Speaker 1: Hello, and welcome to another episode of the Odd Thoughts Podcast.
Speaker 1: I'm Tracy Hallaway and I'm Joe. Wasn't Joe remember that
Speaker 1: ever Given? Yeah? That was. That was a great story.
Speaker 1: It's not over yet, is it? So? Possibly my favorite
Speaker 1: sort of finance eco story of all time. It's still going.
Speaker 1: Uh So, there's still this legal thing over what's going
Speaker 1: to happen to all the actual things that were on
Speaker 1: the ever Given after it was stuck in the canal,
Speaker 1: and people are still trying to clear the backlog of
Speaker 1: container ships the sort of logjam that came from the blockage,
Speaker 1: you know, months at this point after the thing was
Speaker 1: actually stuck, right, So it wasn't actually stuck like sort
Speaker 1: of blocking the canal for that long. I think it
Speaker 1: was like about a week maybe or something wrong that,
Speaker 1: but it caused all kinds of issues obviously, and they
Speaker 1: had to have this huge rescue effort and that cost
Speaker 1: all kinds of money. And then the last I heard
Speaker 1: about it, and I probably read an article like a
Speaker 1: week or two ago, there was some sort of like
Speaker 1: some issue with like the boat, the vessel not being
Speaker 1: allowed to actually continue on its journey until the owners
Speaker 1: paid up for the the rescue operation, and then I
Speaker 1: started lost track of it after that. Yeah, that's exactly right.
Speaker 1: And of course the ever Given it's sort of, I
Speaker 1: guess symbolic of all these logistics snarls that we've had
Speaker 1: recently during the coronavirus crisis. And you know, we talked
Speaker 1: about it before in various episodes. We've talked about basically
Speaker 1: the surging traffic and shipping container rates going up, but
Speaker 1: we've also talked about this idea that there's a shortage
Speaker 1: of lots of different things, including lumber, including semi conductors,
Speaker 1: and the logistics snarls really play into that because if
Speaker 1: you already have a short things like semiconductors, plus you
Speaker 1: can't actually move them to where they need to be,
Speaker 1: then everything just gets compounded, right. I was just about
Speaker 1: to use that word compounding, because that's really what it
Speaker 1: feels like that Like the ever Given story was like
Speaker 1: kind of wild. The ship like got turned and went
Speaker 1: into the bank, and it was kind of weird, but
Speaker 1: it really was sort of like the perfect emblem of
Speaker 1: this moment because they are just so many issues recently.
Speaker 1: Did that episode about with the lumber trader, and so
Speaker 1: that after that episode, I was like reading about or
Speaker 1: I was like following like one of the big sawmill companies.
Speaker 1: I read their earnings report and they missed a man
Speaker 1: about this. Oh you did, Joe. You've read this from
Speaker 1: my post, Yes, you published it. That was the thing
Speaker 1: about the sawmill company. Yeah, yeah, they couldn't get enough
Speaker 1: truckey right, should have been minting money, but it wasn't. Sorry,
Speaker 1: of course, because they couldn't actually move the wood. Okay,
Speaker 1: so we're all on the same page. So anyway, all
Speaker 1: these things are piling up on top of each other,
Speaker 1: chips and trucks and boats, and it doesn't feel like
Speaker 1: we're getting any closer to some sort of equilibrium. Of course,
Speaker 1: you beat me to that story, Tracy. I don't know
Speaker 1: why I would have ever suggested on the way, but look,
Speaker 1: what's really interesting. Well, I'll tell you one thing. I've
Speaker 1: been trying to ship something on a container from Hong
Speaker 1: Kong to l A for months now, and I cannot
Speaker 1: get room on a ship for lover money. So you know,
Speaker 1: I've been trying to do this for the purposes of
Speaker 1: journalism slash science, so I personally know how bad it is,
Speaker 1: and the guests that we're about to speak to on
Speaker 1: all thoughts. Is someone that I got in touch with
Speaker 1: to try to give me some logistics advice and figure
Speaker 1: out what was going on with my own container shipping woes.
Speaker 1: And he's really the perfect person to talk to about
Speaker 1: this because not only is he the head of a
Speaker 1: tech platform for global logistics, so this is what he
Speaker 1: does day in and day out, but he also has
Speaker 1: about forty containers still stuck on the ever given so
Speaker 1: he can talk about that situation as well. Well. I'm
Speaker 1: really looking forward to this. I'm hoping to learn something
Speaker 1: and hopefully you get some some advice on making your
Speaker 1: making your ship all right. Our guest for today is
Speaker 1: Ryan Peterson. He's the CEO of Flex Support. Ryan, thanks
Speaker 1: so much for coming on. Great to have great to
Speaker 1: be here. Thank you for having me so Ryan. Hopefully,
Speaker 1: Joe and I kind of described the extremity of the
Speaker 1: logistics log jam correctly in the intro. How bad is
Speaker 1: it right now? Um? And it depends where you sit.
Speaker 1: If you if you own a ship or an airplane
Speaker 1: or a fleet of those, you're making a lot of
Speaker 1: money right now. Prices have gone through the roof. The
Speaker 1: reason is because people are shipping more things than ever
Speaker 1: before in human history, and all the ships and planes
Speaker 1: are full. But all the companies in every industry, I
Speaker 1: think lumber, the lumber one you describe super interesting. But
Speaker 1: everybody's having trouble getting anything delivered. And it's not just
Speaker 1: you with your little container. It's some of the best
Speaker 1: companies in the world are struggling right now. So my
Speaker 1: little container is when you feet long for the record,
Speaker 1: but it only has one thing in it. How does
Speaker 1: a flex port sit within the logistics ecosystem? And who
Speaker 1: are your clients and all this? Yeah, so we work
Speaker 1: with about six thousand great companies around the world that
Speaker 1: regularly ship. We actually have more than ten thousand customers,
Speaker 1: but six thousands of them are shipping constantly like every day,
Speaker 1: like medium sized, big, big companies, household names, some of
Speaker 1: the most important brands in the world as well as
Speaker 1: like we have almost all of the directed consumer e
Speaker 1: commerce businesses that are these up and coming companies, So
Speaker 1: we have all of those customers. They contract Flexport to
Speaker 1: manage the full end to end from shipping everything once
Speaker 1: it leaves a factory loading dock all the way into
Speaker 1: their downstream network for distribution into the u S and
Speaker 1: we handle air ocean freight, UH customs and the delivery
Speaker 1: both pickup and delivery for trucking. So talk to us
Speaker 1: a little bit about the containers on the ever given
Speaker 1: then what was your role there in the logistics and
Speaker 1: what's their current status. Yeah, we do have we have
Speaker 1: forty three containers sitting on that ship still, that's our
Speaker 1: European customer base. Obviously they contracted us to ship containers
Speaker 1: out of mostly out of those ones left from China.
Speaker 1: You've seen you've seen the pictures of the ship. They're stuck.
Speaker 1: The name of the game here is second order effects,
Speaker 1: Like you just couldn't predict what was going to happen.
Speaker 1: So you've got the forty three that are stuck on
Speaker 1: that ship, but actually a hundred and twenty other ships
Speaker 1: containing twelve hundred flex sport containers were stuck behind that
Speaker 1: ship or ahead of it which way they're going, and
Speaker 1: also couldn't be delivered. How to get delayed. And that's
Speaker 1: the biggest cost that's going to come about through litigation
Speaker 1: and everything else that flows through here is all of
Speaker 1: these people feel like, hey, you owe me money, you
Speaker 1: blocked my delivery, and all of that that's gonna be
Speaker 1: a lot of lawsuits. It's not just the cost of
Speaker 1: the rescue operation, the dredging of the canal and everything else.
Speaker 1: It's like all these people who had their cargo delayed,
Speaker 1: and what's the how do you quantify that? It's like,
Speaker 1: is it the lost profits that they would have aid
Speaker 1: from delivering those goods. It starts to be a really
Speaker 1: hard exercise that we'll get settled in the court of
Speaker 1: law or or many um and it's gonna take a
Speaker 1: long time to shake out. I don't know if there's
Speaker 1: like client confidentiality, but can you tell us some of
Speaker 1: the items that are stuck on the what types of
Speaker 1: items are stuck on that boat? Yeah, there is a
Speaker 1: lot of confidentiality. But I know that one of our
Speaker 1: customers has is a relatively famous company that make and
Speaker 1: I can't show that, but make keyboards, keyboards and mice, uh,
Speaker 1: the entire like many container loads of that. Um. By
Speaker 1: the way of the forty three containers, we have all
Speaker 1: of the customers except for three, opted into cargo insurance,
Speaker 1: which will cover the damages in the eventual lawsuits that
Speaker 1: come out of this. Those three we're gonna have to
Speaker 1: work through and make sure it doesn't bankrupt them. But
Speaker 1: one of the little known facts about global shipping is,
Speaker 1: under ancient maritime law, the company shipping the cargo, not
Speaker 1: the owner of the ship, but the company that whose
Speaker 1: cargo owns the cargo the products on there is liable
Speaker 1: when something like this happens. Yeah, and and the real
Speaker 1: that's a law called general average. It's a fascinating Wikipedia article.
Speaker 1: And the reason that that's true under ancient sort of
Speaker 1: not I mean ancient, Yeah, it goes back I think
Speaker 1: hundreds of years. And the reason that that was true
Speaker 1: is that in a in a storm or an accident
Speaker 1: at sea, you don't want people to stop and argue
Speaker 1: about whose cargo they're gonna throw overboard, and do you
Speaker 1: want the mariners. You don't want these arguments. You don't
Speaker 1: want the mariners like worrying about that. Just throw the
Speaker 1: cargo over and save the ship, is the principle, and
Speaker 1: you'll sort it out later. And the way you sort
Speaker 1: it out later is everybody agrees that we will share
Speaker 1: equally and whoever's cargo got thrown over the rest of
Speaker 1: the people will make them whole. And that's a principle
Speaker 1: called general average. And the ocean carrier under the law
Speaker 1: has the right to invoke general average and declare it
Speaker 1: and say okay. And so that's what Evergreen has done.
Speaker 1: They have declared general average, which means all of the
Speaker 1: customers who have cargo on that ship are going to
Speaker 1: be liable for the damages that come through um and
Speaker 1: it could be billions of dollars in aggregate and it
Speaker 1: and it gets divided pro rata based on the commercial
Speaker 1: invoice value of your goods. That when you do get
Speaker 1: this your goods put on that ship, you should pay
Speaker 1: for cargo insurance because if that ship gets something terrible
Speaker 1: happens all of a sudden, You're little Bloomberg research project,
Speaker 1: could you know, bring bring you all. You've got to
Speaker 1: make sure that you don't get a bankrupted Oh man,
Speaker 1: that's actually a really good point. And now I'm worried
Speaker 1: about like bringing all of Bloomberg down with this one shipment.
Speaker 1: It's not that expensive. This is actually something that I
Speaker 1: wanted to ask you about. So I'm hoping you can
Speaker 1: expound on that point. Who is actually liable for the
Speaker 1: snarls that we're getting in global shipping traffic, Like when
Speaker 1: stuff goes wrong, Who bears responsibility not just in terms
Speaker 1: of I guess insurance for lost or delayed cargo, but
Speaker 1: also who bears responsibility for solving the problem, Like who
Speaker 1: do your clients go to and say, I can't get
Speaker 1: my stuff shipped on time. Someone needs to fix this. Um,
Speaker 1: that's all on us as as a logistics industry. That
Speaker 1: it's really tough. The analogy I've been using with my
Speaker 1: teams is that we're doing wedding planning outdoors and all
Speaker 1: of a sudden we've been moved to Seattle, you know,
Speaker 1: and it's like, well, every you better be warning your
Speaker 1: customers about what's going on. Tell them that, hey, we're
Speaker 1: not able. The thirty percent of ships are being are
Speaker 1: not making their schedule right now, seven percent of containers
Speaker 1: are getting rolled, which is like what it calls when
Speaker 1: you get bumped in an airline, when you get when
Speaker 1: you get bumped to the next plane that's getting rolled.
Speaker 1: In ocean containership industry standard industry average before the pandemic
Speaker 1: was eight percent. So it's just like a huge spike
Speaker 1: in in failure, service delivery failure, and it's a ton
Speaker 1: of second order effects because right when when that and
Speaker 1: then this was the ever Given is a really good example.
Speaker 1: Like that ship. Okay, it's six days late, the ships
Speaker 1: behind it were six days late. I mean they ever
Speaker 1: given is gonna be months late, but the ones behind
Speaker 1: it were six days late. We're arriving, but now they
Speaker 1: were supposed to go to the next port and the
Speaker 1: next sport, they're gonna be delayed there and there, and
Speaker 1: all those other bookings that were supposed to get put
Speaker 1: on get rolled and have to find a new you
Speaker 1: know what, what ship do they go on? It's a
Speaker 1: mad scramble. That was just like adding you know, insult
Speaker 1: to injury. After a year of this, well at least
Speaker 1: six months of really excess capacity and not enough ships
Speaker 1: to move all the cargo that's trying to move. See,
Speaker 1: I explained that, like ever given a side, what have
Speaker 1: been the main factors that explain why the system is
Speaker 1: basically buckling? Like where where are the big pain points
Speaker 1: coming from? The first thing and the most the easiest
Speaker 1: thing to point to is just like way more demand,
Speaker 1: way more volume is being shipped, and my own working
Speaker 1: I thought this is for this, and I didn't predict
Speaker 1: this in advance, so I'm not claiming to be smart
Speaker 1: and I just sort of looked at the data x
Speaker 1: post and rationalize it, which we're all capable of doing.
Speaker 1: I don't know if it's true or not, but ex
Speaker 1: post we can look backwards and say, well, all of
Speaker 1: these consumers who got locked in their homes and couldn't
Speaker 1: go out, You've got to get your dopamine somewhere. And
Speaker 1: so you just buy stuff on the internet, and and
Speaker 1: people have bought way more things than they were buying before.
Speaker 1: And you've had this like big shift, and the data
Speaker 1: does bear this out. You've had a big shift from
Speaker 1: services which are way down double digit percent down, onto
Speaker 1: durable goods, onto home goods, upgrading your furniture building, um.
Speaker 1: And so that's that's the first thing. It's just like
Speaker 1: way more cargo getting shipped, and you have the same
Speaker 1: number of ships, in some cases less because of actually
Speaker 1: the ocean carriers cut back. We all predicted as an
Speaker 1: industry and as a world, as like economists around the world,
Speaker 1: everyone predicted that goods purchases would fall off a cliff,
Speaker 1: and the opposite happened, which I think is a lesson
Speaker 1: that we should all take from this, is like, maybe
Speaker 1: don't be so certain in predictions of the future. But
Speaker 1: we all predicted that, and the ocean carriers actually pulled
Speaker 1: back capacity. Um. A lot of companies pulled back orders
Speaker 1: and their factories made other plans and then all of
Speaker 1: a sudden goot new orders. So you've got a log
Speaker 1: jam at the factory where right now it's taking I
Speaker 1: talked to one bicycle producer, pretty big brand, last two
Speaker 1: weeks ago, and it's taking them three hundred days when
Speaker 1: they place a purchase order with their factory, three days
Speaker 1: before it's ready to get picked up, which normally this
Speaker 1: is like a thirty day process. Um, So you've got
Speaker 1: delays at the factory. Ships there wasn't enough capacity. Well,
Speaker 1: we also ran out of containers, and this is a
Speaker 1: really interesting second order effect. Imports have surged. US exports
Speaker 1: are down of containers. If you don't have containers being exported,
Speaker 1: you don't have empty containers to put those imports in
Speaker 1: coming back, and it needs to run in a loop.
Speaker 1: So normal days pre pandemic of US of containers leaving
Speaker 1: the United States are empty. Uh, it's it's running around
Speaker 1: right now. But for a while they didn't, the ocean
Speaker 1: carriers weren't on top of this and just shipping back
Speaker 1: extra empties to make sure that they have enough capacity.
Speaker 1: So there was a moment a couple of months ago
Speaker 1: where we were as a as an industry, as a society,
Speaker 1: five hundred thousand shipping containers short in China. Sorry sorry,
Speaker 1: could you just explain that. Why is the shipment back
Speaker 1: of empty containers a problem? Because normally you have you
Speaker 1: have full stuff going. Yeah, but US exports fell off
Speaker 1: a cliff, right, and nobody thought, hey, I still need
Speaker 1: the container even if I'm not exporting the goods. So
Speaker 1: the ships were going back to China but leaving empty containers,
Speaker 1: and the empties were staying here because they would get
Speaker 1: imported and usually they get exported automatically. And that's like
Speaker 1: just a really quick reaction. You know, the industry is
Speaker 1: not made to like change this fast, this physical goods
Speaker 1: type of stuff happening in the real world that it's
Speaker 1: not software. Can you go into that in detail, because
Speaker 1: this is something that we spoke about with a previous
Speaker 1: gust on shipping. But how flexible is the industry? I
Speaker 1: get the sense that it isn't very And you're dealing
Speaker 1: with you know, massive ships and huge ports that take
Speaker 1: a lot of coordination and big lead times. But why
Speaker 1: can't it respond to you know, at this point, it's
Speaker 1: a change in the world that's sort of been going
Speaker 1: on for more than a year, So why does it
Speaker 1: take so long to respond to it? Yeah, I mean
Speaker 1: it's it's my personal obsession is to try to make
Speaker 1: this industry more agile and and bring technology to bear.
Speaker 1: And a lot of it is a lack of technology.
Speaker 1: A lot of these companies are running old systems. I've
Speaker 1: heard the word as four hundred more times than I
Speaker 1: ever want to hear again in my life. That's like
Speaker 1: an an operating system built by IBM as a predecessor
Speaker 1: to OS two. Like we're talking about early early eighties
Speaker 1: technology that's still running and and it's hard to switch
Speaker 1: out a system that runs such vital systems and your
Speaker 1: you know, running your company. And so some of it
Speaker 1: is technology and lack of tech to be agile. Some
Speaker 1: process I don't know, like I send some bureaucracy. So
Speaker 1: for example, with these empty containers, we saw this problem
Speaker 1: coming like six months ago. We're like, hey, the exports
Speaker 1: aren't happening, there's gonna be a lack of empty containers
Speaker 1: in China. We went to a couple of ocean carrier
Speaker 1: partners of ours and said, we want to ship empty containers,
Speaker 1: will pay you to ship them. We want to make
Speaker 1: sure we have empties available, and they told us sure,
Speaker 1: but once it arrives there, we're taking it back in.
Speaker 1: It's our container and we're like, okay, well I'm not
Speaker 1: gonna pay you to ship an empty like so we
Speaker 1: didn't do it, and then fast forward a couple of
Speaker 1: months and they didn't have the empties. Were like, ah,
Speaker 1: we were offering to pay you to do this, and
Speaker 1: you'd be making more money right now. So some of
Speaker 1: it is just like, hey, how do you get older
Speaker 1: companies to be less bureaucratic and be agile and respond
Speaker 1: to change, which is not something they've really had to learn.
Speaker 1: I think we've seen this with a lot of institutions.
Speaker 1: I don't need to just pick on any particular industry.
Speaker 1: We've seen this with healthcare distribution, We've seen it across
Speaker 1: the board of the Pandemics really exposed a lot of
Speaker 1: our institutions, and I think it's a wake up callegs.
Speaker 1: You're not stupid people. They're like, oh wow, okay, we
Speaker 1: really have to invest in upgrade our technology systems. So
Speaker 1: we're seeing um, good partnership there, but in the midst
Speaker 1: of a pandemic, it's hard and mistakes are made, for
Speaker 1: sure from the companies that you work with. Obviously I
Speaker 1: assume in normal times has already complicated stuff, but you know,
Speaker 1: like what's sort of going on inside at the corporate
Speaker 1: level as they sort of have to like pivot too,
Speaker 1: this kind of thing that I don't know, maybe I
Speaker 1: don't know if it normally runs an autopilot, but it's
Speaker 1: sort of smooth to this becoming a major strategic focus
Speaker 1: for their ability to conduct business. We're talking about brands
Speaker 1: like companies that need to get their products in stock,
Speaker 1: and yeah, it is logistics team has been I sometimes
Speaker 1: call it like the offensive lineman of business, Like you
Speaker 1: don't really get noticed until you commit a penalty. Every
Speaker 1: everybody's piste off with you, and the rest of the
Speaker 1: time you just say, yeah, he blocked somebody. That's his job.
Speaker 1: And I think we're finally seeing the opportunity for for
Speaker 1: these people, these teams to become much more strategic and
Speaker 1: get a seat at the table and talk with the CFO,
Speaker 1: talk with the head of marketing and sales, and the
Speaker 1: e commerce team about hey, where's the stuff? I mean,
Speaker 1: the dirty little secret is that the best brands in
Speaker 1: the world have no idea where their products are. And
Speaker 1: that's in normal times and now really they have no
Speaker 1: idea where it is or when it's going to get there.
Speaker 1: And it's all the previous models have stopped working. Um.
Speaker 1: And they need they need technology, they need answers. They
Speaker 1: can show them, Hey, show me on a satellite where
Speaker 1: this ship is, and show me used machine learning to
Speaker 1: predict when is it actually going to clear customs and
Speaker 1: get delivered to me? So I can communicate that downstream
Speaker 1: to the end consumer, all the way to the end consumer,
Speaker 1: who cares when's there? When's their couch going to arrive? Um?
Speaker 1: And that's an age old problem. No one can tell
Speaker 1: you when your couch is gonna arrive. But it's been
Speaker 1: compounded in a lot a couple of months, and we're
Speaker 1: trying to at least be able to give people visibility
Speaker 1: even if you can't run it faster. And I can't
Speaker 1: make the ships not be stuck at the port waiting,
Speaker 1: but I can tell you what the estimated weight time is,
Speaker 1: and I can tell you what current throughput levels at
Speaker 1: that port terminal are etcetera. Uh, and that's what that's
Speaker 1: what the Flex Moore technology platform is built for. So
Speaker 1: we've we've found this whole thing. You know. The silver
Speaker 1: lining in US is like we're all of a sudden.
Speaker 1: Normally we just ship cardboard boxes through our platform and
Speaker 1: no one thinks it's that interesting. All of a sudden,
Speaker 1: here I am talking to you all and trying to
Speaker 1: talking to board levels and really getting in there and
Speaker 1: trying to solve real problems for people. So this actually
Speaker 1: leads to a question that I wanted to ask you
Speaker 1: as well. Can you talk to us a little bit
Speaker 1: about how the economics or the process of actually loading
Speaker 1: container ships work. So you just mentioned that, you know,
Speaker 1: you have technology and machine learning that help you estimate
Speaker 1: that process. It seems to be really complicated. And again
Speaker 1: I'm speaking a little bit from personal experience here, but
Speaker 1: I keep getting rolled from ship to ship to ship,
Speaker 1: which means there's someone else who is taking my space
Speaker 1: on the ship that I was supposed to get and
Speaker 1: either they're paying higher rates or I don't know, maybe
Speaker 1: they're a bigger client for the company. But explain exactly
Speaker 1: how that works. Who gets preference on these extremely crowded ships. Yeah,
Speaker 1: and I'll tell the way it's worked traditionally in the industry,
Speaker 1: and then I'll tell you what where I think innovations,
Speaker 1: but there are opportunities are for innovation on top of that.
Speaker 1: It's like traditionally it works by who has the best
Speaker 1: relationship with this person probably named large sitting in Copenhagen
Speaker 1: or something, who's making these decisions, and it is like
Speaker 1: pretty human driven. They're going to look at factors like
Speaker 1: how long have you been a customer, do you ship
Speaker 1: a lot with them? How much money are you paying them?
Speaker 1: Obviously and things like that, But they're not really they
Speaker 1: don't have a lot of systems to try to build
Speaker 1: this in terms of actual algorithms. It's people kind of
Speaker 1: horse trading and communicating by email and prioritizing things. So
Speaker 1: a lot of favor trading and taking care of people.
Speaker 1: In fact, I have an imp of mine who used
Speaker 1: to work at another company in this industry, and he
Speaker 1: said that he spent seven years trying to sell this
Speaker 1: like household name is retailer and they finally agreed to
Speaker 1: give him twenty containers and the because the company and
Speaker 1: they paid extra to make sure that they got loaded,
Speaker 1: and then his company just rolled all twenty containers and
Speaker 1: after seven years of work trying to close this account,
Speaker 1: he just lost it on the first day. And it
Speaker 1: was just like disaster. It was just a lack of systems.
Speaker 1: Everybody wanted to support him, but there was no place
Speaker 1: to like star that those containers and be like, we
Speaker 1: need to prioritize these. Look, at some point, if the
Speaker 1: ship is well, you do have to decide who gets
Speaker 1: on and who doesn't. And what we're building towards is
Speaker 1: the world where you prioritize people based on their own
Speaker 1: past reliability of because it goes two ways in that
Speaker 1: of all ocean containers that are booked with carriers get canceled,
Speaker 1: and that was pre pandemic numbers. And so the reason
Speaker 1: that you have an eight percent roll rate in a
Speaker 1: world where ships were only at capacity or so before
Speaker 1: the pandemic. So how are you at percent, Well, they
Speaker 1: have to overbook. Uh, if you have a seventy percent
Speaker 1: book to show ratio or at PC cancelation ratio, you're
Speaker 1: gonna you can't. You can't make money selling a seventy
Speaker 1: percent full ship. So you overbooked your container ship, and
Speaker 1: then people cancel on you and you sort it out,
Speaker 1: and on the average people are getting rolled. So it's
Speaker 1: kind of like a commercial flight that way, a pass
Speaker 1: where they might over they just assume some people aren't
Speaker 1: going to show up, and then if everyone does show up,
Speaker 1: then they have to bump. It's exactly like that. But
Speaker 1: the airline industry on the passenger side has like been
Speaker 1: really early adopters of technology and computer you know, and
Speaker 1: data science, and they've done pretty I mean, I don't
Speaker 1: get bumped very like almost ever. Anyone to hear those
Speaker 1: announcements on the loudspeakers anymore. Wait, so is a book
Speaker 1: to show? Is that like a term that you got
Speaker 1: work to show? Is it's the opposite of cancelation. So
Speaker 1: we learned in terms of book to show what was
Speaker 1: the other one? General? General average your roll rate, I've
Speaker 1: already learned. If we stopped it here, I would have
Speaker 1: already learned plenty of I haven't even gotten into all
Speaker 1: the Viking English that still predominates in global trade. There's
Speaker 1: a lot of there's us. The word for chucking is
Speaker 1: called drege, which is I guess too is as an
Speaker 1: old word for dragging. Something like when you add horses dragging,
Speaker 1: you have a bill of lading. Yeah, well that lading
Speaker 1: is an old English word for loading, and the bill
Speaker 1: of lading. This is to show you how ancient this
Speaker 1: industry is. Like the bill of lading is a is
Speaker 1: a piece of paper that serves as title to the
Speaker 1: merchandise by default in global trade in this today, by default,
Speaker 1: that piece of paper needs to be flown across the
Speaker 1: ocean to be given to the new owner. So your
Speaker 1: containers going along slowly like this, your piece of paper
Speaker 1: gets flown around and then you need to present that
Speaker 1: at the port to be able to pick up your container.
Speaker 1: It's not it's crazy. I just realized I've been pronouncing
Speaker 1: all of these words wrong. In my head. I always
Speaker 1: thought it was bill of latting and dryedge. So thank
Speaker 1: you for clarifying that. Thanks for having me on. Look,
Speaker 1: if some one has to get rolled from your ship,
Speaker 1: you know your ship is overpooked, and you have to
Speaker 1: choose who gets rolled. You should be able to look
Speaker 1: at past performance and go, hey, look, give me your
Speaker 1: forecast of how much you're gonna ship and what you ship,
Speaker 1: and and then I'm gonna look at how accurate you
Speaker 1: are in your forecast and how good you are at
Speaker 1: maintaining that book to show ratio that you actually ship
Speaker 1: what you booked, and then I will reward you. When
Speaker 1: when someone needs to get rolled, it won't be you,
Speaker 1: It will be someone else who's way in unpredictable, and
Speaker 1: I can give that person an opportunity to pay more
Speaker 1: to be treated like a more predictable client. And I
Speaker 1: think you can bring some sanity to this industry, which
Speaker 1: is like and one of my dreams is to like
Speaker 1: send the person who makes the company that makes the
Speaker 1: best forecast. I want to send them one of those
Speaker 1: big golf sweepstakes checks that they have to go and
Speaker 1: try to cash in because no one, no one that
Speaker 1: the guy who makes the forecast in the back office
Speaker 1: of one of these companies, Like really, no one has
Speaker 1: ever recognized that person for doing anything like an industry
Speaker 1: award show is what you're near. Yeah, I don't know
Speaker 1: that anyone would care, but I think their finance apartment
Speaker 1: would celebrate him for an after him or her for
Speaker 1: an afternoon. That leads to another thing actually that I
Speaker 1: wanted to ask you, And I'm sorry we have such
Speaker 1: a long list here, but can you talk a bit
Speaker 1: more about the situation at the ports and the actual
Speaker 1: unloading of containers, because you know, on the one end,
Speaker 1: it's difficult to get on a ship, and then at
Speaker 1: the other end, it seems to be difficult to actually
Speaker 1: get unloaded at your destination port. So what's going on there? Yeah,
Speaker 1: and and similar problem. I mean, you have all the
Speaker 1: ships are sailing, all of them are sailing completely full.
Speaker 1: We still use like nineteen seventies technology to unload these ships.
Speaker 1: I mean we all like look at those containers and
Speaker 1: think they're kind of cool, but like that's the nineteen
Speaker 1: seventies innovation, and we still unload them one or maximum
Speaker 1: two at a time. So it takes you eight hours
Speaker 1: to unload a ship when it arrives. And that's if
Speaker 1: you have a full crew, full work crew, full a
Speaker 1: group of longshoreman um stevendors. They're called the warehouse, the
Speaker 1: workers on the at the port. Obviously, COVID has had
Speaker 1: impacts on work, on staffing, and the union has told them,
Speaker 1: I understand that they don't if they don't feel safe,
Speaker 1: they cannot come to work. So they've had a lot
Speaker 1: of time getting enough people. There are brave people going
Speaker 1: to work throughout the pandemic um and they have been
Speaker 1: hit pretty hard by COVID in these in various poor
Speaker 1: terminals around the world, so they haven't been able to
Speaker 1: be fully staffed, and even when they are, it just
Speaker 1: takes so long to unload these ships that that's one backlog.
Speaker 1: Second is the truckers, and you need to be able
Speaker 1: to find a chassis. The chassis is like the trailer
Speaker 1: that you put a container onto that so that it
Speaker 1: can be dragged around by a truck. And we haven't
Speaker 1: had enough chassis. You know, all these second order efacts
Speaker 1: that are really hard to predict. Bullwhip effect. It's called
Speaker 1: in supply change. One thing I noticed, so by the
Speaker 1: way recording this may third. So the latest I s
Speaker 1: M manufacturing reports came out and I was reading the
Speaker 1: ones for Europe this morning, and one of the things
Speaker 1: that it said was that manufacturers, we all know they're
Speaker 1: facing backlogs and delays and supply issues, and that because
Speaker 1: of the uncertainty about their ability to get supplies, that
Speaker 1: they're increasing their orders. And so because they're compensating for
Speaker 1: supply uncertainty by actually amping up their orders, because then
Speaker 1: presumably that they view that as increasing the chance that
Speaker 1: they're actually going to get uh. But then I have
Speaker 1: to imagine that that only further exacerbates the shortages, because
Speaker 1: if everybody is fear of shortages, and everybody increases their orders,
Speaker 1: and then you actually sort of manifest shorter shortages. So
Speaker 1: I'm curious about how that sort of second order effect,
Speaker 1: where this sort of the compensation for expected delays creates
Speaker 1: more problems. Yeah, and then what happens when you actually
Speaker 1: get all your order and you realize, oh, I ordered
Speaker 1: too much stuff. Then you cancel and you cut all
Speaker 1: your orders back to zero, and it's just all this
Speaker 1: volatility in the system. And that is actually a lot
Speaker 1: of what happened. So because when we first started into
Speaker 1: the pandemic, a lot of almost every business was staring
Speaker 1: at the abyss and said, hey, we gotta cut all
Speaker 1: of it. They didn't order anything. I mean, you probably
Speaker 1: heard that from your I didn't have to listen yet
Speaker 1: to your lumber podcast pack yeaheah, it's the same thing.
Speaker 1: They sold everything to the yeah, exactly. And then that's
Speaker 1: had to happen with a lot of industries. And then
Speaker 1: all of a sudden and the one that was the
Speaker 1: worst that I'm aware of was well, I don't know,
Speaker 1: I don't know how to compare it with the lumber.
Speaker 1: But the furniture industry had a really hard problem because
Speaker 1: as what's happened with price of ocean freight, it's gone
Speaker 1: through the roof, right because it's at capacity, and now
Speaker 1: it's whoever is going to pay the most gets on
Speaker 1: the ship, and the furniture people will have like kind
Speaker 1: of low margins. We're sitting this out and they're going, hey,
Speaker 1: I'm not gonna ship when the price is that high.
Speaker 1: I'll just wait and I'll sell down my inventory in
Speaker 1: the US. And so now all of a sudden they're going,
Speaker 1: wait a minute, I'm like out of inventory and I'm
Speaker 1: just gonna have to pay this price. And so they're
Speaker 1: the furniture imports are only up year over year, but
Speaker 1: volumes in Q one are up to x year over
Speaker 1: year because volumes had gone to zero in previous quarters.
Speaker 1: So you get these crazy oscillations like that, and yeah,
Speaker 1: it can it can lead to all these second order
Speaker 1: effects that are really hard to predict. I don't know,
Speaker 1: it's it's hard to see how we get through this
Speaker 1: other than just time. It takes time to play it
Speaker 1: out and let things come back to what. I don't
Speaker 1: know if that there's a concept of equilibrium, but it's
Speaker 1: a something along those lines. Here's a dumb question on
Speaker 1: that point. But do you see the logistics narls as
Speaker 1: good or bad for the global economy? And maybe that's
Speaker 1: a weird question, but I can kind of see people
Speaker 1: arguing it both ways. So on the one hand, if
Speaker 1: you know you're short now, then you're boosting orders, you
Speaker 1: kind of assume that there's going to be demand for
Speaker 1: the foreseeable future and eventually people start adding capacity, which
Speaker 1: would be a good thing for the economy. But on
Speaker 1: the other hand, it does create this volatility. As you
Speaker 1: just described, people can't get things. There's a lot of
Speaker 1: uncertainty built into the system. And even if prices for
Speaker 1: you know, say furniture or lumber are soaring, you can't
Speaker 1: actually deliver the goods and make money off of it.
Speaker 1: So net net is this good are bad? I don't know.
Speaker 1: I don't know if there's a judgment, like a moral
Speaker 1: judgment or a good bad judgment there, because it's it
Speaker 1: depends where you sit, you know, And like I do
Speaker 1: think it's kind of good that we're shipping more stuff.
Speaker 1: That seems like a positive economic indicator that people are
Speaker 1: feeling comfortable and right if if if shipping it collapsed,
Speaker 1: we'd be having a different conversation about the Great Depression
Speaker 1: or something. So on that sense, it's good. Is it
Speaker 1: good that we shift spending from services onto goods? Like
Speaker 1: really hard for me to say. I don't. I don't
Speaker 1: have a judgment on that. Like I think enjoying life
Speaker 1: and having some nice experiences might be better than buying stuff,
Speaker 1: right sometimes, So hopefully all those people in service jobs
Speaker 1: get a chance to get back to work and and
Speaker 1: that you know that it's kind of like you're just
Speaker 1: seeing this mix shift now. You will see it if
Speaker 1: it stays high long term. If like goods stay high,
Speaker 1: that seems good and you will see assets. People will
Speaker 1: invest in ships. I'm sure people are doing it right now.
Speaker 1: Is if they had certainty that that was gonna happen,
Speaker 1: they'd be placing orders for more ships. But it's years
Speaker 1: for a new ship to come online. Went from that
Speaker 1: the moment you order it from where I said, it's entertaining.
Speaker 1: I mean, I like to just see what happens in
Speaker 1: the world. And it's also really challenging. We have to
Speaker 1: solve problems for our customers, so that part is what
Speaker 1: we live for. Like we we're here to solve problems,
Speaker 1: So I don't think we're not complaining about it. A
Speaker 1: flexport we become more useful than we were in the past.
Speaker 1: I want to go back to the point you made
Speaker 1: about the furniture importers and the low margins that they have.
Speaker 1: I mean, this was again very similar themes to our
Speaker 1: discussion about lumber. But you know, there's the sawmills were
Speaker 1: sort of shocked by it. Didn't really believe that the
Speaker 1: lumber prices we're gonna stay high, so like no one
Speaker 1: really ever invested to increase the capacity. How much are
Speaker 1: the issue? You know, we've just seen the steady worsening worsening.
Speaker 1: Just today, I saw, you know, shipping rates on average
Speaker 1: hit a new high. How much has there been this
Speaker 1: effect of companies essentially thinking that, oh, it must be
Speaker 1: the peak, so I'll wait and I'll wait, and then
Speaker 1: of course and then having to scramble further to pay
Speaker 1: up more because they've delayed so long in they're shipping.
Speaker 1: I think that's I think that's pretty common and so
Speaker 1: right now, the world's ocean freight industry about I think
Speaker 1: it's sixty or seventy percent of the world's ocean freight
Speaker 1: is contracted on an annual basis versus spot market where
Speaker 1: they're signing like an annual rate and saying this is
Speaker 1: gonna be I'm gonna pay this rate for the year,
Speaker 1: and they go and contract that with ocean carriers or
Speaker 1: with Freight forward and Company, or a platform like Flex Sports.
Speaker 1: And right now is the season when that happens. It's
Speaker 1: like April and May is when these decisions get made,
Speaker 1: these contracts get negotiated, and so it is like the
Speaker 1: worst possible timing. And these companies are struggling to get capacity.
Speaker 1: And imagine being that logistics manager at a major corporation
Speaker 1: who you are told by every company you talked to, sorry,
Speaker 1: I can't give you capacity. Your company is not going
Speaker 1: to grow, you're not gonna hit through sales goals like
Speaker 1: I can only ship half of what you want to ship.
Speaker 1: That is a really difficult position to be in, and
Speaker 1: yet it's a brand new position. So these companies a
Speaker 1: month ago might have been able to negotiate and get space,
Speaker 1: but they didn't want to pay the rates, and it's
Speaker 1: sort of a wake up call like, oh my goodness,
Speaker 1: I'm not gonna get any space unless I pay the rates.
Speaker 1: Companies are sort of having that moment of opening their
Speaker 1: eyes and go, Okay, I guess we have to make
Speaker 1: a decision. We're gonna do this or not. In your experience,
Speaker 1: our companies absorbing the costs of higher shipping rates themselves
Speaker 1: or are those costs getting passed onto consumers. I think
Speaker 1: it's going to get passed through by good. Good companies
Speaker 1: can raise their prices and um and people will pay
Speaker 1: for the product if if that's because it's happening to
Speaker 1: all the competitors equally, right, So you're just going to
Speaker 1: see it come through in the form of more inflation.
Speaker 1: Are we gonna see some of these like once? I mean,
Speaker 1: some of these uh DTC companies that were probably growing
Speaker 1: really fast and have huge demand face the situation which
Speaker 1: they could have grown really fast and one but their
Speaker 1: top line just didn't grow by that much because they
Speaker 1: just couldn't move product. I think you'll see that they
Speaker 1: still grew, I mean sort of like the market has
Speaker 1: grown and that's what's happened. But but you won't be
Speaker 1: able to see that. Hey, they might have been able
Speaker 1: to grow even faster if they could have got more
Speaker 1: product to market. And some of the ones that are
Speaker 1: really good businesses with good margins are shifting to air
Speaker 1: or that really care about the customer experience and demand
Speaker 1: that growth and know they need to keep growing and
Speaker 1: need to get to the next level of their business.
Speaker 1: So they're doing there. They're shifting some capacity over the
Speaker 1: air freight and getting creative. You know. One of the
Speaker 1: things that you can do, you can pay more to
Speaker 1: guarantee your space on the ship, and it costs a
Speaker 1: couple thousand blucks extra, but guarantee it. And so you're
Speaker 1: seeing a lot of people like pre pandemic flexport Abo
Speaker 1: eleven of the containers that we shipped, we're on these
Speaker 1: premium products and now it's uh I think it passed.
Speaker 1: It was eight percent a couple of weeks ago. It's
Speaker 1: got to be above by now. We've been getting more
Speaker 1: and more demand for that. Yeah, this was an option
Speaker 1: that was offered to me, but Bloomberg's budget does not
Speaker 1: extend that far to premium shipping rates. You mentioned air
Speaker 1: cargo just then. How nimble is that industry, because I imagine,
Speaker 1: you know, maybe repurposing some old passenger planes is probably
Speaker 1: a lot easier than trying to source new ships. Of
Speaker 1: the world's air cargo lies in the belly of passenger planes,
Speaker 1: by the way, which is a horrifying thought for you
Speaker 1: as you leave Hong Kong to imagine what's down there.
Speaker 1: Don't think about it next time you're flying Cafe. Those
Speaker 1: planes are all grounded, which is uh to cut off
Speaker 1: fifty percent of capacity on the airside from the start
Speaker 1: of the pandemic and hasn't come basically hasn't come back online.
Speaker 1: So that's the first thing we exper this first hand.
Speaker 1: So last year, at the start of the pandemic, we
Speaker 1: recognized pretty early on that their hospitals didn't have enough
Speaker 1: PPE to get enough mass for their front line healthcare workers.
Speaker 1: And that was true all over the world. UM, and
Speaker 1: we I just sort of our flexpoort team just stepped
Speaker 1: up and we actually chartered seventy seven passenger planes and
Speaker 1: filled the cargo holds but also the seats and the
Speaker 1: overhead compartments. We just stuffed mass everywhere. UM ended up
Speaker 1: shipping about five million units of pp FO units of
Speaker 1: PPE two to five continents healthcare workers, so we were
Speaker 1: able to do it, but the break even price um
Speaker 1: was pretty high. So passenger planes only make money, I
Speaker 1: want to say, above ten bucks a quilo, and air
Speaker 1: freight prices are normally about that's asia to us. Air
Speaker 1: freight prices are normally like four bucks a quilo U.
Speaker 1: Right now they've gone back up above ten. So we
Speaker 1: were in the range where you might see some passenger
Speaker 1: planes come back on and be used. They don't need
Speaker 1: to be fully retrofitted. Like that's a longer term thing,
Speaker 1: and I don't think the airline, the passenger airlines are
Speaker 1: have reached that state very much yet. Um old seven
Speaker 1: forty sevens are mostly gonna end up keep flying now
Speaker 1: that they've retired the seven forty seven. You'll see those
Speaker 1: live on as cargo planes for a long time and
Speaker 1: they will get retrofitted. But you can actually use them
Speaker 1: as a passenger plane and just ship cargo in the
Speaker 1: luggage holds and in the overhead compartments. If you, if
Speaker 1: you are so desperate as we were last year, what
Speaker 1: is the state of the trucking market right now, and
Speaker 1: how much of a bottleneck or how much is uh
Speaker 1: for your clients. How much are the sort of after
Speaker 1: get after the uh the container has taken off the
Speaker 1: port and goes on to a truck. How jammed up
Speaker 1: is that? Yeah? And there says there's a few different
Speaker 1: chucking markets that are yeah, loosely related with someone independent.
Speaker 1: And so the one that we play in is called dredge.
Speaker 1: That's ocean port trucking where you're hauling a container out
Speaker 1: of a port. UH. And then we call it cartage.
Speaker 1: I don't know what that term came from Old English.
Speaker 1: I'm sure cartagees airport shark when you're picking up a
Speaker 1: shipment at an airport. UM. And that's where Flexiboard operates,
Speaker 1: and I have the most inside of expertise there. Rather
Speaker 1: than full truck load domestic trucking like point to point
Speaker 1: within the country or or the other one is called
Speaker 1: less than truck load shipping a palette point to point
Speaker 1: on the ocean trucking, you have seen definitely shortages of
Speaker 1: drivers and chassis. So that's the equipment shortage I mentioned
Speaker 1: a little earlier. Flexbord has a big advantage. We build
Speaker 1: technology for these truckers. So we have a suite that
Speaker 1: we've had about a hundred and forty trucking companies that
Speaker 1: run our software and mope with a mobile app and
Speaker 1: a hardware device that plugs into the engine. And so
Speaker 1: about thirty five percent of all the dreades trucks in
Speaker 1: America have flexiboard software on them. And so we're able
Speaker 1: to get access to trucks and find the closest truck
Speaker 1: to the port and assign them a load, assigned that
Speaker 1: driver aload, and we're now doing it of our shipments,
Speaker 1: no human intervention. We just assigned the load and the
Speaker 1: driver goes and picks it up. UM. So it's running
Speaker 1: fairly smoothly for us. But we've seen the trucking companies
Speaker 1: that come on board use flexport are struggling to get
Speaker 1: enough drivers. And and that's a long term trend. You've
Speaker 1: got a driver shortage. Turns out young people don't really
Speaker 1: want to drive trucks. UM. So the average age of
Speaker 1: truck drivers in this country keeps getting older and older
Speaker 1: every single year. So here's the big question, what's your
Speaker 1: instinct on how long this will actually go on for
Speaker 1: and what's going to eventually hopefully solve the problem. Well,
Speaker 1: I think this problem is going to get solved with
Speaker 1: vaccines and a return to normalcy is our best hope
Speaker 1: is that people start spending money in bars and restaurants
Speaker 1: and hotels and travel plane tickets and don't have as
Speaker 1: much money to buy stuff online and buy goods, and
Speaker 1: that will sort of be that. That's what a literal
Speaker 1: return to normalcy is. We used to economy used to
Speaker 1: look more like that. On what timeline does that happen?
Speaker 1: It's your because it is much better than mine. I
Speaker 1: don't know. But are you seeing any easing yet? No,
Speaker 1: not really. We're still still seeing similar levels of ordering
Speaker 1: and and like to your point earlier, like if I
Speaker 1: can't get my stuff, maybe I should order twice as
Speaker 1: much stuff and um, And you're seeing that kind of
Speaker 1: behavior more than more than a return to normalcy. At
Speaker 1: some point, are people going to have massive inventories and
Speaker 1: then maybe they'll stop shipping things so much? That's possible, Yeah,
Speaker 1: And I think that's that's the downside of all of this,
Speaker 1: is like we're all trying to predict the future, and
Speaker 1: like we've just proven we're pretty bad at that, and
Speaker 1: so right now everyone's predicting the future is going to
Speaker 1: look more like what we see today. And you just
Speaker 1: keep on ordering, ordering, ordering, and then at some point
Speaker 1: your customers have shifted and they stop buying your cool
Speaker 1: new products and they started spending money in the bar
Speaker 1: like they used to, and you're stuck with all this inventory.
Speaker 1: So yeah, that can that's the bull whip effect where
Speaker 1: it just oscillates back and forth. Flex Port is a
Speaker 1: technology company, and I feel like, you know, in in
Speaker 1: normal times, everybody wants to I assume wants to optimize
Speaker 1: their inventory and having you know, extra days of inventory
Speaker 1: that they're not selling is a liability. And you want
Speaker 1: to just into the dream scenario, get the ship right,
Speaker 1: you know, a minute before you're gonna sell it. Everything
Speaker 1: is just in time? And A is that a fair
Speaker 1: characterization of how a lot of your clients operate? And
Speaker 1: B is there a sort of a risk to this
Speaker 1: sort of like just in time thinking? Will there be
Speaker 1: a sort of rethink post pandemic, post crisis about the
Speaker 1: costs of perfect optimization? And how are you thinking about
Speaker 1: when things normalize whatever that means change? Will there be
Speaker 1: any changes to uh behavior? Yeah, and it's got to
Speaker 1: be cased by industry by industry, like some industry insteadives
Speaker 1: absurd to have no inventory of ppe and stock like
Speaker 1: that is almost criminally negligent. It's like, how we do
Speaker 1: you know we can't have life saving equipment with no inventory.
Speaker 1: It will be a decision for each company based on
Speaker 1: the margins and how much it costs them to sit
Speaker 1: on product, and is this product going bad fashion fast fashion?
Speaker 1: Like is it going out of style in two weeks,
Speaker 1: maybe you get maybe you revisit, maybe it could last
Speaker 1: a month or something. I do think you're definitely gonna
Speaker 1: see a reconciling there. And this is, by the way,
Speaker 1: a longer term trend. It's like in the old world,
Speaker 1: but I grew up in my mom bottle are closing
Speaker 1: the series catalog and you just have one distribution center
Speaker 1: in the middle of the country, and you could provide
Speaker 1: a three week or seven days shipping time from one site.
Speaker 1: But if you want to get to an e commerce
Speaker 1: world where it's two hour delivery, you've got to have
Speaker 1: inventory cash sort of the Internet term would be edge cashing,
Speaker 1: your edge cashing your inventory, keeping it close to the customer,
Speaker 1: and you've gotta have inventory and every single zip code
Speaker 1: almost and that's a lot more inventory. So now you
Speaker 1: need to really be smart, like how much inventory do
Speaker 1: I want? What's the value of that customer proposition of
Speaker 1: saying two hour versus two days, versus two week versus
Speaker 1: two months. And that's the trade off that every brand
Speaker 1: has to make, is between the customer experience they want
Speaker 1: to create and the lost sales if they don't have
Speaker 1: goods in stock, versus the cost of working capital. And
Speaker 1: these are old models, like in business school, you'll see
Speaker 1: this model in an Xcel operations class. You'll sell most
Speaker 1: those busines school crowds like saved that Excel filand still
Speaker 1: have it from their professor. But no one's ever been
Speaker 1: really good at feeding real time data into that model.
Speaker 1: And that's that's what technology enables today, is like we
Speaker 1: can show you what our actual lead times when you
Speaker 1: place the order with your factory, what's the actual transit time?
Speaker 1: Not like your fudge your fudge factor thirty day number
Speaker 1: that you put in your Excel model, but like, what
Speaker 1: are we seeing trailing ninety days? What's the distribution curve? Data?
Speaker 1: Data will help with these problems, um but at the
Speaker 1: end of day, it's a trade off they have to
Speaker 1: make between growth and the cost of capital. So what
Speaker 1: should Tracy do to like get her. I don't even
Speaker 1: know what she's shipping, but like, what is she doing wrong?
Speaker 1: I do think it's I'm protecting yourself. You gotta you
Speaker 1: gotta make that company that's trying to shoot your cargo
Speaker 1: believe you're gonna be like this important long term customer
Speaker 1: that's gonna be there for them in the future. Maybe
Speaker 1: maybe call the guys, call the team at Bloomberg that
Speaker 1: ships all your umbrellas and schwag and everything. Maybe maybe
Speaker 1: they got some hookups for you. And uh, all right,
Speaker 1: I'll give it a go with with Lars and cop again.
Speaker 1: But yeah, I mean, I think they have to prioritize
Speaker 1: and if and if I probably do the same thing.
Speaker 1: No offense to you, but I gotta, I gotta who's
Speaker 1: gonna be there for me next year in the year after.
Speaker 1: If I'm if, I'm gonna choose which customer gets on
Speaker 1: the boat. And it was like a sort of a
Speaker 1: two way exchange that goes on in these in these
Speaker 1: negotiations of who gets on the boat and who doesn't.
Speaker 1: I can't believe my mostly empty container being shipped for
Speaker 1: the purposes of stunt journalism is not a priority for
Speaker 1: these companies. Amazing. All right, well, Ryan, it was lovely
Speaker 1: talking to you. Thank you so much. Great guys, thank
Speaker 1: you all. It's great, Joe. I love that conversation. So
Speaker 1: nice to be talking. You know. I like talking about markets,
Speaker 1: and I like talking about economic and financial theory, but
Speaker 1: sometimes it's nice to talk about actual things and the
Speaker 1: way they move around the world. And I think I
Speaker 1: mentioned this before, but it kind of gets to one
Speaker 1: of my pet themes for the year, which is this
Speaker 1: idea that economics actually does a terrible job of incorporating
Speaker 1: and thinking about logistics, and this is the year that's
Speaker 1: kind of proven that. But the other thing I liked
Speaker 1: in that conversation was Ryan's point that this whole problem
Speaker 1: started from expectations and an incorrect view of what the
Speaker 1: future actually turned out to be, and now we're trying
Speaker 1: to solve it with expectations yet again, ramping up inventories
Speaker 1: and orders, and the big question is whether or not
Speaker 1: it's actually going to materialize the way we think it is.
Speaker 1: You took the words right out of my mouth, and
Speaker 1: I think that's exactly right. Like everything is expectations and everything,
Speaker 1: like so many conversations like expectations about the future end
Speaker 1: up affecting the right now, and uh in all different
Speaker 1: kinds of ways. So whether it's expectations like, oh, shipping
Speaker 1: costs are gonna come down, so we're gonna like hold
Speaker 1: off and then we have to pay more, or even
Speaker 1: uh Ryan's points like, well, maybe you'll get greater investment
Speaker 1: in shipping capacity, but only if there is the expectation
Speaker 1: that global shipping remains very high. And of course, as
Speaker 1: we talked about in um Levinson and this sort of
Speaker 1: like the decline of globalization that leading to consolidation of capacity,
Speaker 1: Like everything about expectations ends up having an effect right now.
Speaker 1: And I just think that's such a fascinating thing that
Speaker 1: turns up like over and over again in our conversation.
Speaker 1: And I gotta say the bonus of all these episodes
Speaker 1: about logistics and lumber and actual things is that we're
Speaker 1: really learning great new terms like stumpage, fees, bill of
Speaker 1: lading and dray edge, which I always I said it before,
Speaker 1: but I always thought it was ladding and dry edge.
Speaker 1: So the more you know and the general what was it?
Speaker 1: I can't remember general something liability, but actually I need
Speaker 1: to look it up for this container. Now I'm worried
Speaker 1: what was the one ship to show was that we're
Speaker 1: going to have to start uh an All Thoughts glossary.
Speaker 1: I think, no, oh yeah, that's a good idea. But
Speaker 1: also I thought that was like super interesting again because
Speaker 1: it's like, you know, how much of these businesses it's
Speaker 1: not just you know we think of like, oh, everything
Speaker 1: is just like a pure auction, right, It's like there's
Speaker 1: capacity and who pays the most, But of course from
Speaker 1: the perspective of the shipper, like they want to reward
Speaker 1: their good customers, and who's going to be the customer
Speaker 1: a year from now? And who is the best ship
Speaker 1: to show, like who actually shows up? Like all of
Speaker 1: these things that are beyond just like pure pure price.
Speaker 1: I guess I would say end up determining somebody. Fascinating thing. Again,
Speaker 1: it kind of gets back to expectations, right, who do
Speaker 1: you expect will be a better customer over time? Totally? All? Right?
Speaker 1: Should we leave it there? Let's leave it there. This
Speaker 1: has been in another episode of the All Thoughts podcast.
Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at
Speaker 1: Tracy Alloway and I'm Joe Wisn'tal. You can follow me
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