Q&A with Doug Waggoner, CEO of Echo Global Logistics
Logistics Management Group News Editor Jeff Berman chatted 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, at last week’s eyefortransport 3PL Summit in Chicago. The conversation covered things impacting shippers and 3PL’s alike, including capacity, rates, and e-commerce, among others.
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Logistics Management Group News Editor Jeff Berman chatted 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, at last week’s eyefortransport 3PL Summit in Chicago. The conversation covered things impacting shippers and 3PL’s alike, including capacity, rates, and e-commerce, among others. A transcript of the conversation is below
Logistics Management (LM): How do you view the current state of the freight economy?
Doug Waggoner: The first quarter is always the softest quarter, and this year was no exception in that it was maybe even a little bit softer than what we anticipated. We believe that the macroeconomic environment for 2013 is going to look no different than 2012 and certainly no better or worse. It is almost like a mirror image, with anemic growth following normal seasonal trends. There was a spike in business in recent weeks but it was correlated to weather as spring came late to some parts of the country, with some vertical markets like beverages not shipping as early as usual. But once the weather broke and it got warm we saw more volume hit the market, which caused a bit of tightness on top of produce season.
LM: What about things in the short term?
Waggoner: I think that we are in a place that as the economy continues to improve, coupled with regulations like hours-of-service and other things, you are going to see tightening capacity. In a way, we are fortunate that the economy is not recovering faster as it would further squeeze available capacity.
LM: Do you think there will be a Peak Season this year in the traditional sense.
Waggoner: I don’t think there has been a real Peak Season since 2005. Those days may really be gone, mainly because nobody carries inventory the way they used to. Retailers, for example, are more likely to carry just what they think they are going to need on their shelves to sell their products until they run out and get more instead of having high inventory levels. If you think about Peak Season from a holiday season retail perspective, so much of that has gone online, with companies leveraging small parcel shipments more so than LTL or large truckload, and there have been dramatic changes in the supply chain as a result based on the advent of e-commerce or online purchasing.
LM: As more people but things online, what are some of the significant changes you are seeing from a supply chain operations perspective?
Waggoner: It is clearly changing patterns. If you look at some of the work Amazon is doing with final-mile delivery, as well as the top big box retailers with their online presence, with free shipping and in-store pickup for online orders there are a lot of unique things happening what is being transported and from where to where. It can to a degree change the role or a warehouse or a retail store for example.
LM: The new HOS rules take effect very soon. Are you hearing lots of concerns from shippers, given that most estimates are suggesting it will eliminate up to three percent of available capacity?
Waggoner: The thing is nobody really knows just how much of an impact it will have yet. Even a two percent reduction will raise rates. But I talk to a lot of asset-based carriers who say that their network is such that their relay network and average length of haul will not be hugely affected. It really is carrier-specific in terms of how far their runs are or if they are using teams, and other factors, too.
LM: How big is Echo’s carrier network?
Waggoner: We have about 24,000 carriers in our system and actively use at any given time about 7,000 carriers. So we have lots of unused capacity, which, frankly, is why the role of the core broker changes throughout the different parts of the economic cycle.
LM: In what ways do they change?
Waggoner: In a loose market, brokers have a big rolodex they can use to shop around and find a deal, and in tight markets, brokers can use that same rolodex to find capacity when a shipper can’t.
LM: Is it odd at all that there is a good amount of available capacity at a time when there remains a dearth of qualified and available drivers?
Waggoner: One of the questions large carriers get asked is if they are going to expand the size of their fleets, and if I were them I would say not until I can get a better price and find a driver to drive the truck.
LM: Are you seeing intermodal increase as a byproduct of improving service and increased length of haul?
Waggoner: The railroads have done a great job over the last 20 years improving their service and the “ride” that freight gets. In the old days, there was more of a stigma when it came to intermodal, with shippers saying freight was getting damaged and late trains. But now freight is getting as good of a ride as it is getting on a truck, and as fuel prices and trucking rates go up, the length of haul that makes sense comes down to closer to 700 miles. It is also a function of how far a shipper and a consignee are from the two terminals involved. There are several factors involved in determining whether it makes sense. Echo is an Intermodal Marketing Company (IMC) but is primarily and LTL and truckload broker so we have come upon a great opportunity with the rails to convert truckload freight to rail. We are not a big intermodal player, though, so we are not really doing big box retail intermodal, we instead can go to a shipper that primarily uses truckload and give it an alternative that maybe costs 18 percent less and takes a day longer, which is a nice option to have. And as prices rise, there may be more happening with that. We work with a lot of smaller shippers, many of whom have never used intermodal.
LM: Regarding M&A activity, what is Echo’s over all approach to acquiring companies?
Waggoner: We don’t need companies but if we find them and they fit well, we will take them. We have a pipeline of companies we are looking at and have a person dedicated to that who meets with them and tells them about what we do and what is going on with us as a company. If it makes sense, we will move forward with it.
About the AuthorJeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman
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