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 and welcome to this episode of the FR the Freight Buyers Club Insight sponsored by Ontegos Cloud. We are available on all podcast platforms, YouTube and www.the freightbuyersclub.com. please review, follow and subscribe wherever you are listening so even more people can find us and you can follow me in the Freight buyers club on LinkedIn. Please come and say hello now. I'm delighted that today we have yet another major figure in the world of forwarding and supply chain. He has worked in the logistics industry since 2000, holding leadership roles at Maest Logistics, which then of course became Damco. And now he is the Global CCO and COO at Scan Global Logistics. Mads Dreher, welcome to the Freight Buyers Club.
[00:01:36] Speaker B: Thank you very much Mike and a pleasure to be to be on here for the second time. So looking forward to driving. So all good? Thank you.
[00:01:43] Speaker C: Great to have you Mans. So Scan Global Logistics present in more than 55 countries, which of course a sizable footprint for your BCO customers. I'm guessing that this ballooning tariff war poses a lot of challenges and I'm sure your phones have been ringing off the hook this past week or so with all the confusion, this flip flopping about who's being tariffed, who's not and at what rate. We're still waiting to hear what might happen around tariffs in Europe. We discussed off air that you view your own role and that of SGL as being aimed at delivering strong and personalized customer solutions with the idea of making the world a little less complicated for customers, I think was the phrase that you used. How are you applying that customer service focus right now around the world for customers as they try to plan for these new tariff regimes amid all this confusion? Or is this all something you've been trying to Strategize in advance.
[00:02:44] Speaker B: Speaking to my fair share of customers, I think it's fair to say that our core task is trying to sort of filter out what is noise and what is actually facts. That is evidently a lot of views out there in terms of what you could do, what you should do and what the implications might be. I think one of the things we try to, you can say, talk to our customers about is, okay, what has actually happened before and this is not the first time there's a tariff war. We had one the last time Trump was president as well. And secondly, what are the implications when you would do a change? And I think starting with that latter point, it's fair to say making significant changes to your supply chain on the basis of events that can change basically on a daily basis in our best judgment is not the right thing to do. So I think if anything, our role of course is to share the facts and our perspective, but it is also to calm the waters a little bit.
Our primary stakeholders are obviously getting a lot of questions internally, but supply chains are more complex than you sometimes give them credit for. And changing your supply chain is not an easy, is not an easy thing to do. So you have to be very, very sure that there's an element of a midterm long term change. And we are not at that point yet. I think we saw basically the best example after, after one day the, both the Canadian and the Mexican tariff was, was suspended for a month. So yeah, I would say filtering out the noise, trying to line up the potential consequences of changing your supply chain to accommodate this is probably the most important. We read the same news, we try to of course bring it into a supply chain context. And then I would say most customers I talk to, they are still in monitoring limbo mode, I would say, and not making actual change yet. There might be a few companies where it has such a critical nature that they are actively looking into Plan B. But I think on a broader scale, I don't see our customers yet changing their supply chains to mitigate this.
[00:04:51] Speaker C: Are those customers who are looking at a Plan B, are they in a specific industry? Can you share?
[00:04:55] Speaker B: There are obviously some industries that are harder hit than others, no doubt, but there's actually not one that I would single out. But if you take automotive as an example, there's no doubt it has a profound impact on their production. If things are, you can say delayed is as much the delay that would occur from the changes as it's only the tariff. The tariff is a financial instrument as such but it doesn't necessarily mean that the cargo is not going to be, you can say, arriving at the same time. So I even, I even, I think there it is more so if they have categories that would be included in the hardcore scope of the tariff. And again it's, the tariffs are not applicable equally for all product groups.
[00:05:39] Speaker C: When I'm chatting to people who aren't in the supply chain field like we are, there is often this perception that products are simply made in one place and then shipped to somewhere else where they're sold. So with tariffs, for example, people often think that there's only one element to this and that's like the final shipment of the finished product which is then subject to tariffs. And I think this ties in what you're saying with automotive supply chains, which in North America are really, really integrated in our industry. We call that bit. Right. That's the outbound supply chain. Can you explain a little bit about the complexity of some of these inbound supply chains and how, how they are impacted by tariffs?
[00:06:17] Speaker B: Well, in essence they're impacted in the same way. If, if it's a trade between two countries, then it doesn't really matter whether it's a semi finished goods or whether it's, it's a finished product. And, and I do think you're very right. There's a huge focus on the end product and the end consumers and, and who's paying the bill for that. And you can of course argue if, if there's a tar tariff on, on semi finished goods as an example, ultimately it will still end up at the consumer. But if you take China, there are those who say that China is as much a assembly country as it's a production country. I believe it's both.
And there's no doubt that that deserves an equal focus. And, but that also means it's much more complex. So I, I, I, I've seen many companies state here, but we are not a US Company, we're not a Chinese company, we are a global company. And by, by that you're also saying that it is much harder to avoid than you might think because of, you can say the inbound nature of supply chains, especially for larger corporations.
[00:07:16] Speaker C: Yeah, sometimes I feel like the political debate is about the final assembly. And even if you're talking about bringing production back home, back to the States, for example, big companies can't make that investment decision. They're not sure if all their inputs are going to get tariffed.
[00:07:33] Speaker B: No, I know and I think tariff would be one complexity. But again, if you Take the famous topic of near shoring that it is so complex one lack of labor as one and simply also just the competence level. I think if you. I saw an interview with Apple and say, but if we don't only produce in China due to cheap labor, we produce there also due to the level of, you can say innovation and technology. It's the total sum of it all. As to why companies have assembly or production in a given location and saying that only tariffs would impact that, I simply don't. I don't see that I have to say, because you wouldn't know where the tariff would hit next. And secondly, there's a lot of other components going into why production or assembly would take place in a certain geography, which is also why I fundamentally don't believe in the instrument of tariffs. But obviously political administration has the tools that it has. But I highly doubt companies would start to produce closer to home only on account of tariffs, whether they are going to buy more. So American products in. In America or US as opposed to foreign. That might be, but then again that has.
Then that's a little bit more an isolated impact.
[00:08:50] Speaker C: Okay. Do you think, Mads, that this trade war has the potential to radically alter trading patterns? It sounds like maybe not or maybe not yet. Based on that previous answer, I think.
[00:09:02] Speaker B: It can affect the capacity and demand perspective for sure. So maybe we're going to touch upon it later. But if you take the air freight industry as an example, that there's no doubt that if demand goes into a slack mode on the Trans Pacific, that capacity will likely be adjusted and of course moved to other lanes. So I think from a demand and supply perspective, for sure, if you're talking about trading pattern sort of fundamentally, no, I don't think so. And again, I do believe history is always worthwhile to, to look into and that was neither the case last time that the Trump administration came in. It's viewed as an instrument to leverage certain negotiations and our thinking is that it, it will remain an instrument for that, but nothing more, nothing less. So the answer would be no, we do not see this as fundamentally changing trading patterns.
[00:09:56] Speaker C: What sort of technology do you guys deploy so you can keep track of this, or more pertinently so you can keep all this transparent and cost effective as these new costs are introduced into supply chain so your customers understand what's going on?
[00:10:11] Speaker B: Yeah, first of all, the telephone hasn't gone out of fashion yet and we do actually prefer to talk to our customers as opposed to just, you can say, try to do our own thinking. Only but obviously we monitor activity on a daily basis and we do that at the point of origin to be able to react as quickly as possible. So that goes into a BI tool that simply produces a report every morning where we have a very, very good insight into our bookings going up or down both versus you can say the last weeks and last month, but also versus the same period last year. I think most freight forwarders would have that in place by now. We have commitments to our carrier partners that we need to honor. So this is already standard practice that we monitor activity levels and bookings on a daily basis. We simply have to. So in that sense, nothing more we do. We do spend more time with customers trying to understand how they see the world. And that's also why I'm fairly comfortable by saying that we do not yet see a significant move to make drastic changes.
[00:11:13] Speaker C: Thanks Mads. I'll come back to technology and what 2025 holds for freight markets in a moment. Let's hear a little bit about how, how you and Scan Global got here. I, I was reading a press release I think it was, and it described Scan Global as, and I'll quote, Danish rooted. It's an interesting phrase. Does the company still think of itself as Danish or, or Scandinavian? Because you guys have become pretty major hitters as a global logistics forwarder after some pretty rapid growth in recent years.
[00:11:46] Speaker B: No, but I think the name gives it away almost. So there's an element of Scandinavia, there's an element of Global and that's not by coincidence but I think the translation would be that we are proud of where we come from and we do also believe that some of the cultural aspects of our area are important is an important foundation for the company. We believe in flat hierarchy. We believe in direct communication where you include people at all levels.
We do have a due respect for different cultures but I think you can still have a translation of culture. So the version can for sure be one in one location and something else elsewhere. But we do not wish to be a company where the culture is not clearly defined and knowing where you come from we believe is healthy and taking the best of that and trying to instill that. And I think we have a few good other examples in Denmark. I don't think it's also by coincidence that Denmark with a population of 5.8 million people has a very prominent standing in the shipping and logistics industry. I think obviously Maersk and DSV as two major, major players globally but also a number of mid sized companies as ourselves. So there's A rich tradition for logistics and shipping and trading and we want to take the best of that and instill that in the DNA of the company. So it is as simple as that. And that's why we choose to underline it.
[00:13:09] Speaker C: Your Latest results showed third quarter revenue of 674 million euros and a bit of 51 million euros. Can you tell us how that translates into ocean and air volumes and what are the company's ambitions? You mentioned dsv. Are you looking to get alongside them at the top of the tree?
[00:13:29] Speaker B: Yeah, first I can't comment on specific volumes. What I can say is that we have, I think for the last eight, nine years consecutively enjoyed a double digit growth. And I'm also fair, fairly competent in saying, and I know that, that we are for sure outperforming the market growth wise. But we're also investing a lot. As you said, we have done acquisitions and we open up new offices. So. So with the investments made that that for sure was also to be expected.
I would say today we have become a very meaningful player. I think when we talk about size we talk about it from basically the best of two worlds. I would say big enough to compete and the catchy phrase on the other side would then be but personal enough to care. We do see, and that is my view that we do think our some of the big global ones have become a little bit lost in their focus. We more so see their focus on standardization and efficiency, which in its own right I understand in a low margin industry, however, there is also danger when you focus so much on that aspect that you lose sight of value to the customers. And our starting point will at any given point in time be a value for the customer and customer centricity. And thereafter we will choose to look at efficiency and other things. But the solution to the customer will never be compromised by us wanting an efficient solution. And by that I'm also saying that size in itself is not a goal for us. We have a declared ambition which has been communicated to double the company by 2027, which we believe we can do. Whether that brings us to top 25, top 20, top 15 as such is not something we spend a whole lot of time on.
So I prefer to use the term customer obsession and not competition obsession. We don't spend that much time looking into whether we are number 16, 18 or 22 under rankings.
[00:15:26] Speaker C: Does that mean not necessarily prioritizing the human element of the business, but is not not getting lost in thrall to the technology over the human element in terms of Customer service. Is it a case of balancing that very carefully?
[00:15:40] Speaker B: We are very, very observant of that fact and we insist on putting people ahead of technology. And by that I mean technology will enable and support our people, but it will never be the other way around where it's, where it's. Our people and colleagues supporting technology that we are very, very clear on that. And I actually think, I think if you go back to the blockchain days, basically not talked about anymore, but it was some five, six years ago. I think it's proven that it is a very, very complex industry to standardize because the volatile nature of what we do and the complexity is much greater than people give it credit for. There's regulatory impacts, there's climate impact, there is impact from, from infrastructural challenges and, and so forth where volumes go up and down. So I actually never think that the human element has been more needed than it is now. And I was reading a article from, I think it was BlackRock that commented that logistics is one of the industry that will be least impacted by AI. As an example, if you take it compared to financial services, I think that the number I saw was financial services. Up to almost 50% of the tasks could be done by AI. And I believe the equivalent number in logistics was 19% in their estimate. So for sure it plays a role and we do believe in technology as an enabler, but never ever at the expense of our people. So we are probably more in the middle on that than what I view some of our competitors are.
[00:17:11] Speaker C: God, I dread to think what those numbers are for journalists.
[00:17:14] Speaker B: Yeah.
[00:17:14] Speaker C: Good luck on the acquisitions front. You've made a lot over the last decade. I won't run through them all, but I would say they're not generally big splash acquisitions or mergers. They're not big, huge jumps forward, maybe I'd say bolt ons to your footprint. Is that a fair way of describing them? And what's the expansion playbook moving forward? How are you going to hit that 2027 target?
[00:17:38] Speaker B: I think generally speaking you're likely right. It has been a, it's been a way to grow our geographical footprint and we believe there's been a lot of attractive and good companies with a lot of skilled people out. I would say the reason ones we've done, we've done a major one in Brazil and also in Italy. They have been more meaningful in size, if you will. And you will see continued M and A from our side. Less but larger in size, that's for sure. We have achieved Our geographical, you can say expansion. We are global today. We are in all the markets we need. We are now in 58 countries. So we'll more so pursue scale going forward. There's no doubt you need a certain scale in this industry in order to continue to compete. We can drive more efficiency from that. So you will continue to see it and they will on average be larger those acquisitions than what you've historically seen. That's the plan. If you look ahead on that 27 goal. Yeah. Maybe half from acquisition and half from organic growth would be a qualified guess.
[00:18:33] Speaker C: Your most recent announcement was the opening of a new office in Tanzania, which is Southeast Africa. Do you see Africa with its growing markets and young population as a big growth area in the future?
[00:18:46] Speaker B: Yeah, for sure. I think when you look into the numbers and statistics as you, as you, you mentioned the average age in Africa, you get a few. It's, it's a reminder of the potential that sits in that continent. I think you've seen a number of players, including asset players, I think MC as an example, have invested heavily in Africa. We have a fairly large part of our business within the Aden relief segment. So we have been in Africa for, for decades and years and, and feel we have something to offer and we feel we understand how to do business in Africa. So I would say for sure we believe that Africa holds a very big potential. But there are other areas of the world that do the same. I think I would like to highlight our acquisition in Brazil. I think Latin America will be a significant growth area for the company, Brazil not least as an example.
[00:19:33] Speaker C: Why is that such an interest in market South America?
[00:19:35] Speaker B: I think the size in itself is just. I think if you take the Brazilian economy is just vast. But I also think you have to say obviously we are European company and we'll continue to invest in Europe. But if you look at GDP growth, it's not exactly impressing in Europe. And, and I think it's fair to say even the politicians in Europe are sort of being honest about the fact that Europe has its challenges and need to get back on a growth track and innovation track. So for us, I think it's natural to look towards other markets and other continents. So just because they sound more exotic doesn't mean that they are not super attractive for us and they will continue to be. And I for sure expect that Africa will be a major area for us in the years to come.
[00:20:16] Speaker C: Your personal journey, Mads. People are always a bit reticent to talk about this, but you've had this great career. What would you say are the highlights so far? I mean you've been active in this very interesting period. The last couple of decades have been really quite fascinating, particularly the last few years. But yeah, what have you enjoyed about it all?
[00:20:36] Speaker B: Well, the part I enjoy the most is always the customer side and I think sometimes people ask me would you like to jump the fence and go to the customer side? And I think my answer has always been that on one day I talked to a fashion company, the next day I talked to an automotive company and the third day I talked to yeah, whatever vertical you might, you might find and for me that's the inspirational thing that you, you get to learn so much about so many different industries as opposed to. If I was working in a, in a textile company I would be thinking about textiles all day I presume.
So I thought you were going to.
[00:21:08] Speaker C: Say doing media interviews, top of the tree.
[00:21:10] Speaker B: But that also might be my, my, my childhood dream was actually journalist but, but that's, that's how it goes. So I think that I'm, I'm super happy for my decisions. I, I had one year in, in liner shipping in my first year and I'm super happy that, that I took the, the jump over to what I call the logistics freight forwarding side because I think the creativity element is, is bigger and the dealing and wheeling if I can call it that I, I enjoy personally I think it's fun and now I've then seen the best of two worlds. I, I've, I had my racing in, in a large corporation in, in Maersk Damco Maersk and have now been a part of a growth journey in a mid sized company. They were two very different journeys and not comparable as such but I think it's always fun to be part of something where there's a high degree of growth and high degree of entrepreneurial spirit. So I probably will never go back to a defined management position where everything is already set in stone. I need an element of entrepreneurial spirit but for sure also global platform to play from.
[00:22:17] Speaker C: So yeah, on leadership we discussed before we started recording this interview that your idea or your belief is it's all about empowering people, it's about openness, it's about encouraging. How do you turn that into practice? And on a side note is the type of encouragement needed in business. Is that changing? And by that I mean do more recent generations maybe require a different management approach than previous ones? This is something I hear quite a lot at conferences and when I'm chatting to senior executives. I Just wondered what your take on that is.
[00:22:55] Speaker B: Personally, I believe in, I think you would call it situational leadership. I do believe different situations and different times require different leadership. So I very much believe in adaptability but obviously some of the fundamentals will be the same. I do think it's extremely important to be clear and create clarity on who you are as a person and also direction and the way you lead and work. Then there might be those who say that's not for me, but I think scanglobal from a cultural perspective, but myself from a leadership perspective. We, we do believe it's healthy that, that you attract some people, but actually also that some people will be detracted from what we stand for. And that that goes to me as an individual but also the company as a whole, which is all fine, but I do think that clarity and being very vocal around how you see the world as opposed to trying to be everything for everyone. So, so to your latter point, I don't so much buy into the fact that you need to try to be everything for everyone. Obviously people are different, so of course you can always adjust. But I do think what you see is what you get has always been healthy and then you can make your own personal choices. That's how I have to with my boss. I always know what I get, which makes it easy and you can determine for yourself if that's something that gives you a meaningful working life. So that's my view.
And if there's a crisis, I do believe, I wouldn't say I'm old fashioned, but I do believe people, people look towards leaders to take a step forward and not necessarily just include everyone at any given point in time. So there's a time for coaching and delegating and there's clearly also time for leaders to show decisiveness and step forward. And I don't think it's a one size fits all.
[00:24:35] Speaker C: Matt, we touched on tariffs earlier and I'm sure this is part of the answer to this question. How do you view the demand or macro environment for global forwarders and 3 PLs on a general level right now as we're talking early February, slight downwards.
[00:24:50] Speaker B: Trends from a demand perspective I think is fair to say obviously a little bit. We just passed the Lunar New Year so obviously that was already factored in. But I think with all the uncertainty going on, it would be strange if there was not some overspill into the economy and consumers maybe spending a little less than what they did before. But that said, I do believe, I think a term I was Reading recently is called the perma crisis, that the world is simply just in a permanent state of crisis by now. So I think economies are also more resilient than we give them credit for. I think these events that we see now would have had a lot bigger and profound impact 10 years ago than they do today. So it's almost like we've gotten used to it. So while I see a slight downward trend, I don't necessarily believe that anything's going to fall off a cliff. I have so mildly optimistic that it can be a flattish year, if I can use that term. So that's our projection for the year.
[00:25:48] Speaker C: Ahead in terms of where the markets will go. Will a lot of this not be clear until we come out of Chinese New Year, the Lunar New Year period, and factories start firing up again and we see where that underlying demand is for sure.
[00:26:00] Speaker B: And I think obviously I received a lot of calls from carriers in the first days after and also during lunar year in terms of, of of bookings and how we see it. And we see obviously a clear upward strength. So I don't foresee that volumes will just disappear overnight. I, I simply don't. Again, bear in mind that whatever was, whatever is shipped now was put into, into the order books two, three months ago as a minimum. So I expect bookings to pick up again. And, and they have. But then of course, on the, on the supply side, you have other factors that might play into. But demand, I would say pretty flat compared to last year.
[00:26:37] Speaker C: On the ocean side, as you say, there's, there's quite a few things changing. One's the aligned system. The other is the possible opening of the Suez Canal. Again, at the moment, most container ships are diverted around Southern Africa, which takes a huge chunk of capacity out of the global fleet. So if that Suez Canal opened up again, obviously that changes the supply side significantly. It looked like this was going to become more likely, but then as we're talking, there's been talk about the US taking over Gaza, which I'm sure hasn't gone down that well in the Middle East. But these changes on the ocean side, how have you been breaking them down in terms of how you will manage them as a business? And what are carriers saying? You mentioned you've been talking to lines. There's a lot of changes from their side as well. I guess this all adding to volatility and difficulty of forecasting.
[00:27:23] Speaker B: Yeah, it is. And I think if you talk to the carriers right now, then our observation is that the opening of Suez or Red Sea, if You will is not as close as what you might have thought the first days after the ceasefire and the announcement by the Huti rebels. So I think for now we don't plan with which Suez opening up. That's not part of our forecasting and it's not part of our, you can say, dialogue with customers. So it was obviously a big news on the day. But I think again, if you're CEO of a container carrier, you have to be very, very sure because of course, obviously people focus on this from a financial perspective, supply and demand. But at the end of the day, we're talking about human lives at risk. And I think you have to be very, very sure when you order vessels to go through the Red Sea, that the risk is, I would almost say, non existing before you do that. So as much as it has a big impact on shipping, I truly hope that human lives has an even bigger weight than that. So we plan with the routing around the Cape of Good Horn, as we've seen the last year. And that's also what forecasting is based on as we speak. Will it change during the year? Yes, I hope, because that means more stability in the region of the Middle East. So for sure, I hope that. And it also means shorter transit times again, which we need, need. But that's where we see it right now. You're right. Supply wise, there's a little debate, is it 15% or 20% of supply that comes back. But in any scenario, it's obviously a significant number that comes back and that for sure will impact rate levels and supply and demand, no doubt.
[00:28:57] Speaker C: We've also got a lot of new buildings being delivered this year as well. How about the alliance system? How are you looking at that?
[00:29:02] Speaker B: But again, neither the first or the last time we're going to have a change in the alliances, I think. Kudos to Havag and Maersk for trying out something new. I think both we and our customers, we would like to see work in practice. I know they are very well prepared, but again, just because something works for one doesn't mean that the other alliances are wrong. So I think on the discussion of direct calls, if you take MSC versus the Hub and spoke by Hapag and Maersk, we believe there's room for both. And at the end of the day, transit times is not the only deciding factor as to which carrier you choose. There is capacity, can you get the needed guarantees for equipment and space. And secondly, of course, price, needless to say, plays a significant part when you choose your carrier. So I think it's good. The reliability around the 65% mark is not sustainable. Customers have been paying for getting their cargo shipped on time, in full and in roughly 34% of the cases in the last many years, that has not been the case, which is not satisfactory. So there's a focus on trying to improve that. I think everyone welcomes, but we don't have a principal view on whether one or the other alliance is better. We work with all carriers across all alliances and that's the nature of a freight forwarder. We are neutral.
[00:30:23] Speaker C: Just a note for our listeners there. So the, the tie up between Maersk and Hapag Lloyd is called the Gemini Cooperation. If you want to get a bit more detail on this, I did interview Henrik Schilling from Hapag Lloyd on the Lodestar podcast in January and he explains the hows, the where's the whys of how this will work. He also says it's going to be cost competitive. Now, the Gemini cooperation is also promising schedule reliability of 90% which as MADs has just mentioned, that is a big jump from 55, 60 maximum, more or less, just into the 60s from Maersk, I think last month, the last month we have Figures 4 from C Intelligence. So quite a lot of changes underway there, but that's the big one. So something's worth keeping an eye on and we'll be covering that on this podcast. Mads, what do you think about some of the container lines and their strategy of moving into the logistics business, moving into your business selling services end to end, almost as integrators? Are they now your competitors?
[00:31:25] Speaker B: Yeah, well, when they sell logistics services, then yes, they are competitors, but at the same time they are also suppliers and we put on them to manage that. You can say double head, if you will, that that is not for us to manage, that's for them to manage.
We always welcome competition. I think freight forwarding and logistics has always been a fiercely competitive environment. I do think there's an important thing that is not, not mentioned enough and that is that every morning a freight forwarder wakes up. We are by definition neutral. So whether the vessel is blue, yellow, pink doesn't really matter. And the same for the, for the airplane. And that also means we're in a position to neutrally advise on the solution. We find the best one. From a supply chain perspective. I do believe that an asset player advising on supply chain and logistics solutions by definition is not neutral. They have an asset to optimize and they would more so prefer that that booking goes on. That asset as opposed on the most optimal solution. So in that sense I'm neither con. I'm not concerned either. We believe that the customers that have traditionally been freight forwarding customers that they continue to value that neutrality that we provide. I usually compare to a restaurant we offer the a la carte menu and the asset player that offers logistics will offer a set menu you where you don't really get to choose. And personally I like to choose my own food, at least in most of the cases. And I think it's going to be a costly adventure. I think especially on the air freight side, I think it's going to be a costly adventure and it's not my job to to speculate on their behalf and how the business case looks like. But I would be very surprised if it exists in the same shape or form in 5 years time as it does now depending on development in ocean freight rates. Because obviously when you have that much money on your balance sheet that you need to deploy, I can understand why they choose to look at other areas. But it is no doubt it is the it has more so been the profits from the ocean freight rates that has gone into the logistics. So that's a slightly different calculator than the one I use. And I think the day we all need to use the same calculator, I think freight forwards will have a distinct advantage to still, I have to say.
[00:33:39] Speaker C: Do you think if we did have a bearish run on rates after Lunar New Year, do you think that the carriers have learned their lessons from the last two decades and that they've got that discipline now and they won't, one of them won't break for the hills and go, I need to fill my ships, you know, let's start a rate war. Have we moved beyond that as Covid taught too many lessons?
[00:34:04] Speaker B: No, no, I don't think, I don't think anyone has learned anything. But maybe that's not the point either. Maybe it is just the point that we once and for all make our peace with the fact that this industry is driven by supply and demand. Maybe it's not more complex than that. Does that make sense for outsiders? Why do you lose money one year and you make money another year? No, maybe not. But that's the nature of the industry and has always been so I would for sure not be. And I think we actually already see it. I think we do see carriers increasingly battling for market share right now with the new alliances coming in and ships to fill. And I think I'm not a shipping guy, so I don't claim to be a container carrier, but I do know that they need to fill their ships and having a container with a rate of $2,000 on it as opposed to zero is still better than zero. So that, that much logic I, I think I can apply to it. So no, if there's a significant deficit between supply and demand, rates will come down as they've always done one and the second it goes the other way, race will come up. So no to your question, they have not learned.
[00:35:08] Speaker C: No changes.
[00:35:08] Speaker B: No changes.
[00:35:10] Speaker C: How about on air cargo? We had a surprisingly busy 2024. A lot of new capacity came in 25% up out of mainland China, for example. A lot of this was to meet E commerce demand. I interviewed Neil Jones Shaw last week who's ex Flexport, ex Delta X United Cargo. He was pretty concerned that changes to the de minimis rules in the US combined with this possible oversupply of ocean freight, maybe the opening up of sewers later in the year. But I say it's very uncertain at the moment, might be very detrimental to that air cargo market. How are you looking at it?
[00:35:47] Speaker B: I tend to agree with him if all those you can say things come true. The Red Sea is still, as I just said, highly speculative. But there is a clear correlation between ocean freight and air freight volumes. No doubt. And yeah, I would agree with him in that sense. As for the Trans Pacific, which right now is more so a China to US impact. But obviously if that impact is sustained, then that capacity needs to go somewhere else. So I agree the E Commerce volume has had a significant effect on supply and demand in recent years. So obviously if there is a significant change in that, that then it will have a almost immediate impact. That said, similar to my view on tariffs, people will still buy products online, so somehow it needs to find its way. But there are a couple of companies specifically in China that have, you can say, really, really boosted the volumes and thereby taking up a lot of capacity. So. So I would likely agree with him on the other side. One thing I think that adds to the other side equation is that if you look a little bit ahead then quite many of the airplanes in the freighter fleet, they are quite old and at some point needs to be scrapped. And I think it's fair to say it's not that easy to buy airplanes nowadays than it used to be with Boeing and others having a bit more problems than what they traditionally have. So some capacity will go out of the market again. But the short term, if the impact is here now, yes, I would agree with him then rates will probably be sluggish.
[00:37:21] Speaker C: Thanks Matt. Just if you can just jump back to technology as we're wrapping this up. I'm going to talk about geopolitics to finish but just on the technology where do you think across modes or regions or any to go wherever you like with this. Where do you think a lot more could be done to take costs and frictions out of supply chains and out of businesses that run or depend on them. Does technology provide some of the answers?
[00:37:47] Speaker B: Yeah, I think automation there's no doubt. I think this industry is known for having a high degree of you can say manual work. Again I stand by my comment. I do believe that outsiders underestimate the complexity and thereby the the how easy it is to automate things. I think you talked about Flexport just before and I think they bothly have done a lot and tried but probably also have seen that it is more complex than than what they might have given it credit for 10 years ago. That doesn't mean there' a place for it. It just means okay it's not as easy as someone from from the outside might think but I think automation for sure. I think on the service side, on the customer side I sincerely hope but again I'm maybe I'm old fashioned that the people component will will remain. I I don't hear any customers that saying they they prefer to talk to a chatbot compared to to a person. Companies might say it's equally good because they want to save money but that's not the wish of customers just to be very very clear. So it sits on the back end of our business to become more efficient. No doubt an AI will play its role for sure but across many functions tender, management, marketing but of course also on the data side we do produce and churn a lot of data on any given day and that is very likely where the big upside sits.
[00:39:09] Speaker C: Is our industry a bit resistant to new technology do you think think compared to other industries.
[00:39:14] Speaker B: You know and I would ask the question why should it be so so I I know I actually don't think and I think I worked in most logistics in my younger days and there were very very high focus on innovation and it. But I think it's also fair to say that it's also an industry where there's a lack of willingness to pay for it. So being a bit blunt why would you innovate a lot of it if there's no willingness to to pay for it? And and there are customers that will make the decisions which is all Fair, hence the supply and demand part. Part that will make the decision on other factors than it. And then I think there's a gross underestimation of the complexity we deal with. It sounds super easy to ship container for me to be, but I once recall a mapping exercise I was involved in. It takes around 90 things to go right for container to arrive on time and whether that number is 80 events or 100 doesn't matter. But it is much more complex than you think how to connect local customs authorities in China into your systems. And you can continue the list of complexities. So no, I do not accept that notion. But I do know that there's a view on the industry as such and of course we need to take up the challenge and continue to innovate for sure.
[00:40:25] Speaker C: Thanks Matt. Just as we're drawing to a close, I'm going to look for something positive. When I look at all the conflict around the world, Obviously if I'm being honest, it can be quite good for supply chain journalism, all this disruption. People want to know what's going on. So maybe that's good. Good. But is it good for the soul? Possibly, possibly not. But when I see trade wars and division and security threats and countries threatening one another and this surge in the idea that might is right in international relations, sometimes I'm grasping for positives even as the journalism gets more interesting in a way. So as we're finishing up, please dash away my pessimism. Give me some reasons why those are. The coal face of global trade might make hay in this environment. Or why the global economy could do better than many are predicting over this year.
[00:41:15] Speaker B: Yeah, but I think I mentioned a word called perma crisis, which is probably one of my new favorite words. And I think when, when you then use that word, you, you also conclude that the world is simply much more resilient nowadays than it is. I do agree when you open up the newspaper or you look on on the local news at night, it's not necessarily an encouraging view. But I think it also then drives agility and innovation. I have to say I think on a positive note, with my professional hat on, I would say logistics since COVID has moved into the boardroom. So there's a fundamental different view on logistics as an enabler for you can say business success, which in turn means that there's more money being allocated to drive innovation within logistics and supply chain. So that's the good news if you work within the industry. I don't think we need to discuss that from a private perspective. We would all wish that the world would look different than it does now. And on the economy side, it's been a long time since we had a real financial crisis. Actually, if you think about it, I think you basically have to go back to 2008 to think about a true financial crisis. There has been up and downturns, but I actually think it goes to prove the resilience of the world we now live in. Despite war in Europe, despite tensions in the Middle east, despite changing administration and new directions, it seems like it has almost become a normal somehow, which is good for the economy because I think it's better to have a flat year or 2% up or 2% down than have these highs and lows. So I don't believe these highs and lows will come in the same way that they have done before. So I think that's the positive news from both a professional and private perspective.
[00:43:01] Speaker C: Let's stick on the positives. Can you think of an idea or a trend that's going to flourish this year or maybe a personal ambition that you hope to achieve?
[00:43:09] Speaker B: Yeah, you mentioned the younger generation a few times, and I have to say, looking at my own children, they are clearly different in the way they look at life. So I do still hope, because it's something we focus a lot in, that we will start to incorporate that thinking more into the business that we run in this industry. There is a lot of older people in this industry that have been here for many years and they have made a big difference for the industry. But we need to get our hands around and our heads around that younger people think about it differently.
We defined our purpose back in 2017. We believe in meaningfulness. Those were not words of my vocabulary in my earlier days, but it makes a difference. And when people go to work and have those things in mind and frozen, that they will also produce better results. So I hope we can try to move beyond the KPIs and the business cases and think about human element even more, especially in a world where the human aspects are becoming a little bit under pressure with AI and other things. So I truly hope that we'll see a resurgence of the human element when we look at business and not just talk about automation and AI and they have to complement each other. But I too often hear that it's an either or black and white. So I hope for that. That's my wish for myself, for SGL and for the industry that we can try to incorporate that into our thinking at sgl.
[00:44:35] Speaker C: Do you feel like you're equipped to succeed in this sort of rather table and logistics environment in terms of your tech, your leadership, your finance, the footprint for sure.
[00:44:46] Speaker B: Faculty never been more optimistic. I have to say I think the world speaks to an agile freight forwarder that is quick on his feet and that can make quick decisions for sure. And there I think we have a distinct advantage. We now have the global scale and the global footprint. But I think we have a very, very flat business model or hierarchy, you can say internally that allows us to act. And I think we are very good in reminding each other about what we don't want to become. We always talk about what, what do you want to become? But we actually remind ourselves on what do you not want to become. And when I look at the industry, there are a few companies along the way that got a little bit lost in their thinking, got too far away from customers.
So we, we talk about that aspect a lot and yes, but then, and then I simply feel there's enough space for everyone. It's a super fragmented industry still, but you have to move forward. If you don't do that then you will slowly erode your business. So we believe in the more entrepreneurial extreme, growth is the direction is the right one for us and we see customers responding to it.
[00:45:46] Speaker C: Madstrayer Global CCO and COO at Scan Global Logistics thanks so much for your time and thanks for joining me today on the Freight Buyers Club.
[00:45:55] Speaker B: Thank you Mike. True pleasure as always. So thank you.
[00:45:59] Speaker C: Big thanks to Antigua's 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 content coming your way in 2025 and we appreciate all the support. See you.
