Q&A: Pilot Freight CEO Richard Phillips

Logistics Management Group News Editor Jeff Berman recently caught up with Richard Phillips, CEO of full service 3PL and non asset-based 3PL services provider Pilot Freight about various aspects of the supply chain and logistics sectors and the economy. A transcript of their conversation is below. 

LM: How do you view the current state of the freight economy?
Richard Phillips: We are continuing to see slow paced and sluggish growth in broad-based markets, with the private sector seeing slow or sluggish pickup since the recession. It is clumpy in that we still see some months or quarters when durable goods orders are down and there still some sputtering. And there was also the impact of the sequestration and federal government shutdown as the government has been much more volatile than the private sector. Another thing we are seeing in regards to the economy is an ongoing reliance on technology?

LM: In what ways?
Phillips: E-commerce for one. E-commerce is really all about technology and the ability to really integrate with customers’ platforms and our ability to work with customers to drive efficiencies and gather shipment information in a residential environment and make it immediately available to customers.  At Pilot all of our drivers have handheld devices that collect delivery information immediately, whereas it used to take upward of an hour to access the same information. That type of stuff is really driven by the demand of e-commerce. It is where the future is really. There is also a further integration of technology into the supply chain, which has been going on for more than a decade, and we are more and more integrated into the systems and platforms being run by our customers.

LM: How do you think Peak Season –related trends shaping up at this point?
Phillips: Things seem to be slightly ahead of pace. It is difficult to say what the consumer demand is going to be like, but it is too early to truly gauge that as people are not doing much holiday shopping yet but the inventory stocking by retailers certainly is.

LM: What are you seeing on the brokerage side as it relates to capacity availability and other things?
Phillips: We are still seeing tight capacity but for the most part we have been able to get the capacity we need. Things on the ground are tightening, and that is only likely to continue with Hours-of-Service regulations and other challenges motor carriers are facing. On the air side, we are seeing dramatic cuts in capacity generally over the last ten years. There has been a slight uptick in capacity recently, but nobody new is really entering the fray.

LM: How are you seeing things on the ocean side?
Phillips: We don’t do a ton of ocean freight compared to what we do on the air side, but we are starting to do more and more of it. That said, we really don’t see any capacity pressure on the ocean side as there is plenty out there.

LM: With some recent momentum occurring in the manufacturing sector, is that resulting in increased activity in terms of things your customers need from you?
Phillips: They are definitely pushing us to handle more of their business on the manufacturing side. In addition, much of the growth on the manufacturing side is still inconsistent from month to month, in terms of order growth. Part of that is because the economic recovery is still shaky, and shippers don’t want to get ahead of themselves. There is also a lingering impact from the 2008-2009 recession, when inventories were so low that supply chains, in my view, were not smoothed out, and any uptick at all in demand creates a velocity throughout the supply chain because there was not enough backup inventory to handle an increase in demand. 

LM: Are you seeing any increased evidence of near shoring with customers bringing operations back to the U.S. or Mexico.
Phillips: We are seeing a great deal of work move back to North America. The biggest chunk of it is going to Mexico in the form of higher quality assurance and slightly more physically demanding aspects of the manufacturing process like importing finished products and taking raw materials into the states.

LM: What are shippers asking out of their providers that you are hearing more of these days?
Phillips: Over the past four or five years, much of it has centered on technology, with shippers clamoring for things like online track and trace and greater visibility into what we are doing for them.  And now they are expecting greater integration and want visibility tools into their entire supply chain related to shipment information data that they may not have previously had. This all relates to their needs and is not just about transportation. It could be for solving a problem for a customer and we can look at their data to identify a problem they may have yet to realize or look for future trends related to where to locate a distribution center based on demand trends or different ways to solve a problem for them.