Announcer: 0:10

Welcome to Tire Tracks, a Banyan Technology podcast driving the logistics industry. And now your host, Patrick Escolas.

Patrick Escolas: 0:19

Hey, everybody, this is Patrick Escolas. And we're here at the first ever Banyan Users Conference Connect 2022 at downtown Cleveland at the Hilton. And this is the first episode of Tire Tracks. We're making history with Banyan's first podcast, and I've been volun-told that I am the host. Couldn't be more excited. But I'll try to be No, but really, I'm very happy to have Anne Reinke here as my first guest. And she had some awesome things to say just for our attendees here a few minutes ago. And and first off again, thank you for being here.

Anne Reinke: 0:53

Thank you, Patrick. I appreciate the invitation. This is Summertime Santa Claus, in case you're wondering. And he's giving the gift of knowledge.

Patrick Escolas: 1:01

That's how I'm getting it for sure whether or not I can translate it that's going to be left up for debate. Yeah. So and you had some great things to say, just for our attendees. For anybody watching this after the fact or who couldn't make it. Can you give me kind of a quick recap or summary of what you had to say?

Anne Reinke: 1:17

Sure. So there's a couple phenomenons we've seen throughout the pandemic, obviously, people are aware of the brokerage industry now they didn't necessarily used to be the supply chain became a brutal reality to a lot of people because they couldn't get the kind of toilet paper they were used to, or they couldn't bring their kids the gifts that they said that they wanted. So we are using that as an opportunity to try to make sure that people understand that we're bigger than we have been, our industry has expanded, our industry has grown and we become more sophisticated. So we always work excellently in times of market dislocation. And of course, we've had market dislocation for two years. But what our shippers have seen is that they can turn to us and rely on us just as an ordinary course of events. And they want to because we have access to specialized equipment, for example, we have relationships with drivers, so that we can kind of magnify capacity, which was, as you know, in short supply over the last two years. And so we really are deemed a solution for those who may not have known about us as a solution before. And this

Patrick Escolas: 2:21

TIA you're talking about here and I apologize for not putting it in the foreground. But TIA is this

Anne Reinke: 2:27

Yeah. So TIA Transportation Intermediaries your kind of spoke to where you are now kind of a pivot? Why why did TIA come about in the first place? What was the reason for its, you know, for its beginning? Association, we represent the brokerage industry, those who are 3PL professionals. And the origination of it was we wanted to have an organization that was best in class. So brokers, you know, have had a storied history, they weren't always part of the transaction. They used to be a an arm of the carrier, and they became a third party over the last 20 years. And so there were some commonalities of interest of people who wanted to have resources into how do they get to be better? Or if they let's say, they're starting a brokerage, they have a phone, and a desk. That's all you need, you kind of need to know more. So how do you get the education for that? How do you meet the people that you need to meet in order to expand to scale your business? And so that the association started with those sort of small, necessary origins, and now have really become a network of individuals who want to be the best.

Patrick Escolas: 3:41

And that's, that's awesome. Because, you know, to me, you say that, that started when brokerage with new and you 20 years ago, but that seems so standard. And like it's always been that way for someone like myself, it's just about a year into the logistics space. How do you gain the insight on the industry as a whole? Is that something where you're just talking to each person? Or where's that information coming from?

Anne Reinke: 4:04

Sure. So a couple different ways. We have a market report that we issue every quarter, that's based on our member data about what is affecting them. So we broken it out into intermodal, intermodal, LTL and truckload. And so we'll see what their volumes were, what their revenue was, and their margins and how it is affected quarter over quarter. And so we have that every quarter. But what I'm trying to do is get more regularized data. So we have that same pool of members, they provide data, but I also want to know, alright, what are those members who aren't contributing? What are they experiencing? And so I talked to our membership team about how best to get that knowledge and harness it because we are thought leaders in this space and how can I talk about it, let's say in a communication so if we're talking about the trends in the industry, I want to make sure that I'm reflecting the latest from our members, so we're working on that right. You

Patrick Escolas: 5:03

Can't be talking about a trend from five years ago. Would you say you're on the forefront of the the industry thought process? Right? So a few of the things that you talked about that I thought were big issues that kind of got it resonated across. So is this the AB5? Can you pretend I don't know what that is? Because at a part of me, I got it from some of the context. Yeah. But that's not something I've been keeping a finger on the pulse of what what is, what is that whole situation? You're?

Anne Reinke: 5:30

So this is so funny how it originated? So the state of California, as you know, they're, they're aggressive about just about every everything's California, California, right. So this originated with the plight of the Uber driver, and the Uber driver is an independent contractor. And they thought they were getting taken advantage they were taking advantage of now did Uber drivers think that I don't know if it even matters. So the state of California determined that these independent contractors were essentially employees for all intensive purposes, and yet they were treating as an independent contractor, and so weren't prevailing on the benefits, et cetera, the sort of infrastructure that you would get as part of a company. So the law was passed. Unfortunately, for for us, there were unintended consequences, right? So there were industries that you wouldn't have even thought about who wept wording was kind of vague. It was, it didn't just say, hey, Uber, you guys, these are your employees. It was so vague it was it was almost interpretated that that a whole bunch of industries, including owner operators, and motor carriers could be swept up into it. And so that is what we found. Now, funnily enough, Uber got themselves exempted, of course, as did a number of industries. But I don't know sounds like policy. Right? Right, exactly. But the California Trucking Association brought suit against the state of California, it went all the way up to the Supreme Court, the Supreme Court decided not to act on it. Okay, so we're back to where we think it's going to be enforced by state, California. But worse, because it's so vague, it is ripe for trial lawyers to interpret it and determine, Okay, we think that that independent contractor, that motor owner operator, should for all intents and purposes be considered an employee, and we're going to file suit.

Patrick Escolas: 7:23

So what does this mean to the logistics industry as a whole? Like that I understand is that just mean, that there's going to be people that saying, This isn't worth it for me to be an owner operator anymore? Or there's going to be less of a pool to get resources from to move all these shipments? What does what does that mean?

Anne Reinke: 7:38

I think you're exactly right. I think it's gonna have a direct impact on capacity, which is already dear. Right? Yeah. And so there are those in California who say I don't want to, I don't want to get swept up into it, right, or there's a hassle, much of a hassle. They don't want to have the situation where they're gonna have to comply with regulations, or they're going to have to somehow determine whether or not they're gonna get sued. They're not going to want to do it. So they're going to move themselves out of the state or out of the business. I think that's the first. The second is what's it going to do to freight agents? So brokers, we have freight agents, who by and large are independent contractors. So how is that going to affect our relationship? Are they going to be considered employees? So under the law, there's these business to business exemptions, there's about 12 or 13 of them, but again,

Patrick Escolas: 8:23

Because if you got enough money, and lawyers, middle, the middle guy, and the little guy didn't stop,

Anne Reinke: 8:29

Right, and so we're just concerned to that it starts in California, and it spreads east. So they're already states that are looking at it. And so that's just going to affect the supply chain, which already is, is has been disrupted over the last few years.

Patrick Escolas: 8:42

I mean, disrupted is a good word for now. Kind of my last comment on this, because it came up to me. So there's unintended, maybe negative consequences of it. They didn't. Are there any positives that could come out of this for the industry? For like, sheer curiosity? Is there some glimmer glimmer? Or is there a better vetting process now? Or Are the places or the carriers that are adhering to this? Just there to the drivers? Are they getting added benefits? What? What's On the plus side, if any?

Anne Reinke: 9:09

Gosh, I'm so used to being negative that it's hard to see the positive. But I guess...

Patrick Escolas: 9:13

I like to be devil's advocate, because I'm thinking both sides, because I don't know enough, you know.

Anne Reinke: 9:18

So I guess there probably are situations where there are owner operators who only have one shipper that they work for, or one larger carrier that they work for. So in that situation, sure, there could be a benefit to that person. But most of the owner operators have any number of customers or clients. So I don't know if there's that much of a benefit. Gotcha. the only the only other thing I think of is that there are those who are interested in opening up a brokerage arm as a way of dealing with this and so potentially, that means there are more brokerages but we have to make sure that those people are doing it the right way, and are ethical and all of that and know what the regulations are and I'll just give a pitch for TIA for a second since I'm

Patrick Escolas: 10:01

Sure we already got Banyan Yeah. So TIA can get some time Yeah.

Anne Reinke: 10:06

So we are developing an independent contractor course precisely because this because we think there will be more entrants in the brokerage space as they try to navigate and try to figure out alright, how can we get through this? Or how do we actually make money out of this? What do you do? And so we want to make sure that they do it the right way.

Patrick Escolas: 10:22

No, and, and you were talking about some of the unethical things that can happen there and kind of gets me somewhere else we were talking about that you guys are playing as advocates for and that we talked about? So tell me about this, again, 80,000 complaints and nothing getting done on kind of the the double booking and the practice these kind of illegitimate practices. Yeah. Recap that, because I thought that was really, you know, that caught me immediately, because you hear about some of the things see stuff on social media about man, this is this is terrible. But that that number, and the lack of anything kind of blew me away. And I know, that's something you guys are fighting.

Anne Reinke: 10:59

It just seems so counterintuitive, that there is a law that establishes what a broker is, there is a forum for people to complain when they think that law is being violated, right, the consumer complaint database, and there is a penalty system, which you can use to find these bad actors. So it's sort of baffling as to why none of that actually happened.

Patrick Escolas: 11:27

All the way from a to x, but we can't get to gotten Z ROI. Last few letters, that something, something's not right.

Anne Reinke: 11:35

And it's hard to know, it, you know, look, the the Federal Motor Carrier Safety Administration, they're, of course, they're strapped for resources. It's entirely possible that they can't chase down and you mentioned it 80,000 complaints, but this is over a 10 year history. So you'd like to think that there is an enforcement arm, we're not entirely sure if they feel reluctant to enforce the law if they don't have the resources to enforce the law. But look, we the law exists. So you sort of think, well, the law exists. That's the first step, right. Surely, in here, we're self interested in this, of course, because when you have illegal brokering that makes brokers look bad, even if we're not implicated in the slightest, right, right. And it also leads to unsafe practices. If you lose control of your load, let's say you broker to a motor carrier, the motor carrier brokers that to somebody else, then we have no idea where that load went, right. There's

Patrick Escolas: 12:30

No visibility, no idea on the liability of it either. So that's where that comes into play. Yeah, no, Well, you said peak season, it's been not super picky. Right. that's, I appreciate that. Because like I said, that immediately hit. So going back where we've been talking kind of a few points on more of the legal policy side here. We're Right. That's, and that's why people are nervous. Yes, they getting into kind of fourth quarter for peak season for a lot of it. What are what is all of this? And I know you kind of have the finger on the pulse of what is what does that mean? How what's a good way for the people in logistics space to have a good fourth quarter share knowing all this? are. And they should be in the sense that if they're totally retail facing, this is something that should concern them, because as you know, except for the auto space inventories are and we heard it today are bloated, that's a great way of framing it. So we've got a bloated inventory for most of our retailers. So But it's it's somewhere bloated else than in actually in front of us.

Anne Reinke: 13:26

Yes, that's fair, that's fair.I think there's still way the market is still strong demand is still strong, it's not as strong as it was moving back to reality years has been unreal. So so we, you know, there's still we're still capable of doing well, I would say this, our our economists have said that and what's wonderful about our industry is we are always nimble and pivot and whatever we can do to make sure that we are sort of serving our customers and serving ourselves. So they suggest the manufacturing is still a huge strong growth output for our country. So if they can start diversifying their reach into not just retail shippers, but also manufacturing shippers that can help soften the blow. And and, and you know, we're talking about fourth quarter, but I think that's going into 2023, which you know, you and I can talk about, but I think that that's something to think about is alright, what do we see the trends are coming, there's still a lot of manufacturing out but there's still the trucks that need to be built. There's still any number of heavy equipment and machinery that needs to be built. So how can I get into those lanes? So

Patrick Escolas: 14:30

It's really about diversifying not only the lanes, but maybe that source of revenue, that source of deals. Okay, that makes sense. I think that's something that is now how would someone do that? Would they just go by networking, they would they pick up? Like, I mean, do they go walk down the shop and say, Hey, you're a manufacturer, I got a truck. Let's go, you know,

Anne Reinke: 14:47

Right. Well, so it's interesting. You say that because I think some of our folks, their sales cycle are much longer than you anticipate, and they continue to work through the same shippers to get them caught. have trouble with the idea of using the brokerage? And how if they've never used one before, if that's not a client they've had in the past, how they can use this and what we can produce. So this is this is sort of related. One of our members has been for years in the pharmaceutical space. And over the last two years got into vaccine distribution makes sense, right? ideologically? Yeah. And so how did he do it? Well, because he had access to the specialized equipment you need, for example, the vaccines, you know how to stay real cold, just a reefer knew how to get that equipment, and had a line on it. And so that's what I think, you know, what we can do is, here's how we can showcase our advantages. So this is how, why you should use us. And in that particular instance, he had the relationships, he had the equipment, he had the specialized knowledge, and they said, Oh, my God, why would we do this any other way? Why would we try to chase down capacity ourselves, when we can have a do? What have our you know, broker? Do it for us? So it...

Patrick Escolas: 16:01

Sounds like you know, outside of the kind of logistics, not logistics, knowledge, it's kind of all knowledge, because at some point, everything's got to move unless you're completely in the software space. Right? Yeah. Okay. That's something you know, we throw about we talked logistics, logistics, but really, we're talking about everything. We're talking about medicine, manufacturing, commercial and everything in between. So we've talked about and we've just discussed that we are talking about everything. But so we talked about like fourth quarter what they can do to kind of adapt for that. How with how disruptive the supply chain has been in 2022. And the year before it past 1218 months. What is 2023 look like? Do we see does it get crazier? You know, what, do we get a new normal? What what are you and TIA what does that look like? Yeah,

Anne Reinke: 16:46

I tend to think I You saw what Brent Hutto said, we saw what Matthew said from Yellow, I tend to think it becomes a normalized market, which to those who started a brokerage in 2021 is going to feel like a depression. But I don't, I don't think it will be I think it will be more normalized market. That being said, I do think the retail space will continue to be challenging why? Inflation, right? The cost of goods, right? We already know the real estate prices, because of interest rates have slowed. And so what impact will that have on home building, for example, right, like, you know, wood and stone and blah, blah, blah, blah, blah. So I think that's something to be concerned about, and will have an impact. But I do think there is still a lot of demand out there, particularly manufacturing.

Patrick Escolas: 17:34

I mean, that's that's gotta be hopeful to hear for anyone listening to this anyone in this space? Because like you said, could have gotten in, like, this is great. And looking at projections, like what are we going to do? So and we've talked about, like, next year, so what is five years look like for the space? I mean, with a lot of they're talking about automation within some of the, you know, self driving trucks, we're talking about automation on the data side, what is five years look like from now just as a, you know, what is your thought on that?

Anne Reinke: 17:59

Yeah, so it's interesting, too. So five years, we already have 27,000. Brokers, I tend to think that they're, we're gonna get more, but I also see the impact of private equity, hedge funds, who are interested in consolidation, they're interested in purchasing because they see a growing line of business that there is never going to not be a need for. So why would they try? And they already? Have you see it all the time? Yes. Right. And so some of our members, you know, God bless them, they are trying to scale up and ultimately try to be an appealing purchase for those private equity. So I see, while the continuous expansion, there is that level of Alright, there is going to be some consolidation there too.

Patrick Escolas: 18:43

And that that makes sense. It's not necessarily a bad thing. I mean, it was kind of the Wild West for a minute there. Yeah. Right. No, and but yeah, I, I liked thinking about it that way. Because that's kind of where the natural shift, it's got to if it went one way, you kind of got to come back. And I think Brent Hutto said it was like, you know, we're not in equilibrium is not what this industry. That's right. And I thought that was that was huge. So we talked about President, five years from now, if you have you got the venue, and I'm sure other people will put a microphone and a camera in front of you. But what's one message you have for everybody in the industry now as kind of a parting parting shot or a takeaway from anything and everything here?

Anne Reinke: 19:25

Well, I think that you want to strive towards continuous improvement, not just for yourself, but for your business. And the only way to do that is to stay current with the people who are in your space, and the education that is out there. And how do you do that? Well, we have the resources. So we have meetings and literally for the 3PL industry. Those are where you get to meet the best of the best of the people who have done, maybe what you've already done and learn from it. And then you have education that we try to keep current like I mentioned this independent contractor point we're trying to look ahead. We're not just reacting to what is happening today. We want to look ahead and it's incumbent on you I think if you don't stay current, you don't stay relevant. And then you lose business and there's plenty of people out there who are happy to take the business from you what

Patrick Escolas: 20:09

And then just there was the one quote you gave when you talked about the TIA and education is like, I learned that I don't know enough right? That's right and I in that and I think that that's kind of where the starting point that you kind of need to get to right figure out what you don't know and figure out what you need to know real. Exactly right. Implement. Yeah, implement exactly. Well, and it has been a pleasure talking to you. You have been our first victim on the the Banyan podcast.

Anne Reinke: 20:36

Patrick, you did a nice job, Summertime Santa.

Patrick Escolas: 20:39

Gotta has got to do pretty well. It's a gift of knowledge and gift of knowledge for everybody again, and thank you so much. You made this easy and thank you. We'll have a lot more episodes coming soon. Thank you.

Unknown: 20:54

Thank you for listening to Tire Tracks. Watch for new episodes dropping monthly and subscribe on Apple Podcasts, Spotify and other podcast apps. For more information about Banyan Technology, visit banyantechnology.com