Episode Transcript
[00:00:00] Speaker A: Boost your EBIT by 10% in just a few months. Sounds like another empty promise, doesn't it? Maybe. We'll tell you it's magic. A sprinkle of fairy dust and poof. Your profits soar. But here's the deal. No fairy dust, just proven results. We've slashed late billing by 80%, recovered millions in missed revenues, and cut cash cycles by five days for some of the world's biggest forwarders. Real numbers, real impact, real fast. If you are ready to find out how we do it, visit www.ontegos.cloud.
[00:00:35] Speaker B: You are listening to the Freight Buyers Club, a home for those interested in international trade, shipping, procurement, logistics and air freight. In fact, all things supply chain in the Americas, Asia and beyond.
[00:00:50] Speaker C: Hello, I'm Mike King. Happy New Year one and all, and welcome to this episode of the Friday Freight Buyers Club Insight Today, sponsored by Ontegos Cloud. Now, just a note before we start. We are available on all podcast platforms, on YouTube and at www.thefraitbuyersclub.com. please review, follow and subscribe wherever you listen so even more people can find us. And you can also follow me in the Freight Buyers club page on LinkedIn, where all of our content will also be posted. Now, normally I would like to start the year with a note of optimism, but there's no way of sugarcoating this. January 2025 is going to be rather chaotic. More hangover from hell than clean slate, if you will. Certainly, if you're in the business of shipping or supply chain or freight buying or procurement, you have a lot to consider right now. Take your pick. Container shipping alliances are being realigned. A new US President is threatening trade flows and promising new regulations almost on a daily basis. We have looming port strikes from January 15th in the US that could disrupt a large chunk of global trade. And on top of all of that, we have some worrying threats to shipping logistics from bad actors and the Red Sea. Shipping diversions don't look like being resolved anytime soon. So in many ways, the start of 2025 is going to be more about how best to cope with the challenges kicked down the road from 2024 than it is about new beginnings. But amidst the dark clouds, I think this episode of Freight Buyers Club Insight will give you some ideas and strategies into how you can manage all of this confusion. Or at least put it into context, both in the short term and long term. Not least because my first interview of 2025 is. Well, it's a bit of a cracker. He is the founder of Inception Partners, an independent advisory which focuses on shipping, ports and logistics. He worked for the Nedloid Group, P and O, Nedloid and maersk group for 33 years of which the last 15 years was as A.P. moller, Maersk's regional president for respectively west and Central Asia, the Asia Pacific and Latin America. Since 2023, he has worked with clients as an independent advisor and as a senior advisor to McKinsey & Co. And today he will be sharing all his expertise with us. Robert Van Truurian, it's a pleasure to have you on the Freight Buyers Club for a chat. How are you and did you have a good New Year?
[00:03:19] Speaker B: Really well thanks Mike for having me and New Year's was excellent and I hope yours was as well.
[00:03:24] Speaker C: Oh no, it was okay. It was okay. You're. I've got a bit of a cold. Sorry. Anyone listening? It's sort of a bit snuffly. Robert, you're, you're now located in Panama which is raw rather timely considering some of the shouting around the ownership of the canal which will come back to a bit later on that. But on a general level, how's life in Panama and why Panama if I may ask?
[00:03:46] Speaker B: Panama is excellent. It's the tropics, the climate is, is very good in many ways and this is why we decided to stick around here after I finished my last job at Maersk which was based here in Panama. So that's the reason why we are still here and we're loving it.
[00:04:00] Speaker C: Well that's very understandable and I say that from a very cold and gray England. Okay Robert, I was thinking where to start this interview because there's so much going on. Let's try this Leadership. Over the course of your career you've been involved in multiple organizational transformations particularly at Maersk and particularly as Maersk was becoming a supply chain player and moving away from that more traditional port to port shipping business that, that was the foundation, at least on the container side. I know you were involved in the integration of Maers with this forward in business DAMCO in the Asia Pacific. Maybe you can explain a little bit about these experiences to get us going. But also perhaps maybe you could explain what leadership lessons you learned from these experiences and any relevant others that perhaps might be of use to listeners attempting to lead their organizations through the obstacles they will face in 2025 which probably going to be quite substantial.
[00:04:59] Speaker B: It's a really relevant question because shipping is a cyclical business and as you explained in your intro, there's going to be a lot of moving parts in the industry in the next couple of years. So undoubtedly there's going to be some need to integrate, to reorganize, to look for efficiency. So to give you a bit of context, when I joined Asia Pacific actually it was two regions in one. North Asia was one region and Asia Pacific was another region, which was actually only Southeast Asia, Oceania at the time. So the first job was to integrate Asia Pacific into one region as MERs Line as the only ocean shipping business. Secondly, China was getting three in those days, so there was not one China organization. So that's the other thing we did before we even started thinking about Demco. And the third one is indeed, as you say, to integrate the largest organization in Maersk at the time. Both Demco was the largest Demco organization was Asia Pacific and for Maersk Line, the largest organization was Asia Pacific as well. So integrating those two was actually quite a task. Some of the things I learned, first of all is that in logistics, because what DAMCO was doing there was not just ocean freight forwarding, but was actually contract logistics, warehousing and distribution, air freight, et cetera, is that the sales cycles for all of these products are very different. The ocean shipping sales cycle has a certain timeline, but contract logistics sales cycle is almost two years from start of the negotiation, the start of the approach to the finalization of a contract. So to have a salesforce that sells both contract logistics as well as ocean freight as well as air freight was quite a. Was quite an integration. But for me, the biggest learnings were actually two. First of all, that organizations are around three themes, people, structure and processes. And when you look at reorganizations, the first step is always let's make an organization chart, let's put names in boxes, and then we're done. The third part is actually mostly forgotten, which is that you have to rewire all of the functions working together in a different way. And that's often left at the aftermath or almost forgotten. And our reorganizations fail because we have names in boxes and probably the right people in those functions, but we haven't defined how those people should work together in a new context. That's number one. Two, during reorganizations, keeping a focus on the outside world and on the client is actually really, really important. And often when organizations reorganize, they tend to withdraw within themselves, be entirely focused on whether they have a job or not and what job will they have and who will be their new boss. And sometimes the client is forgotten in the process. And that's usually the time where the competition says, listen, they are off the ball, they're not paying attention. This is the time where I'm going to steal some customers away. So keeping your eye on the ball and keeping staying open for business is a really major factor in reorganization. So appointing the right people, not forgetting the nervous system as we call it, and not forgetting the client in the process, those are the leadership learnings I've certainly had.
[00:07:54] Speaker C: Not forgetting the clients in the process. This could be very relevant to some of my questions later on about liner shipping alliance reorganizations and some of the problems that we might be looking at on the ocean supply chain side through the course of 2025. Let's look at some of those challenges now then. First up we have this possible strike from January 15, a container port on the US east and Gulf Coast. Incoming President Trump appears to be taking the side of Harold Daggett's ILA union against liner and port interests represented by the US amex. The two parties have agreed a major pay increase already. The sticking point is automation and the ILA pretty much wants to row back against any tech that could limit employee numbers in any way. As we're speaking on the 7th of January. Talks have resumed this week, today in fact. But not many people expect a resolution. In terms of timeline, this possible strike over a new long term contract could be happening just ahead of Trump's inauguration on January 20th. Now with your extensive container line executive experience, how do you think Robert, this is all being viewed in carrier boardrooms and does it vary, say in Europe? I'm thinking Maersk Lloyd cma, cgm, msc compared to how it might be viewed in boardrooms in Asia and those container lines over there in terms of maybe how they see being dragged into this US political hot potato psychic insight into.
[00:09:24] Speaker B: The minds of the CEOs of shipping line executives. But I do think that there are several factors to consider. The first factor being that the US shipping industry is actually mostly in the hands of foreign investors. If you look at the ports environment, most of the terminal operators, with perhaps exception of Stevedore and Services of America and Ports of America, they are in foreign hands. So from a voter and from a political perspective, I can imagine the US President would have less interest in satisfying the investors than if they were US interests and domestic interests. So you see both a Republican president and a Democratic president choosing the side of the union, which in historic context I guess is less expected than that. I would assume that first of all the US over the cycle is a significant commercial interest for most shipping lines. So I guess most shipping lines want this to go away and want to have a sustainable solution that keeps business flowing. On the other hand, at some point automation is inevitable and you've seen it on the West Coast. Actually the west coast deal with it comes to automation is more progressive than what the east coast is prepared to concede in terms of discussion. So even if automation is swiped off the table today, that issue will keep coming back because technology will keep progressing and the productivity differences between US ports and Asian ports, for instance, is going to grow. So there you see already that at the end of the day somebody's going to have to say we do need to do something. But I would assume that from a liner perspective, and don't forget, many of those liner companies are ports and terminal companies as well. So they have a port interest. They will try to keep the cost base manageable, try to offset any cost increases with freight rates or income from the shipper, and do it that way. And don't forget, if there's a presidential decree that dictates that costs should increase, the shipping lines can go to the client and say, listen, it's your president who dictated this, it's not us. So you're going to have to pay the bill for what your president decided was important. And that I think will also be a negotiation tactic in the upcoming Trans Pacific contract season.
[00:11:31] Speaker C: Come back to costs in a minute. Robert, just going back on one of the points you just raised there, port productivity, obviously you spent a long time in Asia, as I did myself. Can you just give us a rough idea? Not necessarily numbers, but how do, how do ports in the US in general compare to say, ports in Asia in terms of efficiency?
[00:11:51] Speaker B: You just have to take a look on Shanghai and Ningbo and see how they operate. This is, in my view is some of the best operations in the planet. Also, the big hub ports, Singapore, Tangipela, Pass, El Tangios, they have gross net moves per hour that are significantly above the other simply because they use automation in a good way and double shifts or triple shifts, 24 hour operations, which I think in many ports in the US is still not the case. So there is a significant difference and you just need to look at the course to see how that productivity difference plays out.
[00:12:22] Speaker C: So that would play out in terms of box density, yard productivity, crane productivity, speed of turnaround for vessel operators and.
[00:12:32] Speaker B: Simply being on time, being on schedule, always getting the burst on arrival, all of those things, no waiting times, all of those things are big differences.
[00:12:41] Speaker C: Okay. For the container lines we heard on the previous freight bicycle podcast with Vespucci Maritime's Lars Jensen and S and P Global's Peter Tirschwell that while politically container lines are in a tough position with this, they also do make quite a lot of money when ocean freight delays cause congestion and push up freight rates. We're already seeing rates into the US rise in January. Now, this idea that congestion leads to higher returns for carriers, that wasn't really a thing, or at least as far as I remember pre Covid.
What do you think of that contention? The idea that carriers could see profits rise if this strike drags on, and it will be, the US unions and businesses and consumers would have more to lose than the carriers. Does that make any sense to you?
[00:13:28] Speaker B: Okay. As long as I've been in shipping, net net shipping lines have made significant money during periods of congestion and disruption, and they usually coincide with a lack of ocean capacity to absorb those disruptions. So when there's a tight space situation coupled with waiting times at ports, coupled with landslide disruption or landslide congestion, those are the times across the cycle in the shipping industry where the shipping lines have made the most money. Not because the cost base is under control, because obviously costs increase, but lines are able to offset those cost increases with tariff increases simply because shippers do not have a choice at that point. This is particularly relevant today because there are situations that are creating a artificial supply demand imbalance, when in fact, if you look at the amount of capacity that's being built at the moment in relation to global trade growth, the moment that Suez normalizes and the moment that the US normalizes, there will be a significant overcapacity of vessels simply because the new build programs are so aggressive and they're coming in on stream in the coming years. So the next couple of years should actually be quite the opposite of today's situation.
[00:14:50] Speaker C: Yeah, very interesting. Obviously the order books around about 30% of the active fleet at the moment. So big overhang and you're looking at sort of 7, 8, 9% tied up via Suez Canal. So you can see where that excess could come from. And bit of a debate about how much might be scrapped and when some of these orders might come in. But yes, excess capacity would have probably been a big factor in 2024 without sewers. Just one more question on that, Robert. So how would you be thinking about this potential strike in January 15th? If you were looking at ocean supply chains or you were looking at liner networks and services, how would you be planning for what could be quite disastrous next week? If you're a shipper, what normally happens.
[00:15:31] Speaker B: Right before Chinese New Year is that there is a buffer of cargo stacked in the origin ports and in the hub ports because all the shippers want to get their merchandise out before the start of Chinese New Year and all of them want to make sure that that cargo is already on the ship. So what happens is that both in Shanghai and Nebo as well as in the hub ports in Asia, there's an overflow of cargo that is sitting there waiting to be shipped out post Chinese New Year. This situation is going to disrupt that A because presuming that tariffs are launched on the 20th and the strikes happen before the 20th, it's going to be tough for shippers to get their merchandise in before any tariffs are announced by the new incoming US president. So I would assume that the strike actually comes at the worst moment in that sense. And, and you could see the communique of Maersk already saying get your merchandise out of the ports because the chance that you'll get it out after the 15th are limited. So there's going to be a period of congestion basically because the cargo that is stuck in Asia may not be able to get to the US in time to avoid tariffs, as you mentioned.
[00:16:41] Speaker C: Yeah, lots more challenges out there. We have this strong likelihood of new tariffs against us friends and foes alike, perhaps as soon as January. We don't really know. We'll know more on the 20th of January. I guess if there's an announcement then. But there's been lots of, lots of talk, but very hard to know exactly what any of it means at the moment. We also have the incoming president threatening Panama over canal fees as I mentioned earlier. In fact, he's talking about buying control of the Panama Canal. He's also talking about taking over Greenland. I'm not quite sure where that fits into logistics for now, but it has prompted Denmark to double defence spending. And just to throw another one out there at you, we have this bipartisan and I'll, I'll try and say this, it's a bit of a mouthful. The Shipbuilding and Harbour Infrastructure for Prosperity and Security for America Act. I'm out of breath. Also known from here on in as the Simply the Ships Act. Now the aim of this is to build up the US flagged fleet by ordaining that US ships should handle more US imports. So I've thrown quite a few things there together. Robert, how are you thinking about this melting pot of sort of unknowns? I sort of see them a little bit as part and parcel of an approach to international relations that is anti free trade maybe, or pro0 some mere cantalism. So I wondered if you see it in the same sort of way, is that the right prism to look at this through?
[00:18:04] Speaker B: Let's start by saying there is actually a U.S. merchant fleet already. There are several companies like CMA, CGM and Maersk who have U.S. flagged vessels, but they are primarily used to carry U.S. government cargo. They're not used to carry or not as much to carry normal commercial cargo. I think for the United States to start a new domestic fleet is quite an ambitious plan because if that means that those ships need to be built in the US to be US flagged and they need to be crewed in the US that cost base should be significantly higher than commercially built ships. Plus, if someone says, listen, all my imports need to be carried on my flagged vessels, then all the other countries can say the same. And then you have again your back to square one. Because all Chinese imports need to be flagged on Chinese flagged vessels. All EU imports need to be on EU flagged vessels. And I think that would be going in the wrong direction.
So could there be a more influence of US interest in that? Of course it should be. But as something as drastic as a, as the start of a new shipbuilding industry in the U.S. i think it would be ambitious. Certainly all the things like Panama Canal, I would assume. Although the incoming President has spoken about US flagged vessels who pay too much. I don't think he means that because there's no real US flag fleet left in container shipping. But the fact that he says Panama Canal Terrace, that is something I guess is subject to negotiations with. Based on that, I think when you look at the inflation environment in the US in terms of the factors influencing inflation, I'm not sure when the Panama Canal fees are a huge impact on US inflation, if you compare it, for instance, to deficit spending or other inflationary economic measures and tariffs. So I'm not so sure that that's going to solve the inflation challenge in the United States, but I'm sure it's one of the factors where the incoming President has a point. I also understand, and I'm not an expert on the Panama Canal Treaty, but I do understand there's a clause in the Panama Canal Treaty that in case of security, national security issues, the Americans have the right to take control of the Canal. I think that is in the agreement, but I didn't memorize that. But it's in case of a war or national security challenge, in case of future potential war.
[00:20:21] Speaker C: And how do you see the imposition of all these potential tariffs, I say we don't know exactly what rates there'll be and on whom. But with pretty much everyone sort of being threatened with new tariffs, there'd be the changes, the landscape on which international trade exists, doesn't it?
[00:20:38] Speaker B: So ironically, I was the head of Asia Pacific for Maersk in 2018 when the last tariffs were launched, and it had a significant impact on two items. Both the trade volume was significantly affected. It took a shift towards Southeast Asia from China, produced volumes. And secondly, because of the devaluation of the renminbi against the dollar, the local income of all the stuffing charges and CFS charges and warehousing charges in US dollar terms went down significantly. So when you have a US dollar target and your income is in renminbi and that devaluation is 20%, that significantly affects the profitability of the operation in China for a Western company. So those items will definitely come back into fruition when, if and when tariffs are launched to the same extent as they were launched before.
[00:21:26] Speaker C: Okay, there's another little geopolitical thing I wanted to bring up. We've had a series of mysterious attacks on undersea cables and on integrated supply chains. Western intelligence services have talked about bad actors, or they've talked specifically about China and Russia. Elsewhere we've got the Houthis are continuing to make the Red Sea and the Suez Canal unnavigable for most container shipping services at least. Is all this just building evidence that supply chains have become sort of a vulnerable extension of geopolitical friction? Or maybe I mentioned neo mercantilism. Some of this type of thing happened back in the 17th, 18th, 19th centuries as the European powers divided up the world and colonialism. And we had things like the Navigation of the Seas act, very similar to the Ships act in some ways at least. I mean, do you see a trend there?
[00:22:17] Speaker B: I'm a strong believer in globalization, and I cannot imagine a world in which that is reversed. There could be a level of French shoring. There could be a level of near shoring which has a significant logistical impact in its own right. But as you can see, the tariffs are levied on Canada and Mexico. The whole French shoring model is also impacted significantly. I do think that we talk a lot about, you know, you talk about the vulnerability of the supply chain. I see a dichotomy happening. On one hand is that we talk about the use of artificial intelligence and optimizing supply chains and demand sensing. And on the other hand, if the capacity overhang happens as it does shipping lines will launch quite dramatic blanking programs to protect their bottom line, which sort of makes the whole use of something as fine tuned as artificial intelligence in the supply chain a bit of a of an anomaly. Because why are you fine tuning on the one hand, if whole strings of ships are canceled on the other hand and you have to redo your entire supply chain planning based on dramatic sudden unexpected capacity withdrawals from the shipping lines. So I think that's a little bit of a conundrum on the very advanced technological demand sensing insights on the one hand and these very archaic drastic capacity withdrawals on the other hand. And I don't see them going hand in hand very well.
[00:23:37] Speaker C: So this blunt instrument, avoiding sailings and yeah, withdrawing capacity. It's going to be interesting what happens in the January, February, March, lots going on in terms of container shipping. I mentioned Suez diversions of container ships around Southern Africa. We've also got carriers realigning these alliance networks from the start of February, which we're expecting this to be quite disruptive. And I'll just for our listeners, I'll be covering this in a lot more detail on the Lodestar podcast when I've got two container line representatives and a bunch of other interviews. We'll be looking at the alliance system and going into this in a bit of a deep dive that's out next week. But as you mentioned before, in January, apart from all these other things, we've got the Chinese New Year as well. Can you give us some insight into how this would be planned for by carriers or by forwarders, given your crossover expertise? What's the thinking or processing of those in charge of these organizations as you have been yourself?
[00:24:32] Speaker B: So first of all, as you know, when you phase in and phase out vessels from an alliance, you need to finish the voyage that you started. So you need to deliver the last box of your partner carrier in your alliance to the last port of destination to finish the voyage of the last alliance. As you are phasing in vessels into the new alliance, picking up your partner's cargo in the first port of origin. So it is always a messy process. It is usually planned well in advance. What may hamper the effects this time is that normally ideally in an alliance phase and phase out, you have ample capacity ships that are on the on the side waiting of sweeper ships that are just going to carry some outflow cargo from here and there. I would assume that in the current situation there is not a lot of sweeper vessels available to carry the old box that was misplaced or misdone So I expect it to be a very tightly planned process that nonetheless is going to be a little bit messy for that, particularly if the shipper is in a hurry to get its cargo to the final destination. That is certainly on the, on the one hand, as a shipper, obviously you need to spread your risk. So if you're entirely dependent on one carrier, you need to have a really good relationship with that carrier to make sure that you are always the first one on the ship when it comes to delivering cargo. When you're dealing with forwarders, you have the blessing, I guess, of spreading your risk out over three or four alliances and different carriers. So when one doesn't deliver, the other one can catch up. What you obviously do as a shipping line is that you try to make sure you have coverage across each string. So when you pull out a vessel from one, it's because you have double coverage with another string that covers the same port pair or temporarily covers the same port pack. You can only do that if you have several different strings per port pack combination that cover the same, maybe not with the same transit time, but certainly cover the same port pair. But like I said, capacity is very tight at this moment. So phasing in, phasing out without the buffer of backup vessels or surplus capacity is a little bit more risky than you would otherwise do it.
[00:26:35] Speaker C: And presumably that all gets a lot more complicated if there's this strike on the US Eastern Gulf coast port.
[00:26:41] Speaker B: Absolutely. There's going to be a lot of buffer stuck in hub boards that's going to have to be carried out that will have a transit average significantly longer than that.
[00:26:50] Speaker C: So just back to looking at that from the buy side, how would you strategize this in terms of contracting with carriers? And I say that as said before, we've got spot rates are increasing early January.
We've got Asia Europe contracts normally negotiated around now under this period. Now the first quarter also sets the scene for those contract negotiations on the Trans Pacific in the second quarter. So what advice would you give people buying freight?
[00:27:17] Speaker B: Give me the same advice I give to the clients that work with me in that, in that area. And there's a few clients that actually ask me, how do I do this? Obviously when you are calling me when the freight rates are really high and you have zero negotiation position, that's a very tough nut to crack. There's very few clients that think long term when the market is really, really low. But there are many clients that when a situation is like this, where the carriers are raising rates and they can to say how do I negotiate? This is of course not a great negotiation position. In my experience, being on the line of side of things, the best approach to this is to have a long term relationship with the carrier that has an index at the basis of it. Whether that's CTS or preferably CTS or whether that's the Shanghai freight to index that is not so relevant. But with some delay, an index will always adjust to the market reality over time. Right now, negotiating a long term contract when you really don't know how 2025 and 2026 are going to play out is really difficult. You may get a deal that is slightly below the spot rate today, but if as we expect there's a significant influx of capacity, you could easily overshoot the mark. Now we've seen time and time again where when the market is below the current contract rate, clients will walk away from the contract and vice versa. You really need to know that the guys you're dealing with are going to uphold their end of the bargain. But I would always say if you're not clear about how the market's going to play out, make an index based view.
[00:28:49] Speaker C: So that's on the pricing, but terms of the services, especially if you're going direct to a carrier, for example, I mean, should shippers be saying, you guys, you've got the data, you've got the ships, why aren't you managing this better and communicating how you're managing it with me better as well, if that makes sense.
[00:29:06] Speaker B: Plenty of data available and there's plenty of information available. And the famous quote is always, you know, I work with an alliance where three carriers are on the same vessel and I get three different ETAs depending on which carrier I talk to. So I don't necessarily think it's a matter of data. I think it's if you're on top of the list of those carriers to give you the right information, I'm very confident that, that they will. But you need to be on top of the list. And to be on top of the list is something based on a long term relationship where you've had this mutual trust in terms of service delivery, where it has not been a zero sum effect where you know, either you win or I win, but we both win together. Usually carriers have protected their most loyal customers through ups and downs during the COVID pandemic, even when the freight rates were sky high. Carriers have protected their core customers because they know they're with them for the long run. And they have usually gotten a Very high delivery on time, even during periods of upheaval. I've seen that from personal experience that the most loyal customers got virtually all of their cargo delivered on time at the agreed contract rate, even if the SCOT rate was three times that. So I would always recommend that. But again, that is based also on, for instance, committing the volume you actually need in the transpacific contracts. Many times people have minimum, minimum order requirements that is 10% of what they actually need because they don't want to commit themselves for more. Well, the shipping line says, listen, I've committed to 10% of the MQC. As far as I'm concerned, the contract's been delivered and then you're up the creek without a pedal because you, you didn't want to commit your full volume to the carrier of choice. You only wanted to commit a portion of the volume. So had you committed a larger proportion, you would be protected for a larger part of your cargo base.
[00:30:52] Speaker C: I mean, taking from that, though, if you're an SME shipper and you know you've maybe using a few different carriers, you're nowhere near the top of that list.
[00:31:00] Speaker B: No, if you're an SME, I would certainly say you will not get the level of dedication you might need from an individual carrier, particularly if you spread your volume over 3, 4, simply because for each of those carriers, you're not significant enough to warrant the VIP treatment. So work with a freight forwarder who can spread that volume out over different carriers and the freight forwarder will have the stamina and the respect from the carrier to do that.
[00:31:24] Speaker C: Thanks, Robert. Let's pivot slightly. I know you follow logistics M and A markets really closely. Obviously the big deal last year was probably DSV Bayanchenka. We've also had the container lines themselves further expanding into logistics and intermodal services and port assets. Do you expect an active MA market this year and do you expect the container lines to be following a similar sort of strategy this year? Next year?
[00:31:48] Speaker B: It's a very active market this year simply because many of the container lines have a lot of cash in their war chest. Further, M and A on the shipping side could happen, but might face regulatory challenges. So I expect a lot of M and A also because last year there actually wasn't a lot. The M and A market was. Except for the big deal you mentioned, the M and A market was almost dried up because the multiples were still too high as an overhang from the pandemic. During the pandemic, the multiples were stratospheric and now the multiples are more down to earth. So I expect there will be a big interest, not just from shipping lines, but also from private equity in making deals that were not interesting last year. And if the interest rate in the US keeps going down, more and more capital will flow into the market and will be used for deals.
So I expect a great interest in M and A. The crux with M and A is not the deal. The crux with M and A is the successful integration of that acquisition. And that's often where also that is underestimated the post merger integration process. And actually delivering on the sell side deal or the value that was promised in that deal, that is the big crux. And then you come back to the organizational question you asked earlier in the interview. You know, how do you integrate an acquisition to make sure that it doesn't lose its identity and what made it successful?
[00:33:05] Speaker C: I think you need to get a consultant, don't you?
[00:33:08] Speaker B: Yes, that could be one, but that's certainly something I've seen indeed that the interest is increasing that things more and more things are coming on the market, but that the post merger integration is a big sticking point.
[00:33:20] Speaker C: Okay, thanks for that. Yes, a very interesting market this year, I think during your career across container shipping, forwarding and consulting. Just if we look at the tech itself, what would you say have been the biggest changes in that market in terms of how it's affected those industries? What were the big advances and is there still scope out there for the adoption of some of this tech that's already available that might be able to drive efficiency, improve digitalization?
[00:33:47] Speaker B: There's a lot of digital technology available that is not or not sufficiently being utilized today in the industry. You can basically use artificial intelligence, as I said, to optimize your supply chain. You can use demand sensing by data sharing. You can optimize someone's supply chain and data sharing between the part the individual partners through what they call digital twins. You can actually optimize a facility or a warehouse or construction of a vessel. I think that when it comes to the application of digital technologies in the logistics sector, we are barely scratching the surface. There's a lot more to be done. One of the big items there is not so much the availability of data, but the willingness of the partners in the supply chain to share those data, to share the data. So we've seen have been examples mentioned of things like Tradelands, which were technologically way ahead of their time and could actually have been the standard for the whole industry in terms of Data sharing, which to my knowledge fell because the partners didn't trust each other enough to share full data or always thought that someone else was taking more benefit. At the end of the day, the bco, the end customer, benefits significantly from suppliers sharing data. And you saw already in the case of Tradelands, you would have a port saying that the truck arrives at 3:00. The trucker himself said he arrived at 3:30. And whatever the BCO said, to my knowledge, he only arrived at 4. Why is that? Because there was no consolidation of the data in the system. So I think that when it comes to digital innovation, it's barely scratching the surface. And of course every CEO of every company in the world, if he doesn't mention the word AI in his investor podcast, then his share price will go down. So they always find a way to mention it. But I'm not necessarily sure it's always backed up by substantial investment in progress.
[00:35:41] Speaker C: If you were a forwarder or an SME shipper, what tech solutions out there save you? Trying to cut costs or freight rates or procurement or transaction costs of borders? Take your pick. Where's the low hanging fruit? What's available on the shelf? You can pluck it off and if you're not using it already, it'll save you money.
[00:35:59] Speaker B: Seen in action is the use of digital twins, where you literally mimic an operation, be that an office operation, be that a warehouse, be that something else, where you run the data through an optimization tool that tells you how to optimize your physical operation. And it's not saying that it's the absolute truth, but I'm saying it provides you an alternative data set analysis based on your physical operation. And there I think the advantages are significant, particularly as capacity is short, as warehouses are full, as throughput is very important as well. Often in ports you see that the waterfront is not fully utilized, but the yard is completely condensed because the boxes are not moving in the right way. You can use a digital print to do yard optimization. So I see very much that the technology is there, but it's not always utilized in the right way.
[00:36:51] Speaker C: You mentioned AI there, generative AI. I'm thinking particularly, have you got any ideas about how this might change our industry in the years to come? I know it's relatively early days really for this type of AI, so there's many ways it could transform our industry. But what's your take on it?
[00:37:06] Speaker B: I'm going out on the limb now, but I would assume that the use of generative AI to rewrite contracts, the use of generative AI to rewrite agreements because it can do essentially what a law clerk can do. Genai can do as well. I'm being very rude now at the moment towards that profession, but I would assume that Genai can do a lot, particularly for the paper trail in the industry and simplify it and start.
[00:37:28] Speaker C: Robert Van Turian, founder of Inception Partners thanks for joining me today on the Freight Buyers Club.
[00:37:34] Speaker B: Thanks for having me.
[00:37:37] Speaker C: Big thanks to Antigos Cloud for supporting this episode, Karen Ball and Tom Matthews for making this production happen, and you all for listening. Please follow and like wherever you found us because we have loads of great content coming your way in 2025 and we appreciate all the support. So see you soon.
