[00:00:03] Speaker A: 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.
[00:00:18] Speaker B: Welcome to the Freight Buyers Club, the podcast where we cut through the noise of logistics and freight forwarding to get straight to what matters. I'm Mike King. I'm joined today by Oliver Gritz, who's the CEO of On Tegos Cloud and a man with decades of experience and a bold vision for how the industry can unleash its full potential no matter the market conditions. Oliver, thanks for joining us.
[00:00:43] Speaker C: Thank you, Mike.
[00:00:44] Speaker B: Oliver, the world of trade and logistics is in quite the state of flux right now with tariffs rising and protectionism making a comeback.
From your perspective, how are these external market pressures affecting freight forwarding businesses and the interests of their shipper clients?
[00:01:05] Speaker C: Well, my answer to this is the more difficult the environment, the more the shipper needs a great freight forwarder. Freight forwarding thrives on difficulty. Freight forwarding thrives on complexity. The prime example we've seen is Covid, where everybody suffered and freight forwarders had their heyday.
I could envision something similar happen now.
If you're dealing with freight forwarding and logistics, you're dealing with an almost unlimited universe of possibilities.
That's the difference to being a travel agent, where the options, what you can offer are more finite. And freight forwarding is all about service diversity and customization for specific customer needs. As said, the more complex the better.
Freight forwarders are an artist to finding great logistics solutions for their customer no matter what.
And therefore I claim that a great forwarder, a great branch manager, will make money under all market conditions. Even if a Met strikes or the sky falls down, they'll always find ways to make money.
[00:02:15] Speaker B: Very interesting, Oliver. So forwarders, you should be out there, you should be making money right now because the market's been up and down in the last few weeks. Can you unpack a little bit, Oliver? What you mean in terms of how they go about doing that in practical terms as they managing these logistics operations in this complicated time?
[00:02:34] Speaker C: Yeah. As Mike, you were so kind to point out at the beginning of the interview that I have decades of experience, which means that I have decades of experience. And the downside is I'm very old.
And in that context, I always like to tell a story from my very early days as an apprentice in the branch office of Schenker in southern Germany, and I was in charge of a number of trucks that I had to disposition.
And as a beginner, I made the Stupid mistake to order two trucks for the same destination of which one wasn't needed. And then it was late in the evening, nice summer evening. And all of a sudden somebody calls me, a customer calls, says, I have a huge problem. I need to get a spare part or a couple of spare parts urgently to a place far away. I urgently need a truck, can you help me? And I reacted appropriately to the moment. This time I said, I'm not sure. Friday night, getting a truck, very difficult. I'll call you back. So I waited 10 minutes, then I call him back. I say, I found a truck for you, but it was very difficult and the price is a lot higher. It's about double of what it would normally cost. The customer said, no problem whatsoever, let's do it immediately. And we made a hugely profitable business, a hugely profitable file.
And that kind of encapsulates what freight forwarding is about. It's helping customers in difficult situations. And that is what I was referring to before.
And that's how you make money in this business.
[00:04:25] Speaker B: Oliver, Change is hard for everyone, especially in an industry like freight forwarding and especially now we've got these long standing cultures and traditions.
We've discussed off air your view that human psychology tends to favor the status quo, how does that impact companies trying to transform their operations?
[00:04:48] Speaker C: Well, it's true. Everybody likes to play it safe and cautious.
In Germany there's the saying, wash me, but watch out that I don't get wet.
And there's this other saying that nobody ever got fired for buying IBM or hiring McKinsey.
So management tends to like to stay in their positions and play it safe and do what everybody else does.
But what everybody has to recognize the familiar. Playing it safe also means mediocrity.
And great is not on trodden path.
So there's a problem for many companies that hinders them from transforming. Transforming is in new territory. And fortunately today technology offers unthinkable solutions that were impossible just a number of years ago. And I'm not talking about AI here. So that's a buzzword everywhere to be used.
Advanced analytics or AI. Yeah, AI offers great opportunities, but there are huge amount of opportunities outside of AI.
And freight forwarding for its longest period of time was dealing well with the vague, with a not so precise.
But if you turn the vague and the not so precise of an already quite profitable industry into perfect, into zero defect, into outstanding customer service, into perfect files with very high profitability, then that is the potential that the proper use of technology holds there.
And it's Absolutely doable. And I encourage every manager of a freight forwarding company to consider that as an almost equally safe option that that is available for everybody today.
[00:07:00] Speaker B: Do you think this is particularly true of our industry? I'll give you an example from the media side of things. We've had digitalization of media for 20 plus years and now we've got this shift of consumption from reading into video or to audio like this podcast. I still speak to people in my industry, but this is very much the freight trade press and, and they still want to do what they were doing 20 years ago. They still really just want to do an event and a hard copy and sell advertising against those page views. Are we behind? Is it all something to do with our industry that doesn't want to adapt to these new techs that are changing everything about. We can see this in other industries. Do you think we're slow to see?
[00:07:42] Speaker C: No, it's everywhere. I mean, look at Tesla. Mercedes was holding a huge stake in Tesla.
You know, that could have saved their day and made everybody very rich. They sold it off very early. The former CEO of Volkswagen, Mr. Winter Korn, at a time right before Tesla started, said for sure that electric vehicles are not coming for many decades. It's everywhere. It's a normal human reaction.
And if you manage to break through this, then you are leaving the average and get into the territory of great where I think especially business people like to be.
[00:08:28] Speaker B: Okay, interesting. We've discussed previously how you've been deeply influenced by Enlightenment philosophy and ideas about every person having unique talent. Can you explain to me how that philosophy connects to what you're doing as on Teaga's cloud? Especially when it comes to data mastery and operation excellence? We can put it like that, yeah.
[00:08:50] Speaker C: Now you are asking me to build a very long bridge. I try to make it as simple as possible.
So what philosophy Enlightenment is about is take things out of the opaque into the light.
And one idea of it is that, as you already said, that really every person has a unique talent and how we can unleash this talent. So freight forwarding, as I got to know it, has one very strong point and that is that people who work in this industry often have a huge amount of passion. I mean, I can only refer to myself. I went to school, I looked at a bank first as an option to do my apprenticeship and my professional training. I did that for a few weeks. I was bored out of my mind. It was horrible.
I started working for a freight forwarding company and I could interact with customers immediately. I could help them solving problems. And this is what I have loved with this industry all along, since I started. And I know that there are many people who think alike. So how does the day for a highly motivated frontline operator usually looks like? They would love to help their customer, they would love to offer them unique solutions, they would love to manage the profitability of their files and what happens in reality. They are buried under tons of admin work that is killing them, that is draining them out, that is stealing their motivation. And here is where technology and what we do come in. We help the frontline operator to do what they do best, totally focus on the customer and have the terrible administration more and more taking over by the computer and by very well thought out processes.
So we free their potential, just as the philosophy of enlightenment describes.
[00:11:09] Speaker B: Very well done. Great bridge. Let's try another bridge. Let's dial back a bit and work out how you got here because you've had a. I mentioned earlier, you've had a standout career that started in logistics and it took you to the C suite at DHL Express. Can you walk us through some of the key moments that shaped your professional path?
[00:11:28] Speaker C: Yeah, my professional path was initially very much shaped by my practical education, which I complemented with a university education, specifically in finance.
And then I was very fortunate that the Swiss logistics company, which at the time was one of the largest logistics group in the world, Danzas, had the problem that they were many years behind in building their finance and controlling system.
The law in Switzerland had changed. In 2003, all companies were required for the first time to publish consolidated accounts. Did I say 2003? I meant 1993, sorry, consolidated accounts. And they set up a finance controlling department for which I was perfectly educated.
And right from the beginning I had an edge with my equally university educated colleagues that I knew the business from the very beginning. So all the practical parts of the business, which was enormously helpful when we built a system. We had a very ambitious CFO at the time, somebody who came over from Kune, who copied the green finance system, which I'm still a big fan of today, and that worked very successfully. Finance at the time ruled the company and that kick started my career really well. And from there it went up and up and up.
And then in 1998 we were bought by Deutsche Post who in 2002, back end of 2002, got 100% control of DHL Express.
And then because I was apparently one of the most talented guys out there, DHL Express, which was the pearl or the crown jewel in all the acquisitions that Deutsche Paulus had done at the time they hired me. And there I also had a few promotions and ultimately became the CFO of DHL Express at age 39. A job that I held for five years.
[00:13:51] Speaker B: You said that you had a steep climb. That's very, very true.
What do you think set you apart?
[00:13:57] Speaker C: It was two things.
One is that I had this good start and this practical knowledge, which by the way helps me to this day.
Amazing enough where they say that your education is outdated only few years after you had it. In my case, I was lucky that that is not the case.
And then I always focused on results of my work. I love doing difficult projects, love to touch stuff that nobody else wanted to touch and very often found very good solutions for it. And that helped me come climb up the ranks. I was not a careerist, though, I have to say, really I owe at least that's what I think. But I really think that that is the case. That I owe my career to really hard, measurable results.
[00:14:55] Speaker B: I like to say I'm not a careerist because I refused to take a job for about 20 years.
But you stayed a bit longer in the corporate world than me. You made the leap at age 44. It's a big move, especially when you're at somewhere like DHL Express.
What pushed you to leave this highly successful, bald level position and strikeout on your own? And what was the major difference or maybe the major challenge you found once you were outside that corporate world? Because it can be a bit of a bubble, can't it?
[00:15:27] Speaker C: Yeah, I mean, it was a huge move for me. My parents are both civil servants, all my friends were salaried employees.
And in this circle there is the saying, you are either gainfully employed or you're dead. I had one colleague who said the down path or the path to hell for people is first goes their job, then goes their marriage, then goes their health.
So that's the general thinking that very often prevails in this circle. And of course that scared the hell out of me. On the other hand, I was confronted with that situation that especially in this huge Deutsche Pos dhl.
I more and more became a stranger to myself. This was not my world, not my way of acting and I didn't really fit there. And that affected my well being more and more and I needed to go out. But it took me about three years to make that move.
And after I made it, initially that was very good for me because I had carried this long aspiration and Dream that I wanted to cross the United States of America by bicycle, which I was then, after some difficulty, able to finally realize after I left the corporate world.
But then I had a few moments where I was shit scared because I didn't really prepare what my next professional step was. And I was definitely in a situation where I still needed some income. And this was a pressure cooker learning exercise. Probably one of the most educational period of my life where I did all the personal development stuff, which I should have done many years back, but didn't because I was too busy doing a career.
And one very important question that I asked myself in that context, what is actually your biggest asset? What do you have? What you can build on?
And initially that was my network of contacts, especially also the contacts that I had left, whom I still had, when I say left from my employment, with whom I still had splendid relations.
And then very soon I made some very good moves. Very soon I was making as much money as before, but more and more on my terms.
And then the next big asset that I had was that I really always loved the content of my job. And my hunger to achieve outstanding results never, never ended well.
[00:18:22] Speaker B: I think that probably applies to a lot of people in a lot of different careers. You can still do the things that you enjoy without being part of that corporate world. Sometimes it's nice to try and do it by yourself as well. Yes, you've highlighted to me, I'll put it in quotes, the importance of quote start proactive real time business steering. Quote ends.
Can you explain how this approach changes the game for freight buyers or for freight forwarders, and what kind of impact it has on key business metrics like cash flow or billing cycles. But maybe best to start with explaining what is that? What is proactive real time business steering?
[00:19:02] Speaker C: I think we all agree that providing information, or in very boring terms, reporting, when done well, can create huge amounts of value.
And this is a core part of what I loved as my profession as a CFO is providing good information for good business decision.
Very mundane, but super important.
And over time I realized that modern technology today offers one great feature over the time when I started my work, and that is it is no longer necessary to provide information in hindsight, after things happened in terms of a report at the end of a day, at the end of the week, at the end of the month, to then send traffic light charts around and trigger corrective action based on outdated information.
Today you can make the relevant information available to the relevant party, the frontline operator at the right time to take immediate corrective action. And that is what I understand under real time business steering that you make the information available in real time. Who take immediate action.
[00:20:34] Speaker B: Your case studies have shown significant improvements in cash cycle times and profit margin.
What are some of the common barriers companies face when trying to implement these? Well, I guess we call them transformative digital processes. Is that the right word?
[00:20:49] Speaker C: That's transformative business processes. So how does that actually work? Billing is always superb example to illustrate it and where the value comes from.
So what we realize is that all freight forwarding companies, if you measure or if you define when the earliest time to bill is compared to when they actually bill run at least five, mostly 10 days behind their potential.
And the way to solve this is by immediately flagging to the operator in charge, hey, there are 1, 2, 3 files that you can immediately bill and demand that that action is immediately taken.
Or we detect items like demurrage or storage charge that should have been built and haven't been built. And we equally flag this information to the frontline operator.
And if you make the information available in a very user friendly manner, if you immediately lead him to correcting the file in the transport management system, then our experience is it will always be done 100% no fail.
And then you think of a 10 days of earlier billing, which means 10 days acceleration of the cash cycle. That means you have the cash 10 days earlier.
10 days is 1/3 of a month. So say your monthly revenue is $90 million, say 1/3 of it is 30 million.
So with 10 days earlier billing, you have 30 million of additional cash immediately. And we achieve that all the time and therefore we have the claim, you know, you get, if you work with us, you get your money back 10 times within just a few months. And then when it comes to complete billing for getting items, that usually leads in our experience to an improvement of the gross profit of 3% and 3% gross profit increase that runs all the way down to the bottom line, that equals EBIT and net profit and that usually then equals a 10% improvement of the EBIT. And these are just a few examples. You can apply this to all business processes and then you end up having the perfect operation with perfect customer service and huge amount of additional profits.
[00:23:36] Speaker B: So why isn't everyone doing this? Does this go back to your inability to confront change even if it's in your own interests?
[00:23:44] Speaker C: Yeah, because it's, it's very radical and it is very fundamental. It's not superficial.
Very often when I talk to customers or potential customers, say we Implemented Cargowise, we implemented Salesforce, we've done everything we can, right? But very often then when you look at it is yeah, they've implemented this system, but to which degree is it used to use those systems to their fullest extent, the first thing you got to think about is your data architecture. You need a single company data model. Everybody needs to think of the same home sheet. So you need to have one version of the truth, from first customer contact to cashing in on your accounts receivable. And that fundamental work is a significant transformation and many companies shy away from starting it. That comes, you know, what is everybody else doing? I'm doing the same as everybody else is doing.
And it is often difficult to convince people to go one level deeper and another level deeper, which is the level you need to get to when you really fundamentally want to change your business, when you really truly want to make use of the possibilities of digitalization. Even if you want to use all the good business cases for artificial intelligence, the first thing you have to do is to build a well thought out company data model and have to make sure that the data quality is high for the algorithm for the artificial intelligence to lead you to proper business decisions. And yeah, to have the trust to convince people to go to this level of, of transformation is a stretch.
[00:25:49] Speaker B: Fear of risk or I'll put it another way, using your own words, back to you. No one ever got sacked from hiring McKinsey. You've shared some great stories today, Oliver, from your early career about the power of frontline operators in freight forwarding. How do you see on a general level technology helping these frontline staff unlock even more value in their day to day work as we move forward.
[00:26:13] Speaker C: In this context, I always like to refer to a Roman story of a Roman farmer who was indicted for witchwork because his farm had an output of a multiple of all the neighboring farms. And he got out of the case by convincing the court that in fact the reason for his higher productivity was treating his slaves better than anybody else and providing them with better tools.
I already referred to the fact that many of the frontline operators are buried under masses of administration and administrative requirements and can't really do the work they love to do and they are meant to do. That's working with a customer and providing outstanding logistics solutions to a customer and making the maximum amount of money from doing business with a customer. And technology, if applied well, has the potential to free the frontline operator. Good information technology is to come back to my story is the tool are the tools that you want to provide to your passionate workforce to be super productive and to delight the customer.
And that's the interplay I see between humans and technology.
I'm by no means of the opinion that a freight forwarding is ever going to die as an industry.
I'm absolutely convinced that a great forwarder will always have a job.
And I'm also deeply convinced that a grade forwarder can even be a lot greater if given the best possible technology to do their job.
[00:28:06] Speaker B: Okay, thanks Oliver. Just as we're wrapping up, just take you back to that idea of selling transformation and how tough it can be irrespective of industry.
Just some quick fire advice from yourself, if you don't mind, for leaders in logistics who want to push through that resistance and drive real change.
[00:28:24] Speaker C: Well, I mean there's, there's one thing which is also may sound very bland, but the number one thing in education, in transformation, you always must pick up people where they stand.
So you have to devote a lot of time to the psychology of the people. You cannot make fun of it, you cannot belittle it. You have to take it very serious and have to take other human beings in a very gentle fashion from where they are to where they need to go. Very important.
And then the same, the second thing that I always give with advice, don't shy away from the difficult stuff. As a matter of fact, start with the difficult stuff. And in freight forwarding, the difficult stuff is the data, particularly the financial data processed in the context of processing a file. You know, all the revenue and cost of sales transactions is very often debt that nobody wants to touch. Where you know, where the, where the blame is passed back and forth between operations and finance. And that's exactly where you want to put in the needle and where you want to start and what you want to sort out. Because if you can, you get mass improvement and you build a huge platform of trust to move on with your further transformation.
[00:30:03] Speaker B: Oliver, finally just looking ahead, what does world class performance mean for freight forwarding companies in the next five year? Let's, let's put use that timeline and how can technology and human talent come together to get there?
[00:30:18] Speaker C: So just before the interview I looked at the numbers. For me, a very important metric, KPI in freight forwarding is the return on capital employed. How much money do you make on the capital you use for doing that business?
And in that context, I've many years back always claimed that freight forwarding is in fact one of the most profitable industries in the world.
At the time when we started the analysis that was 2016 and then another one in 2019.
Expediters was of all companies we could find the one that generated the highest return on capital, followed by Kuhner and both were at the time more profitable on that measure than Apple.
In the meantime, Apple has surpassed the freight forwarding industry with a return on capital employed of 65%. But number three still is today ExpediTers at 39%. And you go into freight forwarding companies, nobody does everything right at this stage because especially the legacy forwarders to totally transform. There's a lot of things to change.
Some of them are very difficult.
So we have through analysis come to the conclusion that the sweet spot, if everything is done right, the gold Standard is a 50% return on your capital, which is massive, which right gets you into the super profitable territory.
And that's what I consider gold standards. And we've put together a whole long list of things that every company can do to get to this level. I really sincerely think it is possible for everybody. Freeing up the frontline operations and having them totally manically focusing on customer and customer service and creative logistics solutions is one part of it. Having the whole company being obsessed with file profitability is another part of it. And then of course automation of your backend administration make that leaner and lighter, get rid of regional structures and other useless, useless I'm saying today no longer needed management layers is another part of it. And then you can every company can nudge themselves towards the 50% over say a five year period.
50% return on capital is the gold standard.
[00:33:05] Speaker B: Oliver Grit, CEO of On Tegos Cloud thanks for joining me today on at the Freight Buyers Club.
[00:33:10] Speaker C: Thank you Mike.
[00:33:12] Speaker B: Before everyone signs off, if you want to learn more please do check out onto
[email protected]. you'll also find Oliver at the huge Transport, Logistic and Air Cargo Europe show in Munich at the start of June. He's displaying his wares as Hall B1, stall 619. The freight buyers Club will be reporting live from Munich too. Please do ping me on LinkedIn or on email if you want to meet up. And obviously please do like and follow this content on your platform of choice. You want to keep up to date on everything new in the world of shipping, logistics and freight. And finally, big thanks to Tom Matthews and Karen Ball for their sterling work on production. And thanks all for listening. See you next time.
Sam.
