Q&A: Scott Dobak, CEO of Dicom Transportation Group

LM Group News Editor Jeff Berman caught up with Dicom Transportation Group CEO Scott Dobak on various industry trends like freight volumes, inventory levels, and Peak Season. Dobak joined Dicom in February 2014. and before that he served as the President of the Transportation Management Services and Less-Than-Truckload divisions of Roadrunner Transportation Prior to Roadrunner, and he also held various sales management roles at YRC Worldwide/Yellow Corp. A full transcript of Berman of Dobak’s conversation is below.

Logistics Management (LM): How do you view what is happening in the freight transportation market, given the uneven nature of the economy?
Scott Dobak: From a Canadian focus, what we were experiencing was very flat, or even anemic, growth, but from a pricing standpoint things look pretty good. Nobody is lowering pricing, as it is a losing game, coupled with pricing discipline and margin having held up pretty well so far, especially through the first half of the year. Where we are seeing growth and where LTL comes into play for Dicom in the U.S. is as more of the market shifts from B2B to B2C and how LTL plays in those markets.

LM: Where are you finding more growth?
Dobak: Where we are finding growth is as LTL carriers become a great outlet for the B2C market and want and need to be able to move to a network that in many cases they are not able or equipped to make that final mile delivery to a house for a large item like a treadmill or some other type of large piece of equipment. As we are building out our final mile network in the U.S., we are working with LTL carriers to be that outlet for them as they can deliver whatever they want. But in many cases they don’t want to deliver flat screen TVs or workout equipment that is larger than what a parcel carrier can handle. We are seeing tremendous growth as the LTL sector figures out how to play in the B2C ecommerce market, and one of the ways we are doing it is to being physically set up for B2B, whereas LTL carriers are not set up to go into neighborhoods to deliver to homes, and we are running final mile with 24-26 foot street trucks with lift gates and that can handle B2C deliveries and go to businesses as well. And we are also seeing LTL as a great opportunity to grow our final mile network so from that piece it is a positive. 

LM: Can you talk a bit more about how you are expanding Dicom’s parcel business?
Dobak: The amount of pressure and interest we are getting in our parcel business from customers to be able to spread and expand their networks into the B2C market unlike anything we have seen before. Our thesis for B2B even 2.5 years ago compared to now has dramatically shifted in last 12 months, and we are now figuring it out with dedicated capacity to do B2C work. If a route driver w 80 or more stops and that are all B2B stops and all of a sudden now needs to go a residence is something that kills productivity and does not work well. We have enough density in some regions where we can run dedicated B2C routes for the major B2C players, and they are coming after everyone to do that work, and we are figuring out ways to make that work and still hold margin. We are figuring out how to grow it and still hold margin against it. We cannot see that ending as it will grow and grow for some time.

LM: What is the impact of high inventories on freight transport volumes?
Dobak: There is no question it speaks to the lack of volumes you are seeing in networks, and there is a lack of demand, coupled with high supplies, that is causing these high inventories up to a point, so I would say between data sources like the Cass Freight Index Report and American Trucking Associations’ monthly volume reports, it is very consistent.

LM: How about the impact of high inventories as they relate to other supply chain-related things?
Dobak: I would also say that companies cannot build warehouses fast enough right now, and that is exploding and we are benefitting from that as well. We have warehousing operations on the West Coast, and warehouse space is at an absolute premium. It is not just B2C as B2B is slow, and there is a lot of inventory. What is going on is everyone is trying to beat Amazon and open up these regional distribution points and not using brick and mortar stores as distribution points, and they cannot get it close enough to customers to compete with Amazon.  We are seeing an explosion in our warehousing business to where we cannot get enough of it to satisfy customer needs and once you get that customer into your warehouse, you need to deliver it next day and try to compete with Amazon Prime and others as everyone wants it now or next day and it is just creating a great opportunity for growth.  We are doing a lot of final mile route work that is a huge growth opportunity. I like the way that distribution networks are trying to get closer to the customer and to be able to have a network that can not only hold capacity for customers but to also be to be able to deliver it to them same or next day.

LM: How do you view Peak Season? In recent years, many supply chain stakeholders say it is not the same as it used to be, given changes in import levels and demand patterns driven by e-commerce.
Dobak: What we observe as it relates to our business is that we are still seeing the shipping trends as far as where the peaks and valleys are in each quarter for the more traditional trends. But you don’t see the ebb and flow at the same levels as it used to be, with the troughs in the slow months not as steep, for example,
as they once were. And on the other side, on the high end, you also don’t see that just all out mad rush in trying to get as much through as people’s networks during Peak. Things seem more consistent as people today are buying for same day or next day delivery and they expect it now and are getting it now and inventories are having to be adjusted to have that product in stock for that mentality and that is what is kind of leveling things off to a point.  But let’s face it when you get into the late third quarter/early fourth quarter people are just going to start naturally buying more as they head into a holiday season. The thing is, though, it is not at the same volume as people are shopping online 5 days a week rather than just going shopping on a weekend at a mall, which leads to higher replenishment by retailers. Things today are more constant and there are still peaks and valleys today but it is just not at the degree we remember it being like 7-10 years ago.