Ben Gordon [00:00:00]:
It's more often the case that you will lose a customer if you screw it up than you gain one. If you do an amazing job, people expect you to do a great job. So if you're a brand or a retailer, you know, you think, what's the lifetime value of a customer? Right? I mean, Glenn, I don't know how much you spend on Amazon a year, but more than I should.
Glenn Gooding [00:00:17]:
How about that? More than I should.
Ben Gordon [00:00:18]:
A few thousand bucks a year times, you know, how many years into the future, 50 years or whatever, that's a huge lifetime value. So if a brand or retailer loses a customer that could have tens of thousands or more of value, you know, because of a supply chain glitch. And by the way, what are they paying the supply chain partner for that? You know, it's a tiny fraction of the customer lifetime value. You know, it might be trite to say it, but the brands and retailers that ask, can I afford to pay for a great supply chain partner? Maybe they should be asking, can I afford not to.
Glenn Gooding [00:00:54]:
Welcome to Parcel Perspectives, the podcast dedicated to small parcel shippers. I'm Glenn Gooding and each episode we dive into insights, best practices and strategies to help you navigate this complex, costly market.
Glenn Gooding [00:01:09]:
Hello everyone. Thank you for joining me again for another episode of Parcel Perspectives. I'm Glenn Gooding, President of iDrive. Very excited to bring a very interesting and I think kind of leading edge Georgia guest on to talk about some exciting forward looking things. Ben Gordon, who's the managing partner at Cambridge Capital is joining us and he's a renowned expert in logistics and supply chain investments. He's got a proven track record of driving innovation in our industry. And today I'd really like to talk with him about the future vision key supply chain investments for the next decade, exploring how technologies and other investments, automation along with maybe a sprinkling of sustainability will shape the future. So Ben, thrilled to have you.
Glenn Gooding [00:01:58]:
Welcome to the show.
Ben Gordon [00:01:59]:
Thanks Glenn. Great to be with you.
Glenn Gooding [00:02:00]:
Great, thanks. So Ben, I'd like to kick it off with kind of a pretty general question. Given what you know and what you're doing, what has you most excited about the future of supply chain and the innovation that you see coming?
Ben Gordon [00:02:18]:
Well, Glenn, it's a great question. I think there's tremendous innovation underway in supply chain and I would highlight a couple things. One, there is the opportunity to use new technology to solve old problems and a great example of that of course is AI. So everybody in transportation knows that there are a set of processes that you got to go through from an operational standpoint and historically from a technology standpoint, a set of EDI protocols and originally a set of green screens that you would type your way through. And those processes are hard to change. Which I think is a reason why a lot of people that have come in from outside of the industry have faced challenges. But people that are in the industry know that there are ways to do things better. Applying AI, for example, to automate workflow, or to do a better job with predictive pricing or to come up with superior analytics.
Ben Gordon [00:03:11]:
All that's one great area. That's something that I'm very focused on and excited about. And I think a second one is the growth of E commerce and all the supply chain technology that can make it better. And so a good example would be whether that's improving returns or post purchase tracking or visibility or fulfillment, all those are areas where E commerce growth leads to supply chain growth and problems that better technology and problem solving can address. So those are two areas that I'm excited about.
Glenn Gooding [00:03:40]:
Great. Why don't you tell me a little bit more about what you're doing with AI today? I understand you're doing some exciting things kind of in the truckload industry.
Ben Gordon [00:03:47]:
Sure. So one company that I'm very excited about is green screens. This is a company that I first met four years ago. Well really I met the founder who was building a tech enabled truck brokerage business and he also had this great technology that was capable of using AI to create all this value. And I looked at the business, didn't think the truck brokerage was that differentiated. Thought the AI for predictive pricing was incredibly powerful. Talked with the founders, name is Felix. Ultimately Felix decided to spin that off, build that into a standalone business.
Ben Gordon [00:04:24]:
I came on board as co founder and executive chairman and then worked with Felix, co invested in the business, helped with building up the team, working with some outstanding early adopters like NFI recruiting all stars Don Salvucci, Favier who came on as CEO and scaling up and what they had that was exciting was the ability to use AI to go to truck brokers and say I can streamline your process. In particular, I can solve a problem that's worth a lot if you get it right. And the problem was pricing. So your average truck Bros truck broker 20 years ago might have had an average gross margin of 18 to 20%.
Glenn Gooding [00:05:05]:
It was pretty lucrative back then.
Ben Gordon [00:05:07]:
It was pretty lucrative back then but. But that was then and this is now. And today the average truck brokerage gross margin is closer to 10 or 11% now. Some of that is cyclically driven because we're coming out of the bottom of this freight recession. But still, nevertheless, even at the glorious heights for truck brokers of COVID if you can say that those margins on average were 14%, so they're now down at 10, 11, maybe they'll come back up to 12 or 13, but still, you know, quite a bit lower than they used to be. Meanwhile, a study from a large truck broker that we've worked with showed that the average pricing error for the de facto standard in pricing, which is dat, the average error was over 20%. So what that means is if you're a truck broker and a customer calls you and says, hey, I'd like a quote to ship a truckload of freight from New York to Miami and you're using that legacy system for pricing, you are probably 20% wrong. You don't know whether it's high or low or where you are in that a 20% error for a business with 11% margins is terrible, not good.
Ben Gordon [00:06:18]:
Means you're quoting at a loss an awful lot of the time. You just don't know it. So what green screens figured out was they could take your data, run it through their machine learning algorithms, combine it with the data of what's now over $20 billion worth of freight from across the industry, and then tell you on a predictive real time basis, here's exactly what the price should be right now with an error rate that's 5x lower than that legacy system. And so as a result, it allows truck brokers to quote with confidence, make decisions faster, get to the right price faster, allow the frontline people to make decisions instead of having to run it up the chain and ultimately the per transaction activity of a rep can expand massively. I mean, imagine if one rep could do three times as much transaction volume. You know, what a huge gain that is. And so, you know, early adopters and companies like NFI figured out that they could make millions of dollars in additional profit simply by using the green screens AI pricing technology. And so that's pretty exciting because I don't know about you, but I don't see too many things in the transportation technology world that instantly pay for themselves.
Ben Gordon [00:07:31]:
And green screens, yeah, it's one of those tools. So that's pretty exciting.
Glenn Gooding [00:07:34]:
It sounds fascinating. I'm wondering, with the advancements of AI, particularly in this company you're discussing green screen, do you anticipate a time when the broker is a large language model AI that's quoting directly?
Ben Gordon [00:07:51]:
It's possible. I think it hasn't happened yet and it won't happen for a while because to paraphrase the wonderful quote, rumors of my death are greatly exaggerated. You know, rumors of freight brokers death also greatly exaggerated. The reason why freight brokers continue to add material value, it's not just a transaction, it really is managing a process and doing labor intensive work that's hard. And so again, people from outside of the industry who have come in to say, oh, I'm going to disintermediate the middleman. Well, the middleman in logistics is actually doing a lot more than say the middleman in say the airline industry. This isn't like, you know, a travel agent that could be replaced by kayak or orbit. So there's just a lot more process complexity.
Ben Gordon [00:08:43]:
So I don't believe truck brokers get replaced by AI. I believe they get augmented. Right. So I think, I mean the phrase that we like is it's not man versus machine, it's man plus machine. And I think the best, you know, I gender comments notwithstanding, the value of a truck broker using great technology I think is enormous. And I think truck brokers that use technology will hands down beat those that just can't keep up. Great example we're going to have at our annual conference, the BGSA Supply Chain Conference next month, a variety of CEOs. Doug Wagner, CEO of Echo, Drew Wilkerson, CEO of RXO.
Ben Gordon [00:09:26]:
Those guys are both spending 70 to 90 million annually on technology. And so those guys have a huge advantage over competitors that aren't spending. Similarly, brokers that are using green screens, which has over $20 billion of freight flowing through its system, which is more than any one RXO or Echo or other truck broker has, they get to benefit from all that. So look, in the long run I suppose technology will replace a lot of things, but in the near term, I think it's more about man plus machine. And the smart truck brokers that use systems like green screens will generate a huge competitive advantage.
Glenn Gooding [00:10:04]:
Just fascinating. So if we pivot to the other area that you said, really had your interest piqued, your interest, it's kind of the, I guess the evolution in growth of E commerce, right?
Ben Gordon [00:10:14]:
Yes, yes, exactly.
Glenn Gooding [00:10:16]:
Yeah. So anybody with half a pulse over the last five years now knows what supply chain means, at least in general terms. And I think we've all been benefactors of the rise of E commerce. Heck, my mom and dad got forced to start buying things online during the COVID times. What are you seeing as far as changes there or the future There you'd mentioned a number of things from a technology perspective on visibility, things like that. Love to learn more from your perspective there.
Ben Gordon [00:10:49]:
Sure. So a couple of things. One, E Commerce was definitely overhyped during COVID I think there's the famous chart that most of us saw. It was a McKinsey chart that showed the first quarter of COVID generated 10 years of forecasted growth in E Commerce and penetration retail. Turned out that that wasn't actually permanent growth. It was really just pulling forward penetration that would have happened over time, which meant that the growth wasn't going to continue like that. In fact, it flattened out. But guess what? That growth has started to resume again.
Ben Gordon [00:11:21]:
We're seeing it. And so as E Commerce grows, there are a whole host of supply chain needs. Okay, so one is you need fulfillment companies so that you can do a better job of fulfilling. And as Amazon has been continuing to use Amazon prime and the ability to do first next then same day now in some cases same hour delivery, there's really an arms race for that and that means more fulfillment centers across the country, across the world. We have a fulfillment company that we've invested in Europe called Bird for example, that's benefited from that and focused on that. Then you have technology companies associated with the management of that E Commerce fulfillment process. Then you have the last mile delivery. How does it get from the warehouse to you? We have a last mile company on the software side called Bring and then on the services side called Delivery Circle.
Ben Gordon [00:12:17]:
Then there's the question along the way of technology for tracking and visibility. So where's my stuff? And if you screw that up, you just lose a customer for life. And there are lots of examples of this. You buy something online and it doesn't show up on time and you're wondering where it is and you reach out to the company and the company doesn't know because they've outsourced, you know, some, some other company to a narvar or a parcel perform or, or somebody else. Well, if they do a great job and we think parcelperform does a great job, customer has a better experience, they do a bad job, customer gets pissed off and says well I don't know where my stuff is. You can't tell me there are delays or there's a problem and it's got to be returned and you're going to go make me drive a couple of miles to a UPS store or something that's convenient for you, but not for me. If you don't handle that well, you lose the customer. So supply chain associated with returns.
Ben Gordon [00:13:16]:
And we have a company in returns called Reverse Logix. All those are areas where growth of e commerce creates an ecosystem of supply chain needs. And the companies that do a great job of that, I think will ultimately be in position to solve huge problems. And there's multibillion dollar upside in that arena.
Glenn Gooding [00:13:34]:
Yeah, I agree with what you're saying on that front. You know, one thing I've always preaching to my clients is you've got your brand and you're working so hard on client acquisition cost. There's a real leap of faith or trust in when you, when you outsource fulfillment or final mile, whether you like it or not, as a brand, that buying experience is pinned to who you source with. Right. And it's tough to your earlier point, if they have a bad experience, we're not coming back, are we?
Ben Gordon [00:14:05]:
Yeah, exactly, exactly. Turns out that the customer loyalty impact of the supply chain, I mean, it's more often the case that you will lose a customer if you screw it up than you gain one. If you do an amazing job. People expect you to do a great. So if you're a brand or a retailer and you think, what's the lifetime value of a customer? Right. I mean, Glenn, I don't know how much you spend on Amazon a year, but more than I should.
Glenn Gooding [00:14:33]:
How about that? More than I should.
Ben Gordon [00:14:35]:
A few thousand bucks a year times how many years into the future, 50 years or whatever. That's a huge lifetime value. So if a brand or retailer loses a customer that could have tens of thousands or more of value because of a supply chain glitch. And by the way, what are they paying the supply chain partner for that? It's a tiny fraction of the customer lifetime value. So it might be trite to say it, but the brands and retailers that ask, can I afford to pay for a great supply chain partner, maybe they should be asking, can I afford not to.
Glenn Gooding [00:15:12]:
That's a, I think that's an important point for sure. And more times than not, and I know you run into it all the time, is it's, it's a race to the bottom on the cheapest so. So often.
Ben Gordon [00:15:24]:
Right, Exactly.
Glenn Gooding [00:15:25]:
You know, kind of. Given that, I was wondering, one thing you talked about as well is kind of the evolution of the elevated experience from a buying experience from today to next day to same day, the same hour. I know if we counterbalance that with what I'm seeing in the market. Final mile perspective USPS postal rate changes January 19th Louis DeJoy delivering for America and things he's doing to attack the work share program. Right. And the DDU inductions and the typical shenanigans that the national carriers impose generate increases in complexity. It just the, the final mile never gets cheaper and it seems to never get simpler from my perspective. I'm wondering, do we achieve a point where we.
Glenn Gooding [00:16:18]:
More rationality goes back into the buying experience, Ben. Meaning is it always important to have same hour, same day, next day delivery or is it permissible from a brand and buying experience to say I want to give good visibility to this order and I want to give reliability. So if, if the Gordon household orders product and they say it's going to be there next Tuesday, by gosh, it's going to be there next Tuesday and you're going to see it move through. I'm wondering what your thoughts are on that.
Ben Gordon [00:16:48]:
Well, absolutely. I mean, I think clearly we don't need same hour delivery and there's a reason why companies like Gopuff and, you know, Getter and others struggle because it's super expensive to do that and the benefit wasn't worth the cost in most cases. So look, I think as a consumer, what do you really want? There's some things that you need instantly, right? And I mean, if you've run out of an important staple or you're cooking dinner and it takes 10 ingredients and you only have eight, okay, you need that same hour and maybe, maybe you'll pay more for it or you're out of a medicine or something, fine. You know, on the other hand, you're buying something that is on a recurring basis and you don't care if it's a day out, two days out, three days out, or a book, but you're maybe not going to read it until vacation the following week, fine, who cares? In my mind, I think, look, you really as a consumer ought to be able to say when you're buying something, all right, I'll pay a $10 premium for same hour or a dollar premium for same day or let me get a $10 discount if it's three days out. Why wouldn't you be able to give the consumer that? And nobody is really doing that today. There are variations of that. I mean, certainly you can use Amazon and pay a premium for something that's rushed. And if it's delayed or if you take more time, you can get like a dollar digital credit, but not that big a deal.
Ben Gordon [00:18:12]:
I think there's probably an opportunity for some innovation to be more creative and more aggressive around that continuum of price, time and Cost good.
Glenn Gooding [00:18:21]:
So in the, you know, in the E commerce space, something that I see as a notable problem, particularly when you talk about fulfillment execution to advanced shipping notifications, to visibility throughout to a returns program, is we have all these disparate technology stacks that don't talk to each other or integrate well. You know, great example. I don't know about you, but there's so many different WMS platforms out there. And now does the WMS truly integrate with the TMS and does it allow for good things? Are you seeing any potential spots for innovation or investment in that type of area at all then?
Ben Gordon [00:19:02]:
Yeah, I mean, I am. I mean, maybe just to take a step back, Glenn, I think there's, there's probably innovation in a lot of areas of supply. AI has gotten the most attention. But what are some of the other areas? I mean, I think, I think one, there's cross border. Cross border has always been a big issue. Look at the amazing growth in excess. Wisetech and Descartes have built collectively something like $40 billion worth of value in the last two decades. Focused on that.
Ben Gordon [00:19:32]:
By the way, it's only going to get bigger with tariffs because that adds complexity. More complexity means more opportunity for software and services companies to solve your headache. So I think cross border is one. E Commerce is another. Healthcare supply chain is a third. I mean, one of those problems that doesn't go away. You know, we're, we're all getting older and need to spend more on medicines to keep us healthy.
Glenn Gooding [00:19:59]:
I'm one of them.
Ben Gordon [00:20:00]:
You're one of them. Well, me too. I mean, sadly, despite the rumors, neither of us is, you know, getting younger over time. So yeah, healthcare supply chain and the technology and innovation around that is important. I think another vital area is bundling of more and more capabilities because customers want. I mean, think about Amazon's success. A large part of it was making the process more frictionless than its competitors and patenting things like one click so that you could do in one step what it took others five steps to do. Well, similarly in supply chain, if you could bundle more capabilities like truck brokerage plus warehousing plus freight forwarding plus intermodal or on the software side, bundling like WMS plus TMS plus OMS plus RMS returns management system, bundles of problems are another.
Ben Gordon [00:20:54]:
Bundles of solutions rather. And then look, lastly, as we see new categories emerge, I know one thing that you and I have communicated about in the past. Things like blockchain, you know, whether, whether.
Glenn Gooding [00:21:07]:
Blockchain is good, good. I'm glad you're Bringing it up.
Ben Gordon [00:21:10]:
Whether you call it, you know, real overhyped or both, the fact is that, you know, there are supply chain solutions for, you know, for those kinds of new markets. So those are all areas of innovation that I think are pretty interesting and important and where we're putting our own money.
Glenn Gooding [00:21:25]:
Yeah. Last month I attended a conference in Atlanta and the. And the premise of the keynote was around de risking your supply chain. And de risking can mean a lot of things. In this particular case, it was around good sourcing of product, child labor, you know, listeria in the produce, that. That type of. That type of stuff. And visibility, you see, you see blockchain offering companies better visibility and let's say, more risk mitigation in.
Glenn Gooding [00:22:00]:
In sourcing in a. What would I call it, in a responsible manner. One in which the consumer feels good about that purchase.
Ben Gordon [00:22:10]:
Yeah, I mean, a couple of parts of that. Okay, so how does the consumer feel good about the purchase? As a consumer, when I buy things, what do I care about? Right. One, I care that it's easy to buy. Two, that I know what's going to happen next. Am I going to get it tomorrow? Two days, three days, whatever. Three, that I can track it, I know where it is if there's a problem. And four, that there's some proactive solution, if there's some issue, if there's a delay, I want to know about it. If it's, you know, if they've, you know, run out, but they're going to replace it with something else.
Ben Gordon [00:22:46]:
I mean, it's the communication. Because in the end, the things that piss us off as consumers the most, it's the negative surprises. One of the things that interested us in Parcel Perform was that they were very good at that, by the way, because. Because they're very good at solving the problem of customer communication. So what they do, they'll work with a Shopify or an Espresso or somebody else, and they'll say, okay. After you buy something, they manage the communication with the consumer and they say, okay, here's where it is, here's when it's going to arrive. And that can become a basis for building a relationship with the consumer. That dialogue can actually be more than just, hey, your product is going to arrive on time or it's late.
Ben Gordon [00:23:27]:
And again, if you handle that well, you have a happy consumer, hopefully for life. So that's one of the reasons why Parcel Perform has been growing. I mean, it's on track to triple since we originally invested in it, which was in 2021. So that tells you something about the value of that problem.
Glenn Gooding [00:23:49]:
For sure, for sure. Where does sustainability fit into your hierarchy of kind of excitability around the future and opportunities? I know that sustainability is a real hot word in supply chain as far as becoming more responsible in that fashion, where do you envision sustainable practices evolving in supply chains in the coming years?
Ben Gordon [00:24:14]:
So look, I think from our standpoint, sustainability is important. It's important because A, it's good for the world, good for the environment, B, it's what customers want. So, you know, that means that you're addressing a market need, but it means different things in different places. Customers willing to pay not much for it here, willing to pay a little bit more for it, for example, in Europe, but more so because of government incentives than anything else. And so, you know, if there's a carbon tax, for example, well, that means that you ought to be motivated to do things that slide into the circular economy. Meaning, you know, if you buy it and it's the wrong size or color or whatever, there ought to be some meaningful incentive to resell it somewhere else. You know, sort of a reverse logistics stream. And then similarly, there ought to be some incentive to work with transportation companies that are better at consolidating shipments into full truckloads, which means you've got less dead air operating in a truck, that they're cubed out, filled out, and ultimately that you've got fewer trucks moving more goods.
Ben Gordon [00:25:31]:
But if there's no economic incentive, no matter how much you or I or other consumers might care, the consumer isn't going to pay more for it ends up not getting done. So that's why I think we've seen more circular economy and sustainable supply chain investments in Europe than in the U.S. number one, and then number two, in places like California, where, for example, look, I mean, there are tax incentives, for instance, that encourage electric vehicles, natural gas vehicles and other alternatives in California, and particularly in ports, Port Valley, Long beach, okay, so there are some interesting companies that, like, I mean, sammycon and Navoya, for example, building an electric trucking business based in the ports of La Long Beach. Sustainability is obviously one element of that, but another element of it is that they're helping consumers ultimately and of course, indirectly through the trucking and truck brokerage and shipping partners with whom they work. You know, it costs them less because net of the government incentives for electric vehicles in California, they're able to operate at a lower cost, keep some of that as margin, share some of that with the consumer. So, you know, I think sustainability is Important, but it only works if the customer is willing to pay or there's a government incentive that makes the unit economics compelling. And we are seeing that in a few places and certainly look forward to seeing more.
Glenn Gooding [00:27:04]:
Yeah, thank you. Let's pivot from sustainability to how about resiliency? We certainly have seen a few very shockwaves and or ripple effects of a lot of supply chain disruptions, even from the most recent, I think port strike along the Eastern seaboard and the Gulf coast for a couple days. And what that did, and obviously what happened with COVID went through and affected the global supply chain. From your perspective, kind of looking forward, what does it mean for supply chain to be truly resilient in today's world with everything that's going on, what does.
Ben Gordon [00:27:44]:
It mean to be truly resilient? Well, I think number one, it means that if there's a disruption that you're still able to operate. So for example, we saw the classic examples were during COVID there were shortages. And if you couldn't get what you needed, whether there was a shortage of semiconductor chips or chicken or toilet paper or anything else, those shortages were hugely disruptive. So I think one important component of resiliency is you got to have multiple sources of something that could be a shortage so that one failure can't shut everything down. And what I think that means in practice is you're going to see more companies increasing their North American sourcing if they're worried about, you know, being able to rely on China or being able to rely on places that could be subject to tariffs or other. I mean, look, one thing that we saw during COVID was China diverted some key manufacturing sources that we in the US or others elsewhere in the world would have wanted to serve domestic needs first. And that should be a wake up call that, you know, it's not just about, you know, partisan politics and trade wars. It's also about the fact that you have a China that's growing increasingly assertive.
Ben Gordon [00:29:03]:
And if they have access to raw materials that they want and they're going to serve the domestic market first, US Companies might find that they're simply not going to get what they thought they were going to get. So look, I think more and more manufacturers are saying I need sourcing in U.S. canada, Mexico and places where I don't have to worry about that. And I think that's going to increase. That's, by the way, a catalyst for growth for domestic transportation companies, whether it's trucking or truck brokerage or warehousing or other supply Chain services. I think a second component of resilience is you got to have software to be able to map your supply chain and be able to analyze it. Glass pipeline, ability to see where is everything. And so, for example, companies that do tracking and visibility, whether It's a project 44 on a more holistic basis or a parcel, perform at a more E commerce parcel basis, that kind of analytical capability is vital.
Ben Gordon [00:30:06]:
And the last thing that I would say in terms of the importance of resiliency is you've also got to shift your mindset from I'm optimizing for unit cost to I'm optimizing for the holistic supply chain. And so look, the line was shifting from just in time to just in case. And that's true, but it's more than just that. It's also, if you are the chief supply chain officer at Walmart, how's your CEO evaluating you? Are they evaluating you based on your total supply chain cost, which would be a reasonable way for people to think about it, or might it be better to say, no, I'm going to evaluate you for not just the cost that you've had, but what sits under the surface like the iceberg, which is, well, what are the potential risks? You got to have some sort of a risk assessment. You've got to know, okay, Glenn, you did a great job as chief supply chain officer. And our cost, supply chain cost as a percent of total revenue were whatever, 8% and it was 9% three years ago. So you saved 1% of, you know, $500 billion. That's a massive amount of money.
Ben Gordon [00:31:18]:
But what if in doing that, you narrowed the number of sources that you had, increasing the risk of some kind of disaster next year or the year after? I think the clear lesson is you have to have some way to evaluate risk and to be able to evaluate your people based not just on the financial performance, but also the risk of a future of financial disruption. So to me, those are three critical ways that, that I think about resilience.
Glenn Gooding [00:31:47]:
Yeah, I agree. It has to be a balance, right, with, with expense, for sure. You'd mentioned earlier that you see the, I think the evolution of AI as a, as an augmentation tool into the supply chain and that's it's really man plus machine. In that side, in that type of environment, does your human capital, what you're looking for, for talent and key skills or qualities, does that change in your mind of what you're looking for for the logistics teams of the future?
Ben Gordon [00:32:22]:
Yeah, I mean, it's interesting you think about human capital and logistics. It's worth noting that when you and I started our careers, supply chain was not considered a path to the top. It wasn't considered the. You look at the CEOs of Fortune 500 companies 30 years ago, I'll bet you none of them had been in supply chains background before making their way up. But supply chains become increasingly important. So much so that multiple Walmart leaders have risen to the top with a supply chain background. Of course, Walmart legendary for its attention to that. And then Apple.
Ben Gordon [00:33:00]:
I mean Tim Cook. Look, nobody was going to replace Steve Jobs, but it's interesting that they went the other direction from a guy who is a legend in marketing and the customer facing side to a guy who is a master in the internal side operations and supply chain. Tim Cook. You know, we can claim him, he's one of us. He's a supply chain guy. So I think that first and foremost it's worth noting that supply chain as a source of human capital has become more and more important because companies are recognizing the value value and the impact of that. Secondly, I would say that that means from a recruiting standpoint, great organizations, whether supply chain software companies like those that we've invested in or services companies or for that matter Fortune 500 companies, should have a better time being able to recruit outstanding people because they can see that there's a path to doing something important and that's measured in many ways. One is path to becoming CEO of the most important companies in the world.
Ben Gordon [00:34:00]:
Path to building value. Look at the many multi billion dollar value companies that have emerged in supply chain over the last 20 years. We've been fortunate to invest in companies like XPO which grew from nothing to a $20 billion business. So you know, when somebody sees the growth and success of a company like XPO and then also looks at what that means for them financially. I mean imagine if you, you joined XPO in a senior capacity in 2011 and had stock options for 1% of the company. Well, 1% of 20 billion is an enormous number. Now that number diluted with equity raises along the way. But okay, dilute it by whatever you want.
Ben Gordon [00:34:38]:
5x. It's still a massive number. So look, I think the path to success for smart people in supply chain has never been more attractive. And I think that's the reason why we see more and more people interested in supply chain.
Glenn Gooding [00:34:52]:
I completely agree. And being a guy that's been stuck back in the closet for the last three decades, I appreciate it. Right. So I get it. You know, I'm going to ask you one last question. I think I know what your answer is going to be based off of what you've shared with us today. But you know, if you, if you had to choose one investment area that would most define the future of logistics, have the greatest impact in the future of logistics, what would it be from your perspective? Ben?
Ben Gordon [00:35:21]:
Well, I think in the long run it's AI. I think it's AI to automate the three critical areas of workflow, pricing and analytics. Because ultimately if you can use AI to take steps out of the process, get better pricing data so you can make better decisions and have other analytical tools so that you can ultimately grow your business, add profit, not have to add costs, whether it's people or other costs. It's incredible what you can accomplish. And so much like the Internet was 24 years ago. Overhyped, yes, but with tremendous value creation possibilities. And we're already seeing that today. I mean, customers for green screens can demonstrate that.
Ben Gordon [00:36:11]:
And if a truck broker is making millions more just because they've got better pricing, think about how much more powerful that will be when they're not only getting pricing, but a whole host of other analytical tools at their disposal. So yeah, I think that's the huge transformative thing that we're all starting to see. But it's early yet.
Glenn Gooding [00:36:34]:
Yeah, yeah. Exciting. Ben where can our listeners find and connect with you? They choose.
Ben Gordon [00:36:43]:
So you can find me on LinkedIn where my handle is BenGorden18. You could go to the Cambridge Capital site cambridgecapital.com take a look at our private equity firm that's invested in lots of great companies and supply chain. You can find me on Twitter, handle is BenjaminH Gordon. And you can also come to Palm beach at the breakers next month along with 350 other CEOs and leaders of supply chain companies. So any listener who's interested, feel free to reach out to me. And it's an invite only event. Be glad to get you an invite.
Glenn Gooding [00:37:23]:
Fantastic. And I would say that Palm beach is a fantastic destination in January. Fantastic, right? So it is.
Ben Gordon [00:37:31]:
And increasingly popular. You'd be amazed how many cabinet members you will see roaming the breakers and various other bars and restaurants right now.
Glenn Gooding [00:37:40]:
I would imagine so, Ben, circling Mar a Lago, right?
Ben Gordon [00:37:44]:
Yes. It's kind of pretty wild.
Glenn Gooding [00:37:46]:
I bet it is. I bet it is. Ben, I can't thank you enough for your time, your insights, your expertise. I've really enjoyed it. I hope our listeners do as well. Listeners, thanks again for putting up with me for another episode of Parcel Perspectives. If you like what you're hearing, please subscribe. Please share with your friends and thanks again, Glenn.
Ben Gordon [00:38:04]:
Thank you. Great to be with you.
Glenn Gooding [00:38:10]:
Thanks for listening to Parcel Perspectives, hosted by me, Glenn Guiding I've been in the small parcel space for 37 years, starting with a deep and broad background working for one of the major carriers as an operator and and industrial engineer, later managing pricing at the highest level for the largest, most complex shippers in the world. Since then, I've been a national thought leader and work to help drive strategy for clients from Fortune 50 companies to startup e commerce businesses, helping them more competitively align in this complex and expensive market. If you enjoyed the show, please subscribe and share with friends. Join us next time for more expert advice and strategies to stay ahead of the shipping game.
It's more often the case that you will lose a customer if you screw it up than you gain one. If you do an amazing job, people expect you to do a great job. So if you're a brand or a retailer, you know, you think, what's the lifetime value of a customer? Right? I mean, Glenn, I don't know how much you spend on Amazon a year, but more than I should.
Glenn Gooding [00:00:17]:
How about that? More than I should.
Ben Gordon [00:00:18]:
A few thousand bucks a year times, you know, how many years into the future, 50 years or whatever, that's a huge lifetime value. So if a brand or retailer loses a customer that could have tens of thousands or more of value, you know, because of a supply chain glitch. And by the way, what are they paying the supply chain partner for that? You know, it's a tiny fraction of the customer lifetime value. You know, it might be trite to say it, but the brands and retailers that ask, can I afford to pay for a great supply chain partner? Maybe they should be asking, can I afford not to.
Glenn Gooding [00:00:54]:
Welcome to Parcel Perspectives, the podcast dedicated to small parcel shippers. I'm Glenn Gooding and each episode we dive into insights, best practices and strategies to help you navigate this complex, costly market.
Glenn Gooding [00:01:09]:
Hello everyone. Thank you for joining me again for another episode of Parcel Perspectives. I'm Glenn Gooding, President of iDrive. Very excited to bring a very interesting and I think kind of leading edge Georgia guest on to talk about some exciting forward looking things. Ben Gordon, who's the managing partner at Cambridge Capital is joining us and he's a renowned expert in logistics and supply chain investments. He's got a proven track record of driving innovation in our industry. And today I'd really like to talk with him about the future vision key supply chain investments for the next decade, exploring how technologies and other investments, automation along with maybe a sprinkling of sustainability will shape the future. So Ben, thrilled to have you.
Glenn Gooding [00:01:58]:
Welcome to the show.
Ben Gordon [00:01:59]:
Thanks Glenn. Great to be with you.
Glenn Gooding [00:02:00]:
Great, thanks. So Ben, I'd like to kick it off with kind of a pretty general question. Given what you know and what you're doing, what has you most excited about the future of supply chain and the innovation that you see coming?
Ben Gordon [00:02:18]:
Well, Glenn, it's a great question. I think there's tremendous innovation underway in supply chain and I would highlight a couple things. One, there is the opportunity to use new technology to solve old problems and a great example of that of course is AI. So everybody in transportation knows that there are a set of processes that you got to go through from an operational standpoint and historically from a technology standpoint, a set of EDI protocols and originally a set of green screens that you would type your way through. And those processes are hard to change. Which I think is a reason why a lot of people that have come in from outside of the industry have faced challenges. But people that are in the industry know that there are ways to do things better. Applying AI, for example, to automate workflow, or to do a better job with predictive pricing or to come up with superior analytics.
Ben Gordon [00:03:11]:
All that's one great area. That's something that I'm very focused on and excited about. And I think a second one is the growth of E commerce and all the supply chain technology that can make it better. And so a good example would be whether that's improving returns or post purchase tracking or visibility or fulfillment, all those are areas where E commerce growth leads to supply chain growth and problems that better technology and problem solving can address. So those are two areas that I'm excited about.
Glenn Gooding [00:03:40]:
Great. Why don't you tell me a little bit more about what you're doing with AI today? I understand you're doing some exciting things kind of in the truckload industry.
Ben Gordon [00:03:47]:
Sure. So one company that I'm very excited about is green screens. This is a company that I first met four years ago. Well really I met the founder who was building a tech enabled truck brokerage business and he also had this great technology that was capable of using AI to create all this value. And I looked at the business, didn't think the truck brokerage was that differentiated. Thought the AI for predictive pricing was incredibly powerful. Talked with the founders, name is Felix. Ultimately Felix decided to spin that off, build that into a standalone business.
Ben Gordon [00:04:24]:
I came on board as co founder and executive chairman and then worked with Felix, co invested in the business, helped with building up the team, working with some outstanding early adopters like NFI recruiting all stars Don Salvucci, Favier who came on as CEO and scaling up and what they had that was exciting was the ability to use AI to go to truck brokers and say I can streamline your process. In particular, I can solve a problem that's worth a lot if you get it right. And the problem was pricing. So your average truck Bros truck broker 20 years ago might have had an average gross margin of 18 to 20%.
Glenn Gooding [00:05:05]:
It was pretty lucrative back then.
Ben Gordon [00:05:07]:
It was pretty lucrative back then but. But that was then and this is now. And today the average truck brokerage gross margin is closer to 10 or 11% now. Some of that is cyclically driven because we're coming out of the bottom of this freight recession. But still, nevertheless, even at the glorious heights for truck brokers of COVID if you can say that those margins on average were 14%, so they're now down at 10, 11, maybe they'll come back up to 12 or 13, but still, you know, quite a bit lower than they used to be. Meanwhile, a study from a large truck broker that we've worked with showed that the average pricing error for the de facto standard in pricing, which is dat, the average error was over 20%. So what that means is if you're a truck broker and a customer calls you and says, hey, I'd like a quote to ship a truckload of freight from New York to Miami and you're using that legacy system for pricing, you are probably 20% wrong. You don't know whether it's high or low or where you are in that a 20% error for a business with 11% margins is terrible, not good.
Ben Gordon [00:06:18]:
Means you're quoting at a loss an awful lot of the time. You just don't know it. So what green screens figured out was they could take your data, run it through their machine learning algorithms, combine it with the data of what's now over $20 billion worth of freight from across the industry, and then tell you on a predictive real time basis, here's exactly what the price should be right now with an error rate that's 5x lower than that legacy system. And so as a result, it allows truck brokers to quote with confidence, make decisions faster, get to the right price faster, allow the frontline people to make decisions instead of having to run it up the chain and ultimately the per transaction activity of a rep can expand massively. I mean, imagine if one rep could do three times as much transaction volume. You know, what a huge gain that is. And so, you know, early adopters and companies like NFI figured out that they could make millions of dollars in additional profit simply by using the green screens AI pricing technology. And so that's pretty exciting because I don't know about you, but I don't see too many things in the transportation technology world that instantly pay for themselves.
Ben Gordon [00:07:31]:
And green screens, yeah, it's one of those tools. So that's pretty exciting.
Glenn Gooding [00:07:34]:
It sounds fascinating. I'm wondering, with the advancements of AI, particularly in this company you're discussing green screen, do you anticipate a time when the broker is a large language model AI that's quoting directly?
Ben Gordon [00:07:51]:
It's possible. I think it hasn't happened yet and it won't happen for a while because to paraphrase the wonderful quote, rumors of my death are greatly exaggerated. You know, rumors of freight brokers death also greatly exaggerated. The reason why freight brokers continue to add material value, it's not just a transaction, it really is managing a process and doing labor intensive work that's hard. And so again, people from outside of the industry who have come in to say, oh, I'm going to disintermediate the middleman. Well, the middleman in logistics is actually doing a lot more than say the middleman in say the airline industry. This isn't like, you know, a travel agent that could be replaced by kayak or orbit. So there's just a lot more process complexity.
Ben Gordon [00:08:43]:
So I don't believe truck brokers get replaced by AI. I believe they get augmented. Right. So I think, I mean the phrase that we like is it's not man versus machine, it's man plus machine. And I think the best, you know, I gender comments notwithstanding, the value of a truck broker using great technology I think is enormous. And I think truck brokers that use technology will hands down beat those that just can't keep up. Great example we're going to have at our annual conference, the BGSA Supply Chain Conference next month, a variety of CEOs. Doug Wagner, CEO of Echo, Drew Wilkerson, CEO of RXO.
Ben Gordon [00:09:26]:
Those guys are both spending 70 to 90 million annually on technology. And so those guys have a huge advantage over competitors that aren't spending. Similarly, brokers that are using green screens, which has over $20 billion of freight flowing through its system, which is more than any one RXO or Echo or other truck broker has, they get to benefit from all that. So look, in the long run I suppose technology will replace a lot of things, but in the near term, I think it's more about man plus machine. And the smart truck brokers that use systems like green screens will generate a huge competitive advantage.
Glenn Gooding [00:10:04]:
Just fascinating. So if we pivot to the other area that you said, really had your interest piqued, your interest, it's kind of the, I guess the evolution in growth of E commerce, right?
Ben Gordon [00:10:14]:
Yes, yes, exactly.
Glenn Gooding [00:10:16]:
Yeah. So anybody with half a pulse over the last five years now knows what supply chain means, at least in general terms. And I think we've all been benefactors of the rise of E commerce. Heck, my mom and dad got forced to start buying things online during the COVID times. What are you seeing as far as changes there or the future There you'd mentioned a number of things from a technology perspective on visibility, things like that. Love to learn more from your perspective there.
Ben Gordon [00:10:49]:
Sure. So a couple of things. One, E Commerce was definitely overhyped during COVID I think there's the famous chart that most of us saw. It was a McKinsey chart that showed the first quarter of COVID generated 10 years of forecasted growth in E Commerce and penetration retail. Turned out that that wasn't actually permanent growth. It was really just pulling forward penetration that would have happened over time, which meant that the growth wasn't going to continue like that. In fact, it flattened out. But guess what? That growth has started to resume again.
Ben Gordon [00:11:21]:
We're seeing it. And so as E Commerce grows, there are a whole host of supply chain needs. Okay, so one is you need fulfillment companies so that you can do a better job of fulfilling. And as Amazon has been continuing to use Amazon prime and the ability to do first next then same day now in some cases same hour delivery, there's really an arms race for that and that means more fulfillment centers across the country, across the world. We have a fulfillment company that we've invested in Europe called Bird for example, that's benefited from that and focused on that. Then you have technology companies associated with the management of that E Commerce fulfillment process. Then you have the last mile delivery. How does it get from the warehouse to you? We have a last mile company on the software side called Bring and then on the services side called Delivery Circle.
Ben Gordon [00:12:17]:
Then there's the question along the way of technology for tracking and visibility. So where's my stuff? And if you screw that up, you just lose a customer for life. And there are lots of examples of this. You buy something online and it doesn't show up on time and you're wondering where it is and you reach out to the company and the company doesn't know because they've outsourced, you know, some, some other company to a narvar or a parcel perform or, or somebody else. Well, if they do a great job and we think parcelperform does a great job, customer has a better experience, they do a bad job, customer gets pissed off and says well I don't know where my stuff is. You can't tell me there are delays or there's a problem and it's got to be returned and you're going to go make me drive a couple of miles to a UPS store or something that's convenient for you, but not for me. If you don't handle that well, you lose the customer. So supply chain associated with returns.
Ben Gordon [00:13:16]:
And we have a company in returns called Reverse Logix. All those are areas where growth of e commerce creates an ecosystem of supply chain needs. And the companies that do a great job of that, I think will ultimately be in position to solve huge problems. And there's multibillion dollar upside in that arena.
Glenn Gooding [00:13:34]:
Yeah, I agree with what you're saying on that front. You know, one thing I've always preaching to my clients is you've got your brand and you're working so hard on client acquisition cost. There's a real leap of faith or trust in when you, when you outsource fulfillment or final mile, whether you like it or not, as a brand, that buying experience is pinned to who you source with. Right. And it's tough to your earlier point, if they have a bad experience, we're not coming back, are we?
Ben Gordon [00:14:05]:
Yeah, exactly, exactly. Turns out that the customer loyalty impact of the supply chain, I mean, it's more often the case that you will lose a customer if you screw it up than you gain one. If you do an amazing job. People expect you to do a great. So if you're a brand or a retailer and you think, what's the lifetime value of a customer? Right. I mean, Glenn, I don't know how much you spend on Amazon a year, but more than I should.
Glenn Gooding [00:14:33]:
How about that? More than I should.
Ben Gordon [00:14:35]:
A few thousand bucks a year times how many years into the future, 50 years or whatever. That's a huge lifetime value. So if a brand or retailer loses a customer that could have tens of thousands or more of value because of a supply chain glitch. And by the way, what are they paying the supply chain partner for that? It's a tiny fraction of the customer lifetime value. So it might be trite to say it, but the brands and retailers that ask, can I afford to pay for a great supply chain partner, maybe they should be asking, can I afford not to.
Glenn Gooding [00:15:12]:
That's a, I think that's an important point for sure. And more times than not, and I know you run into it all the time, is it's, it's a race to the bottom on the cheapest so. So often.
Ben Gordon [00:15:24]:
Right, Exactly.
Glenn Gooding [00:15:25]:
You know, kind of. Given that, I was wondering, one thing you talked about as well is kind of the evolution of the elevated experience from a buying experience from today to next day to same day, the same hour. I know if we counterbalance that with what I'm seeing in the market. Final mile perspective USPS postal rate changes January 19th Louis DeJoy delivering for America and things he's doing to attack the work share program. Right. And the DDU inductions and the typical shenanigans that the national carriers impose generate increases in complexity. It just the, the final mile never gets cheaper and it seems to never get simpler from my perspective. I'm wondering, do we achieve a point where we.
Glenn Gooding [00:16:18]:
More rationality goes back into the buying experience, Ben. Meaning is it always important to have same hour, same day, next day delivery or is it permissible from a brand and buying experience to say I want to give good visibility to this order and I want to give reliability. So if, if the Gordon household orders product and they say it's going to be there next Tuesday, by gosh, it's going to be there next Tuesday and you're going to see it move through. I'm wondering what your thoughts are on that.
Ben Gordon [00:16:48]:
Well, absolutely. I mean, I think clearly we don't need same hour delivery and there's a reason why companies like Gopuff and, you know, Getter and others struggle because it's super expensive to do that and the benefit wasn't worth the cost in most cases. So look, I think as a consumer, what do you really want? There's some things that you need instantly, right? And I mean, if you've run out of an important staple or you're cooking dinner and it takes 10 ingredients and you only have eight, okay, you need that same hour and maybe, maybe you'll pay more for it or you're out of a medicine or something, fine. You know, on the other hand, you're buying something that is on a recurring basis and you don't care if it's a day out, two days out, three days out, or a book, but you're maybe not going to read it until vacation the following week, fine, who cares? In my mind, I think, look, you really as a consumer ought to be able to say when you're buying something, all right, I'll pay a $10 premium for same hour or a dollar premium for same day or let me get a $10 discount if it's three days out. Why wouldn't you be able to give the consumer that? And nobody is really doing that today. There are variations of that. I mean, certainly you can use Amazon and pay a premium for something that's rushed. And if it's delayed or if you take more time, you can get like a dollar digital credit, but not that big a deal.
Ben Gordon [00:18:12]:
I think there's probably an opportunity for some innovation to be more creative and more aggressive around that continuum of price, time and Cost good.
Glenn Gooding [00:18:21]:
So in the, you know, in the E commerce space, something that I see as a notable problem, particularly when you talk about fulfillment execution to advanced shipping notifications, to visibility throughout to a returns program, is we have all these disparate technology stacks that don't talk to each other or integrate well. You know, great example. I don't know about you, but there's so many different WMS platforms out there. And now does the WMS truly integrate with the TMS and does it allow for good things? Are you seeing any potential spots for innovation or investment in that type of area at all then?
Ben Gordon [00:19:02]:
Yeah, I mean, I am. I mean, maybe just to take a step back, Glenn, I think there's, there's probably innovation in a lot of areas of supply. AI has gotten the most attention. But what are some of the other areas? I mean, I think, I think one, there's cross border. Cross border has always been a big issue. Look at the amazing growth in excess. Wisetech and Descartes have built collectively something like $40 billion worth of value in the last two decades. Focused on that.
Ben Gordon [00:19:32]:
By the way, it's only going to get bigger with tariffs because that adds complexity. More complexity means more opportunity for software and services companies to solve your headache. So I think cross border is one. E Commerce is another. Healthcare supply chain is a third. I mean, one of those problems that doesn't go away. You know, we're, we're all getting older and need to spend more on medicines to keep us healthy.
Glenn Gooding [00:19:59]:
I'm one of them.
Ben Gordon [00:20:00]:
You're one of them. Well, me too. I mean, sadly, despite the rumors, neither of us is, you know, getting younger over time. So yeah, healthcare supply chain and the technology and innovation around that is important. I think another vital area is bundling of more and more capabilities because customers want. I mean, think about Amazon's success. A large part of it was making the process more frictionless than its competitors and patenting things like one click so that you could do in one step what it took others five steps to do. Well, similarly in supply chain, if you could bundle more capabilities like truck brokerage plus warehousing plus freight forwarding plus intermodal or on the software side, bundling like WMS plus TMS plus OMS plus RMS returns management system, bundles of problems are another.
Ben Gordon [00:20:54]:
Bundles of solutions rather. And then look, lastly, as we see new categories emerge, I know one thing that you and I have communicated about in the past. Things like blockchain, you know, whether, whether.
Glenn Gooding [00:21:07]:
Blockchain is good, good. I'm glad you're Bringing it up.
Ben Gordon [00:21:10]:
Whether you call it, you know, real overhyped or both, the fact is that, you know, there are supply chain solutions for, you know, for those kinds of new markets. So those are all areas of innovation that I think are pretty interesting and important and where we're putting our own money.
Glenn Gooding [00:21:25]:
Yeah. Last month I attended a conference in Atlanta and the. And the premise of the keynote was around de risking your supply chain. And de risking can mean a lot of things. In this particular case, it was around good sourcing of product, child labor, you know, listeria in the produce, that. That type of. That type of stuff. And visibility, you see, you see blockchain offering companies better visibility and let's say, more risk mitigation in.
Glenn Gooding [00:22:00]:
In sourcing in a. What would I call it, in a responsible manner. One in which the consumer feels good about that purchase.
Ben Gordon [00:22:10]:
Yeah, I mean, a couple of parts of that. Okay, so how does the consumer feel good about the purchase? As a consumer, when I buy things, what do I care about? Right. One, I care that it's easy to buy. Two, that I know what's going to happen next. Am I going to get it tomorrow? Two days, three days, whatever. Three, that I can track it, I know where it is if there's a problem. And four, that there's some proactive solution, if there's some issue, if there's a delay, I want to know about it. If it's, you know, if they've, you know, run out, but they're going to replace it with something else.
Ben Gordon [00:22:46]:
I mean, it's the communication. Because in the end, the things that piss us off as consumers the most, it's the negative surprises. One of the things that interested us in Parcel Perform was that they were very good at that, by the way, because. Because they're very good at solving the problem of customer communication. So what they do, they'll work with a Shopify or an Espresso or somebody else, and they'll say, okay. After you buy something, they manage the communication with the consumer and they say, okay, here's where it is, here's when it's going to arrive. And that can become a basis for building a relationship with the consumer. That dialogue can actually be more than just, hey, your product is going to arrive on time or it's late.
Ben Gordon [00:23:27]:
And again, if you handle that well, you have a happy consumer, hopefully for life. So that's one of the reasons why Parcel Perform has been growing. I mean, it's on track to triple since we originally invested in it, which was in 2021. So that tells you something about the value of that problem.
Glenn Gooding [00:23:49]:
For sure, for sure. Where does sustainability fit into your hierarchy of kind of excitability around the future and opportunities? I know that sustainability is a real hot word in supply chain as far as becoming more responsible in that fashion, where do you envision sustainable practices evolving in supply chains in the coming years?
Ben Gordon [00:24:14]:
So look, I think from our standpoint, sustainability is important. It's important because A, it's good for the world, good for the environment, B, it's what customers want. So, you know, that means that you're addressing a market need, but it means different things in different places. Customers willing to pay not much for it here, willing to pay a little bit more for it, for example, in Europe, but more so because of government incentives than anything else. And so, you know, if there's a carbon tax, for example, well, that means that you ought to be motivated to do things that slide into the circular economy. Meaning, you know, if you buy it and it's the wrong size or color or whatever, there ought to be some meaningful incentive to resell it somewhere else. You know, sort of a reverse logistics stream. And then similarly, there ought to be some incentive to work with transportation companies that are better at consolidating shipments into full truckloads, which means you've got less dead air operating in a truck, that they're cubed out, filled out, and ultimately that you've got fewer trucks moving more goods.
Ben Gordon [00:25:31]:
But if there's no economic incentive, no matter how much you or I or other consumers might care, the consumer isn't going to pay more for it ends up not getting done. So that's why I think we've seen more circular economy and sustainable supply chain investments in Europe than in the U.S. number one, and then number two, in places like California, where, for example, look, I mean, there are tax incentives, for instance, that encourage electric vehicles, natural gas vehicles and other alternatives in California, and particularly in ports, Port Valley, Long beach, okay, so there are some interesting companies that, like, I mean, sammycon and Navoya, for example, building an electric trucking business based in the ports of La Long Beach. Sustainability is obviously one element of that, but another element of it is that they're helping consumers ultimately and of course, indirectly through the trucking and truck brokerage and shipping partners with whom they work. You know, it costs them less because net of the government incentives for electric vehicles in California, they're able to operate at a lower cost, keep some of that as margin, share some of that with the consumer. So, you know, I think sustainability is Important, but it only works if the customer is willing to pay or there's a government incentive that makes the unit economics compelling. And we are seeing that in a few places and certainly look forward to seeing more.
Glenn Gooding [00:27:04]:
Yeah, thank you. Let's pivot from sustainability to how about resiliency? We certainly have seen a few very shockwaves and or ripple effects of a lot of supply chain disruptions, even from the most recent, I think port strike along the Eastern seaboard and the Gulf coast for a couple days. And what that did, and obviously what happened with COVID went through and affected the global supply chain. From your perspective, kind of looking forward, what does it mean for supply chain to be truly resilient in today's world with everything that's going on, what does.
Ben Gordon [00:27:44]:
It mean to be truly resilient? Well, I think number one, it means that if there's a disruption that you're still able to operate. So for example, we saw the classic examples were during COVID there were shortages. And if you couldn't get what you needed, whether there was a shortage of semiconductor chips or chicken or toilet paper or anything else, those shortages were hugely disruptive. So I think one important component of resiliency is you got to have multiple sources of something that could be a shortage so that one failure can't shut everything down. And what I think that means in practice is you're going to see more companies increasing their North American sourcing if they're worried about, you know, being able to rely on China or being able to rely on places that could be subject to tariffs or other. I mean, look, one thing that we saw during COVID was China diverted some key manufacturing sources that we in the US or others elsewhere in the world would have wanted to serve domestic needs first. And that should be a wake up call that, you know, it's not just about, you know, partisan politics and trade wars. It's also about the fact that you have a China that's growing increasingly assertive.
Ben Gordon [00:29:03]:
And if they have access to raw materials that they want and they're going to serve the domestic market first, US Companies might find that they're simply not going to get what they thought they were going to get. So look, I think more and more manufacturers are saying I need sourcing in U.S. canada, Mexico and places where I don't have to worry about that. And I think that's going to increase. That's, by the way, a catalyst for growth for domestic transportation companies, whether it's trucking or truck brokerage or warehousing or other supply Chain services. I think a second component of resilience is you got to have software to be able to map your supply chain and be able to analyze it. Glass pipeline, ability to see where is everything. And so, for example, companies that do tracking and visibility, whether It's a project 44 on a more holistic basis or a parcel, perform at a more E commerce parcel basis, that kind of analytical capability is vital.
Ben Gordon [00:30:06]:
And the last thing that I would say in terms of the importance of resiliency is you've also got to shift your mindset from I'm optimizing for unit cost to I'm optimizing for the holistic supply chain. And so look, the line was shifting from just in time to just in case. And that's true, but it's more than just that. It's also, if you are the chief supply chain officer at Walmart, how's your CEO evaluating you? Are they evaluating you based on your total supply chain cost, which would be a reasonable way for people to think about it, or might it be better to say, no, I'm going to evaluate you for not just the cost that you've had, but what sits under the surface like the iceberg, which is, well, what are the potential risks? You got to have some sort of a risk assessment. You've got to know, okay, Glenn, you did a great job as chief supply chain officer. And our cost, supply chain cost as a percent of total revenue were whatever, 8% and it was 9% three years ago. So you saved 1% of, you know, $500 billion. That's a massive amount of money.
Ben Gordon [00:31:18]:
But what if in doing that, you narrowed the number of sources that you had, increasing the risk of some kind of disaster next year or the year after? I think the clear lesson is you have to have some way to evaluate risk and to be able to evaluate your people based not just on the financial performance, but also the risk of a future of financial disruption. So to me, those are three critical ways that, that I think about resilience.
Glenn Gooding [00:31:47]:
Yeah, I agree. It has to be a balance, right, with, with expense, for sure. You'd mentioned earlier that you see the, I think the evolution of AI as a, as an augmentation tool into the supply chain and that's it's really man plus machine. In that side, in that type of environment, does your human capital, what you're looking for, for talent and key skills or qualities, does that change in your mind of what you're looking for for the logistics teams of the future?
Ben Gordon [00:32:22]:
Yeah, I mean, it's interesting you think about human capital and logistics. It's worth noting that when you and I started our careers, supply chain was not considered a path to the top. It wasn't considered the. You look at the CEOs of Fortune 500 companies 30 years ago, I'll bet you none of them had been in supply chains background before making their way up. But supply chains become increasingly important. So much so that multiple Walmart leaders have risen to the top with a supply chain background. Of course, Walmart legendary for its attention to that. And then Apple.
Ben Gordon [00:33:00]:
I mean Tim Cook. Look, nobody was going to replace Steve Jobs, but it's interesting that they went the other direction from a guy who is a legend in marketing and the customer facing side to a guy who is a master in the internal side operations and supply chain. Tim Cook. You know, we can claim him, he's one of us. He's a supply chain guy. So I think that first and foremost it's worth noting that supply chain as a source of human capital has become more and more important because companies are recognizing the value value and the impact of that. Secondly, I would say that that means from a recruiting standpoint, great organizations, whether supply chain software companies like those that we've invested in or services companies or for that matter Fortune 500 companies, should have a better time being able to recruit outstanding people because they can see that there's a path to doing something important and that's measured in many ways. One is path to becoming CEO of the most important companies in the world.
Ben Gordon [00:34:00]:
Path to building value. Look at the many multi billion dollar value companies that have emerged in supply chain over the last 20 years. We've been fortunate to invest in companies like XPO which grew from nothing to a $20 billion business. So you know, when somebody sees the growth and success of a company like XPO and then also looks at what that means for them financially. I mean imagine if you, you joined XPO in a senior capacity in 2011 and had stock options for 1% of the company. Well, 1% of 20 billion is an enormous number. Now that number diluted with equity raises along the way. But okay, dilute it by whatever you want.
Ben Gordon [00:34:38]:
5x. It's still a massive number. So look, I think the path to success for smart people in supply chain has never been more attractive. And I think that's the reason why we see more and more people interested in supply chain.
Glenn Gooding [00:34:52]:
I completely agree. And being a guy that's been stuck back in the closet for the last three decades, I appreciate it. Right. So I get it. You know, I'm going to ask you one last question. I think I know what your answer is going to be based off of what you've shared with us today. But you know, if you, if you had to choose one investment area that would most define the future of logistics, have the greatest impact in the future of logistics, what would it be from your perspective? Ben?
Ben Gordon [00:35:21]:
Well, I think in the long run it's AI. I think it's AI to automate the three critical areas of workflow, pricing and analytics. Because ultimately if you can use AI to take steps out of the process, get better pricing data so you can make better decisions and have other analytical tools so that you can ultimately grow your business, add profit, not have to add costs, whether it's people or other costs. It's incredible what you can accomplish. And so much like the Internet was 24 years ago. Overhyped, yes, but with tremendous value creation possibilities. And we're already seeing that today. I mean, customers for green screens can demonstrate that.
Ben Gordon [00:36:11]:
And if a truck broker is making millions more just because they've got better pricing, think about how much more powerful that will be when they're not only getting pricing, but a whole host of other analytical tools at their disposal. So yeah, I think that's the huge transformative thing that we're all starting to see. But it's early yet.
Glenn Gooding [00:36:34]:
Yeah, yeah. Exciting. Ben where can our listeners find and connect with you? They choose.
Ben Gordon [00:36:43]:
So you can find me on LinkedIn where my handle is BenGorden18. You could go to the Cambridge Capital site cambridgecapital.com take a look at our private equity firm that's invested in lots of great companies and supply chain. You can find me on Twitter, handle is BenjaminH Gordon. And you can also come to Palm beach at the breakers next month along with 350 other CEOs and leaders of supply chain companies. So any listener who's interested, feel free to reach out to me. And it's an invite only event. Be glad to get you an invite.
Glenn Gooding [00:37:23]:
Fantastic. And I would say that Palm beach is a fantastic destination in January. Fantastic, right? So it is.
Ben Gordon [00:37:31]:
And increasingly popular. You'd be amazed how many cabinet members you will see roaming the breakers and various other bars and restaurants right now.
Glenn Gooding [00:37:40]:
I would imagine so, Ben, circling Mar a Lago, right?
Ben Gordon [00:37:44]:
Yes. It's kind of pretty wild.
Glenn Gooding [00:37:46]:
I bet it is. I bet it is. Ben, I can't thank you enough for your time, your insights, your expertise. I've really enjoyed it. I hope our listeners do as well. Listeners, thanks again for putting up with me for another episode of Parcel Perspectives. If you like what you're hearing, please subscribe. Please share with your friends and thanks again, Glenn.
Ben Gordon [00:38:04]:
Thank you. Great to be with you.
Glenn Gooding [00:38:10]:
Thanks for listening to Parcel Perspectives, hosted by me, Glenn Guiding I've been in the small parcel space for 37 years, starting with a deep and broad background working for one of the major carriers as an operator and and industrial engineer, later managing pricing at the highest level for the largest, most complex shippers in the world. Since then, I've been a national thought leader and work to help drive strategy for clients from Fortune 50 companies to startup e commerce businesses, helping them more competitively align in this complex and expensive market. If you enjoyed the show, please subscribe and share with friends. Join us next time for more expert advice and strategies to stay ahead of the shipping game.
