Last week, Convoy announced it was shutting it's doors. We are joined by 3 guests: Ryan Soskin, who was employee #15 at Convoy, Zach Knobel, who was VP Enterprise Sales at Convoy, and John Marrinson, EVP at Wintrust Bank.
Ryan and Zach take us through Convoy's journey, helping give perspective to how the company innovated and approached the industry. It's clear that Convoy found ways to create more efficiencies than many of it's competitors, but in the end, the organization ran out of cash. The Convoy story is a fascinating one, and we are lucky to have great guests to walk us through it.
We spend time with John Marrinson talking about what is coming for brokers and carriers. The impact of interest rates rising, abundant capacity, and squeezed margins is making life very challenging for brokers, and more trouble is coming. John paints the picture well to understand how all these factors come together.
Tune in for this special episode.
Last week, Convoy announced it was shutting it's doors. We are joined by 3 guests: Ryan Soskin, who was employee #15 at Convoy, Zach Knobel, who was VP Enterprise Sales at Convoy, and John Marrinson, EVP at Wintrust Bank.
Ryan and Zach take us through Convoy's journey, helping give perspective to how the company innovated and approached the industry. It's clear that Convoy found ways to create more efficiencies than many of it's competitors, but in the end, the organization ran out of cash. The Convoy story is a fascinating one, and we are lucky to have great guests to walk us through it.
We spend time with John Marrinson talking about what is coming for brokers and carriers. The impact of interest rates rising, abundant capacity, and squeezed margins is making life very challenging for brokers, and more trouble is coming. John paints the picture well to understand how all these factors come together.
Tune in for this special episode.
Alright, welcome back to another episode of the Freight Pod. We have a special edition, special episode today. I suppose we'll call it the convoy episode. So to our regular listeners, you lucky ducks, you're getting two episodes this week. I have a feeling we will have some new listeners, some first time listeners. Hopefully you enjoy what you get. Go back and check out old episodes and become part of the Freight Pod Legion, as we'll call you. Like subscribe, do all the things. Like subscribe, do all the things. I'm your host, andrew Silver, with my co-host, paul Estrada. We have three guests today. We're going to do some quick introductions. This is our first time doing multiple guests, so we'll do our best here to keep it contained. Let's start with some introductions, though. Mr Soskin, why don't you go ahead and take it from here?
Speaker 4:Sure, yeah, first off, thanks for having me on and giving us a chance to tell a little bit of the convoy story. I know a lot of folks out there have a lot of opinions and I'm glad that we had the opportunity to kind of share our experiences from the inside, so really appreciate the opportunity here. But yeah, my background is 13 years in the freight industry. I work pretty closely with Andrew and Zach in the early days at Coyote Logistics back, you know, starting there in 2010 when it was 100 some odd people and scaled with the company for five and a half years through the acquisition by UPS in the summer of 2015. And spent most of my time there on the carrier side. When I joined we were just launching the refrigerated division and so I was helping get that off the ground as a carrier rep for the first year and a half or so and then managing teams of refrigerated carrier reps for about four years after that. Had a great experience there and a lot of great memories. Yeah, learn from some of the best in the industry at Coyote. Learn the X's and O's of freight.
Speaker 4:After five and a half years or so, felt like I'd sort of ridden that ride to a conclusion and we're sort of looking around for the next thing and honestly, sort of serendipitously read this geek wire article about Convoy's seed round. This is, you know, I think September, october of 2015. I talked about these A-list investors that put in 2.5 million. They dropped Bezos and Benioff and a bunch of other you know high profile folks and I read the article and they talked about the Uberization and automated matching and, given that I'd spent so much time on the carrier side, you know, the last five and a half years doing this in a manual kind of traditional model, it really resonated and it was super interesting. Of course, this is around the time that Uber was catching on it, so we had just seen this firsthand in another application of accepting loads through an app or jobs through an app. So I don't know what came over me, but I'd never done this before. But I reached out to Dan Lewis on LinkedIn and just said something along the lines of hey, you know, just read this article, congrats, it's super interesting what you guys are doing. Here's my background. Let me know if you know if I can be helpful in any way and, to Dan's credit, he got back to me, you know, within an hour or two and the rest is history.
Speaker 4:That kicked off, you know, five, six weeks of phone calls, video calls. They flew me out to Seattle. I met the very early team and you know I got back to Chicago and they called me the next day and gave me an offer and so moved out to Seattle. As you mentioned, I was the 15th employee, first person from a brokerage background, and I wore a lot of hats there over, you know, almost five years in the early days helped stand up the carrier side, or what we call the supply side, of the marketplace. After about a year or so doing that helped launch the enterprise sales team, not as a seller myself but as sort of the freight DNA that would go on all the meetings with the enterprise sellers, kind of be the freight backstop to answer some tough questions from often skeptical stakeholders across the table. And after a bit of doing that I was asked to build a contract pricing team, so called that deal desk spent about three years building out that team. Lots of learning is about RFPs and contract freight and just about Convoy's marketplace and the types of freight. That was a creative automation and what we were trying to build and also the types of freight that we should stay away from. That led to a lot of you know annual work. Also, frankly, a lot of those learnings were some of the genesis ideas for good shit. But yeah, fast forward.
Speaker 4:I'll also spend some time as an interim head of the food vertical, so leading the account managers that were leading their own in the relationships with the big food companies, and then, from there, I got recruited to go to store, which is a cloud supply chain company out of Atlanta. I joined after series A and got to build the freight brokerage internally. They had been doing e-commerce fulfillment both warehousing and they came up with this term, cloud supply chain but they were missing middle mile and so they brought me in to basically build the freight brokerage and gave me a lot of autonomy to do that. And so, in January of 2022, I started Good Ship with my co-founder, david Sy, who was one of the original engineers at Convoy. He went on to be head of marketplace engineering super talented guy and very fortunate to have him as my co-founder.
Speaker 4:Good Ship basically is the first all in one platform for analytics, carrier management and transportation procurement. We seamlessly plug into any shipper TMS, providing modern tooling to truly understand what's going on in the shipper network, including a recommendation engine which is like kind of an easy button that shows them lanes where they're overpaying the market by the most you know the opportunity to save money. Lanes where they're having the worst on time service and opportunity to improve that on time service, and then lanes where they have the most spot exposure. And then also giving the ability to take the corrective action directly from that platform, whether it's renegotiating the rate, initiating a carrier pip or even running a full on mini bitter.
Speaker 2:RFP Awesome. Thank you for that kind of introduction and I can vouch for Good Ship, having been on a few calls with Ryan and a few potential customers. It's a very strong product that I would recommend any shipper consider. So thank you for that intro. Let's move on to Zach.
Speaker 5:If you could give us some of your background, yeah, absolutely, and again I'll echo the same Thank you for having me. It's been a while since I've seen some of the faces on this call, so definitely excited for the conversation. So I'm Zach Noble. I started. My background was at was at Coyote as well, so I actually started in 2007. So I think that puts me in the first 25 ish or so people there. So it was awesome working next to Jeff and Mary and a bunch of others like that I would consider pioneers in the industry. So that was really cool. And I stayed on through the acquisition of UPS and then stayed on with the broader UPS org for about five years.
Speaker 5:Most of my time that at Coyote, and then convoy as well, was all in enterprise shipper facing sales. Of course, at Coyote early days it was a little bit of everything. I mean that was startup culture, but I think that's really what allowed me to learn the business. I mean it was everything from calling carriers to talking to shippers and doing operations and really learning the business from the inside out. So that was that was a really great experience. Towards then I was always enterprise shipper facing both as an IC and as a manager, kind of in the, in the background. I had started hearing about some of these startups coming about that were going to more of like a digital footprint and it really resonated with me like I thought that all of these companies have to adopt some form of digitization to get to the next level. So I liked it. I liked what they were doing at the time it was mostly just Uber and convoy, so it really resonated with me and, similar to Ryan, I actually went over to convoy and took a role as their head of account management on the shipperside, so I was managing a group of account managers that were specific to the food and beverage vertical.
Speaker 5:I did that for a relatively short period of time I've been I've been at convoy in total for two and a half years. Then I moved over to like a strategic sales role where I was really just focused. It was kind of a hybrid between a player coach and an IC, but I was really focused on just like bolstering our relationships with our largest enterprise shippers and then, shortly after that, moved over to enterprise role where I led the enterprise sales team, and I did that all the way up until until last week. So it's been a wild ride. It sounds like a lot of jobs over the course of two and a half years, but for anybody not from startup life, that's. That's kind of how it goes. So it was awesome. I'm thankful for all of it. So it was a good ride and I'm looking forward to the conversation. Thanks for having me.
Speaker 2:Of course, thank you. We're going to move now to Mr Maranson. John, go ahead.
Speaker 1:Absolutely. Thank you for the invite and so my background is a little bit different than everybody else on this call. So I have 30 years of experience in financing various sectors of the transportation industry, currently doing that with Wind Trust Bank, overseeing the Wind Trust receivables finance group, and what we really do is provide aggressive working capital facilities within the transportation industry. So that's a lot of brokerages, a lot of asset based carriers, asset like carriers, so obviously have a lot of exposure to the industry, to the trends.
Speaker 1:Prior to joining Wind Trust, I was at Wells Fargo and I would say over the last 15 years been very fortunate in working with some of the fastest growing logistics and brokerage companies in the US, so seeing a lot of changes obviously over those 30 years. I know you know there's a lot of focus on tech in the industry, especially as it relates to this conversation. So you know we've seen the growth of that technology, literally going from fax machines to internet capability, you know invoice loading from the cab of your truck with using your phone. Just a little bit different perspective that I can provide in kind of where we are in the market cycle right now and what we're seeing really from a credit perspective and how that plays into the overall conversation relative to convoy and some of the other companies that are having some difficulties right now with the current market.
Speaker 3:John quick question Are you familiar with the black fax?
Speaker 1:I am not.
Speaker 3:Okay. So we had a guest on named Kevin Nolan and he said when people would not pay their freight bills he would take a sharpie on a piece of paper, you know, put it in complete black and then just send fax after fax, after fax, until he said I'm going to use up all your toner until you pay your bills. That's the black fax.
Speaker 1:Yeah, so there you go. That's interesting technique. Episode one of the freight pack we might get back to that pretty soon.
Speaker 2:It was an effective tool, he said.
Speaker 1:I'm sure it was. Toner was expensive back in the day.
Speaker 2:There you go. Got to get creative. So thank you, john. So those are our three guests and given that I think we will have a new audience kind of joining us today, giving the interest around convoy, paul and I are going to introduce ourselves as well. Paul, you want to go first?
Speaker 3:Good morning. Paul Estrada, co-host of the Freight Pod, spent 15 years primarily on the enterprise shipper side and was one of the early on, I guess people to invest or take on convoy as a carrier. So I'll be offering some perspective to that end.
Speaker 2:I'm Andrew Silver, co-host of the Freight Pod, formerly a coyote employee, from 2006 until early 2017. I was then the CEO of Molo Solutions of Freight Brokerage, found in July 17, acquired by Arkbest in November 2021. In my experience, that I think should hopefully provide a helpful perspective here is having grown a brokerage with a different strategy but similar growth trajectory as convoy, and I've personally had a few instances where I've kind of gone head to head with Dan Lewis, and so I think there should be some interesting perspective here and to give everyone kind of a lay of the land of what we're trying to accomplish. This is a fascinating story about convoy. There are some really high highs and some, you know, really low lows in terms of where the story has ended. My role, paul's role, as we started our podcast in the last month and a half we've just spent a lot of time looking at media in general and I'm frustrated by all of the misinformation that seems to exist in the world and the impact it has across the board. So I feel a little bit of a responsibility as we've seen this story about convoy unfold in the last really couple of months, but most importantly in the last week. There's a lot of information being talked about, and convoy has been a focal point in our industry for years and people say a lot of things about the company and a lot of it is kind of unsubstantiated and doesn't necessarily have enough of the right info to tell the whole story. Now I don't think that we'll be able to tell the whole story here today, but what we're going to try to do is take some trusted opinions and experiences, firsthand experiences and share those through the context of providing kind of thought provoking, interesting discussion.
Speaker 2:I know our three guests firsthand very well. I spent a long time working with Zach and Ryan at Coyote. I trust them. I know they are both very intelligent and that they can provide undjaded opinions here. That should be really helpful, and I personally also worked with Mr Marison Molo. Frankly wouldn't have existed without wind trust in the relationship we had there. We could not have grown without them and I think kind of our plan here is to spend most of the first probably maybe around an hour, talking focused on convoy. So I think a lot of that discussion will be led with Zach, ryan, myself and Paul and then we are going to pivot to a overarching market conversation because I think there's a lot more to be told there.
Speaker 2:Convoy may just be the beginning of more challenges, and I think John's experience and insight will provide a lot of value there. So stick with us. I hope you all enjoy this. We're going to try to make it as exciting and interesting for you and informative. So let's start with Mr Soskin.
Speaker 2:Given you joined the company Convoy as the 15th employee right, so as you came over, you give us a little bit of the why in terms of your interest and what you saw with the Geekwire article and whatnot. But can you give us a little land of when you got there? What did the organization look like? I think one interesting thing here is both Ryan and Zach have what you would call the traditional freight background, and I think we can use that as a backdrop of comparison, because I think what we want to uncover here is what was really good about Convoy, what was really interesting and innovative, what did the company do that we hadn't seen before? And, on the flip side, clearly certain things didn't go so well or we wouldn't be here today. So we want to uncover as much of both of those as we can, trying to be unbiased. So, ryan, why don't you?
Speaker 4:kick us off here? Yeah, absolutely. So going from coyote to convoy was just an incredible culture shock for me. You know nothing about it felt similar. Everything was completely different. I was really, you know, a fish out of water. You know where.
Speaker 4:Coyote was extremely structured, everyone knew exactly what their job was and what they were going to do. They show up, you know, on the carrier side. You show up and you call your carriers, you book loads, you make margin. It was a very competitive environment.
Speaker 4:Convoy was the opposite in pretty much every way. There was a lot of ambiguity, which for me was a big learning curve in the early days, but at the same time there was so much optimism. We knew we were doing something special and that the team we were assembling was just absolutely incredible. You know, we felt like we were pioneers working to automate the waste out of the traditional brokerage model and it was really exciting. I mean, there were a lot of late nights, a lot of ping pong, a lot of time, you know, in conference rooms. You know doing, you know we call it whiteboard jam sessions, like just trying to innovate, think outside the box, really challenge everything that we knew about the traditional model to try to figure out where we can innovate and kind of reinvent. But it was a lot of work but you know also a lot of fun and a lot of learning for me.
Speaker 3:Ryan, for some additional context. You said you were employee number 15. Right, so what was like the distribution of the other 14, what type of roles were they? Just to give us a lay of the land.
Speaker 4:Obviously it was Dan and Grant the founders. There were a couple early operations leaders and then the balance were pretty much engineers. I think there was one product designer in there. But you know, the early folks that I was working closely with were a couple guys from Uber that I became very close with and kind of followed their lead on the tech front because they had experienced it and I was kind of they would follow my lead on the on the brokerage fund as I was kind of the industry guy.
Speaker 3:So, as you got in there, since they didn't have a freight person on board, what were some of the early opportunities that you saw? I'm assuming you were they had an. Did they have an existing app already? They?
Speaker 4:had the iOS app. It was very much still a work in process, but they were able to start offering loads through it to carriers. And we were only, you know, we were only offering freight or supporting freight in Washington state. So it was we started very small. We were supporting lots of different truck types, ltl we were. You know, we were pretty much trying to get any business we could get. So there was a lot of very specialized freight which proved to be very challenging and over not too long we figured out that we should probably stick to the kind of mainstream, you know van reefer type stuff.
Speaker 2:I thought it's interesting. You mentioned the kind of origin being focusing on Washington state and this is something that I had heard over time that I think was different and interesting about convoys model was their approach to building out the network. Can you, maybe Zach and Ryan, both talk about how that kind of transpired over time, what that looked like, because that was different than how I feel like a lot of traditional brokers approached procuring capacity?
Speaker 4:Yeah, absolutely, I can speak for the early days. I mean, I think it made a lot of sense because we weren't trying to just get business anywhere in the country, because then it was guaranteed to be a manual motion to get the load covered, to find a carrier. So by being thoughtful about being very concentrated geographically, we could build supply, build carrier capacity and then bring the demand, run it through the app and have some level of automation as a starting point and then continue to build capacity. And so we're very thoughtful. We started in Washington and we expanded to, you know, the full Pacific Northwest, then down to California. We opened up Texas, then the Midwest, and so we thoughtfully, over time, expanded and it was only drive-in once we figured out that we should kind of hone in. And then eventually we opened up reefer. But the point of that was just to not start taking loads all over the country that you knew you were going to have to broker manually and trying to really be disciplined about the automation.
Speaker 5:Yeah, and I would just piggyback on that, definitely still the strategy towards then as well, and I think that we'll obviously just scratch on the surface on the differences between a traditional and more of the tech approach. But that's absolutely true. When we want to get to a spot where it's like no touch loads, they just move through the system From the enterprise shipper-facing side. We sold very programmatically, which I think is also unique for the business. You know traditional brokerage. They're out looking to move the hardest load in the craziest area or something like this massive spike in demand where they needed to bail a shipper out, kind of what we didn't play in that space.
Speaker 5:Really, like we built a network around like certain areas and certain metros and if it hit that like I mean I hate to bring up like the proverbial flywheel, but if it hit the flywheel like it was fine, it was going to work, it was going to move. But if it fell outside of that, quite frankly it was a challenge. I mean Ryan probably saw that in the early days and I think that that was still true later on. So yeah, it was that we were very deliberate and like where we were going to be successful, what markets worked for us and where probably wasn't a good fit.
Speaker 2:A traditional broker and I am that guy. I am that. You know I'm thinking of how I was selling and a lot of my sales reps were selling is is. You know it's let's just give the context here that it is so challenging to sell to new shippers in this industry because of how largely undifferentiated all brokers are and the there's definitely a strategy around find a shippers most challenging lanes, do your research, like you know, if they ship out of Florida, hit them during the middle of produce season, because they're likely, you know, if you think about what I used to try to do is think about a shippers inbox, their email, and you know where are they getting the most emails of frustration from their planners, customer service, whatever and it usually was whatever was the most troubling lanes. And so, as a broker, you know that's how that was. An entry point was to say I can help you with your most challenging freight. You're saying Combo didn't do that, right?
Speaker 5:You know, I would say where and Ryan might have some more of this too Like I'd be hard pressed to say we didn't do that. We didn't do that in that fashion, like we wouldn't go give me your outbound Florida produce lanes, like that that would be a non starter for us. But where we would go is like similar strategy, but on a on a more expanded level. So like tell me your retailer that is like the biggest thorn in your side. Like where are you paying massive OTIF fines? And like where can we like really dive deeper into the data and see what we can do to improve your fines, improve your on time performance and execute to that level? So in some regards like very similar but different. But I would say we focus more in that space. Or like a larger scale of a cell, versus like trying to help on as needed lanes that I was used to in like a traditional brokerage space for sure.
Speaker 3:I know, as part of the funding approach. Obviously there's a a a story to be told around automation. At one point I think I heard a number of 90% of all convoy loads were automated. One, I'm curious how accurate that number is. But two, I'd also heard that you know, when you're scaling a business like that, you know obviously most types of companies are going to go for a load that has margin. So when you talk about this difficult freight, yeah, it's got, you know, really high margin potential versus other shipments that are. Maybe they're more regular but they have a higher propensity for automation, and so the margins might be small but the automation level might be extremely high, right, and so these two variables kind of seem to be at conflict with one another. So I'm curious, from both of your perspectives, which approach did convoy take? And again, and to that 90% automation level, like what was the accuracy to that number?
Speaker 4:Very early days it was low automation. We did, you know, start getting some density out of a certain facility just north of Seattle, out of, actually, marysville, washington, fertilizer loads that were moving on flatbeds and drive-ins and that was our first sort of glimpse into some automation. We found a handful of carriers that really liked these lanes and would take them and I think we got, you know, 40% of them automated. At one point we were just, you know, high fiving and saying, wow, you know, this is, this is promising, like we think this might actually work. But over time, you know, it really did become, I think 90% actually is a low number.
Speaker 4:The local stuff was automated at a rounding error from 100%. I mean, we were incredible at local and not only at matching and like instantly matching it, but it actually, you know, buying really, really competitive and most of the time below market. So there were things we were really good at, but I think the overall number where no one from convoy on the supply side was picking up a phone to dial a carrier, we were at like 96, 97% of loads getting matched. We weren't always buying super competitively. We didn't always pick up the phone and cold call. It was usually price was a function to drive the automation. But you know, the automation, that was really what was, in my mind, special about what we built at Convoy.
Speaker 5:Yeah, and I would say very similar later days. And I think when you hear that story out of context it doesn't make sense Like you're, like there's no way you are automating that much of the business. But when you go back to what we said initially, is that like we targeted these like hyper dense metro areas, where we knew we had the supply already built and had that capacity ready to go. It was easy to automate that process. I shouldn't say easy, but that's the freight that moved easily within our system. That's where we worked well, that's where we operate well and where we were going to be successful. And then when it deviated from that, that's where you would get to a more manual fashion.
Speaker 5:I always enjoyed, like, the compare and contrast between Coyote and Convoy. It was super interesting to me as I worked through my career. But to give you like a little bit of flavor and I mean this might have been different when Ryan was there, but when I left Coyote there were hundreds if not like scratching the surface of a thousand brokers, carrier, reps, calling people to move that produce lane out of Florida to the Midwest or whatever it might be Convoy in my whole time there. I don't have the exact number, but a fraction would be an understatement. I mean, they were in that camp of under 50 carrier reps most of the time that I was familiar with it and granted moving a lot less volume, but still I think that it was super interesting. We were really relying on the app to match capacity in our system, so what was how many loads?
Speaker 2:roughly would you say that the company was moving a day. At the end, if you had to guess or maybe you know- yeah, ballpark, it'd be like 16, 1500, 1600.
Speaker 5:Okay so.
Speaker 2:I think we can clearly call out a point here. This is different, this is this is differentiated, and maybe it's only differentiated against everyone other than companies like Uber. But what Convoy was able to accomplish in automating so much of the carrier procurement side, that is undoubtedly innovative. And there's an interesting thought here that I think a lot of the frustration around Convoy in the early days tied to marketing and we'll get into this conversation, maybe we'll do a little bit of it now and the fact that Convoy was given so much credit for changing the game in a lot of ways, and one of the things that was first was this kind of automated matching and before Convoy started doing that, coyote had scratched the surface there.
Speaker 2:Robinson had definitely scratched the surface there, and these incumbent players were undoubtedly making investments in this type of process. However, the rate at which they were was was nowhere near the rate at which Convoy did. You know, to get to 1600 loads a day with 50 or so brokers, carrier people covering loads that's a very impressive feat and I think we should just jump into that for a minute. Obviously, the benefit to that could be considered, you know, low overhead around coverage.
Speaker 3:Yeah, I was going to ask that, andrew. So if you think of Molo or just any of your experience, like just to give people perspective at a traditional brokerage, and it's my understanding, and please chime in, is that they're targeting minimum $125 per load to cover overhead, right, is that? Is that about the right number? And then I'm curious what that would be for Convoy.
Speaker 2:Well, I don't want to say that's the right number because every company's is different, right, and I think at the end of the day, you know, the interesting strategic aspect to all of this is that what you know, I don't even think we should be lumping traditional and digital brokers anymore, like I just don't think that's a thing. I think every company's kind of got a unique approach and digitization is a spectrum and the companies that go all in or heavier on investing in that technology, they carry heavier overhead costs to, you know, build out what they're doing, but once they get to scale and don't need to kind of maintain those building costs, they certainly have lower overhead in the coverage aspect than a traditional broker. But every company is different, their approach is different, their overhead is different. Company like Molo you know our approach.
Speaker 2:We were like kind of the opposite of Convoy, because we had four people on our tech team building technology. We did everything else buying off the shelf, but we also never ran into the kind of money issues that I guess a company that Convoy did, because we weren't investing so heavily in building the technology. We thought we could still execute for customers at the highest level possible by focusing on the people in terms of investment and then kind of the operating model.
Speaker 3:I guess my point, what I'm trying to highlight here is there's two approaches. One is you know, were the rates coming in low just to buy market share? Or were the rates coming in low because they genuinely had a lower overhead model that allowed them to do so? Right, because that's the scalable piece of this whole equation. So that's where it's coming from with this. So I don't know, ryan, or yeah, zach, if you can kind of touch on that, yeah.
Speaker 5:I'll answer that question a couple of different ways. So I'll take the first one. Like was Convoy buying market share? You know, I don't doubt that that happened at some point. You know, I was probably sitting across the table at Coyote when that was happening, but during my time at Convoy that absolutely was not happening. We were not buying market share, we were taking business to be profitable. And when I say to be profitable, you know I think traditional brokers often measure gross margin and then they somehow get to some form of net margin, usually with like a rounded or, like you were saying, paul or Andrew, like an average cost per load.
Speaker 5:One of the unique things that Convoy did was just like you know it sounds ironic saying it now, but the amount of data that they would capture on a load that they could be like very responsible, like they could attribute an operating cost per shipment, per shipper.
Speaker 5:So so I can I can like tell you we didn't have every load is $100, because we would say, like this load, nobody has to touch, it'll go from A to B, nobody brokers it, it comes pre scheduled, it's going to cost us a dollar for it to run through that. I'm making that number up. But then you'd have this shipper over here where it's like it's going into a large retailer. You're going to have X number of detention. Here's the differential between what we can bill a shipper versus what they're willing to pay, and we take all of that into account to give you like a fully baked cost per shipment, and then you can obviously use that strategy when you go to bid and do things of that nature. Again, like high insight, there was also challenges with that, because when you have all that data and others don't in pricing scenarios, you could often actually look too expensive because you're you're really quoting with completely open eyes, going into some of those scenarios and, ryan, you could probably speak to the earlier days though too. Yeah, absolutely.
Speaker 4:I think that was well said and in lines with my later years experience at Convoy earlier on, especially when I was building out the contract pricing team. This is like late 2017, early 2018, at no point were we ever planning to have negative gross margin on a lane. So there were lanes that we thought were very valuable to building the network, accreted to automation, where we would be more aggressive. Maybe we're pricing it to have break even gross margin at no point where we, you know, trying to buy market share at 20%, 10% below market. That was never a thing we did. We were.
Speaker 4:We were somewhere between break even at the most aggressive in the early days, just really trying to get the market or new geographies off the ground. You know, up to 15, 20% for the stuff that we thought we can handle, but maybe it was not quite as desirable where we had to be a little more conservative. So I guess it depends how you define buying market share or subsidizing. You know, I think for us the play was, as we scale this, we're going to be able to make it profitable because of that scale, and so we weren't planning to be net margin positive in the early days. We just wanted to get the union economics right, get the you know the buying power right and then scale it from there. And I think the idea was that things were right size and we would build a healthy business.
Speaker 3:Zach, I want to call out something really important here, which is when we talk about differentiators. If you think about all the companies out there that rely on a third party market index for their pricing right and you look at, okay, you just put it in a five digit zip to a five digit zip, it spits out a price, but there are so many operational nuances on a given customer, on a lane, et cetera, that I mean how could you really rely on that price? So a big call out for me there is you know, convoy had this level of sophistication to be able to take pricing beyond just typing in a five digit zip to a five digit zip, and I think that in itself is a huge differentiator. So can you talk a little bit more to that?
Speaker 5:Yeah, totally. I mean these were some of the things that you're mentioning that I thought was truly like pioneering the industry, Like I had not seen this done before. Sometimes I even question like saying, a traditional brokerage, because, like I would call, coyote was definitely on the cutting edge with technology and doing a lot of these things. But there were certain things like that that I saw was like this is incredible. I've never seen anything like this, this level of scrutiny on a shipment level. So I thought that that was interesting.
Speaker 5:The counterargument I will give to that is we did some other things within that. You know, we made it really easy for drivers to get paid. We made it really easy for drivers to collect detention, all of these different things that probably made drivers lives significantly better, streamline the business. But there's a cost to that and I don't think anybody could dispute that. So anytime that you pay a driver out detention on a load without any any type of you know, I mean we would sure we would vet it out within an app, but the the shipper might say I need signed in and out times or some other type of stipulation that would make that money harder for us to collect versus what we just paid out.
Speaker 5:All could be true, but that could also raise my incremental cost per shipment above what a traditional brokerage might see on that. Because they didn't pay that truck order not used or they didn't pay that detention because they went back and they said, driver, give me your signed in out times. The driver didn't have them and then all of a sudden essentially in that scenario I just played out a traditional brokerage technically has a lower cost to serve on that shipment than a, than a digital or technology enabled shipper. So although I think we were doing a lot of things the right way, there was definitely a cost to it in a certain extent. So, like some of those times we were baking in that very scrutinous level of detail on a shipment, it still might not have been an apples to apples comparison.
Speaker 2:So essentially what you're saying is the automation clearly had benefits, but to some extent there was a trade off that that other brokers that would be more you know, human, thorough. We're doing so. I think that's interesting.
Speaker 5:Yeah, absolutely, and you know I think that you know it was probably a benefit for drivers too. You know, I mean, I, if I'm driving a truck, I haven't done it before, but I would much rather submit something on the app requesting detention and then go, go get the next job versus like, call a broker and argue with somebody about, like a guard shack that wasn't willing to sign my in and out times or whatever the case might be.
Speaker 2:You segue us into a conversation. I want to start around the carrier experience, right? So why don't we spend a couple minutes talking about, well, you know, as a carrier, did you love convoy, Did you hate convoy? And I think it's impossible to answer super generalized because you know every carrier is different. But I guess let's think about it from the lens of what about the procurement process for convoy made things easier and better for a carrier and what things made it?
Speaker 4:more challenging. Carriers came to love convoy in the early days when we were making that, you know we were calling them and getting them to download the app and making them jump through hoops. I think they didn't love that but we kind of powered through and made it work. But as we came out with some of these industry firsts automated detention if you use the app free. Quick pay if you do all the actions in the app, you trigger the geo fence, you submit your bills I think carriers really came to love. Convoy was low hassle, they were getting, you know they weren't having to pay, you know, any percentage off their receivable to get the quick pay. There was a lot of really good that we did for carriers and I think a lot of other brokers and folks in the industry followed suits. I really think that we made a meaningful you know made meaningful progress and pushing things forward and helping them.
Speaker 4:You know, thinking back to my time at coyote, you know having that relationship was also really important, right? You know, when there's a load that just needs to move and you need a favor, you have a relationship to rely on. And so I think, not so much relating to the carrier experience, but the benefits or the. You know the advantages and disadvantages of using the app. One disadvantage at convoy was that we didn't have those relationships and so it was harder to call on somebody to ask a favor.
Speaker 4:Certainly we had some relationships, but not nearly to the extent of a traditional broker. And the other piece I would add is that it's also a lot easier to give a load back to an app that's not going to hold you accountable personally, versus somebody that you work with and talk to every day. If somebody gives a load back and kind of put you in a tough position, you know there's consequences. Hey, I'm not going to give you this load next time because you just kind of burned me. It's a lot different when you're looking at an app and there's no person behind it that you have a relationship with. So just shedding light on some of the other advantages and disadvantages.
Speaker 5:The only other components I would add to that is is, like you know, I would say convoy really did have a unique carrier base, like on multiple different levels I'm definitely like the enterprise shipper side of the fence, but like a couple of things that I think were super interesting with that is is like we truly did like aggregate, the owner operator community, a lot of other brokerages sure, that's technically a tagline I think brokerages would use just in general, but realistically, like they were still heavily reliant on medium and large carriers or carriers they might find off of an external board. Convoy was really specific in working with that owner operator community and I think we built density in certain areas and then that worked for them. The other pieces I would add is like I do think that there's a solid base of driver community that doesn't speak English as their first language. I think going into an app and being able to negotiate a shipment and take a shipment can be a lot different than calling your broker in Chicago and potentially haggling over price. That being said, like when things go off the rails, like you need that human intervention. So I've definitely seen both sides of that equation and seen where they work and where they don't.
Speaker 5:You know, and I think finally, and to translate this back to the shipper side, I think one of the more interesting components is convoy was really the first to mandate the use of the app in a truck. Now I think it's getting to be more commonplace. From a tracking perspective and visibility for a shipper, that was incredible. Like you know, I was always in the camp of like, especially when you get to a level of consistency with some of these like third party aggregators. From, like, a tracking perspective, it was like no chance, like we're not gonna be able to hit that, but because we were collecting that real time data every three minutes, like it was never an issue, like you would report tracking on every shipment, and then with consistency too, which a lot of large enterprise shippers were looking for.
Speaker 2:You guys were not only hitting the 95 or whatever percent fork heights tracked, but you were also hitting 90 plus percent consistency, because that Correct which I'd never seen. As far as I know, the only brokers that were hitting 90 plus percent on consistency were the ones who were faking it, and they were doing predicted times.
Speaker 2:I mean this is true, I mean we never did this, but I had heard about it because shippers were challenged and say, hey, you're at 60% consistency, others are at 90 plus. And then I talked to those companies and they'd say yeah, I mean we just have it auto, assuming where it's gonna be and if it breaks down like it's not necessarily accurate.
Speaker 5:Yeah, no, and it makes sense when you think about it because, like, you do have that tech in the cab, so you're already tracking. So at that point you just need the connectivity and, paul, you can probably speak to it first.
Speaker 3:I can vouch for the fact that in fact, the tracking metrics were through the roof and really there was a pretty wide gap between what we were seeing from Convoy versus everybody else. So that was legit. So we've got some positives here.
Speaker 2:We've walked through some real benefits to a carrier, to a shipper here, of what Convoy was bringing to the market. I'm curious, from the carrier experience side, what were some of the downsides? My assumption is that exception management was really challenging. I think that's one of the things that the human freight broker has to be really good at is dealing with issues, because issues arise on 20 plus percent of the shipments you're managing a lot of the time, even if they're small issues. So walk me through if a carrier had a problem on a load, if the pickup number wasn't working, if they were detained for six hours which meant they were gonna miss the delivery, what was that?
Speaker 5:process like Absolutely, you're right, like I think you can always in either space, traditional or digital. You can deal with problems in a couple of different ways, like one you can talk through it, work through it. You can, you know, handhold the entire journey until the issue's resolved and secondly, you can pay for it. There is a cost for a driver to not deliver a load till a month later or whatever the case might be. I would say like I mean, you definitely hit the nail on the head. I wouldn't be able to tell you that we did a perfect job with exception management. I would say we got a lot better.
Speaker 5:When I first started, we were. We had an operations model that looked more like a customer service platform that you would probably get if you called in to a large corporation. Definitely more. You saw more of the tech side of it there. But the challenge would be is that whoever would be next in queue to pick up the call or whatever the case might be, wouldn't have any context onto what happened with that story, so they'd spend the first whatever block of time just figuring out like who's on first.
Speaker 2:I know from being a rep and having carriers who call and they're like I just spent 20 minutes trying to explain to this guy cause you were at lunch and he and that person has no interest in solving the problem anyway. So sorry, I keep going.
Speaker 5:Exactly exactly. So we did pivot off of that and went to a more customer specific model, which helped a lot, like I mean, maybe it didn't happen as fast as we all would have liked, and you know, so we realized some of those benefits later on. But yeah, I think you're absolutely right there. I mean, we just we didn't have the robust bench of people able to tackle those problems that a large traditional shop might. So it was more of a challenge for us 100%.
Speaker 3:Now there was, I think, an interesting approach that was taken.
Speaker 3:That was, you know, those are band-aid approaches, those are things that happen after the fact.
Speaker 3:And one thing that I can also attest to is, you know, with all the data that was being captured, just the level of operational insights that the team was able to extract from that to identify problems like on lanes, chronic problems on lanes that were reoccurring, that could be addressed upfront, such that you never got, you never found yourself in that situation.
Speaker 3:And so you know, when we talk about different years, I think about you know, this is not just a capacity provider, this is an organization that's almost a consultant. They have so much data, so much unique data, and they've got really talented people on their side that are extracting these really interesting insights that are sharing what the total costs or what incremental costs you might be incurring because of X, y and Z operating issues. And to me that was also extremely unique and valuable to being able to help in that automation process, such you never find yourself in a place where you're dealing with you're having to get on the phone because you've addressed it upfront. Would you guys agree with that, and how? I guess how important was that to solving the problem proactively, as opposed to, you know, waiting till being reactive.
Speaker 5:Yeah, I would definitely agree. I mean, I think you have to manage the day to day, so like I think you obviously have to like solve those issues. But we were definitely more concerned again with like a more consultative approach like how do we fix this systemically so that it doesn't happen again, versus like the one-off types of issues.
Speaker 4:Definitely spent more time in that space, yeah and, I would say, on the advantages of having the data and having carriers have to use the app. To Paul's point, there were some really cool things we were able to do, really unique insights about shipper supply chains that we were able to provide. I remember that during the time that I led the food vertical, somewhat briefly, we were able to get data on you know. So, I guess, as background, when a carrier would pick up or drop off a load, they would be prompted to put a star rating one to five, for the pickup and drop off experience, and then they also had a free form opportunity to put in any notes or feedback about what was great or what was not so great, and so that allowed us in QBRs and other customer meetings to be able to bring these insights. And so one that we always liked that was really, I think, pretty unique, was the ability to say hey, paul, your Houston facility is getting, on average, 2.4 stars from carriers that are going in and out of it. Compared to the Houston Metro across our platform is at a 4.6. Here's some of the free form feedback we're getting hey, the folks at the guard check are really rude, or they don't let drivers use the bathroom, there's never parking, whatever it might be.
Speaker 4:Oftentimes the folks would already know that, but oftentimes they didn't know that, and so being able to bring that information was very valuable, and for shippers that actually acted on it, they were able to save money, because, of course, over time, as carriers figure out which facilities are no good for whatever reason, they aren't willing to go there, or, if they are, they're only gonna do it for a higher price, and so this was a way to help save money, improve the basically streamline how things were going, and just making a more pleasant experience for everybody.
Speaker 4:And then, on top of that, we just had such a data heavy culture and data science teams that were available. Our account management teams were very different than what you would find at a traditional brokerage. These folks not only had to be good in the industry and good with the customer, but they had to have real data chops, and so if they didn't have the ability to do whatever they exercise, they could tap into those data science resources and bring even more data about transit times and how to optimize it, which ultimately leads to better costs if you take the corrective action.
Speaker 2:Does that mean for a carrier? Then, when I'm looking at the app and I'm considering loads, it's just like Yelp, where I can see each facility, what their pre-rating is like. Hey, this is a 2.4, so I'm not gonna take this one, or I'm gonna charge an extra 500 bucks to take it. Something like that.
Speaker 3:Exactly Okay. That QBR was a really important piece again, because I think when you think of those, typically you know the carrier comes in, the shipper presents a bunch of data, or maybe they don't present data, but they have this qualitative assessment and they start ripping right and it just becomes this conversation he said. She said types of conversations and Convoy's able to come in and to your point like yes, I'm sharing my scorecard and going through that whole process. But I would say without fail, they were also coming in saying hey to your point, ryan, here's three opportunities. We see we're scorecarding you too, and it was kind of this two-way conversation and it was just very constructive. I always walked away learning something new and I can't say that about 90 plus percent of the QBRs that I was in right, so that was huge as well.
Speaker 2:So you would characterize your experience as a shipper working with Convoy as one word Go ahead.
Speaker 3:Geez, really put me on the spot there. Don't overthink it, just throw me a word.
Speaker 2:When you think of how they were as a provider for you. What's the word you think of? Different, different. Okay, now you have to in a good way.
Speaker 3:There we go In a good way.
Speaker 2:Okay, so Niagara Story is one of. They were a strong provider, zach, in your last few years. You were on the enterprise side, of course, but was this true of every large enterprise shipper? They felt the same way. Can you give some context around the service that was provided to customers?
Speaker 5:Yeah, definitely, and I alluded to that a bit earlier as, like, I think that we've made great strides to improve some of that, but kind of goes back to what we initially discussed. I mean, convoy sold different. We showed up different with shippers. We only worked in enterprise space up until the end. I mean we were really focused on that. Call it Fortune 1000 shippers.
Speaker 5:And if it wasn't in that realm, like they weren't on our radar, like we weren't talking to those people and I think that that's unique for a number of different ways. But like shippers weren't used to being approached that way, like Paul's one of the largest out there and he can probably attest to it. Like they're not used to buying in that fashion, you know. So you can still call a Fortune 1000 shipper and they might be like hey, can you help me with these loads out of the produce area in produce times? They weren't necessarily like an open book, like come in here and help me consultatively solve my problems. Quite frankly, like if they weren't in that camp, they probably weren't gonna be a fit for us. Like we needed to get to a level of automation we needed to get, like it needed to be in our target areas.
Speaker 5:Like we did make it, I guess, like I don't wanna say challenging, it's the wrong word but like you had to be the right fit for Convoy to work for you and if you fell outside of that you weren't gonna have a good experience. You know, I mean, that's just unfortunately how it was. Like we weren't set up to deal with the one-offs, we weren't set up to be a spot carrier, like in an ad hoc environment, to deal with like the worst of the worst, like which obviously made it more challenging for us as the market shifted. But like we focus like on very, I would say like basic freight, and if it deviated from that, if you threw in hazmat, if you threw in multi-stop, if you threw in like a lot of these other functions that traditional brokerages might even thrive off of because they can drive profitability. That's not really. We didn't play in that space.
Speaker 2:My understanding and a lot of you know, the image of Convoy, the image of the DFM as they refer to themselves initially, was not necessarily one of exceptional service all the time. And I had a few you know one of my most interesting and I played in the same sandbox. So most of my experience I personally was out in front of customers and they were mostly Fortune 1000. So I was constantly having conversations with shippers about companies like Convoy just to see how they were doing. And I'll never forget one of the biggest sales calls I was ever on with a Fortune call it five.
Speaker 2:The first question the guy asked me was are you guys Molo, dfm? And I was like no, why? And he's like because my experience with them has been terrible, all of them. And there was one other experience where I waited three years to get in with the shipper and they kept just telling me yeah, the last broker we let in was Convoy. And when they finally let me in I was like, okay, I'm in. Yeah, we just booted Convoy. And so I'm like, okay, what was the challenge in servicing some of these? You know, I wanna get the full picture here of what the service looked like. And obviously there was clearly some benefit to what companies, what Convoy was bringing to shippers, but on the flip side there were some challenges too there.
Speaker 5:So if you could speak to that for a second of what you saw, yeah, I mean definitely true and, like I said, I think we made a lot of adjustments within the last 12 to 18 months. That certainly improved that and we also got better at what we were looking for. Like I said, if a shipper didn't have a way to integrate and wasn't looking for a larger solve, we didn't work that well and we also needed density. You know we needed those shippers that not only fit our footprint from like a capacity standpoint, but they also had to be leaned in pretty heavily because we were looking to do that from our side. So anytime we started a shipper like we wanted to integrate, we wanted to automate just about everything we possibly could again to make that backend process as seamless as possible. And, quite frankly, like even when you look at Fortune 50 shippers, a lot of them just aren't there yet. Like they're not ready, they're not interested in doing that and they certainly aren't used to that.
Speaker 5:In the brokerage space and I think where we didn't have that like collaborative or equal levels of tech and automation and buy-in, I think that's where you saw it fall down. And then, like I said, we showed up differently I would say that in a good way and a bad way, like those shippers that you talk about, they're used to getting a problem solved by calling that one person. When I tell you, like you know, initially we had more of like a generalized operations model, you can imagine they did not get that same feel and look and I'm sure that was frustrating. Like I said, I think we were on the right path to fix a bunch of that. But, absolutely like when I would talk to new shippers, I had to dispel some of that early concerns, like because I ran into the same thing. They're like yeah, we tried Convoy. It was not good. And then you'd have to explain a lot of the differences and changes that you made along the way to make the process better.
Speaker 4:I think there's also kind of an element of how much the shipper was spending If they were one of our top shippers spending a ton of money with us doing a lot of volume. Obviously the density helped with matching and having good on time service. But also going back to something we talked about earlier on exception management and sort of this kind of you know, take the task at the top of the list and this lack of familiarity, that also carried through to the shippers side, especially for shippers where they didn't have a lot of spend. So our top shippers like Paul's company, we had a dedicated pod that was working on them. So those folks understood the nuance and they were familiar with the facilities and all the different parts that go with it, and so it was a much better experience.
Speaker 4:Whereas if you're a shipper that's not doing that much business, you're getting lumped in with a bunch of other shippers and then you've got a large group of folks that are just taking the task at the top, setting an appointment or dealing with an issue. And we heard all the time from shippers I've answered the same question 10 times in the last week Like why do you guys keep asking me this? I haven't talked to the same person ever. It's always a different person, and so I think that that was something that got a lot better.
Speaker 4:To Zach's point, but the fact that customer I think customer outcomes for some shippers suffered because we were not vertically aligned and so the account managers didn't sit on the same team as the operations folks, where at a coyote or a traditional brokerage there's an enterprise operations coordinator who's setting appointments and doing some of those types of tasks and then there's a whole track of seniority and they all sit on the same team. They all have the same knowledge and are sharing those insights, with operations sitting in a different organization altogether, sometimes in Seattle, sometimes in Atlanta, sometimes offshore. A lot of those learnings and insights didn't get passed between the account managers and the operations folks and again, I think this improved significantly after I was, after my time there. But there was a lot of frustration from some of our shippers that weren't our biggest customers for a long time.
Speaker 2:That makes sense and I think what this conversation is really helping me see is the need to dispel the notion or this lumping of digital freight match or reverse traditional, because I think every company at this point is unique and has such a unique approach to what they're trying to do. It sounds like Convoy approached this very differently than even I maybe thought coming into this, and I appreciate you all both giving color to that. But it does tell the story that each company is unique in how it approaches the market, how it deploys capital and resources, and it seems like Convoy really tried to solve a lot of problems and did improve some. Maybe that's part of the challenge is going after too much trying to boil the ocean. That leaves you where you are now. But I'm gonna turn to Paul here and let him take us to the next segment as we go.
Speaker 3:Yeah, guys. So I wanna talk. So we've been talking a lot about tech and how Convoy is different. I wanna touch on the people component of this, that there's been a lot of discussion about that online as well. So, ryan, zach, I'm curious to get your perspective. You guys come from the freight side. You grew up in that space. Can you talk a little bit about the ratio of, let's say, non freight people to freight people and the interactions between the two? Who won? What were those debates like? Who won in some of those debates? Just a little bit of flavor of that component.
Speaker 4:Yeah, absolutely, I can start with the early years. Certainly it was very, very tech heavy. I was among the very, very few folks that came from the traditional freight background, so I think that was intentional right. We wanted to push the envelope, we wanted to reinvent the wheel, we were trying to find any way possible to innovate and drive efficiency or better experiences for customers and carriers, and so it was extremely tech heavy and over time I think there were things that the company came to learn that it was valuable to have some more industry folks there and so over time more industry folks came into operations, roles, account management roles, sales roles I don't think we ever had, you know, traditional brokerage folks at the executive level.
Speaker 4:But it was an intentional tension or friction there to try to innovate. So that was by design and I think we learned and found a lot of cool things and created a lot of new industry first that were very valuable and helped drive the industry forward, not only at Convoy but also for folks that came after Convoy. But that was at the expense or the trade off of sometimes not getting to the right solution, but that might be, to a freight person or an industry person, the obvious solution. So if for something that we didn't figure out the right new, innovative approach for, we would ultimately land at the industry SOP best practice, but it might have taken us a long time and a lot of headache to get there, longer than it should have as a result.
Speaker 5:Yeah, that was well said. Yeah, but and it was the same towards that, I mean, I think we realized that there were certain functions that you needed industry experience and that background, but generally speaking, convoy still relied much more heavily on like a tech background or background outside of the industry. I think that was good, like you could look at problems with a fresh perspective. But again, you might like, not everything in trucking makes sense by any stretch of the imagination, but just some things are the way they are. We would struggle to land the plane on those at some times and, like Ryan mentioned, you might do a whole bunch of work and then realize that that is the best outcome right now. But so, yeah, definitely unique, but still very tech and non-transportation heavy.
Speaker 1:So just gonna jump in. I think that kind of speaks to where the market is right. So you know Zach and Ryan have touched on Convoy a lot and the tech influence and you know it was a tech first company. But what I'm hearing and what everybody is kind of coming to the conclusion of is, at the end of the day, everybody's a freight broker. So you know, we can talk about traditional versus you know tech. But we're at a point in the market where you have to be both and your focus can certainly be okay, we're tech first, we're, you know, traditional model first. But if you can't straddle both sides of that fence, I think that's where you run into issues. And we talk about some of the exceptions right, and Zach and Ryan touched on maybe more load-specific or shipper-specific, but we're at a point now where there's market disruption.
Speaker 1:Look like I said, I've been doing this 30 years. I've seen some cycles. A lot of these brokers out there, whether they're tech or more traditional base, haven't seen this cycle that we're in now and it's a lot of okay. Well, how do we address it and what do we do? And I think your focus is having an impact on that. I think the you know the convoys, the tech-based data analytics companies, are trying to feel the way through this different than some of the you know, more traditional brokerages, because there's a roadmap for the brokerages, right, okay, well, we might not have been through this before, but you know, maybe some of our investors have, or people we know in the industry have, and they can kind of tell us, you know, these are the levers you pull, whereas on the tech side it's a little bit different, because not only are you seeing a change in the transportation industry, but you're also seeing a shift in the tech industry, and now you're traditional people that you would go to, you know if you're needing to raise equity or you have liquidity issues are pulling back from both industries and saying, okay, well, wait a minute. What are you exactly? Yeah, are we investing in a tech company or are we investing in a freight brokerage?
Speaker 1:And if it's both, you know how are you, what is happening in this downturn in the industry and how do you move forward. You know, what are your data analytics now worth, now that the industry is seeing a downturn and your margin has gone from, you know, 15, 16% top line to 10 or 11. And I think that's where some of the difficulty is coming. In the current marketplace of you know, you've got to be both now in the industry. You can't just be a traditional broker and really grow to scale. I mean we talked about scalability earlier but you also, you know, can't just be a tech company. You've got to be able to do both really well. And I think there's been some change in the shipper side which you know we'll get into later. That's also impacted the industry pretty significantly.
Speaker 3:Yeah, so just to wrap up on the people side, as it relates to tech, how did you guys find those challenges when you're having these internal debates? Where was the tiebreaker? Was the tech side winning out over the traditional broker side? How did the? I just curious to hear more about that.
Speaker 5:I mean, from my perspective, I always liked I mean, quite frankly, that's one of the things that drew me to Convoy is like I wanted a different perspective. Like I think that's one of the unique things is I didn't want, you know, everybody in the room to have the same perception and viewpoint that I did. So I was looking forward to that and looking forward to being challenged and it absolutely was like I mean, there were certain scenarios that you know I don't think we always gravitated towards the tech side being the right answer or the transportation side, but I would say it was like a very collaborative group, like they were always like open and listening and wanting to learn, and so I think that that goes. You know, I would say they had a very open mind, especially with some of the more like industry norms that they might not have known to begin with. So I think that was interesting. But to John's point, like I mean I think that that's right and when you really look at the Convoy business model, like I mean it was like perfect, like you had like the capital markets tightening up, then you had the freight market, the volatility that was going on there, and then you combine all of that with like, where we did well and like.
Speaker 5:I think one of the interesting things is, like during COVID, all of these companies were struggling for capacity.
Speaker 5:So you had this like influx of capacity, and I think that that's what normal brokerages have all felt and experienced right now.
Speaker 5:But beyond that, like you had shippers going out and being like, how do I get more capacity? And one of the other logical solutions to that is going out and procuring your own Like, sign up dedicated contracts, buy your own fleet, expand your fleet. Because we operated in such like a metro heavy localized fashion, you know we were competing with a lot of those assets directly that maybe a large brokerage might not be, but at that point, if you're a shipper and you've already made those capital expenses to bring on your own capacity, you're going to use that to. You're going to fill your own trucks first before you'd go out to the market, and so, like I think that's just one more aspect that, like you know I mean this is the definition of Monday morning quarterback, but like that is one of the things that made it unique is like not only did we have some of the transportation challenges, but there was also some components that were specific to convoy. That made things more challenging for us, so definitely been interesting.
Speaker 2:So I'm curious. You know we didn't talk much about the trailer convoy go and all the trailers that convoy purchased or leased. I want to say the number was around 4,000. As we talk about kind of the changing environment as John alluded to, and Zach as well, can we talk about that as both a point of differentiation? Let me give some pretext.
Speaker 2:That I think is really interesting here is most freight brokers only do live load, live unload. It's the easiest model, it has the lowest overhead costs and it's just the way that most brokers, traditional brokers, have operated. The problem with that, especially if you're dabbling in the Fortune 1000, is you only have access to in some cases the little as five to 10% of a customer's freight and then on the high end maybe it's only 30, 40% and that's frustrating with all the amount of work that a broker puts in just to get an opportunity with the Walmart's of the world to then have an opportunity but only be accessing 10 to 20, 30% of the freight. It's just it doesn't make a ton of sense.
Speaker 2:Now the challenge is managing trailers as a broker is really hard and there are a number of ways to do it. The least risky but lowest ceiling way is to just partner with carriers that have their own trailers and you manage the relationship between the shipper and the carrier. That's not the way to scale it very quickly. The other way, the more expensive, riskier, heavier overhead cost is to own or lease the trailers yourself, and that's what Comboi did in a very big way. So can we talk about that for a little bit, cause it certainly is a differentiator. If you can go to a shipper and say I have assets, I have trailers, I can get them into your facility tomorrow or next week. That's gonna help you get business. It's a great approach if you can manage it effectively. Can we talk about that for a bit? Either one of you wanna jump in and start that?
Speaker 5:Yeah, I can definitely. You're absolutely right. I think that that was one of our largest differentiators was the ability to have our own trailers and, like, the unique thing with Convoy trailers is they were branded. The challenge that a brokerage runs into when they are subcontracting, like Andrew mentioned, is like, especially when you get into these large shippers, it can be an absolute mess because they're looking for a Convoy trailer or X broker trailer, but then it's actually whatever this underlying carrier's name is, it creates a ton of confusion and yard confusion and we didn't really. We had conquered a lot of those obstacles and I would say, like, from the outside, looking in, you can say, like any brokerage can just go buy a bunch of trailers. That really wasn't the unique component From my perspective.
Speaker 5:It was like back to the tech piece. Is that like the easiest way to describe it is? We basically built like a nationwide yard management tool so we could see not only could we track, like drivers through the app, but we could see every trailer within the ecosystem the United States and it would rebalance these trailers based on demand. We would be forecasting tenders received from shippers and rebalance these trailers and it did a lot of unique things. Drivers had the option of taking a Convoy load and then they could actually lease the trailer directly from Convoy right through the app. So I think we did a lot of unique things in that space.
Speaker 5:But again, it was very different than what shippers were used to. So they were used to the format that they're like you're a broker, you don't do drop Like. So we had to dispel that quite a bit and I think we made a ton of progress, but still, like I think the market to a certain extent wasn't ready for that wasn't familiar with that model, that you could be a brokerage but still operate very much like an asset, and that, quite frankly, was an area where the business was growing and doing well. So I think that would have continued, of course, under pressure as well, because we went from COVID, where nobody could get their hands on a trailer, to this current market where not only did Convoy have trailers but every asset has a yard of park trailers as well. So it was absolutely challenging, but I think the model was really cool.
Speaker 2:Yeah, and just where I think about it being a challenge, especially in you know, as John described, the kind of perfect storm of challenges that Convoy endured and really every broker has endured. But especially if now, all of a sudden, you have 4,000 trailers that you're on the hook for and the market's not allowing you to profit off of those, that's certainly you just lose a lot of flexibility in that situation and I assume too, in just the carrying costs of all the tech employees, the engineers. I mean, what did the organization look like at the end in terms of headcount and how much of it was engineer versus other roles?
Speaker 5:Yeah, I mean I don't have the exact numbers but like roughly speaking, I feel like towards the end it was 500 people. Our enterprise shipper team from like a sales aspect was, you know, I think we're around 10 to 15 people, account managers, another 15 to 20, and then you know the balance of that I think would probably fall in like operations for more of like the tech or engineering side of the house. So still, even towards the end, I mean it was absolutely a heavy investment from Convoy, but I think that that was, you know, Ryan, probably even the intent in the early days. Yeah, absolutely.
Speaker 4:I mean it was always very tech heavy and I think the idea was that with scale that would pay for itself and the economics would make sense early on. Of course you know it was impossible to cover that overhead, but the idea was to build it and scale it and obviously in the end, as the company described, the perfect storm of low freight rates, you know, tight monetary policy and tough access to capital that made it really difficult. But yeah, that was kind of the plan was scale would scale would solve for that.
Speaker 2:So there's one more topic within Convoy that I think we should touch on and that's marketing. The image of Convoy in the market from the early days was, I think, polarizing is probably the right word. There were a lot of companies shippers, carriers, even brokers that were really interested and curious about what Convoy was doing, and I think there was a lot of condemnation around how media portrayed Convoy and, in some cases, how Convoy kind of portrayed itself in how it marketed. So I'd like to talk about that a little bit for your perspectives, because my perspective is a lot of brokers did not like Convoy for a couple of reasons. I think there was a hint of jealousy in some cases. I think there was a bit of fear potentially seeing like hey, I make a good living as a broker and these guys are coming in trying to disrupt that. But there also was a little bit of this is BS, the valuations, especially that any broker really understood the business. You see and hear these valuations and the thought is just, this isn't real and the way they're presenting themselves is having innovated all these things. That's also not that different.
Speaker 2:Automated matching that's not a new thing that Convoy invented they certainly, as we dove into this conversation. They elevated it and accelerated the rate at which it was used. But when they came out and said we were the first ones to automate a load, or the first ones or at least media portrayed it was that I think that pissed off a lot of incumbents and really jaded incumbents ability to see any potential innovation as real. So I think over time, as every few months, there'd be another article about Convoy changing the game with this as we talked about today, there are clearly some things that did at least elevate the game or improve the game, but so many of us were just like kind of over it and thinking these guys are full of it and this isn't real. So can you guys talk about, from your perspectives as historical, traditional brokers, what your thoughts were on the marketing and how that approach worked and didn't work?
Speaker 4:Yeah, I think you hit the nail on the head.
Speaker 4:From the inside, having been at a traditional broker and kind of being a hybrid over the years working at Convoy, there were absolutely things that were very innovative where we raised the bar and really pushed the industry forward.
Speaker 4:I think the marketing was justified to say that there were other times where probably not intentionally the people in marketing or the teams were repackaging ideas and we were coming up with ideas and thinking about it in a slightly different way, but such that folks in the industry who'd been around for a while would compare that to something else that already existed and I got the sense that people probably rolled their eyes and it probably took away credibility from the things that really were innovative. And so from the inside I definitely felt that too. But credit to the marketing team for getting us out there and really helping us be known. I mean they did a lot of amazing work. But certainly there were things that we sort of passed off as new or the teams thought were new and just sort of thought about it differently and did get that reaction from the rest of the industry.
Speaker 5:Yeah, I would echo that. Like I mean, our marketing team probably won't this won't be a surprise to anybody but they were not transportation people. I think they were incredible at marketing and I think that that's exactly right. Like what Convoy was doing was, you know, might've been a different spin on something that was out there, but it was unique.
Speaker 5:And I would say the part that I liked is that we were willing to try things. Like we were willing to try different methods and like the most recent one was the like just in time or guaranteed deliveries. Like yes, I've talked about that at multiple different brokerages forever. I'm sure it's been a topic of conversation, but have I ever seen somebody say, hey, we're gonna guarantee it and then we're gonna pay for a portion of it if we don't deliver on time? Never seen that. But yeah, maybe it exists in some form or fashion somewhere. I did like that they would take these ideas and package them up and, quite frankly, from a sales perspective, like that was critical. Like it was great to have this content that you could go to shippers with that was unique or a little bit different than what they'd seen in the past.
Speaker 2:Makes perfect sense. You know it's interesting you talk about you almost allude to this curiosity that the organization seemed to have in thirst for knowledge. You know, I spoke to a fortune I don't know 100 shipper yesterday to get their feedback about their experience with Convoy and one of the things I thought was really interesting was how he talked about Dan Lewis himself and said that he was just really really good at asking questions and constantly looking for new problems to solve. And I think you know from a high level that does speak to how Convoy approached the industry and maybe that's a benefit and a fault and speaks to both one, how Convoy was able to approach so many different challenges and start to create solutions for them. But maybe it's a fault in the context of, you know, essentially trying to boil the ocean and maybe you lose focus and it gets hard to.
Speaker 2:You know, I mean they were managing a billion. They raised a billion dollars over the time. It's the most highly invested in VC backed company in the history of our industry and it's unfortunate that all that's left. Well, not necessarily all that's left, but the end of the Convoy story is. You know where we are today, but there was a lot built in that time and you know seemingly a lot of good that hopefully can be repackaged, and we'll know more about that, I think, in the coming weeks. I don't want to speculate there, so go ahead, paul.
Speaker 3:Yeah, no, I was going to shift over to John. So, john, you said you've been doing this for 30 years. You know it seems like probably since around 2015 or so, things really kicked into high gear from, you know, just an investment perspective. So just want to get start to get your thoughts on. You know, when did you see this shift happening? When the dollar started coming in? And you know, just from your side, how did it raise eyebrows, how did it raise just the overall significance of how you were thinking about investment?
Speaker 1:Yeah. So I mean, look, there's a lot of people on this call that have connections with Coyote, right, and part of it started with that, with the business model of you know that traditional Chicago brokerage that suddenly you could grow and scale to significant numbers. That then gets on the radar of you know VC firms, investment bankers, and suddenly it's OK, well, this is an interesting, industry-interesting business model. But how much further can we take this? And you know you can pull up Coyote logistics and the first thing that's going to come up in your Google search is the transaction with the UPS. You know the size of that transaction suddenly changed the liquidity within the industry. There were outside investors that suddenly you know we've talked about it here, you know these people were running companies. They didn't know freight, but suddenly you know it became, quote unquote, sexy to get involved. And I think that's where you started to see a shift in, certainly in the liquidity and how you know the credit world approach the brokerage industry and business model. And you know I had it at Wells Fargo all the time you would go to credit committee for line increases and trying to explain, you know the financial side of it and you, like I said earlier, you had to straddle that line between what is the freight brokerage and what is the tech company.
Speaker 1:And I think where we've come and I talked to you, know clients, current and former, on a regular basis, where they're bringing in money. And the first question is okay, well, what's the background of? You know the equity group and do they want board members? And what are those board members? Know about the industry and the cycles of it, and that's what we're seeing now is, again, you go back to 2009, 2010,. You know significant downturn in the industry. I think where we are now, just based on the length of the cycle that we're in, is a first for a lot of these investors and a lot of these companies. And the problem that we're seeing is the liquidity is suddenly drying up, and so you're not only being hit with a lack of capital, but you're also being hit with margins that are being squeezed for various reasons. And we talk about capacity in the marketplace.
Speaker 1:And, to Andrew and Zach's game Ryan's point, you've got brokerages now that are going out and buying trailers. Well, that's that can be a very different business model for them. Traditional brokerage is very scalable, both up and down. It's not pleasant sometimes in the down market because typically how you scale is by cutting heads and reducing your overhead. But when you've got fixed costs, it's a different game. And not only that. The bigger issue right now is with interest rates increasing significantly. Those fixed costs that, you know, 12 months ago were acts are now two times acts, because your variable interest rate on your equipment and your working capital facility is now costing you more dollars in a time where your margins are getting squeezed.
Speaker 1:So the issue that the industry is really facing is okay, how many levers can we pull to kind of keep our balance sheets strong? And what does that mean? And that's where, from the credit perspective, things are going to flip pretty quickly here, and that's, you know, what's it going to take to turn around the industry. And when do we start to see improvement in margins? And you know, balance sheet strength, and I think the real aspect of that is how much capacity can come out of the market and how quickly, because that's what's going to have a meaningful impact on turning things around. And so what we are seeing right now is a situation where you know the PPP dollars are long gone. Like I said, margins are, you know, getting squeezed, even if top line is 1214%, like I said, the cost of your working capital facility has, you know, taken 2-3% out of that.
Speaker 1:So you're feeling the squeeze on that, and one of the first levers that a broker is going to, you know, pull to help their cash flow is extending their payable terms with their carriers, and that's, you know, not only is that a concern from the carrier side but, more importantly, the carriers to a large extent work with factors, and the factors are the ones now saying, okay, well, wait a minute, why is broker a paying me in 43 days now when it's been 35 days for the past three years? And that's where we start to see that the problem on the credit side come through where, if the factors and we've seen it already the credit insurance companies are already pulling back from the freight market, and the first place that they do that is the credit lines that they're willing to hold on brokerages, even significantly, you know, large brokerage. If they're private and there's no visibility into their financials, credit insurance companies are going to pull those lines, and I've talked to four or five clients in the past two weeks that are all telling me exactly that. So then that creates a problem with the factor relationship because their historical carrier network is now saying, well, I don't know if I can pick up that load because my factors saying they won't carry your receivable anymore. So that's going to have a significant trickle effect into the market. That will first impact brokers and how they approach their day to day working with carriers. But then it's going to impact the carriers because if they can't finance their receivables, you know historically they don't exactly have a lot of money in the bank they got to pay their equipment. The only way they can do that is to, you know, quick pay programs and factor their receivables so that liquidity change and credit availability in the marketplace is what is going to accelerate the you know, reduction in capacity as it relates to carrier and both broker side and I alluded to it earlier.
Speaker 1:Part of this is exacerbated by the shippers. Large shippers historically have always considered transportation a 30 day pale. They've been very, very little variance from that, you know, even going back five years. That's not true anymore. They're now realizing hey, wait a minute. Just like we work with our vendors, if they're a retailer, we're pushing all them to 6090 days. Let's do the same thing on the transportation side.
Speaker 1:Because again, what does that do for our balance sheet? You know what is our liquidity then look like, based off of a 90 day payable. You know we anhyzer bush 120 day payable. You know ball Niagara has just gone to 90 days with their transportation partner. That has a big impact and again exacerbated by increased interest rates when you're working capital costs. Now suddenly you're carrying, you know, receivable for 95 100 days instead of 35 or 40, has a big impact. And so we've kind of got this perfect storm of not only a down cycle in the industry, which obviously has happened before, but there's a big change in the relationship between shippers, carriers, brokers and all three. And you know to the point earlier, they're kind of blurred between who's an asset, you know carrier, who's a broker with their own trailers and own assets. They kind of blur that line. And are they a tech company and how do they use data analytics?
Speaker 2:so it's let me interrupt you there because you gave us a great answer, with so much that it's going to be hard for me to circle back to everything I want to circle back to here. So let me start with the just the evaluation process. You just kind of brought up an interesting point around. It's hard, you know, you're not necessarily when when someone calls you and says hey, john, I want to borrow some capital from you, I want to work out a deal and maybe L. How are you evaluating providers now? What was historically? How did you evaluate? Is this going to be a good deal for us? Is this someone who I should trust and have confidence in? And how is that changing, as kind of these lines blur and the models are changing? How do you think about all that?
Speaker 1:First and foremost, we're collateral based right. So we're going to look at. You know who are your customers, how are they paying their bills? You know what does the how does the collateral perform? Because, more than anything, I'm going to lend you money based on that right. You know, balance sheet is secondary to what we look at.
Speaker 1:But the issue becomes for us Now what is your cash burn and how long do you have what right? So it's become that situation of we know that liquidity is tight in the marketplace. So before we would say, okay, you know, that's fine, you'll go out, you'll raise $10 million, $15 million, when liquidity really gets tight, that luxury doesn't exist anymore. And even if the dollars are out there, the valuations are so low on these companies that there's a lot of pushback to bring in any new dollars because of the equity they have to give up in the industry. So what we are really looking at is the experience of senior management.
Speaker 1:How have they navigated through this before, if they've been through it before, and you know what relationships do they have that they can, you know, utilize in a worst case scenario and we're seeing it a lot, you know, in the portfolio now where, like I say, the balance sheets are starting to suffer and there's very little liquidity left. And it's a question of, okay, you know, what can you do to change your cash flow model and to change your cash burn? You know, and, like I say, you know everybody goes through kind of those Okay, we'll stretch the carrier payables three or four days to start, and then you know, okay, maybe we scale back on some of our offshore headcount, and you know things of that nature. So it's there's a lot of discussion now of what is the business plan to get through what could be another nine plus months, you know, before there's a meaningful cash flow recovery in the industry.
Speaker 3:John, you're basically saying that there's this reckoning that's coming, or is? In the process of happening, absolutely. What is the? What is the remaining runway? I mean, we're seeing, you know, the dominoes are starting to fall a little bit, but like what is this? That now a weekly occurrence and what do you see going forward?
Speaker 1:So you know the Andrews point earlier when you kind of talking about dollar margin and you know what's average, it really depends. It's such a unique industry and how people approach it. So there's there's a big range and just I'll give you, you know, my portfolio as an example. There's, there's some companies in my portfolio probably have 30 days before they need to bring in outside equity. You know there's others that could easily last another 18 months based on kind of where they are. But everybody, you know the last nine months have really been the start of that reckoning all where it's okay. You know cash is starting to go get a little bit lower. You know availability on the working capital facility is starting to get real tight and and there are scenarios in which that's fine. You know, in hyper growth scenarios you know Andrews well aware of this and Molo right, there's a lot of. You know liquidity needed to grow a company four times revenue, you know, every eight, 12 months.
Speaker 2:Yeah, we were calling you regularly trying to increase exactly. I mean, the focus was always on the phone with you, you know so.
Speaker 1:so there's there's times where tight liquidity are for good reasons, right, you know, it's that different, but good, same thing in our world, right, in the finance world. But that's where sometimes, you know, outside equity comes into play and things like that, you know. Or it's okay, let's just keep increasing the line and throwing more fuel on the fire. It's different now. It's survival mode, now it's you know how how many weeks do we have left before, you know the factors cut us off or the carrier stop, you know, taking our calls.
Speaker 2:The factors cutting you off. The factors cutting you off is a is a big deal and you know I think it was, yes, it. You know we saw it with OTR cutting off convoy, maybe a month and a half ago, two months ago. And this is another interesting thing where, where media plays an interesting role, because you know if the media goes and publishes to the market that a large factor has cut you off, like like what happened with convoy, there is an immediate fall out. There should be getting concerned around. Okay, what, what's really going on here? Do I need to be pulling freight?
Speaker 2:And you know this just happened last week where I saw one of the facts. So basically, freight waves came out and said we've heard that another digital broker is going under but they didn't say who and heard some murmurs or who it might be, but that's not even the point here. But the next day one of the factors, basic block came out and said we're no longer supporting flock freight and he basically said I think their CEO came out and said you know, we just heard the news and we wanted to protect ourselves. Everyone's job is to protect themselves, but it's a domino effect and you know, once that first domino starts to fall. If you lose OTR, if you lose RTS, if these factors won't work with you, that is a huge blow to your capacity. There are a lot of that you won't be able to work with. Can you talk about that, john, for just a second, so our audience understand?
Speaker 1:Yeah, and that goes back to the point of you know, a carrier has to get paid and as soon as the factors start saying telling carriers, yeah, we're not carrying those receivables anymore, they've got two choices right. And here's how a lot of the factors work They'll carry that receivable for you for 30 days, but it's going to be at carrier risk essentially. And if it's not paid on that 31st day, it gets charged back, so the carrier no longer has that borrowing capacity. So then that next invoice they don't really get any dollars back, it's just going to cover that. So they've got a tough choice.
Speaker 1:The carriers now have to say, okay, do I continue working with company a? They've been a good broker, but I don't have any visibility. And my factor is telling me you know, don't, don't work with them anymore, essentially. So that's where a lot of brokers are going to run into issues that if they can't start covering loads because carriers won't work with them, well then they're damaging their customer relationship because now the shippers are going to say, okay, wait a minute. What's going on? You know, if their efficiency ratio start to drop, the shippers are going to walk away, and that's another. I think change it to some regard in the industry is shippers are much more willing to either renegotiate contracts they signed six months ago because market conditions have changed and you know they want the benefit of whatever the conditions are, or they'll walk away because there are a lot of brokers out there now, so there is an ability to pretty quickly pivot from who they're working with.
Speaker 1:So the issue for the brokers is, once they start getting cut off by, you know, the major players and on the factoring side, they're going to do damage their carrier relationships and then they've got to spend more time trying to place loads, which, as we all know, is going to eat into their margin, which is only going to exacerbate their liquidity and cash flow issues. So, and that's where it all starts to snowball, and what you're seeing is essentially everybody kind of stepping back and saying, well, I don't want to be the one left holding the bag. Right, credit insurance companies kind of start that process. Then the factors are saying that.
Speaker 1:I mean, I've seen it with the large banks who are in the transportation sector, which means, when times are good, they're more than willing to give you a line of credit, with all kinds of financial covenants and everything else. But then, as soon as the market turns, they're the first ones to walk away. You know we've had some very nice transactions come over to wind trust that you know. The large banks have basically said look, you need to find a new home and since our structure doesn't have those financial covenants and isn't really balance sheet focused, we can not only bring them in but we can give them more liquidity and a larger working capital facility. But, like I say, the problem is that then all trickles down. So it's now trickled down to the factors and that's where we'll really start to impact the brokers and the carriers within the industry.
Speaker 2:So you can say with confidence that over the next few months there's more trouble coming for the brokers in this space.
Speaker 1:Absolutely. And then, like I say, that will then trickle down to the carriers, you know, because somebody is going to be holding that receivable. So it will also impact the factors, you know, because they can certainly pull back, but they can't completely cut their exposure to the industry. It's what they do. So, at the end of the day, there'll be an impact across the industry, not only to brokers, carriers, but also factors, the, you know. The credit insurance companies will still take some losses, but not as significant, you know. So it really is who's going to take the biggest hit and win.
Speaker 2:So you know, I think that this should serve as a Canon moment or event or whatever they say about how shippers evaluate providers, and what was never a conversation around liquidity or stability or financial viability, I think needs to become part of that conversation and I hope that shippers what I think shippers, I hope shippers do is get more nuanced in how you try to understand what a provider is offering.
Speaker 2:Ask a carrier, ask a broker how do you procure capacity? What are the rules of engagement that drive how you choose which carrier goes on which load and at what price? There's just so much more to the story that I feel like shippers don't often get, and this is something that came up in the first time Dan and I faced off with Cassandra Gaines. I mean an argument that I think it's important for shippers to think about this and to think about the longevity a broker has in the market, and you don't necessarily get all the answers on the far. You can't necessarily get all the answers, but it would be interesting if shippers started asking for financials. You know, I don't know that we get to that point, but it would be interesting.
Speaker 3:I think you raise a good point, though, about you know you do have to ask questions around. You know the financial health of we're going into a procurement cycle right now. Right, the bid events are starting up, and I think these types of questions that have never been asked historically are going to need to be asked or in some way shape or form, and so it'll be interesting to see how those conversations play out, because they've never really been had before. All right, so it's really interesting.
Speaker 1:Yeah, I think it's a little bit more Andrew than just hey, you know a shipper coming to a broker and saying, ok, open everything up and let me see what it looks like inside. I think what a lot of these large shippers have failed to realize and respect about the relationship with some of their larger transportation providers is it's a partnership and you can't constantly beat up your partners over pricing because next thing you know, one of your largest transportation providers is closing their doors. Right, so it's I respect. Ok, maybe they should look, you know what's, what does your financial picture look like? I understand that, but I think it's more important than that. I think it's a partnership that they have to realize.
Speaker 1:You know, pushing someone to 90 day terms but saying, but that's OK, we partner with these two banks and here's the cost. But as interest rates go up, you know again to that point, that cost keeps going up and up and it becomes harder and harder for these companies, depending on the industry cycle, to navigate through that. And I think there's a lack of respect by a lot of shippers for that aspect of the companies they're working with. You know it's it becomes so important about their bottom line that they lose sight of the fact that they can't put these companies under.
Speaker 2:Well, it's a double edged sword, right, because part of it is yes, shippers saying I'm going to take advantage of the market condition and our quote unquote partnership by raising you from 30 to 60 days or 60 to 90 or 90 to 120 pay terms. But if, if a broker won't accept that, then a shipper can't enforce it. And the problem and this is again a challenge of how undifferentiated and how how many brokers are is that a shipper can get away with saying I'm raising you from 60 to 90 days and the broker is going to say yes, because they know that someone else will take the freight. So part of this is everybody's got to be a little bit more disciplined and brokers need to understand hey, am I going to get in bed with this large shipper that, yeah, I can get 10 to 20 million dollars of spend from, but the cost of doing business is way exacerbated by you know the pay terms.
Speaker 1:I think that's part of the reckoning, you know, that Paul mentioned earlier is I think there were companies that were just willing to buy that freight regardless. Right, I'll take those terms, that's fine, my margins get squeezed. I'm going to take that freight, and you know why. Because in 18 months the multiples on you know what I'm doing are going to be so significant, based mostly just on the revenue you know and the top line that you know it is what it is. I'll buy that freight all day long because you know two years from now it's going to be somebody, some private equity groups, going to come in and buy me out, because, of course, you know there's the smartest guys in the room so they can always run a company better, right? Then people that know the industry there's no sarcasm in that comment whatsoever, no, none whatsoever.
Speaker 1:So, but that's part of where we are in the cycle right now. I think you will start to see that shift, but those kinds of things don't happen overnight, right, that's an industry-wide, you know mindset that's going to have to change and I think that's where, you know, the next three to six months, we're going to see some pretty significant differences in the market and how companies approach the market, absolutely.
Speaker 2:Really great insight, john, and you know, I guess, to summarize John's perspective here, you know, while this is certainly the end for Convoy, it's not just the end of the challenges and there will be more challenges coming in the near term for brokers it's going to.
Speaker 2:You know, as a shipper, if you're looking at your partners, I would be thinking about the companies that are most financially stable, that are capable of being most flexible in pulling the levers that need to be pulled. If I'm a broker, you know all the frustration I maybe have had towards my bosses for changing compensation or cutting this or that. You know, at the end of the day, I'd rather have a job than be on the street, and I think hopefully this whole situation opens everyone's eyes to the challenges of running a brokerage in complex, cyclical markets and the fact that it's not easy to make the decisions that brokers have to make to get by and keep going. But you know the right, hard decisions need to be made. So before we close here I appreciate everyone's time I do want to turn to Zach and Ryan once more and kind of ask them to think about your time at Convoy. What, to you, was the greatest accomplishment of what the company was doing and what, to you, was the biggest failure and the biggest miss.
Speaker 5:I think you'd be hard pressed to say it didn't change the industry, so I wouldn't take it back for a minute, like obviously an outcome that none of us wanted to see. But I do think that you know we change the industry, like I think that tech and digitization is here to stay. How it's adopted, I think is going to be more mainstream and I think some of the things that Convoy did or helped develop or push further along, I think you'll see those as more mainstays. I mean, you know I've heard a number of people say, even when you think about, like the latest, like a hybrid carrier function, like every asset has a brokerage division, every broker has the ability to procure trailers. Some of those are doing the other one well, some not so well. But I think the future of the industry is probably more of a model that's more flexible and ability to do both. How that works out with the capital structure I think will be interesting to watch, as I'm sure John's looking at too, Because, like he said, it changes the game, like it's no longer just scaling up and down people once you own assets and bring that to the equation. But I do think it injects a level of flexibility that shippers and everybody in the industry want. It's just like how do you bridge that gap? How do you get there? And quite frankly, I'm not sure we're ready to get there yet, but I do think it will be there soon.
Speaker 5:So I think that was the greatest part for me to see, and I mean the worst was just the end of it. I mean there's not a world where I expected that outcome to be how it was. I thought for sure there would be an exit, something would happen. I didn't think that we'd be looking for jobs, so that was super interesting. I'm fortunate. I met a lot of awesome people along the way. So I think, again, the positives far outweigh the negatives. It was just a really great group. So I'm sorry to see it see it on like that, but looking forward to what's next.
Speaker 4:Thank you. I agree with everything Zach said. From my perspective, whether it was the perfect storm of tightening monetary policy or come combined with the soft freight markets or, as Andrew, as you speculated earlier, trying to boil the ocean and work on too many new things at once, resulting in just too much overhead, I just want to reiterate how incredibly experienced of building Commva really was. I'm proud of the work we did and the innovation and pulling the industry forward in so many ways and bringing so many smart people into the industry that otherwise never would have considered a career in trucking, and my company Goodship, for example, wouldn't exist if it weren't for the learnings and culture and relationships that were created at Commvo. And so, even knowing the way things ultimately would end, I think I would still do it all over again in a heartbeat, and I'm grateful to have been a part of it.
Speaker 2:Great feedback and, paul, any kind of parting thoughts from you, whether from your personal experience with Niagara and working with them or just in general of how you view the situation.
Speaker 3:No, I just appreciate everybody's time. It was a wild ride. I certainly learned a ton and, like I said I'm of the camp that a lot of new, interesting, innovative approaches were brought to the space. It caused me, as a pretty seasoned professional in this industry, to think about it differently, even looking at the same data, but looking at it in a new way, and so I'm very you know, I feel very fortunate for having had that opportunity. I will certainly take those lessons with me and, yeah, just appreciate you guys. Great conversation. Thanks for being here.
Speaker 2:And I'll close with this. You know we didn't talk a lot about the reaction to Commvo's news was interesting and there were a lot of people, I guess, cheering the end of this saga. And you know a lot of pitchforkers out there. And I will say, you know, at a point I was a pitchforker, at a point I had the pitchfork and my reasons. Maybe I didn't think it was as legit as it was marketed, whatever it was. But I loved competing with Convoy. I love competing with everyone in our industry and I especially liked competing with Convoy because I was constantly, you know, in the same room with shippers that they were in the room with and trying to beat them and whatnot. And so I wasn't necessarily cheering for Convoy, but I won't cheer in the face of the kind of the end of it. It just, you know it's way more fun when everyone's in it and you're competing with one another. And that's what makes this industry so fun is that you know you can go head to head and somebody comes out on top in terms of how a shipper views you. And that's what I cared about and that's what I was pushing my team. We always wanted to be the number one provider in a company's network. So I liked how Convoy challenged the status quo there. But I'm not cheering for the demise. I'm not happy that it's over. So I think everybody that is excited about it. I think you got to rethink kind of your motives and whatnot. But you know it's an interesting story. It's a fascinating story.
Speaker 2:I appreciate all three of our guests, zach, ryan and John for sharing your perspectives. I hope our audience got value from this. I hope we weren't too biased or opinionated one way or another. We really just wanted to present as much of the interesting information as we could. And to all the listeners out there, you know the Freepod. Welcome to it if this is your first time. If not, thanks for sticking around. You get your lucky duck extra episode this week. With that said, thank you all. I hope you have a great week and that's it from this special episode of the Freepod. Have a great day.