It’s time to embrace chaos in the supply chain
When I first launched FreightWaves, I would get asked if I could build a media and data business solely dedicated to supply chain and logistics. To many this seemed like a boring and niche topic that few would ever care about. I would point out that logistics is 12% of global GDP, and 40% of the global economy is tied to logistics-dependent industries, with billions of jobs relying upon a functioning supply chain.
Supply chains are under constant stress. A winter storm, hurricane, labor strike in a critical industry, or a sudden change in government policy, can play havoc with how supply chains function. It has always been this way.
After college, I started my career in the air freight industry, working for my father’s business and its airport-to-airport LTL division. I learned that the air forwarding industry often plays the role of a supply chain ambulance, providing last-minute and last-resort transportation services when everything else breaks down.
This inspired me to launch my first venture, the on-demand truckload-expedited truckload division of US Xpress, Xpress Direct. In two years, we grew the business from zero to $144 million in revenues, with margins exceeding 40%.. Our mantra was we wanted to be the “first last call” for a shipper or logistics company, when all options were exhausted. We would offer as many truckloads within six hours of 60 major U.S. markets, but we wouldn’t guarantee a price. The Xpress Direct division delivered more than 80% of US Xpress’ margins in 2004, with only 13% of the revenues.
This massively profitable division was able to charge a premium because we existed only to bail out customers when all other options failed. We had the right of first refusal on any truck in the US Xpress system and could “bump” a load for higher paying or more critical load. At times, we even chartered entire intermodal trains off the West Coast to handle our surges.
We were the cleanup guys and gals, helping provide emergency capacity release when the market had few other choices. I learned quickly that there is always a capacity crisis somewhere.
One of the biggest challenges in running on-demand freight is forecasting demand and incidents. Having some sense for where a disruption might pop up became critically important for us at Xpress Direct. We started to build models around seasonality calendars and monitored internet sources (pre Twitter) for any news story, which might eventually disrupt a supply chain.
We became pretty good at anticipating weather, customer surges, seasonality, and economic cycles, but we had little visibility into much else.
There was no Bloomberg of freight and while the topic of supply chain or freight would occasionally get a small mention in mainstream media outlets, it was often days or weeks after a disruption happened.
This experience eventually led me to start FreightWaves. While the business plan has evolved over rtime, the goal was always to provide transparency to a very opaque market. It is now a nerve center of information for the logistics and supply chain industry.
By bringing together journalists, market experts, analysts, and data, we aimed to help monitor supply-chain market events that would cause disruptions and forecast logistics, demand, capacity, rate, and volume. All of this works because the global physical supply chain is so fragmented, with hundreds millions of independent companies looking after their self-interest along with millions of logistics providers trying to respond to fluctuating demand and service requests.
Add to the fact that global supply chains are interconnected that may expose inefficiencies or significant vulnerabilities. One disruption in a remote part of the world or an industry that is a tiny part of the economy could spark a massive chain of events impacting many interdependent parts.
COVID and the rebooting of the global economy has…