Echo’s Hurst takes a look at key logistics and transportation trends at SMC3 Connections

Logistics Management Group News Editor spoke with Frank Hurst, Executive Vice President, LTL, for Chicago-based third-party logistics and technology-enabled transportation services provider Echo Global Logistics, at this week’s SMC3 Connections conference in Orlando. Hurst addressed various supply chain and logistics trends and themes over the course of their conversation. The interview follows below.

Logistics Management (LM): If one thing has been made clear going back to the onset of the pandemic, it is that planning for the unplanned has become a key part of the logistics’ playbook, for shippers and services providers alike. How do you view that?

Frank Hurst: I think it's the situation we're in really resonates well with everybody when it comes to planning for the unplanned or unexpected. And being able to pivot and make sure that we make adjustments is key. But I think what's important in terms of if the pandemic taught us anything is about the importance of relationships with carriers and having a very transparent conversations with our customers. And really what we're excited about at Echo is really around data and big data and how we can leverage it to work with our shippers to optimize the data. They have to take the data that we have as well to help better plan and run more efficient networks, which, at the same time, improve the profitability for everybody in the business. So, when you think about what we can do to prepare, obviously, I love what's going on in the world of pricing with dynamic pricing, which is coming full circle at this point, and it is the same thing around API connectivity for track and trace real time shipment information. I think those things are exciting.

LM: How do you view the current state of the freight economy? Do you think that we are in a freight recession or were we in one or are we entering one? It's everyone that seems to have a different answer on that topic the last several months.

Hurst: I'm definitely not an economist, but I will tell you that the way we see this is that we do see that we're at the “bottom of the U” on the on the truckload side. We have seen rates stabilize over the last six weeks on the buy side within truckload, and we're starting to see a little bit of an increase in tender rejections. So, that tells us there's some green shoots. We're not overly optimistic, but we do think that the second half is going to be better than the than the first half in the truckload market. Looking at LTL, I think what we all know is that while volumes are softer than what they were over the last couple of years, which may be related to tough annual comparisons, that it's much more rationalized in the business and I think what we're seeing is that a lot of LTL carriers are taking the opportunity in this market to actually kind of have a breather from the past couple of years and really talk about and have conversations.  around network optimization. Those conversations focus around how they can become more efficient and improve service at the same time. A lot of LTL providers are going through that right now all, talking service first and improving their networks overall. And we know that LTL always follows truckload, so if we're seeing some green shoots on the truckload side, hopefully we're going to see the same thing, for LTL but we're bullish on the on the second half of the year at Echo, for sure.

LM: How do you view the current state of pricing, given that it really appears to continue to be a shippers’ market, when looking at, for example, current spot market trends and demand weakness?

Hurst: The spot market is obviously at a very low point. Carriers have subsequently turned to us to help match up with available capacity with the volume we have from our customers. We are seeing some price reductions, and we are not immune to a freight cycle either. We are seeing the downward side of revenue per load on the truckload side. On the LTL side, pricing is much more rational, and a lot of the conversations we have with our carriers and customers around LTL pricing expectations go back to our LTL carriers having continued to invest in their networks. They have added notices, as recently as last week, regarding increased door count, and a lot of national LTL carriers continue to invest in driver wages and equipment, which has only gone up. We know what it happening in the real estate market from a cost standpoint. Their costs continues to rise, so that even though when volume softens a little bit, our expectation at Echo was how do we work with our carriers so they can become more efficient and how can they take cost out of their network, at the same time, to continue to really continue to reinvest in their businesses that they have. The task that we really have is to understand our carrier networks and where they continue to invest. But I think the real thing that we're seeing now is RFPs and pricing are probably at somewhat of an all-time high and continues to increase as shippers are kind of looking for their pound of flesh if you will, and from a rate reduction standpoint. And, really, we see our opportunity in looking at how do we take the data that the shippers have and work hand-in-hand with the carriers and how do we mirror that data together? Because it's not one or the other. And how do we look to ways to where that we can work with their LTL providers to fill backhaul capacity and reduce acuity in their networks, and, at the same time, provide the customers with some savings that that they may want as well. But the LTL business is much more rational than what we've seen in truckload.

LM: How has the year has gone over the first six months, for Echo, in your opinion? And what would be your expectations for the second half of the year?

Hurst: Echo is the same as everyone else, in that we are not immune to a down economy. We have seen that. Even though our revenue per load has gone down, we feel that we’ve really outperformed some others in the industry from a profitability standpoint and are pleased with how we performed. We're now getting to the point where the comps are not nearly as difficult year-over-year from a comparison standpoint. So, we are we're optimistic in the second half, that we're going to continue to be able to improve over the comps that we've seen. In talking to customers, obviously, inventory levels are still at a high level, but they're coming down a little bit. And customers seem like they're pretty optimistic as well, when talking about the volumes they have. Obviously, orders are softer than what they were in the past. But we're hoping that that we see that the peak that we normally do. In the first half we didn't see it. Our businesses you know at Echo include LTL, truckload, managed transportation and we've acquired a company called Roadtex, which is a national provider of temperature-controlled LTL and warehousing. You always normally see the ramp-up at the end of March. We didn't see that this year. It was it was somewhat flat in our businesses overall. So, we're optimistic that we're going to see that hopefully in the during the Peak Season and in the second half of this year.

LM: What are your thoughts on the 2023 Peak Season? There seems to be a fair amount of sentiment that it will be muted, to an extent, with things possibly pushed out beyond the more typical timeframes.

Hurst: I think we see things the same way we see, in that will probably be somewhat of a lift during peak. But really, we don't expect that freight volumes really come back prior to the first quarter of 2024, which seems to be pretty much in line with a lot of the carriers that we speak to and other professionals as well. So, I think we're doing the same thing everybody else is doing. We're going to weather the storm but really looking for technology on how we can become more efficient at Echo, which really where, when you think about in times like this, of how we can adjust and address some of the inefficiencies that we all have in our business… that's really where our focus is.

LM: In what ways?

Hurst: I'll give you an interesting example. We're investing in technology but today at Echo we receive a million e-mails into an inbox per day. Now that's all the blind copies and carbon copies that we all get in our emails and so forth. But of that one million emails that we receive, 30,000 of those are for track and trace. Another 30,000 are for rate quotes and so forth. If you think about that, we have more than 1,000 people in sales and operations spending 30% of their time in e-mail, or 3,000 People hours on a daily basis. We're looking where we've invested on work with AI and natural language process to see how can we automate and improve efficiency by reducing waste of people actually responding to those and how can we respond on their behalf without a human intervention. I think that's what's exciting to me about times like this when there is little of a breather, I like to say, and then why are we investing in technology is going to improve the efficiency of our business and then working with our carriers to do the same thing on their side as well.

LM: Echo is obviously is a company that's always had a really strong reputation on the IT side. How do you see the kind of role of logistics technology evolving right now in the middle of 2023? Where do you see things perhaps going or trending over, say the next three-to-five years?

Hurst: Echo is a technology company that just happens to move several billion dollars of transportation on an annual basis. But a lot of the technology we invest in is internal and is really not seen [externally]. A lot of it is working with our sales teams on how we can provide them more with data analytics around their customers’ trends so that they can be more of a value to our customers around carrier selection, service, quality, and so forth. And then we spent a lot of time working through carrier and customer technology, which was around price elasticity. That's a big piece of what we focus on. And we also do a lot of work around how do we automate the processes that we have to improve efficiency in our in our network overall, so Those are some of the internal technologies that we're investing in. There's a lot of really cool stuff that we're talking to right now. We are also working on predictive analytics around weather to make sure that we can work with our carriers and our customers to proactively notify them, in events of weather. We know weather-related events are going to happen in Chicago and storms are coming in and so forth. And I don't mean just receiving a notification indicting there is going to be a winter storm next week so you may want to change your flight. If you think about our business, think about how much different it would have been if you'd have gotten a phone call on Saturday with an airline saying your flight will be getting moved so you can get to your conference on time. Customers think the same way. For many years in our business, we talked about failures that were out of our control, like weather events and trucks breaking down and so forth. But the customer doesn't care that the shipment was late and they want their freight on time. So, we're really challenged our IT teams to see how can we work with predictive analytics so that we can adjust and help work with our customers and let them know when a shipment was going to be late, and, more importantly, here's what we're going to do to divert traffic to move out of Chicago to other areas and so forth. So, that's the type of work we're doing in spending a lot of time working with our carrier partners and customers on the data that they have and then bringing in third-parties for issues like weather. And then I think, as I mentioned before, is we are really excited about the dynamic pricing piece, especially in LTL. We're partnering with some providers now and we really feel that it's going to be a game changer where the last two pallet positions on a schedule that's leaving Atlanta to go into Chicago for our providers…how do we work with them to fill that capacity when they need it? At the same time, we are thinking about price elasticity so that when it's down to only one position left, maybe the price goes up? Those are the things we're excited about. And we are partnering with providers like SMC3 and some of our and our carrier partners around dynamic pricing.

LM: How does Echo approach working with customers in regards to inventory management?

Hurst: A big piece of our business and that goes towards our managed transportation. We are the outsourced transportation solution for our customers, so we're working with them on a daily basis, looking at their inventory levels or ERP systems to make sure we're planning properly for the carrier selections that they have to begin, because we are responsible to make sure we provide the highest service at the at the most competitive price to meet the needs they have. We work with on a daily basis around inventory planning, as well as quarterly reviews. And, at the same time, we're also hearing from customers as well as around service, which is a big piece of the conversations we've had with our last quarterly meetings with our customers where now that inventory levels are coming down a little bit but there is also really the importance of delivering on time and damage free. We're seeing really, really great strides, especially on the LTL front.

LM: One “positive” aspect to come out of the pandemic has to do with how the profile of supply chain and logistics has realty increased and also received more attention from the C-suite, too. How do you view that?

Hurst: People outside our industries are understanding the importance of supply chain, especially in freight transportation logistics, which has been evident over the last couple of years. As I look at my career, I grew up, driving a forklift and then running LTL facilities and so forth, while that's important, what's exciting to me is to come to conferences like this and listen to people talk about technology and automation and efficiency, and all the technology that's out there that makes our lives easier. And I think that's what's exciting is how we can blend, which was historical knowledge of transportation operations and sales, versus really the inclusion of technology, which is really the game changer as we think about all of our jobs, which is to make sure that we're running as efficient as possible, providing the best levels of service for our customers. So, that's, that's what to me is really exciting about where we are in the business, and I think that I think everyone is taking notice of that, especially around the supply chain schools and in the majors around data analytics and how you're taking data analytics and moving it with supply chain management. I think it's only going to probably move at a little bit more of a warp speed than it has over the past few years, going forward.

LM: What do you think will be the catalyst for stronger freight demand or tighter capacity as we head into 2024?

Hurst: So, I obviously don't have a crystal ball. But I think that, as we've said, obviously, inventory levels coming down is going to play a major piece in that, and I think we'll probably see some capacity leave the, especially on the truckload, that will be a catalyst on the on the truckload side as well. And then just the continued demand that we should hopefully see as the economy starts to improve a little bit. That's, that's kind of the way we think about what there's probably capacity is going to have to leave the market on truckload side to see any type of a large spike.

LM: Truckload capacity still remains fairly abundant today. Why do you think it hasn't left the market as quickly as people though it would going back to last year?

Hurst: I think you know that. When you think about truckload capacity that there's a lot of digital platforms out there, too, so it's probably access to volume being probably a little more plentiful than it would have been years ago. I think that probably has a piece to it. And I think also that truckload has done really well in the last couple of years. So, there's maybe a little more probably have a little more cash in their in their banks and what they did in the, in the prior few years to be able to weather the storm out is what I would expect.