Q&A: Doug Waggoner, CEO of Echo Global Logistics

LM Group News Editor recently spoke with Doug Waggoner, CEO of Echo Global Logistics, a non-asset based freight brokerage company and a provider of technology-enabled transportation and supply chain management services about how 2015 ended up in the freight transportation and logistics sectors and various related topics. A transcript of the conversation between Berman and Waggoner is below.

Logistics Management (LM): What type of year was 2015 in terms of overall industry performance?
Doug Waggoner: It was a bit of a lackluster year for volumes and the economy never really caught on fire the way we all hoped it would. There was plenty of capacity out there in the marketplace, and whether you are a trucker or a broker or LTL or full truckload carrier, all the transportation providers had ample capacity and hope 2016 will be a little bit more robust.

LM: What about capacity from a supply and demand perspective?
Waggoner: Things were fairly balanced in that respect in 2015. From an Echo perspective, as a broker we had record margins and good growth. But looking at 2016 we would expect the economy is going to continue to get better.  I think the interesting thing if I were going to make a prediction is that even though there seems to be plenty of transportation capacity available right now I think that gap between loose capacity and tight capacity is fairly narrow. In other words, it does not take much of a catalyst to take us from times of loose capacity to times of tight capacity. It could be a period of bad weather, regional disruptions, a sudden improvement in the economy, a strong produce season or a combination of things. Anything that disrupts equilibrium, I think, will more quickly accelerate tight capacity, because the truckers have not been adding a lot of additional capacity. Even though volumes were relatively soft in 2015, there is still a driver shortage, and it won’t take much expansion of demand to [change things].

LM: With the ELD mandate now official, people are saying it will have an incremental effect on capacity when it is fully enforced in late 2017. As far as the truckload fleets you with and have longstanding relationships with, how do you factor the ELD mandate into your future outlook, especially towards the end of 2017?
Waggoner:  I think the larger TL and LTL carriers already have the latest ELD technology today, whereas most of the smaller carriers do not. And as the smaller carriers start to acquire and implement the technology it will definitely affect their capacity utilization and the national system in terms of making an impact on capacity. It will basically force people to play by the rules, which does not always happen today, and take capacity out of the national system.

LM: Shifting gears to fuel, the current national weekly average price per gallon for diesel continues to decline every week. How do you view and approach the current fuel situation relative to how it impacts business and the carriers you work with? Are these lower prices viewed as a game changer, laggard, or bellwether at all?
Waggoner: If you are a shipper moving products and paying for transportation then fuel is a part of your current costs of transportation. For a trucking company or, in our case, a broker, we do have a pass through and when fuel goes down it affects our top line revenue because we are paying a fuel surcharge to the carrier and we are charging the fuel surcharge to our customer as a pass through. For us, it will our top line revenue less, but will not affect our profit. When you look at our financial numbers, our revenue performance will reflect the revenue headwind caused by reduced fuel and reduced pricing but not impact profitability.

LM: Looking at brokerage operations, 2015 saw a ton of in M&A activity, with Echo buying Command and other high-profile deals. Is this type of deal activity here to stay?
Waggoner: We are really excited about our acquisition of Command, it is a great deal and we are working hard to get it integrated and expect the integration to be complete by this summer. We continue to see consolidation all around the transportation space, and I don’t see any reason to think it is going to slow down, even with interest rates inching up a little bit. Nobody is taking their foot off the gas, and these deals all make sense for the parties involved. It is a healthy environment with deals getting done.

LM: What is your take on the recently passed five-year surface transportation bill, the FAST Act? It has a nice freight focus, as well as paying attention to specific mode-related aspects, too.
Waggoner: I think it is just great to see a focus on our industry, because we need to do things that are needed, when you look at the cost of equipment, the driver shortage, crumbling infrastructure, and other headwinds, especially when you consider that logistics costs account for around ten percent of our GDP. We have got to do things that enable our supply chain sector to flourish, and government can either be an impediment or a facilitator and I am happy to see we are trying to grease the wheels.

LM: How do you view the recently passed climate deal, the Paris Agreement?
Waggoner: One of the things we think we can do is to help shippers who are concerned–many are not yet-about emissions and greenhouse gases and what’s the carbon footprint of various carriers and various modes. We would like to be in a position to help shippers track those things, whether it is through a carbon calculator where we are looking at a set of carriers, their fleets, and types of equipment or modes. We think we can assist shippers in managing their carbon footprint based on the modes of transportation they select and the carriers they use.

LM: Is that something you are actively working on now?
Waggoner: I would say it is on the drawing board.

LM: What is your view of the freight economy as it relates to GDP, which is still sluggish?
Waggoner: If I were to pick the sectors most affected by the economy, it would be industrial sectors, oil-related commodities, and housing.