLC, a Wakefield, Mass.-based truckload transportation brokerage focused on temperature-controlled logistics services. What is the current environment like for acquisitions at the moment?
Waggoner: There are a lot of small brokers that are nervous about capacity, and they are finding it more difficult to compete. The market is tighter and competition is better, as is technology. What we are finding is that these smaller brokers that are having the realization that maybe it is better to be part of something bigger. Ideal candidates are those companies that want to stay in the business and stay involved and keep growing but need more resources.
To see the original article form Logistics Management Magazine visit: http://bit.ly/QsI9ft
Quelle: eyefortransport
Portal: www.logistik-express.com