Global Trade This Week – January 24th, 2023
What’s going on in Global Trade this Week? Today Doug Draper of Inland Star Distribution and Trade Geek Pete Mento of Mento LLC cover:
3:10 -Temp Controlled Cargo Growth Despite Lack of Investment
9:47 -Rail Industry Concerns for 2023
16:34 -Halftime
28:35 -Mexico’s Drug War and Impacts. What Can Be Done?
34:41 -Warehousing Lease Costs
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Keenan Brugh 0:00
You're watching Global Trade This Week with Pete Mento and Doug Draper.
Pete Mento 0:10
Hello, and welcome back to a another exciting week of global trade this week. We've got your varsity team, we got the A Team folks. All right, none of this none of this backbench stuff here and it's back where he belongs behind the controls. I mean, honestly, I think it might be that I'm just afraid is going to take my spot. That may be what it is. It could be it But Doug, it's great to have you back, buddy. I know that you were busy out on the West Coast. The best Coast probably just what we do you have a bit of a tan. It looks like you got a bit of a tan.
Doug Draper 0:43
I don't know. I think I'm good. It was, you know, I was in Fresno. And, you know, it's all the rain and everything and everything that folks are seeing on the news is very real. And it is happening but in Fresno. It was a light to moderate rain and it felt like the newscast thought the world was imploding so I'm driving I'm like when's it coming? And it was just you know, the in from Texas in the Midwest we no rain my friend and it wasn't wasn't too crazy where I was so that doesn't go anything against what's happening out there on the coast and things it is real. But I chuckled a little bit whenever a steady all day rain was catastrophic.
Pete Mento 1:32
I don't know about Kansas man. But like in Texas, we would just complain endlessly that it didn't rain enough. And then you would get like those flash flood rains and it would hit that really hard dry sort of clay. Texas Land and there's no place for it to go and you would just flash flood you like Why is it raining so much? And you would say to people we were just complaining endlessly and praying for rain. And here it is and all we can do is complain now that it's raining you people just stop complaining about the weather.
Doug Draper 2:03
Yeah, that's that's what old people do. Get off my yard talk about the weather. And the good old days.
Pete Mento 2:10
Get off my lawn. My lawn. Don't touch my car. Yeah. Speaking of old timey I do have on the Brent Musburger. 1980s full on CDs sports, yes. Headphone today, because I am really dealing with it as far as my AV goes. So I am old school in it today. Man, I feel like I should be either doing TV weather and traffic from the global trade this week traffic copter. Which kind of fun. Or I could be doing play by play of the, you know, local division three college football game. They give you one or the other? I don't know. Yeah. Yeah. So this week, we are doing some little different, mixing it up a little bit. We have a pretty big news story that came through something that we had predicted would happen in our prediction show, we think is going to continue to be a problem for the coming year, which is it was a pretty major layoff but and we wanted to devote the first half of the show to discuss it. So I don't want to start off.
Doug Draper 3:16
You know, sure I can I can do that. So here's the gist, right of of everybody is Flexport laying off 20% of its workforce. I think that press release came out a couple of days ago. But that that's that's a big one. So here's, here's my take on this, right. So in the last couple of weeks, the stuff and then newsworthy is the tech bust in Twitter, and meta and all these social media things that we interact with. But we've talked about it for a while that the technology has infiltrated educational tech, medical tech, and we spoken about large tech, lot logistical tech, and when you have tech in it, and there is a tech bust, if you will, that is going to be part of the of the downturn. So Flexport is one of dubbed one of those digital freight forwarders. Right, so there is a tech overlay on it. And so the tech bust is just permeating to different levels. So I think we're gonna see something similar and educational tech, Ed Tech, med tech, the summary ello med techs a little bit more mature than some of the other tech overlays that we've had. But, you know, here's here's the thing with this, Pete is that I don't know a lot about flex port. I know they've made a lot of waves. I know they're out there and that the the overlay in the concept of the digital freight forwarder. Is that it? It sounds great, right? Let's put bells and whistles and API's and interfaces where humans don't have to get involved. But you Know what this industry and you've said it before in some of your postings and even talked about on trade geek is forwarding a transportation is still pretty much old school. And that, you know, there's a driver out there that may be working on the drainage from port to warehouse. Well, a lot of those guys are turning a wrench on a Sunday so they can start their truck up and work on a Monday or Tuesday. Or there could be some phenomenal technology that somebody could access through a digital freight forwarder where Sally Smith or John Davis knows they can access it, but they like the report that they get from their freight forwarder because it helps them understand what's going on, they can ask answer and ask questions. And you know what they get to understand what that Sally Smith is over the weekend. My point being is that the tech overlay can only work so much and our industry is still decentralized tremendously, right? You got the integrators, the vertical, integrate that own and manage their assets and things that this works? Well, I fully admit it. And the whole digital freight forwarding concept is real, I just don't think it's as mature. And there's still guys behind there cranking the wheel and trying to get shit moving. And five, five phones against their ears trying to put out fire and damages and everything else. So behind the scenes, there's there's still a lot of non tech in our industry. But if you're a vertically integrated company that owns assets, the connectivity is real, and it will come. It's starting to come but this is just an example of it may not be as far along as we think and the concept of digital freight forwarder I think is a good buzzword. But kinda like blockchain, or crypto, people are like still unsure about how is a digital freight forwarder really different than a traditional freight forwarder. Other than I can't talk to Sally Smith about her weekend when she sent me her daily transaction report. So it doesn't surprise me Pete, I guess the bottom line is it doesn't, excuse me surprised me about a workforce layoff at Flexport.
Pete Mento 7:16
You give me a lot to unpack there, Doug. So I've never been at a loss to talk about Flexport. And I'm going to temper a lot of my remarks by just saying, right off the bat, I have a lot of good friends that still work there. And I was I was very sad to hear of a lot of friends of mine that don't work there now. So this is for such a big industry that is so important. It's really weird that it's such a small industry, that we all have friends of ours that work everywhere, you would have a difficult time going on LinkedIn, and dialing up a major freight forwarder you know anything, let's say bigger than 100 million, then either you are i Not knowing somebody who works there, it will be difficult because we've been in the industry long enough. So there's this, I took German in high school. I'm relatively conversing in it still, you know. And one of the things I love about German is these big words, these long, big words. And of course, you know what we're about to say there's this great big German word called SHODAN Fraida. And the Germans have this fabulous word for taking pleasure in the pain and uncomfort of other people. You know, and you you, you just saw it happen. On LinkedIn. As soon as it happened. It was like, Yeah, all right, you know, it's like, it's like there were teams playing. And you know, team, old fart freight forwarder scored a touchdown off of a fumble or something, because of the economic, you know, dissatisfaction or problems of Team digital freight forwarder. And I think that was a really shitty way to act. Like, I don't, I don't ever want to feel good, that my ideas were proven right, because somebody else had to go home and tell their family that they don't have a job anymore. Because I had to do that a few months ago, and it sucked. So you know, beyond all of that. It was just seeing people I have respect for, you know, going online and being Yeah, that's right. Take that flex port, you know, and, and it was amazing to watch. But then in 24 hours, you started to see people in the press, people in the finance rags start to come out and say, what are we really seeing here? Are we seeing a lot of people in operations and sales, but them saying they're gonna double down on engineering? So is this them putting more money in the technology in the platform and saying this is where the money is going to be in that Logitech, as you said, Doug, it not so much in freight forwarding, which we don't know if we have a key differentiator where we do have a key differentiator and technology? Are we seeing them just admit that where the money is going to be made is really going to be in selling and leveraging technology, getting people to buy their, their ones and zeros? I think that had a piece to do with it. And then also what you kept hearing about was these new hires from Amazon, some of whom I know, people that came from Amazon, to this company who are going to change the way that it's run. Is it because you could do an IPO? I don't know. Is it because he's a lot? I don't know. Is it because of investor focus and investor pressures? I don't know. But when you hire people that come from a very large digital platform, and that's all that they know. And just take a look, take a look at the resumes that these people dug. It's all they know, they're going to start to run it like it's all they know, than when they were working with people who did not come from traditional 14 backgrounds. And you meld them with people who all they know is digital, and it were the voices of the people who've been moving freight. I don't think that there's enough of them screaming into the void right now. I love talking to people and saying, so tell me what digital freight forwarder is. Then they say, Well, it's a transportation company that using, you know, it's using a digital platform to move data back and forth. Cool. How is that different than insert freight forwarder custom sales broker here? Yeah, how how, you know, well, and they have a hard time doing it. Now, if you begin to peel the layers of the onion back, there are significant technological differences. But I don't know how the customer's interaction with it is easily defined, and then easily related and translated out of that person's interaction. So I think that's where we're going to lose it. But that may change. And that's really where all this money is being dumped into these platforms, is the hope that somewhere down the line, this investment will pay off in that huge differentiation. And maybe I'm going to eat my words, it wouldn't be the first time Doug, right, where a digital platform, you know, or anything, you know, some big financial windfall, and maybe eat my words, we'll see. I think these massive companies that are pouring a bunch of money, their technology would have something to say to these platforms, because more of them are failing than making it.
Doug Draper 12:19
Yeah, no, we're, we're speaking the same language, the whole concept of what is the difference between digital freight forwarders yes, there's some there are some very clear differentiators. But our industry is so segment, I go back to the there's still guys and gals out there that are hand to mouth, in providing exceptional services, to freight forwarders that have zero interest in technology interface that could give to you know, what's about it, and they just want to keep their truck moving in their tires, you know, the wheels ain't turning, you ain't earn and they got to put food on the table. And so there's still a lot more of that, than I think the general public understands. Therefore, it's going to take longer, rather than the integrated integrated companies to really embrace what a digital freight forwarder can bring to the table.
Pete Mento 13:11
I'll punctuate my part of the conversation with this I two conversations with consumers of a digital platform last week digital freight forwarder. And the first one was, God, I hate using them so much. And I said, well, then hey, you know, who's your buddy? Who's your pal? Who needs some freight? And they said, um, I just I love their systems so much. And they said, so you're saying that their systems like the PIO management, the tech is so good, that you're willing to deal with the haphazard mediocrity of how they manage you from a customer service standpoint, they're like, well, at this point, you know, I can't I really need it to run my supply chain. So when things get better, then you know, we can talk? Well, you and I both know that once you're in it with their systems, it's just not gonna get better. Maybe that's the play, you know. And then the other conversation I had was, with a company using a platform, it was a lot different where they said, I don't feel like I'm using a freight forwarder because I do not have a legitimate connection with someone. And that's ultimately how they're going to lose me. So things are fine. Everything's going fine. But my business is growing so much that I need someone to help and guide me that's been there before. And I'm not getting that right now. And I'm wondering how they overcome that without losing their edge.
Doug Draper 14:34
Yeah, exactly. Well, let's bump this thing to our favorite time of the show when our favorite it is my favorite. You know what this shows about global trade and logistics. So maybe that should be my favorite part because that's what I'm talking about. And that's what we don't get paid to talk about. But the halftime always brings the best of us out. So I liked yours. So I say we started with yours and then with mine.
Pete Mento 15:04
Yeah. So, you know, I'm a guy who doesn't have what I would call a complicated hairstyle, Doug. I'm follically challenged. So getting haircuts pretty straightforward. I could do it myself if I had eyes in the back of my head, or I could use a mirror pretty well. So I went to my usual Barber, and the line was atrocious. So I went to my backup Barber, who had not been to since the pandemic, and lo and behold, they've been bought. And I walked in dug to a room where there were three chairs. Three dudes who had tattoos on their hands and their necks. They were all wearing like flannel shirts. With the button up to here, it's a lot like Kenan, you know, saying, right? They they had the skinny jeans on and hiking boots that had never seen a trail ever. I'm like, very much have they? They smelled of like, you know of pears and rose petals, lots of product. And the guy that cut my hair, he had like, one of his tattoos on his hands, of which there were many was a like a straight razor, right? Where his you know, right was these guys were like, barber baby like it was always it's like if I had, you know, a tattoo of Adam Smith on one hand and Keynes on the other like, economist for life, you know what I mean? Like they were, it was as though they they had just bought into this idea that, that it was like, like, it was a I don't know, like a pop culture kind of when did the barbershop not be a place for I would go when I was 15. And there was a playboy somewhere in that pack of magazines and like, Dude smelled like stale cigarettes, and mid marriage depression. And there was like one television that was on. And if there was a hockey game it was going to be on. And, you know, everybody knew everybody's crap. But Doug, like, is this just one of the signs of what's gone wrong? With the adult male there wasn't a single guy in that barbershop that could change your own oil, or change their own tire. Nobody knew how to get a fish. The I guarantee you it was just it was it was just like the saddest place. Now. I did a great job on the haircut. Like he did a great job did a great job in my beard trim. So as far as the actual professional work went, fabulous, but as far as the whole ambiance of being at the barbershop I felt like I was at a club for history losers, you know? It just wasn't for me, man.
Doug Draper 17:59
Yeah. Well, I can see that point. You and I, your your hair cut probably takes 45 seconds. Mine takes maybe a minute and a half. But But I get it. I remember going old school, all the things that you just described. The one barber I went to he had these things. We put them on his hand. They were like they would. Yeah, and they would give you a back rub and stuff. And like, yeah, those don't. They are, they exist. And I want our audience to throw out some names to give some of these places some street cred, but they exist out there. They're just not. They are in the minority. by far and away. So
Pete Mento 18:40
it's frustrating man, like that was the barber shop. There was a place in New York. When I went to New York, I used to get my shoe shine that go get my shoe shine. And it was just there a few places that were no nonsense. Went in there. Got it done. And now I feel like if I'm not dressed appropriately, I don't fit in. Yeah. Got for us.
Doug Draper 19:03
All right, this one I've been I've been waiting to talk about this one for a couple of weeks now. And this is there's a company out there called Open AI. And they just came out with a service called Chat, G P T, which stands for generative, pre trained transformer, which sounds like exactly that a transformer but it's a chatbot. Basically, it was just launched in November of 22. So just a couple, two months ago. And it builds on the open AI which is a company, their platform of length, language modules and fine tuning and reinforcement. Basically, it's a chatbot that learns and can kick out some pretty amazing things. The one thing that sweeping that people may have heard about is it's the new way to forge essays in college. I got two kids in college He, both of them are keenly aware of this. And it's only been around for two months, I have no idea if they're going to use it or not, I have zero plans to ask any questions. I'm all about D for diploma, just get them out into the real world, and they can figure it out. But it, it's absolutely amazing, you know, Google search, and the whole concept of search really made it so you and I are not when you and I had to memorize the periodic table of elements. And that was like, weeks or months of school, they don't even teach that anymore, because you can just Google it, right? So this is a slippery slope. Two, you don't even need to know how to write, you just need to ask a robot, some questions. And one thing I'm gonna do Pete, just to have our audience do it, I have it pulled up, you have to have an account. And I have it pulled up right this second. And I have something I could type in or you could give me something to type in. And we're going to read it to the group here real quick, what do you got?
Pete Mento 20:57
Just go ahead and type it into.
Doug Draper 20:59
All right, so you give me some thoughts on this, because it's gonna take me a second, then I'll tell you what I write. So you give me your comments on this. Now, give me give a comments on the whole chat box thing, it's gonna take me like a minute to write this.
Pete Mento 21:15
Oh, what I think about it. So I have friends of mine that have used it to write the reviews of their employees, because it's an onerous process. So they've like use this to write these big long, you know, difficult HR laden, which I think is fantastic. Because, you know, most of that stuff is really not useful or reviewed by the employer and the way I think that any sort of inward process where a bunch of data and writing where someone's going to use it, that's just about how much they value, what they're getting out of it. So if you're using your home, if you're doing it for your homework, that's how much the person values, the lesson and the learning. That's about how important that learning is for them. Let them use it. Honestly, I don't have an issue with it, or what you get.
Doug Draper 22:06
So I here's what I said, this is pretty mundane, so people should practice and do this is not that crazy and fun. But I said a press release on a podcast. We're global trade and transportation with two hosts that have conversations. And let me see here. And I just hit enter. And 321 is writing right now introducing global trade and transportation insights, a new podcast featuring expert insights on the latest trends and developments in global trade, and transportation hosted by Doug Draper and Pete mento. The podcast will deliver in widget range of topics including logistics supply chains, international trade regulation, listeners can expect in depth conversations with industry leaders, blah, blah, blah. The podcast is available for streaming on all platforms and new episodes will be released weekly. Tune in stay informed on the latest developments of global trade that was just written in a matter of one seconds from typing that in.
Pete Mento 23:06
Yeah, it's madness. I love it. It's my daughter wants to go to college should be a writer. Why bother kid? Yeah, my father. Yeah, you can you can just honestly just let the computer do it for you.
Doug Draper 23:19
Yeah, it's crazy. So anyway, I know that our friends over at CAP logistics. Kenan said that they have used open AI in the past not for this particular specific purpose. But I bring it up because the cap logistics produces the show, gets it out to the masses. And we always want to say thank you for giving us the platform and the soapbox to get up and and spew our comments on things. So cap logistics. Thank you. Keenan. Namaste my brother.
Pete Mento 23:48
Yes, Keenan. Keenan, thank you so much.
Doug Draper 23:52
All right. Number two, Pete, what do you got?
Pete Mento 23:54
Number two, hey, it's time again for the World Economic Forum. Hey, Oh ha who can't be excited for that. It's yet again, another exciting week out in Davos, where the world economic elite get together and pretend to care. I know that you're all excited. I know. You all woke up early, through the TV on to watch what is akin to a bunch of supervillains talk about how we're going to end up dealing with the world's problems. This is the annual list of promises we're going to make and then immediately break session. That seems to happen. I absolutely love the World Economic Forum. Because as someone who has studied economy, economics now for 25 years, ceaselessly, there's very few things that I can point to that are consistent, but here's one of them. The World Economic Forum is garbage. It is nothing but garbage. So here's here's a look into some of the things you're going to focus on this year. The electrifying of everything dug. Super important. We electrify everything and do you know why? Because in 10 years, atomic fusion is going to be Be available, and we're not gonna have to worry about fossil fuels anymore. So we need to get things away from anything that is combustible engines and straight to electricity. Because in 10 years, we're gonna have fusion. No, we're not. Second of all, whatever we can do to bring inclusion into economic concepts, the better. Even in places where there is not an issue of inclusion, how could that be you say, there are parts of the world where there is literally one ethnic group, there is no minority need to be brought there as well. I'll give you some more, we have to consider how interplanetary Earth interactions are going to actually impact Earth's financial economic future, I couldn't make this up. If I tried. There's something called Radio Davos. If you're having a down day, it's been a rough day for you dug, sit back, pour yourself a drink, give it a listen, I think you're gonna love it. This is probably for someone like me, the easiest way to make absolutely certain that you're sure you've made a huge mistake with your entire career by listening to Radio Davos and paying attention to electronic form. You'll have what was allotted to us a couple of years ago, the head of the form, you'll have nothing and be happy. Yeah, just I'm telling you, man, just listen to it. Read it. Learn to love it. i If nothing else, it is gonna give you tons and tons of material for next week.
Doug Draper 26:30
Yeah, well, the title of the theme is cooperation in a fragmented
Pete Mento 26:37
world. Fantastic. What do you think they paid a consultant to write that? I'm gonna go with five and a half million dollars and they paid it?
Doug Draper 26:46
Yeah, and I a couple of things that I realized invitation only, right? There's actually a board of directors so to speak, that can invite, you know, thought leaders, cultural leaders in in the light. And I think there is a red carpet. I kind of made that up, Pete. But it wouldn't surprise me if there's some sort of dinner where everybody walks in and people are taking photos or asking their opinion on something. It's just I'm sure the intent was valuable decades.
Pete Mento 27:20
Probably not. Duck there are there I think I think this year, there are 25 pre read documents for all attendees that you're expected to read. And I think altogether, you're looking at like 3000 pages of text. Do you think any of them read it? Do you think any of them read the prep doc that they paid someone $100,000 to put together? That's only like five pages of bullet points? No. They're just going to show up and drink champagne and go. And then talk about how they're going to use this to forge their own economic opportunities. This is nothing but a meeting of very rich people to get even richer, and then pretending to ice. I'm telling you, Doug, someday I'm unaware of Dr. Evil out fit and interview people out the front gates.
Doug Draper 28:03
Yeah. Well, your passion. You can you can see it and I can, you can hear it. And I can see it with your screen shaking a little bit when you were getting in there and get into the thick of it. I have no more comments on that. Because yours is perfect.
Pete Mento 28:18
I get so angry on this one. Alright, man, bring us home. All
Doug Draper 28:21
right, this one's a little bit, a little bit calmer, but the the catchphrases, air cargo, we've been talking about air cargo in the last couple weeks, is it going to be landing at a regional airport near up? Basically, what I've seen is recent interest in expanding regional, secondary and tertiary airports to accommodate increased volumes of of air freight. So Let's bypass the congestion centers of all the gateways. LA, Chicago, Atlanta, Dallas, New York, yada, yada, yada. And let's move all that air freight into smaller markets where there won't be any congestion, much like happened with the ocean freight and going around to the east coast, the savannahs of the world, and bypassing LA. So sounds good. It may play well in a boardroom. And I don't have anything against any company that's pursuing it. I just don't think there's any legs. They're huge. So here's a couple of bullet points, one huge infrastructure build, right? A secondary airport does not have the infrastructure, whether it's receiving freight or transitioning freight as a connector to other companies to take it on its final mile journey. Journey. And when you build out this infrastructure, the RFPs, the compliance, the planning, the yada yada yada that's gonna have to come into it. It's like, whenever you want to renovate your 1910 home, the second you change out a light switch. The whole electrical system has to be redone. So the expense of this is going to be astronomical and the time involved to make it any level of benefit capacity, again, that goes to the infrastructure bill, I use an example Pete of Denver in Colorado Springs, right? Colorado Springs, you can walk through that airport and about seven minutes from the time that you're dropped off till you're on your plane, which is phenomenal, right? But the concept of saying, hey, let's divert an aircraft to Colorado Springs because of weather. And you land, hey, you may get down there safely. But there's no connecting flights, you got to get people back up to Denver, there's no equipment, the plane may be too big. It doesn't have this, it doesn't have that. So you're wasting time, which is just the opposite of airfreight to support an infrastructure that's not built out equipment allocation. There's only so many airplanes you have and so many trucks that you can redirect. So I don't think it's really sustainable. And the air freight market in my opinion, Pete, more so than then than ocean freight, or domestic trucking or North America Trucking is very dependent on the economy, it can pivot and move real quickly. During the pandemic, when we're talking about the roaring 20s airfreight had one hell of a blip. But that's all it was, was a blip. And now we're seeing over capacity being built out in the air freight market. So I just don't understand how that's it's not going to work. It may be a good play in the boardroom, it may be a good land grab or something to go out there and talk about how to make money in somebody's backyard and the jobs that will bring to the table. But the practicality of how the air freight world is set up. And the limitations of the infrastructure and the requirements to have a secondary airport handle the type of throughput that this is supposed to lever. It's not going to happen. And I think we need to focus more on how do we decongest the gateways, then redirect airplanes to smaller markets that just need a tremendous amount of infrastructure build out.
Pete Mento 32:02
Let me give you one more thing to consider because you stole my thunder buddy. I was gonna say infrastructure, exports. The entire point of this is no different than a truck. You bring the truck someplace, you unload everything. And then you hope there's something to load into the truck to bring it back someplace. So we're going to move all of this cargo to some regional hub, take it out of the plane. And then what we can do with a plane, Doug, are we going to fly it someplace empty with nothing in it? Because that would be economically a foolish idea. So I think that's where I've got my biggest problem with all of this is, it sounds great if there's going to be some sort of giant pile of freight in Colorado Springs, in Manchester, New Hampshire, and wherever. But odds are, there won't be.
Doug Draper 32:51
Yeah, yeah. Good point on the exports. I had not thought of that when I was jotting stuff down. So well, Pete, I'm glad to be back in the saddle. With you and the team. And I can't thank our audience enough. Can't they cap logistics enough for putting this whole thing on? And I guess that's a wrap. So we will see all of you again next week. We'll have another edition of global trade this week. Take care.
Pete Mento 33:15
See you next week, buddy. All right. Thanks.