Echo’s Waggoner takes a look at logistics in 2023 and what may be in store for 2024

Logistics Management Group News Editor Jeff Berman recently spoke with Doug Waggoner, CEO of Chicago-based 3PL Echo Global Logistics. Waggoner offered up insights on various logistics and supply chain trends and themes, including: freight economic conditions, near shoring, and brokerages, among others. Their conversation follows below. 

LM: How do you view the intersection of the freight economy with overall macroeconomic conditions?

Waggoner:  We've seen the business volumes stabilize, so, if anything, they're ticking up a little bit. Certainly, there's easier comps from a year ago, but we're showing positive volume growth. That tells me that the worst of the freight recession is behind us. December, January and February are always the three worst months of the year, so, we would anticipate it probably to kind of remain flat through February and then start to build in mid-March, which is the normal seasonality.

LM: In what ways?

Waggoner: The consumer still feels pretty strong. But that being said, one of the things that I worry about in 2024 is mortgages, people that have variable rate mortgages that are going to reset. I think you're going see a lot of homes that get handed back to the bank, because people can't afford the refinance payment, or the new payment. That will have pressure on housing, but I don't know that it necessarily impacts the freight economy. We're kind of planning on the worst being behind us and that we're through the trough. It's going to get better. I don't know when we're going to see any sort of great inflection point, as it pertains to the demand side of the equation. However, on the supply side, we see a lot of capacity leaving the market as we speak. I spoke with some trucking insurance companies recently, and they're seeing a huge departure of customers that are canceling their insurance, because they're getting out of the business, mostly owner operators. If you look at some of the data about the number of carrier authorities that exist, that's starting to trend downwards. I do think the market will stay somewhat loose until such time, as enough capacity leaves the market to sort of firm it up again. If I had to predict I'd probably say the first half of ‘24 will look a lot like the last half of ‘23. And I'm sort of hopefully anticipating a pick up in the second half of ‘24.

LM: If capacity were to tighten up enough, coupled with consumers still spending, would that prove to be favorable, in terms of the pricing side of things, when we look at truckload rates?

Waggoner: Look at all the failures, like the brokerages. You rarely see brokers fail, and this year we've seen a ton of them. We've also seen nearly everybody have multiple rounds of layoffs. Echo hasn’t had that, and we've weathered the storm, but layoffs are still happening at some brokerages.

LM: Do you think given what's happened within the brokerage space, in 2023, that there will be any type of directional shift in focus, or approach, to the market by brokers?

Waggoner: Whenever the market softens up, a lot of big truckload shippers tend to rely less on brokers. They don't have much spot freight. Everything's being handled by their contracts. They do have brokers in their contracts, where they treat brokers just like a carrier. But what that means is there's no spot freight, and smaller brokers who don't have scale find it difficult to bid on and win contract freight. And if there's no spot freight, they take a pretty bad hit. The larger brokers like us and Robinson and others…in these soft times, we just get more aggressive and bid on more contract freight, because there's no spot freight. When the market tightens up, and the truckload carriers fail to cover their commitments in the routing guides on contract, you then you see that freight spill over into the spot market, and brokers do well. I think that one of the reasons that you've seen a lot of the smaller brokers fail is just because there's no spot freight and they can't be competitive on contract rates. So, with them out of the way, I do think it means that companies like Echo are getting by and doing OK, but when the market tightens up, there's going be fewer brokers for the amount of freight that's there.

LM: There seems to be some good positive sentiment out there, in terms of rebalancing inventories. How are you seeing that? Is that a conversation that you're having with some of your larger shippers that are in the retail space, for example?

Waggoner: It depends on the industry and the vertical but some of our shippers told us that their inventories are somewhat depleted. But they also said that they're sort of dragging their feet on restocking. They want to get through the end of the year and past even past Chinese New Year and try to assess what the future demand is going to be before they restock. We do think that that could be a positive influence in Q1.

LM: How would you characterize the holiday shipping season, or peak, in terms of what is happening so far when compared to what your expectations were just a few weeks back, say early-to-mid November about what might be coming up compared to now?

Waggoner: We're not real big in retail, but it seemed like there was a slight bump, maybe starting in September. Like I said, our volumes are positive, we're showing growth year-over- year. Actually, in truckload our growth is pretty good. We had double-digit growth last week. But I don't know that I can necessarily attribute that to retail sales and the typical peak season. It just feels like, overall, we're seeing more and more volume. I'm cautiously optimistic that Q4 has held in there. And if we can stay at the same levels in Q1, then I think it only gets better as ‘24 builds up.

LM: Does 2023 feel like the first truly normal year since 2019, in the sense that things are a bit more normalized?

Waggoner: We have better numbers now than we had in 2019. So, I guess it feels similar, but I think the big problem you have now is that during the pandemic and following the pandemic, there was just so much capacity added that it created a glut of capacity…which dramatically lowered prices. If you look at the overall demand, it's not that bad on a historic basis. We just need to burn off some of the excess capacity and then supply and demand will come closer together in a more normalized market.

LM: Shifting gears, looking at some other things, you can't help but notice the ongoing run of lower diesel prices. How do you view the decline in diesel prices relative to what's happening in the market?

Waggoner: It is really good for carriers, especially if you're an owner operator. Trucks are more expensive. Maintenance is more expensive, rates are down. There's a lot of pressure on a small carrier. And, so, to the extent that they can get some relief on fuel, it gives them a little breathing room.

LM: What may be in store for 2024, do you think?

Waggoner: One thing is nearshoring, which has made Mexico move above China for imports. In fact, we're opening up operations in Mexico and look to capitalize on that trend. I think that that's a positive opportunity for U.S. transportation. Even if it used to come into the Port of Long Beach and move across the country, now it's going to come in through Laredo and move across the country, and, we want to participate on the on the portion in Mexico as well. As for AI, we've been using AI for years, but not necessarily in the form of the large language models (LLM) that you see now. However, we are incorporating the LLMs into our daily workflow with all of our employees. For instance, we have an LLM that's integrated with Microsoft Office so people can, can use it as they work. We're also looking at integrating our own proprietary data in combination with an LLM so that you can get a combination of next generation that is rich with Echo data.