August 26, 2025 • 37 mins
The right pricing strategy can make or break margins on less-than-truckload shipments, especially amid weak demand. In this episode of Bloomberg Intelligence’s Talking Transports podcast, SMC³ President and CEO Andrew Slusher joins BI’s senior transportation and logistics analyst Lee Klaskow to explain how the company’s technology-driven tools help shippers, carriers and brokers make informed decisions on rates, costs, transit times and emissions. They discuss trends in the LTL industry — from dynamic pricing and sustainability to market uncertainty, consolidation and FedEx Freight’s planned spinoff. Slusher also shares insights on leadership, innovation, AI’s potential impact on transportation and his shift to trucking from aviation.
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Episode Transcript
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Speaker 1 (00:07):
Hi everyone, this is Lee Clasgow when We're Talking Transports.
Welcome to Bloomberg Intelligence Talking Transports podcast. I'm your host,
Lee Clasgow, senior freight, transportation and logistics analysts at Bloomberg Intelligence,
Bloomberg's and house research arm of almost five hundred analysts
and strategists around the world. Before diving in a little
public service announcement, your support is instrumental to keep bringing
(00:29):
great guests and conversations to you, our listeners, and we
need your support. So please, if you enjoy this podcast,
share it, like it and leave a comment. Also, if
you have any ideas for future episodes, or just want
to talk transports, please hit me up on the Bloomberg terminal,
on LinkedIn or on Twitter at Logistics Lee. I'm very
excited to have with us today Andrew Slusher, President and
CEO of SMC three, a position he's held for the
(00:52):
past decade. His career spans transportation, technology, pricing, and revenue
management areas where he built deep expertise and driven innovation
across the supply chain. Welcome to Talking Transports, Andrew.
Speaker 2 (01:06):
Thanks Lee, very glad to be here.
Speaker 1 (01:07):
So SMC three, can you tell us a little about
the company and what does it stand for.
Speaker 2 (01:14):
Sure, It originally was Southern Motor Carriers Association, and we're
a ninety year old company dating back to nineteen thirty five.
And the three and SMC three stands for data, technology
and Education. So we were once a rate bureau back
in the day when there was regulated pricing in the
LTL industry less than truckload industry, and when basically deregulation
(01:37):
took place in the late seventies, there was no longer
a need for rate buros to help facilitate rate making
in the industry. There were ten of these geographic rate
bureaus all around the United States. We're the one in
the Southeast. And when the need for a rate bureau
went away or rate buros went away, basically SMC three
took the lead and morphed into a technology and data
(01:58):
solutions provider. So in the nineteen eighties it acquired or
merged with Southern Central and Southern Rate Bureau and Louisville, Kentucky,
and that was really the genesis of a lot of
the technology solutions that we offer today. Today we offer
we're a middleware provider and we offer solutions that help
provide rate quotes, transit time information to shippers for managing
(02:22):
their freight and really helped drive efficiencies into the industry.
Think about three pls, think about shippers, et cetera. We
do business with thousands of customers around the US and
North America. Most of the Fortune five hundred companies use
our solutions, and so anyway, were widely connected from the
(02:43):
Fortune five hundred down to some of your smaller mom
and pop type logistics companies. SMC three basically makes their
lives easier and optimizing shipment movement, et cetera. So if
for some reason, anything wherever to happen to SMC three
and our service is the LTL free transportation industry would
definitely feel the impact. Think about when you're booking a
(03:05):
flight and you pull up your flight options, you see
a fair quote and you see your different options. Effectively,
that's what we provide to the TMS providers in the industry,
so rate information, transit time information so they can pick
the best option for their transportation needs. We're also looking
at providing carbon emissions and this is a new area
(03:26):
that we've ventured into in the last two years, and
to me sustainability is a really critical part of the
transportation industry and it will continue to be going forward,
but we have staked out a leadership role in the
sustainability stage for the industry. The other piece of what
we provide to is education solutions, and we are a
(03:48):
nonprofit trade association, so part of our mission though is
to bring the parties of the industry together to serve them,
basically serve the industry. So we have education solutions. One
of them as our LTL Certification program and you can
go on and it's five part series and you can
take courses that were prepared by SMC three and professors
and it's an online class and you can learn everything
(04:11):
LTL in the industry. So we host two conferences a
year as well, which are attended by leaders. It's a
who's who of the transportation industry. One is every January
in Atlanta and then one somewhere else in June at
a resort typically in June, but great conferences. So we
have a role in both technology and data but also
education in the industry.
Speaker 1 (04:31):
And so when you talk about shipments, and as you mentioned,
you're purely focused on the LTL.
Speaker 2 (04:35):
Market, primarily focused on LTL, we do have some solutions
that serve the truckload industry as well. We provide beyond
just rate quotes and transit times though. We provide an
activity based costing model. It's used broadly in the LTL
industry by over sixty percent of the carriers in the business,
and that helps them basically distill all of their costs
(04:57):
down to the shipment level of detail. You're trying to
set prices for customers, it's important to know how much
did it cost for me to serve that customer, So
we give them they utilize the model. We provide the
model basically that allows them to accurately cost their freight.
We do the same for the truckload industry. It's available
to many in the truckload space as well. So that's
(05:18):
really the one primary solution that's available to truckload that
we have that we're really heavily focused on LTL. The
nice thing about that model now is I mentioned the
focus on carbon emissions. We actually have a carbon calculator
built into the cost model today, so the carriers can
calculate their carbon impact at the shipment level of detail
if needed. And interestingly, over the last really five plus years,
(05:43):
more and more shippers when they put their freight out
to bid, they're requesting emissions information and so they now have.
We've driven some standardization of that calculation into the industry
that didn't exist in the past. And in the past
the carriers how do I respond to this? And they'd
all come in with different answers. So we've launched a
(06:03):
best practices programer on sustainability, have numerous carriers that participate
in that, and now we have the technology behind it
where they can calculate it at the shipment level of
detail or aggregate it to whatever level they need using
the cost model that we provide.
Speaker 1 (06:18):
And so you know you mentioned you guys are a
non for profit, so so who owns you or like
a member owned?
Speaker 2 (06:25):
Is that how it works? There's really not ownership and
we're a non process.
Speaker 1 (06:30):
For those and air quotes.
Speaker 2 (06:33):
Yeah, yeah, we have members, So we have members, but
ultimately all of the proceeds if we were to basically
we can acquire or merge with another nonprofit, but ultimately
the assets would flow into the state of Georgia. But
we are led I will tell you by a board
(06:54):
of twelve industry leaders from the LTL industry and we
have third party logistics representation. Some of the biggest ones
are on our board. Carriers are on our board, so
they are there to ensure that we're driving in the
right direction. And the nice thing about it is we
don't have to plan for next quarters report right and
(07:16):
we're not driven by short term gyrations in the economy
and the market. We're planning for the long term and
we're a service oriented company. We've again been around for
ninety years. We're a trusted entity in the industry and
it's truly nice that we can plan for the long term,
build for the long term and deliver solutions that help them.
And our board is the face of the industry that
(07:38):
we serve, so we have a great sounding board and
our board meetings to not only go over financials, but
to discuss product strategy and where we need to head right.
Speaker 1 (07:46):
So, obviously technology is pretty important for your company and
it's probably been instrumental in the evolution of the company.
Can you talk about you know how much I don't know,
like you know all about your technology or do you
do most of your stuff in how are you leveraging AI?
How are you leveraging AI machine learning? Can you talk
(08:08):
to us about that.
Speaker 2 (08:09):
You bet. So. We've gone through a huge transformation, as
I mentioned earlier, from a rate bureau from nineteen thirty
five till early eighties into a technology and data solutions provider,
and that was really from the eighties to say, the
eight timeframe. There were new products released, et cetera. All
of it was homegrown and kind of home hosted over
(08:31):
the last ten years. I arrived in twenty fifteen. Even
though we had some really great products and great offerings
that are used widely throughout the industry, we really had
not done a whole lot in terms of innovation. We
were staffed at that time at one hundred people and
in total we had six developers maintaining this environment. This
(08:51):
platform technology, as you know, was rapidly changing, and the
question for me from the board was where should this
organization go to make sure it thrives, it's thriving in
the future, et cetera. We've gone through huge transformation and
we have taken our it staff and our company has
gone from one hundred people to about two hundred today.
(09:12):
We've gone from twenty three million in revenue to this
year will be around fifty four million in revenue. For
a ninety year old company to experience that kind of
growth is terrific to see. But the key underpinning, I
would tell you is service, reliability, service quality. People trust
what they're going to get from SMC three. We have
(09:32):
over a ninety nine point nine percent up performance and
so it's quality solutions that are widely embraced. And one
of my goals when I came in was to make
sure that people use SMC three because they choose to
use SMC three, not because they feel like they have
to use SMC three. And we are very focused on people.
(09:54):
And I know you ask about technology, but I'll jump
onto the people side really quickly. My number one focus
in my career has always been on people. It's my
employees and it's our customers, and I continue to focus
on that, and I want to make sure our customers
have an experience that they say, I love working with
SMC three, I love their products, they work. I love
(10:18):
the people because they're always there for me, supporting me.
So we're trying to be everything we can be to
serve them well and give them a great experience. Technology wise,
we've gone from six developers to well over forty today,
our IT team is over half of our organization, so
we have significantly scaled up our development efforts. We've launched
(10:40):
many new products over the last ten years, so we're
excited about where we're going. We have dynamic pricing solutions
now that are available. We have API solutions available for
tracking and tracing shipments. All of those are homegrown, hosted
in our own cloud. We have multiple data centers across
the US for security and for backup redundancy. But we
(11:03):
all also are moving into AI and a lot of
companies you hear about lead with AI, and we're all about,
you know, a gentic AI or this or that. We're
not leading with AI. We're not not not to impress
the world with AI. But I will tell you behind
the scenes, we do what we can do to drive
efficiencies into the organization so we can do more to
(11:26):
serve the industry. And AI is one of those techniques,
so we're using it. I would tell you today all
of our employees use AI in some shape or form.
We're using it for code generation for some of our
a PI solutions. So anyway we do use AI. Jit
Hub Copilot is used and also an internal version of
(11:48):
Chat GPT, but we we're not what i'd call a
bleeding edge tech company. We've got to make sure because
we are a nonprofit we sell fund need to make
sure when we invest in something it's going to succeed
and deliver our return, so we can continue that cycle
of investment for the industry. But we do deploy new
(12:10):
technologies as they become available. And the landscape has changed
so dramatically over the last ten years. It's been a
lot of fun, right.
Speaker 1 (12:16):
So there's a lot of developments going in the freight
markets and the lto markets. You know, one recently was
you know, a new freight classification. The changes were recently
made by the National Motor of Freight Classification or actually
by the n m FTA. How is that impacting the
LTL industry? How is it impacting your products? Did you
(12:39):
guys have to prepare for this or was this kind
of like a non event for you guys?
Speaker 2 (12:47):
Honestly, I'd tell you it's a bit of a non event.
We were prepared for it. And it's another pricing methodology.
We support so many different pricing methodologies in the industry
and able to in order to be able to deliver
rate quotes to three pls and shippers. You have to
be able to support a lot of different methodologies, so
we get requests for different methodologies each and every day.
(13:08):
What I'm going to tell you is the nice thing
about the change that the NFC NFC made is that
it's a move towards density, which more for the classification
of freight and commodities in the industry. So it more
closely aligns with the carriers and what drives their profitability.
So it's going to help them make smarter decisions as
(13:30):
they price their freight and that better reflect reality of
what's actually being shipped. So I think that'll be good. Now,
we'll result in some surprises for some customers. Absolutely. There
are a lot of customers who were proactive about it
and said we need to make sure that you guys
reprice our freight appropriately, and they got that done prior
(13:51):
to the changes going in, so when it happened, they
were ready. Others may be a little surprised that their
bill could go up or down slightly. There will be impacts,
but at the end of the day, it's another methodology.
But I like it because it more closely aligns with
the carriers' costs and will help them run a more
efficient operation.
Speaker 1 (14:11):
So you guys both have a pretty interesting perspective on
the freight markets. Given your board makeup and the fact
that you mentioned you know most of Fortune five hundred
companies or your customers. What are they telling you about
the freight demand today? Maybe the outlook. I mean, obviously
everyone's crystal ball is cracked and foggy. But you know,
(14:33):
what are you hearing from your customers and your board members.
Speaker 2 (14:37):
It's a world of unpredictability and uncertainty that we live in.
And you know, we've been looking at this. She had
COVID and there was this huge surge in demand which
boosted all fortunes for the LTL industry and truckload for
that matter, great times in twenty twenty twenty twenty one,
and then twenty twenty two things leveled out, inventory adjusted,
(15:00):
and really things flattened out. And I've been hearing you know,
so we've been in a freight recession, and I've been
hearing comments about well, and this is for the last
three years, Oh, we should be coming out of it
by the second half of the year, and we never
never really did. Last year heard the same thing never
really did, and this year is interesting. At the beginning
(15:20):
of the year, a lot of economis were saying, oh,
we should see a recovery, freight recovery. At the end
of the year, I think the verdict is out and
hearing it from some of the carriers and three pls
on our board. The bottom line is we're bouncing along
what feels like a bottom and we're not seeing a
lot of signs of lift yet. The nice thing is
(15:43):
there hasn't been just a major downward thrust, but there's
also not an upward piece of momentum that's really emerged.
And early this year was interesting. You know, I look
at and I'll back up a little bit last year,
spoke with our employees in October, and I encourage them
to go vote. Vote in the presidential election cycle, vote
(16:04):
your conscience, and regardless of which party wins, the economy
should stabilize because the one thing corporations want is predictability
of policy. And so you'll get that. You're going to
know tax policy based on the outcome of the election
from either party, and that will at least have a
stabilizing effect. So we get into the new year and
(16:27):
let's just say it's been far from predictable with the
tariffs and a lot of things that just cast some gyrations.
Not anything against what's going going on, but I do
think there's been some shock to the system. And we
saw early this year the markets dropped pretty quickly with
the threat of tariffs and the concern about inflationary pressures.
And when the markets drop, consumers started to show signs
(16:48):
of pulling back, which they've continued to. One of the
things that has historically propelled the economy has been consumer spending,
driven out of gains that they take off of their
investment and appreciation. And when the market started to dry up,
there was a pullback on the consumer side, and you
had the commercial corporations holding back on a lot of
(17:08):
capital expenditures and decisions because of questions about what's the
policy going to look like, where is this tariff thing going,
and here we are today and there was so that
kind of sent things into a bit of a downward
cycle in the first few months of the year, and
then then basically pulled back and gave some delays on
(17:29):
the tariffs and the market rallied and people are enjoying
that now. So there is actually some signs of consumer stability,
which is encouraging, but it's because the market's going up now.
The market is very different than the economy, as you know,
but it also does propel the economy and it can
(17:49):
create inertia. So right now I think there's some momentum
being generated. One of the underlying areas of concern I
have is the ISM producers production manufacturing production in US.
It's still in contraction mode and it has been for
several months, and that tends to be a leading indicator
of LTL in the freight industry, and the fact that
(18:10):
it's at forty eight point nine, which is below fifty,
which is kind of the break even level. We're still
contracting on manufacturing, so there's some good out there and
there's some challenges out there still, and honestly, we'll see
where it goes. The CPI is another one.
Speaker 1 (18:26):
So yeah, on the ISM, I think it's been in
a contraction territory of the thirty one in the last
thirty three months, you know, and consensus expectations for a
lot of publicly traded LTL carriers are for tonnage to
be done by mid single digits, So the outlook is
not great. You know, you mentioned the consumer, and obviously
(18:46):
consumers they're big into buying online e commerce. How does
e commerce in that development impacted the LTL market from
your vantage point.
Speaker 2 (18:57):
It has, I al would say driven probably more short
haul distribution, a lot of final mile stuff. Amazon does
a lot of it on its own, so it has
created some changes in distribution patterns and all that. So
and I'd say that trend's been going on now for
quite a long time, so not a huge shift this
(19:17):
year versus last. It's a continuation of a cycle that's
been going for a while.
Speaker 1 (19:21):
But a positive.
Speaker 2 (19:22):
It's a positive, it's a positive.
Speaker 1 (19:25):
You know, there's been a lot of interesting things going
on in the LTL space, you know, I know you're
you kind of have a, like I said, a unique
vantage point. We've seen consolidations, we've seen bankruptcies.
Speaker 2 (19:38):
You know.
Speaker 1 (19:39):
What are your thoughts on consolidation in the space. You know,
night Swift has been one that's been buying regional carriers,
you know, Yellow and out of business a couple of
years ago. FedEx Freight is going to spin out and
that could create some interesting dynamics in the marketplace. What's
your perspective on the evolution of the LTL competitive market
over the couple of years.
Speaker 2 (20:00):
I think it's gonna be real interesting to see how
it shakes out. I actually was at Yellow for thirteen
years from nineteen ninety eight through twenty eleven, and saw
some really great times there and also some challenging times
toward the end of my time there. I was sorry
to see them go out a couple of years ago,
But instantly what was interesting to.
Speaker 1 (20:18):
Me were you were you a Yellow guy or a
roadway guy.
Speaker 2 (20:21):
I was Yellow VP of Pricing at Yellow, but ultimately
I had all of them, and honestly, I love the
people from both of those companies and got to know
many of them. It's a great group of employees. So
more than anything, I hated to see the company end
up ceasing to exist, But it wasn't shocking given the
turmoil that had really unfolded over a ten plus year period.
(20:44):
But bottom line is, when Yellow went out a couple
of years ago, there was so much excess capacity already
in the market. It was post COVID boom, and things
had flattened out and started to soften, And I had
heard numbers back in that timeframe of eighteen nineteen percent
excess capacity. So when Yellow went out, it wasn't It
(21:05):
didn't really create much of a blip. And sure there
was a little bit of a bump in tonnage and
freight for the carriers and really helped stabilize pricing further.
But at the end of the day, it was a
bit of an I say, at a non event in
the industry. What is resulting though, as you know and
alluded to, a lot of the carriers out there have
acquired terminals from Yellow and the asset sales that have
(21:28):
gone on, and I would say it concerns me just
a bit long term if the freight environment doesn't pick
up as those terminals start coming online, capacity there will be,
let's just say, capacity will be plentiful, which can put
pressure on the pricing side in the industry. Right now,
(21:48):
there's been a good stability around price in the LTL
space in spite of the flat kind of tonnage environment. Yep.
But I do think it'll be real interesting over the
next day five years to see how that capacity is
absorbed into the industry as carriers look to grow into it. Yeah.
Speaker 1 (22:07):
Yeah, a lot of expectations for pricings, which measured by
a revenue for one hundred eight less fuel search charges
would you of course know as expected in mid single
digit growth, So that's going to you know, help mitigate
the impact from the lower tonnage. But still way on,
uh way.
Speaker 2 (22:24):
The FedEx spent off I think will be interesting too.
I mean, and they used to be independent as American
Freightways in the days, and it'll be interesting to see
how that unfolds. But I honestly think it's going to
bring greater efficiency to the FedEx freight organization and allow
them to operate in a more nimble manner in the industry.
So it should be good from a shipper's perspective and
(22:45):
just a competitiveness standpoint, I think it'll be a plus
for the industry and for FedEx.
Speaker 1 (22:49):
Right, So, what's what's next for the company or do
you have any like services as you're planning to roll
out you know you discussed earlier. You know you're focus
on emissions, you know where what other services do you
guys plan on providing you know in the future.
Speaker 2 (23:06):
I mean, dynamic pricing is one thing that we've rolled out,
and the world of traditional class based commodity class based
pricing is slowly declining and that's what our core products are.
Speaker 1 (23:18):
And can you dumb down when you're talking about LTL
dynamic pricing, what does that mean to you?
Speaker 2 (23:22):
Guys? Carriers can basically set prices on the fly as
they see fits. So we've actually built an integration with
our dynamic pricing model to the LTL carriers costing model,
so they can eat if they want, they can price
it off of the cost for handling freight and given lanes,
and if they know they have a back haul lane
(23:43):
and they need to move the price down on a
given day, then they can do that. So they can price,
let's just to be simple, from day to day, from
hour to hour, minutes minute, They can change their prices
on the fly with this dynamic pricing tool as opposed
to having contract rates that are in place and typically
negotiated once a year if they so. This gives them
(24:05):
far more flexibility in driving efficiency into their operation by
targeting the freight and the shipments that they need to
help balance their system more effectively. And there are a
lot of offshoots of that involving AI and predictive pricing,
analytic analytics, et cetera that can be built into dynamic pricing,
so it's not just a cost driven model, but it
(24:26):
can also be driven by likelihood of winning freight at
such and such a price point, So predictive pricing could
be folded into that. We also have a new application
coming out to help manage contracts and pricing. LTL pricing
is horribly complex, and I.
Speaker 1 (24:43):
Think, can you walk us through what it kind of
looks like? Big picture, Like you know, you.
Speaker 2 (24:49):
Don't want me to go there. But actually it was
funny when I got on at Yellow as VP of pricing.
The former CEO at Yellow was more my and he
had come out of the airline industry, and he said, Andy,
if you can figure out airline pricing, so I was
at American Airlines previously, you can figure out LTL pricing.
(25:11):
I am so thankful. I had a team of seasoned
veterans at Yellow who knew LTL pricing because it's the
most convoluted pricing. But it's driven off of a structured
classification code with weight breaks and link of Haull breaks,
and there's all sorts of complexity when you think about
all the zip code to zip code combinations for moving
(25:35):
freight all around the country and all across North America.
You have literally a price per hundred weight for each
of these zip to zip pairs for every weight break
you can imagine out there, and there mused to be
about seventeen of them and just a convoluted complex. Right.
Speaker 1 (25:52):
And if I'm a shipber and you're an LTL carrier,
so am I getting just like one flat rate? Or
am I like saying, well, give me some rates on
these two points for this amount of weight.
Speaker 2 (26:06):
Is like typically the way it works, there's there's a
set of base rates that cover all points, okay, and
then the car the shippers negotiate a discount and it's
a game of discounting, and the ltail industry a discount
off of the base rates, which are effectively rack rates,
this kind of a max level rate, and shippers negotiate
(26:26):
discounts off of those, and the net rate is what
they end up paying based on what they're shipping from
point A to point B. So it's it's always been
a process a negotiation typically once a year between the
shipper and the carrier to rework their rates or the
three pl in the carrier. And with dynamic pricing, though,
what's neat about that is it's a price for that
(26:49):
shipment in that market at that point in time, and
the model, based on rules or predictive pricing analytics, can
generate a rate at the shipment level of detail on
that day, regardless of what the contractually negotiated rates are.
Speaker 1 (27:03):
So right, and so it's not only good for the carrier,
it's also good for the shipper because they can decide, well,
I can hold this shipment for two days because they
don't need it somewhere by a specific date, and I
can save ten percent five percent exactly exactly.
Speaker 2 (27:17):
So dynamic pricing is a really exciting area. There are
also a lot of rules and conditions that the carriers
have for freight. It's for additional services that are provided.
Do you need a lift gate, do you need a
delivery to your front door, et cetera. And we have
a system now that basically will quote not only the
base rate price that the shipper would see, but all
(27:37):
the ascessorial charges or extended service charges those are built
into it as well, can be housed in our ecosystem,
so to speak. And so basically we take a horribly
complex and I won't go into the depths of it,
a horribly complex pricing environment and we simplify it for
shippers and we provide also tools to three pls and
(28:00):
shippers for analyzing those rates. We have a bid procurement tool,
bid Sense, which if a shipper wants to bid it's freight,
a major corporation wants to bid freight, they can link
directly to the carriers through our bid procurement tool and
actually determine where they can which carriers will provide them
the best rates in all the different lanes, and they
award their freight based on that. So we do have
(28:23):
tools that help them with the analytics behind it as
well as the bid process itself.
Speaker 1 (28:28):
And so just you know, kind of curious, what is
the most common accessorial charge or top two or three
accessorial charges that people get charged for. Don't mean to
put you on the spot.
Speaker 2 (28:41):
Yeah, I'd tell you a lot of them around notification
of delivery, notification of pickup. But with all the tracking
and tracing that's available to today now, that's probably a
lot less in demand than it was when I was
there back in the early part of the two thousands.
Speaker 1 (28:58):
Right, So you know, is there anything on your radar?
You know, as a as a leader of a transportation
related company, a free transportation related company that's on your
radar that either you look at as a significant challenge
or an opportunity on the other side of the coin.
Speaker 2 (29:17):
Honestly, I would tell you that we are so plugged
in with the industry and the customers in the industry,
just through our conferences that we host, and through our
board meetings and we have advisory meetings too with LTL
carriers and three pls. We feel like we have really
good line of sight as to the changing dynamics affecting
(29:38):
the industry and we're always trying to factor that into
our product equation in terms of where we're headed. The
biggest challenge, I guess and the thing that weighs on
me is just where is AI going to go? Yeah,
where is technology going to go? And is it going
to go in manners that could totally disrupt our world
and really all of transportation. And so we're always looking
(29:59):
both extern and internally to prepare for whatever might be,
you know, down the road, and make sure we're ready
for it.
Speaker 1 (30:07):
Right, you mentioned you were you were in the airline
industry before going into trucking or LTL. What made you
make the transition from from the skies to the road.
Speaker 2 (30:20):
Interestingly, I actually set out to be an investment manager
and my goal, and I majored in finance University Missouri,
graduated back in the eighties, and then went to get
my MBA at TCU Investment Management, and I graduated right
after the stock market crashed in October of eighty seven
and jobs were wiped out on Wall Street and all around. Yeah,
(30:44):
so I jokingly say I had a totally unplanned career,
and I actually I went to work very briefly at
the Federal Reserve in Kansas City, left there after five
months because I had a great opportunity with American Airlines,
and this was back in the late eighties when they
were launching their automated yield management revenue management systems and
they were one of the leaders or pioneers in that space.
(31:04):
Had a great experience with America and I spent seven
years with American Airlines and pricing revenue management, and then
I moved from there to Saber, which is the transportation
technology business, which is really where I and well, American
gave me a good dose of technology that Saber was
a complete immersion in it, and spent a number of
years there, and I just had an opportunity that just
(31:26):
popped up on my radar about an opportunity with Yellow
Freight to be the vice president of pricing. I'm originally
from Kansas City, and I thought I'll at least talk
to them and see where this goes. And it just
turned out that Yellow was going through a turnaround back
in the late nineties and they had a number of
people from the airline industry. Mary Myers is one that
I had mentioned earlier, and I hit it off with
(31:48):
them and ended up in LTL pricing for a number
of years. Spent thirteen years at Yellow, and after I
left Yellow in twenty eleven, I went back to Saber
and ran an installation of a yield management system that
Saber was doing at Air Berlin. So I spent a
couple of years working with Air Berlin and Berlin Germany
(32:09):
and then eventually made my way to SMC three. And
what's really funny is I had told my wife back
in the two thousand and ten timeframe that if I
could pick a company that I'd love to work for,
would be SMC three. And we had become customers at
Yellow of SMC three during my time there at Yellow
and I attended the conferences and I had gotten to
(32:31):
know my predecessor, the CEO, Jack Middleton, who had spent
fifty years with SMC three, is a great leader and
visionary for the industry, and Jack and I hit it off,
and when Jack was ready to retire, he asked if
I'd have any interest in that position. But I always
admired SMC three from the outside looking in because of
amazing customer service, amazing customer experience, and just performance. They
(32:54):
were reliable, and so I was thrilled to have the
opportunity and ended up getting selected for it. So long
story short, that's how I went from a goal of
investment management to a career and transportation and technology. But
it's been a lot of fun and truthfully, what makes
my job most enjoyable is the people that I work
with at the company. I love. What I saw on
(33:17):
the outside looking in to SMC three is real and
I've thoroughly enjoyed. We have some of the best people
in the industry.
Speaker 1 (33:24):
Who's your favorite employee and I'm kidding, yeah, I won't go.
Speaker 2 (33:26):
There, but I don't pick favorites, but I love them
all and one thing we've done is we have brought
in people from the industry. SMC three used to be
kind of a homegrown company with people that knew how
to build LTEL base rates and this and that. But
we've brought in people with experience from three pls, from shippers,
from carriers. So today we have a team that really
(33:48):
not only knows how to build rates, but how are
they used, what problems are we solving, and so we're
really able to bring a whole lot more insight to
the table than we did when I first arrived. But
it's been a whole lot of fun, and it's people
serving people, and like I said, we're here to serve
the industry, and it's been a whole lot of fun
making that happen.
Speaker 1 (34:05):
And being originally from Casey. You a Chief Span or.
Speaker 2 (34:09):
That'll get me in trouble, But I'm a Chiefs fan
and I am a Royal Span. I know that's been
a roller coaster up and down, and they've got a
couple of good years here and there over the last
thirty but the Chiefs have been a whole lot of fun,
except for last year's Super Bowl. And my daughter who
lives here in the New York area. She's dating a
guy from Philadelphia, and so we never heard the end
of the Eagles walloping of the Chiefs in the Super Bowl.
(34:32):
But it's been a fun run with Chiefs.
Speaker 1 (34:34):
Yeah, I'm a Giant fan, so it's been tough, especially
with the Eagles doing so well.
Speaker 2 (34:39):
I love sports, so that's my other hobby. We have
five kids, and I've coached youth soccer and baseball for
about a nineteen year period. I finally hung it up
last year and my youngest son is a junior in
high school and he plays on the school team. But
he needed better coaching than I could offer, so well,
it was time to hang it up.
Speaker 1 (34:58):
Well, that's awesome that you had the opportunity with your kids,
so you know we're coming up at the end of
the time. I always like to ask you this question
of our guests, do you have like a favorite book,
either in transportation or leadership that you know, either you
read recently or it's just close to your your heart.
It really spoke to you.
Speaker 2 (35:15):
I read some books, you know on on business. One
of my favorites is It's been out there a long
time and it's it's good to great by Jim Collins,
and I like it because it's a very pragmatic, practical
book speaks about a data driven type culture and mindset.
So I like that book. But honestly, I spend more
time probably reading about the economy. I love reading the
(35:35):
Wall Street Journal and BBC News, Bloomberg. I'm all over it,
and so I'm driven by just staying current on news
and trends more so than books. But Good to Great
was always a good one.
Speaker 1 (35:48):
I just actually listened to that on my commute to work.
I did book on So you know, you mentioned the
LTL certificate, So so how long does that take for
someone to do? Usually? Oh, probably at their own pace.
Speaker 2 (36:01):
Right, it's self paced, it's online, self pace, so some
people can do it. Some people will choose to do
it over a two month period or three month period,
you know. Others if they were to pour themselves in
full time, I'd say they could probably get through it
in a week, maybe a week and a half.
Speaker 1 (36:17):
All right, So very cool. Well, well, Andrew, it was
really nice speaking with you and learning more about the company.
I really want to thank you for your time and
insights today.
Speaker 2 (36:26):
Thanks Lee, I appreciate you having me on my pleasure.
Speaker 1 (36:29):
And you know. I want to thank you for tuning
in and listening. If you liked the episode, please subscribe
and leave a review. We've lined up a number of
great guests for the podcast, so please check back to
hear conversations with C suite executives, shippers, regulators, and decision
makers within the freight markets. Also, if you want to
learn more about the freight transportation markets, check out our
(36:50):
work on the Bloomberg Terminal at Bigo and on social media.
This is Lee Glasgow signing off and thanks for talking
transports with me.
Hi everyone, this is Lee Clasgow when We're Talking Transports.
Welcome to Bloomberg Intelligence Talking Transports podcast. I'm your host,
Lee Clasgow, senior freight, transportation and logistics analysts at Bloomberg Intelligence,
Bloomberg's and house research arm of almost five hundred analysts
and strategists around the world. Before diving in a little
public service announcement, your support is instrumental to keep bringing
(00:29):
great guests and conversations to you, our listeners, and we
need your support. So please, if you enjoy this podcast,
share it, like it and leave a comment. Also, if
you have any ideas for future episodes, or just want
to talk transports, please hit me up on the Bloomberg terminal,
on LinkedIn or on Twitter at Logistics Lee. I'm very
excited to have with us today Andrew Slusher, President and
CEO of SMC three, a position he's held for the
(00:52):
past decade. His career spans transportation, technology, pricing, and revenue
management areas where he built deep expertise and driven innovation
across the supply chain. Welcome to Talking Transports, Andrew.
Speaker 2 (01:06):
Thanks Lee, very glad to be here.
Speaker 1 (01:07):
So SMC three, can you tell us a little about
the company and what does it stand for.
Speaker 2 (01:14):
Sure, It originally was Southern Motor Carriers Association, and we're
a ninety year old company dating back to nineteen thirty five.
And the three and SMC three stands for data, technology
and Education. So we were once a rate bureau back
in the day when there was regulated pricing in the
LTL industry less than truckload industry, and when basically deregulation
(01:37):
took place in the late seventies, there was no longer
a need for rate buros to help facilitate rate making
in the industry. There were ten of these geographic rate
bureaus all around the United States. We're the one in
the Southeast. And when the need for a rate bureau
went away or rate buros went away, basically SMC three
took the lead and morphed into a technology and data
(01:58):
solutions provider. So in the nineteen eighties it acquired or
merged with Southern Central and Southern Rate Bureau and Louisville, Kentucky,
and that was really the genesis of a lot of
the technology solutions that we offer today. Today we offer
we're a middleware provider and we offer solutions that help
provide rate quotes, transit time information to shippers for managing
(02:22):
their freight and really helped drive efficiencies into the industry.
Think about three pls, think about shippers, et cetera. We
do business with thousands of customers around the US and
North America. Most of the Fortune five hundred companies use
our solutions, and so anyway, were widely connected from the
(02:43):
Fortune five hundred down to some of your smaller mom
and pop type logistics companies. SMC three basically makes their
lives easier and optimizing shipment movement, et cetera. So if
for some reason, anything wherever to happen to SMC three
and our service is the LTL free transportation industry would
definitely feel the impact. Think about when you're booking a
(03:05):
flight and you pull up your flight options, you see
a fair quote and you see your different options. Effectively,
that's what we provide to the TMS providers in the industry,
so rate information, transit time information so they can pick
the best option for their transportation needs. We're also looking
at providing carbon emissions and this is a new area
(03:26):
that we've ventured into in the last two years, and
to me sustainability is a really critical part of the
transportation industry and it will continue to be going forward,
but we have staked out a leadership role in the
sustainability stage for the industry. The other piece of what
we provide to is education solutions, and we are a
(03:48):
nonprofit trade association, so part of our mission though is
to bring the parties of the industry together to serve them,
basically serve the industry. So we have education solutions. One
of them as our LTL Certification program and you can
go on and it's five part series and you can
take courses that were prepared by SMC three and professors
and it's an online class and you can learn everything
(04:11):
LTL in the industry. So we host two conferences a
year as well, which are attended by leaders. It's a
who's who of the transportation industry. One is every January
in Atlanta and then one somewhere else in June at
a resort typically in June, but great conferences. So we
have a role in both technology and data but also
education in the industry.
Speaker 1 (04:31):
And so when you talk about shipments, and as you mentioned,
you're purely focused on the LTL.
Speaker 2 (04:35):
Market, primarily focused on LTL, we do have some solutions
that serve the truckload industry as well. We provide beyond
just rate quotes and transit times though. We provide an
activity based costing model. It's used broadly in the LTL
industry by over sixty percent of the carriers in the business,
and that helps them basically distill all of their costs
(04:57):
down to the shipment level of detail. You're trying to
set prices for customers, it's important to know how much
did it cost for me to serve that customer, So
we give them they utilize the model. We provide the
model basically that allows them to accurately cost their freight.
We do the same for the truckload industry. It's available
to many in the truckload space as well. So that's
(05:18):
really the one primary solution that's available to truckload that
we have that we're really heavily focused on LTL. The
nice thing about that model now is I mentioned the
focus on carbon emissions. We actually have a carbon calculator
built into the cost model today, so the carriers can
calculate their carbon impact at the shipment level of detail
if needed. And interestingly, over the last really five plus years,
(05:43):
more and more shippers when they put their freight out
to bid, they're requesting emissions information and so they now have.
We've driven some standardization of that calculation into the industry
that didn't exist in the past. And in the past
the carriers how do I respond to this? And they'd
all come in with different answers. So we've launched a
(06:03):
best practices programer on sustainability, have numerous carriers that participate
in that, and now we have the technology behind it
where they can calculate it at the shipment level of
detail or aggregate it to whatever level they need using
the cost model that we provide.
Speaker 1 (06:18):
And so you know you mentioned you guys are a
non for profit, so so who owns you or like
a member owned?
Speaker 2 (06:25):
Is that how it works? There's really not ownership and
we're a non process.
Speaker 1 (06:30):
For those and air quotes.
Speaker 2 (06:33):
Yeah, yeah, we have members, So we have members, but
ultimately all of the proceeds if we were to basically
we can acquire or merge with another nonprofit, but ultimately
the assets would flow into the state of Georgia. But
we are led I will tell you by a board
(06:54):
of twelve industry leaders from the LTL industry and we
have third party logistics representation. Some of the biggest ones
are on our board. Carriers are on our board, so
they are there to ensure that we're driving in the
right direction. And the nice thing about it is we
don't have to plan for next quarters report right and
(07:16):
we're not driven by short term gyrations in the economy
and the market. We're planning for the long term and
we're a service oriented company. We've again been around for
ninety years. We're a trusted entity in the industry and
it's truly nice that we can plan for the long term,
build for the long term and deliver solutions that help them.
And our board is the face of the industry that
(07:38):
we serve, so we have a great sounding board and
our board meetings to not only go over financials, but
to discuss product strategy and where we need to head right.
Speaker 1 (07:46):
So, obviously technology is pretty important for your company and
it's probably been instrumental in the evolution of the company.
Can you talk about you know how much I don't know,
like you know all about your technology or do you
do most of your stuff in how are you leveraging AI?
How are you leveraging AI machine learning? Can you talk
(08:08):
to us about that.
Speaker 2 (08:09):
You bet. So. We've gone through a huge transformation, as
I mentioned earlier, from a rate bureau from nineteen thirty
five till early eighties into a technology and data solutions provider,
and that was really from the eighties to say, the
eight timeframe. There were new products released, et cetera. All
of it was homegrown and kind of home hosted over
(08:31):
the last ten years. I arrived in twenty fifteen. Even
though we had some really great products and great offerings
that are used widely throughout the industry, we really had
not done a whole lot in terms of innovation. We
were staffed at that time at one hundred people and
in total we had six developers maintaining this environment. This
(08:51):
platform technology, as you know, was rapidly changing, and the
question for me from the board was where should this
organization go to make sure it thrives, it's thriving in
the future, et cetera. We've gone through huge transformation and
we have taken our it staff and our company has
gone from one hundred people to about two hundred today.
(09:12):
We've gone from twenty three million in revenue to this
year will be around fifty four million in revenue. For
a ninety year old company to experience that kind of
growth is terrific to see. But the key underpinning, I
would tell you is service, reliability, service quality. People trust
what they're going to get from SMC three. We have
(09:32):
over a ninety nine point nine percent up performance and
so it's quality solutions that are widely embraced. And one
of my goals when I came in was to make
sure that people use SMC three because they choose to
use SMC three, not because they feel like they have
to use SMC three. And we are very focused on people.
(09:54):
And I know you ask about technology, but I'll jump
onto the people side really quickly. My number one focus
in my career has always been on people. It's my
employees and it's our customers, and I continue to focus
on that, and I want to make sure our customers
have an experience that they say, I love working with
SMC three, I love their products, they work. I love
(10:18):
the people because they're always there for me, supporting me.
So we're trying to be everything we can be to
serve them well and give them a great experience. Technology wise,
we've gone from six developers to well over forty today,
our IT team is over half of our organization, so
we have significantly scaled up our development efforts. We've launched
(10:40):
many new products over the last ten years, so we're
excited about where we're going. We have dynamic pricing solutions
now that are available. We have API solutions available for
tracking and tracing shipments. All of those are homegrown, hosted
in our own cloud. We have multiple data centers across
the US for security and for backup redundancy. But we
(11:03):
all also are moving into AI and a lot of
companies you hear about lead with AI, and we're all about,
you know, a gentic AI or this or that. We're
not leading with AI. We're not not not to impress
the world with AI. But I will tell you behind
the scenes, we do what we can do to drive
efficiencies into the organization so we can do more to
(11:26):
serve the industry. And AI is one of those techniques,
so we're using it. I would tell you today all
of our employees use AI in some shape or form.
We're using it for code generation for some of our
a PI solutions. So anyway we do use AI. Jit
Hub Copilot is used and also an internal version of
(11:48):
Chat GPT, but we we're not what i'd call a
bleeding edge tech company. We've got to make sure because
we are a nonprofit we sell fund need to make
sure when we invest in something it's going to succeed
and deliver our return, so we can continue that cycle
of investment for the industry. But we do deploy new
(12:10):
technologies as they become available. And the landscape has changed
so dramatically over the last ten years. It's been a
lot of fun, right.
Speaker 1 (12:16):
So there's a lot of developments going in the freight
markets and the lto markets. You know, one recently was
you know, a new freight classification. The changes were recently
made by the National Motor of Freight Classification or actually
by the n m FTA. How is that impacting the
LTL industry? How is it impacting your products? Did you
(12:39):
guys have to prepare for this or was this kind
of like a non event for you guys?
Speaker 2 (12:47):
Honestly, I'd tell you it's a bit of a non event.
We were prepared for it. And it's another pricing methodology.
We support so many different pricing methodologies in the industry
and able to in order to be able to deliver
rate quotes to three pls and shippers. You have to
be able to support a lot of different methodologies, so
we get requests for different methodologies each and every day.
(13:08):
What I'm going to tell you is the nice thing
about the change that the NFC NFC made is that
it's a move towards density, which more for the classification
of freight and commodities in the industry. So it more
closely aligns with the carriers and what drives their profitability.
So it's going to help them make smarter decisions as
(13:30):
they price their freight and that better reflect reality of
what's actually being shipped. So I think that'll be good. Now,
we'll result in some surprises for some customers. Absolutely. There
are a lot of customers who were proactive about it
and said we need to make sure that you guys
reprice our freight appropriately, and they got that done prior
(13:51):
to the changes going in, so when it happened, they
were ready. Others may be a little surprised that their
bill could go up or down slightly. There will be impacts,
but at the end of the day, it's another methodology.
But I like it because it more closely aligns with
the carriers' costs and will help them run a more
efficient operation.
Speaker 1 (14:11):
So you guys both have a pretty interesting perspective on
the freight markets. Given your board makeup and the fact
that you mentioned you know most of Fortune five hundred
companies or your customers. What are they telling you about
the freight demand today? Maybe the outlook. I mean, obviously
everyone's crystal ball is cracked and foggy. But you know,
(14:33):
what are you hearing from your customers and your board members.
Speaker 2 (14:37):
It's a world of unpredictability and uncertainty that we live in.
And you know, we've been looking at this. She had
COVID and there was this huge surge in demand which
boosted all fortunes for the LTL industry and truckload for
that matter, great times in twenty twenty twenty twenty one,
and then twenty twenty two things leveled out, inventory adjusted,
(15:00):
and really things flattened out. And I've been hearing you know,
so we've been in a freight recession, and I've been
hearing comments about well, and this is for the last
three years, Oh, we should be coming out of it
by the second half of the year, and we never
never really did. Last year heard the same thing never
really did, and this year is interesting. At the beginning
(15:20):
of the year, a lot of economis were saying, oh,
we should see a recovery, freight recovery. At the end
of the year, I think the verdict is out and
hearing it from some of the carriers and three pls
on our board. The bottom line is we're bouncing along
what feels like a bottom and we're not seeing a
lot of signs of lift yet. The nice thing is
(15:43):
there hasn't been just a major downward thrust, but there's
also not an upward piece of momentum that's really emerged.
And early this year was interesting. You know, I look
at and I'll back up a little bit last year,
spoke with our employees in October, and I encourage them
to go vote. Vote in the presidential election cycle, vote
(16:04):
your conscience, and regardless of which party wins, the economy
should stabilize because the one thing corporations want is predictability
of policy. And so you'll get that. You're going to
know tax policy based on the outcome of the election
from either party, and that will at least have a
stabilizing effect. So we get into the new year and
(16:27):
let's just say it's been far from predictable with the
tariffs and a lot of things that just cast some gyrations.
Not anything against what's going going on, but I do
think there's been some shock to the system. And we
saw early this year the markets dropped pretty quickly with
the threat of tariffs and the concern about inflationary pressures.
And when the markets drop, consumers started to show signs
(16:48):
of pulling back, which they've continued to. One of the
things that has historically propelled the economy has been consumer spending,
driven out of gains that they take off of their
investment and appreciation. And when the market started to dry up,
there was a pullback on the consumer side, and you
had the commercial corporations holding back on a lot of
(17:08):
capital expenditures and decisions because of questions about what's the
policy going to look like, where is this tariff thing going,
and here we are today and there was so that
kind of sent things into a bit of a downward
cycle in the first few months of the year, and
then then basically pulled back and gave some delays on
(17:29):
the tariffs and the market rallied and people are enjoying
that now. So there is actually some signs of consumer stability,
which is encouraging, but it's because the market's going up now.
The market is very different than the economy, as you know,
but it also does propel the economy and it can
(17:49):
create inertia. So right now I think there's some momentum
being generated. One of the underlying areas of concern I
have is the ISM producers production manufacturing production in US.
It's still in contraction mode and it has been for
several months, and that tends to be a leading indicator
of LTL in the freight industry, and the fact that
(18:10):
it's at forty eight point nine, which is below fifty,
which is kind of the break even level. We're still
contracting on manufacturing, so there's some good out there and
there's some challenges out there still, and honestly, we'll see
where it goes. The CPI is another one.
Speaker 1 (18:26):
So yeah, on the ISM, I think it's been in
a contraction territory of the thirty one in the last
thirty three months, you know, and consensus expectations for a
lot of publicly traded LTL carriers are for tonnage to
be done by mid single digits, So the outlook is
not great. You know, you mentioned the consumer, and obviously
(18:46):
consumers they're big into buying online e commerce. How does
e commerce in that development impacted the LTL market from
your vantage point.
Speaker 2 (18:57):
It has, I al would say driven probably more short
haul distribution, a lot of final mile stuff. Amazon does
a lot of it on its own, so it has
created some changes in distribution patterns and all that. So
and I'd say that trend's been going on now for
quite a long time, so not a huge shift this
(19:17):
year versus last. It's a continuation of a cycle that's
been going for a while.
Speaker 1 (19:21):
But a positive.
Speaker 2 (19:22):
It's a positive, it's a positive.
Speaker 1 (19:25):
You know, there's been a lot of interesting things going
on in the LTL space, you know, I know you're
you kind of have a, like I said, a unique
vantage point. We've seen consolidations, we've seen bankruptcies.
Speaker 2 (19:38):
You know.
Speaker 1 (19:39):
What are your thoughts on consolidation in the space. You know,
night Swift has been one that's been buying regional carriers,
you know, Yellow and out of business a couple of
years ago. FedEx Freight is going to spin out and
that could create some interesting dynamics in the marketplace. What's
your perspective on the evolution of the LTL competitive market
over the couple of years.
Speaker 2 (20:00):
I think it's gonna be real interesting to see how
it shakes out. I actually was at Yellow for thirteen
years from nineteen ninety eight through twenty eleven, and saw
some really great times there and also some challenging times
toward the end of my time there. I was sorry
to see them go out a couple of years ago,
But instantly what was interesting to.
Speaker 1 (20:18):
Me were you were you a Yellow guy or a
roadway guy.
Speaker 2 (20:21):
I was Yellow VP of Pricing at Yellow, but ultimately
I had all of them, and honestly, I love the
people from both of those companies and got to know
many of them. It's a great group of employees. So
more than anything, I hated to see the company end
up ceasing to exist, But it wasn't shocking given the
turmoil that had really unfolded over a ten plus year period.
(20:44):
But bottom line is, when Yellow went out a couple
of years ago, there was so much excess capacity already
in the market. It was post COVID boom, and things
had flattened out and started to soften, And I had
heard numbers back in that timeframe of eighteen nineteen percent
excess capacity. So when Yellow went out, it wasn't It
(21:05):
didn't really create much of a blip. And sure there
was a little bit of a bump in tonnage and
freight for the carriers and really helped stabilize pricing further.
But at the end of the day, it was a
bit of an I say, at a non event in
the industry. What is resulting though, as you know and
alluded to, a lot of the carriers out there have
acquired terminals from Yellow and the asset sales that have
(21:28):
gone on, and I would say it concerns me just
a bit long term if the freight environment doesn't pick
up as those terminals start coming online, capacity there will be,
let's just say, capacity will be plentiful, which can put
pressure on the pricing side in the industry. Right now,
(21:48):
there's been a good stability around price in the LTL
space in spite of the flat kind of tonnage environment. Yep.
But I do think it'll be real interesting over the
next day five years to see how that capacity is
absorbed into the industry as carriers look to grow into it. Yeah.
Speaker 1 (22:07):
Yeah, a lot of expectations for pricings, which measured by
a revenue for one hundred eight less fuel search charges
would you of course know as expected in mid single
digit growth, So that's going to you know, help mitigate
the impact from the lower tonnage. But still way on,
uh way.
Speaker 2 (22:24):
The FedEx spent off I think will be interesting too.
I mean, and they used to be independent as American
Freightways in the days, and it'll be interesting to see
how that unfolds. But I honestly think it's going to
bring greater efficiency to the FedEx freight organization and allow
them to operate in a more nimble manner in the industry.
So it should be good from a shipper's perspective and
(22:45):
just a competitiveness standpoint, I think it'll be a plus
for the industry and for FedEx.
Speaker 1 (22:49):
Right, So, what's what's next for the company or do
you have any like services as you're planning to roll
out you know you discussed earlier. You know you're focus
on emissions, you know where what other services do you
guys plan on providing you know in the future.
Speaker 2 (23:06):
I mean, dynamic pricing is one thing that we've rolled out,
and the world of traditional class based commodity class based
pricing is slowly declining and that's what our core products are.
Speaker 1 (23:18):
And can you dumb down when you're talking about LTL
dynamic pricing, what does that mean to you?
Speaker 2 (23:22):
Guys? Carriers can basically set prices on the fly as
they see fits. So we've actually built an integration with
our dynamic pricing model to the LTL carriers costing model,
so they can eat if they want, they can price
it off of the cost for handling freight and given lanes,
and if they know they have a back haul lane
(23:43):
and they need to move the price down on a
given day, then they can do that. So they can price,
let's just to be simple, from day to day, from
hour to hour, minutes minute, They can change their prices
on the fly with this dynamic pricing tool as opposed
to having contract rates that are in place and typically
negotiated once a year if they so. This gives them
(24:05):
far more flexibility in driving efficiency into their operation by
targeting the freight and the shipments that they need to
help balance their system more effectively. And there are a
lot of offshoots of that involving AI and predictive pricing,
analytic analytics, et cetera that can be built into dynamic pricing,
so it's not just a cost driven model, but it
(24:26):
can also be driven by likelihood of winning freight at
such and such a price point, So predictive pricing could
be folded into that. We also have a new application
coming out to help manage contracts and pricing. LTL pricing
is horribly complex, and I.
Speaker 1 (24:43):
Think, can you walk us through what it kind of
looks like? Big picture, Like you know, you.
Speaker 2 (24:49):
Don't want me to go there. But actually it was
funny when I got on at Yellow as VP of pricing.
The former CEO at Yellow was more my and he
had come out of the airline industry, and he said, Andy,
if you can figure out airline pricing, so I was
at American Airlines previously, you can figure out LTL pricing.
(25:11):
I am so thankful. I had a team of seasoned
veterans at Yellow who knew LTL pricing because it's the
most convoluted pricing. But it's driven off of a structured
classification code with weight breaks and link of Haull breaks,
and there's all sorts of complexity when you think about
all the zip code to zip code combinations for moving
(25:35):
freight all around the country and all across North America.
You have literally a price per hundred weight for each
of these zip to zip pairs for every weight break
you can imagine out there, and there mused to be
about seventeen of them and just a convoluted complex. Right.
Speaker 1 (25:52):
And if I'm a shipber and you're an LTL carrier,
so am I getting just like one flat rate? Or
am I like saying, well, give me some rates on
these two points for this amount of weight.
Speaker 2 (26:06):
Is like typically the way it works, there's there's a
set of base rates that cover all points, okay, and
then the car the shippers negotiate a discount and it's
a game of discounting, and the ltail industry a discount
off of the base rates, which are effectively rack rates,
this kind of a max level rate, and shippers negotiate
(26:26):
discounts off of those, and the net rate is what
they end up paying based on what they're shipping from
point A to point B. So it's it's always been
a process a negotiation typically once a year between the
shipper and the carrier to rework their rates or the
three pl in the carrier. And with dynamic pricing, though,
what's neat about that is it's a price for that
(26:49):
shipment in that market at that point in time, and
the model, based on rules or predictive pricing analytics, can
generate a rate at the shipment level of detail on
that day, regardless of what the contractually negotiated rates are.
Speaker 1 (27:03):
So right, and so it's not only good for the carrier,
it's also good for the shipper because they can decide, well,
I can hold this shipment for two days because they
don't need it somewhere by a specific date, and I
can save ten percent five percent exactly exactly.
Speaker 2 (27:17):
So dynamic pricing is a really exciting area. There are
also a lot of rules and conditions that the carriers
have for freight. It's for additional services that are provided.
Do you need a lift gate, do you need a
delivery to your front door, et cetera. And we have
a system now that basically will quote not only the
base rate price that the shipper would see, but all
(27:37):
the ascessorial charges or extended service charges those are built
into it as well, can be housed in our ecosystem,
so to speak. And so basically we take a horribly
complex and I won't go into the depths of it,
a horribly complex pricing environment and we simplify it for
shippers and we provide also tools to three pls and
(28:00):
shippers for analyzing those rates. We have a bid procurement tool,
bid Sense, which if a shipper wants to bid it's freight,
a major corporation wants to bid freight, they can link
directly to the carriers through our bid procurement tool and
actually determine where they can which carriers will provide them
the best rates in all the different lanes, and they
award their freight based on that. So we do have
(28:23):
tools that help them with the analytics behind it as
well as the bid process itself.
Speaker 1 (28:28):
And so just you know, kind of curious, what is
the most common accessorial charge or top two or three
accessorial charges that people get charged for. Don't mean to
put you on the spot.
Speaker 2 (28:41):
Yeah, I'd tell you a lot of them around notification
of delivery, notification of pickup. But with all the tracking
and tracing that's available to today now, that's probably a
lot less in demand than it was when I was
there back in the early part of the two thousands.
Speaker 1 (28:58):
Right, So you know, is there anything on your radar?
You know, as a as a leader of a transportation
related company, a free transportation related company that's on your
radar that either you look at as a significant challenge
or an opportunity on the other side of the coin.
Speaker 2 (29:17):
Honestly, I would tell you that we are so plugged
in with the industry and the customers in the industry,
just through our conferences that we host, and through our
board meetings and we have advisory meetings too with LTL
carriers and three pls. We feel like we have really
good line of sight as to the changing dynamics affecting
(29:38):
the industry and we're always trying to factor that into
our product equation in terms of where we're headed. The
biggest challenge, I guess and the thing that weighs on
me is just where is AI going to go? Yeah,
where is technology going to go? And is it going
to go in manners that could totally disrupt our world
and really all of transportation. And so we're always looking
(29:59):
both extern and internally to prepare for whatever might be,
you know, down the road, and make sure we're ready
for it.
Speaker 1 (30:07):
Right, you mentioned you were you were in the airline
industry before going into trucking or LTL. What made you
make the transition from from the skies to the road.
Speaker 2 (30:20):
Interestingly, I actually set out to be an investment manager
and my goal, and I majored in finance University Missouri,
graduated back in the eighties, and then went to get
my MBA at TCU Investment Management, and I graduated right
after the stock market crashed in October of eighty seven
and jobs were wiped out on Wall Street and all around. Yeah,
(30:44):
so I jokingly say I had a totally unplanned career,
and I actually I went to work very briefly at
the Federal Reserve in Kansas City, left there after five
months because I had a great opportunity with American Airlines,
and this was back in the late eighties when they
were launching their automated yield management revenue management systems and
they were one of the leaders or pioneers in that space.
(31:04):
Had a great experience with America and I spent seven
years with American Airlines and pricing revenue management, and then
I moved from there to Saber, which is the transportation
technology business, which is really where I and well, American
gave me a good dose of technology that Saber was
a complete immersion in it, and spent a number of
years there, and I just had an opportunity that just
(31:26):
popped up on my radar about an opportunity with Yellow
Freight to be the vice president of pricing. I'm originally
from Kansas City, and I thought I'll at least talk
to them and see where this goes. And it just
turned out that Yellow was going through a turnaround back
in the late nineties and they had a number of
people from the airline industry. Mary Myers is one that
I had mentioned earlier, and I hit it off with
(31:48):
them and ended up in LTL pricing for a number
of years. Spent thirteen years at Yellow, and after I
left Yellow in twenty eleven, I went back to Saber
and ran an installation of a yield management system that
Saber was doing at Air Berlin. So I spent a
couple of years working with Air Berlin and Berlin Germany
(32:09):
and then eventually made my way to SMC three. And
what's really funny is I had told my wife back
in the two thousand and ten timeframe that if I
could pick a company that I'd love to work for,
would be SMC three. And we had become customers at
Yellow of SMC three during my time there at Yellow
and I attended the conferences and I had gotten to
(32:31):
know my predecessor, the CEO, Jack Middleton, who had spent
fifty years with SMC three, is a great leader and
visionary for the industry, and Jack and I hit it off,
and when Jack was ready to retire, he asked if
I'd have any interest in that position. But I always
admired SMC three from the outside looking in because of
amazing customer service, amazing customer experience, and just performance. They
(32:54):
were reliable, and so I was thrilled to have the
opportunity and ended up getting selected for it. So long
story short, that's how I went from a goal of
investment management to a career and transportation and technology. But
it's been a lot of fun and truthfully, what makes
my job most enjoyable is the people that I work
with at the company. I love. What I saw on
(33:17):
the outside looking in to SMC three is real and
I've thoroughly enjoyed. We have some of the best people
in the industry.
Speaker 1 (33:24):
Who's your favorite employee and I'm kidding, yeah, I won't go.
Speaker 2 (33:26):
There, but I don't pick favorites, but I love them
all and one thing we've done is we have brought
in people from the industry. SMC three used to be
kind of a homegrown company with people that knew how
to build LTEL base rates and this and that. But
we've brought in people with experience from three pls, from shippers,
from carriers. So today we have a team that really
(33:48):
not only knows how to build rates, but how are
they used, what problems are we solving, and so we're
really able to bring a whole lot more insight to
the table than we did when I first arrived. But
it's been a whole lot of fun, and it's people
serving people, and like I said, we're here to serve
the industry, and it's been a whole lot of fun
making that happen.
Speaker 1 (34:05):
And being originally from Casey. You a Chief Span or.
Speaker 2 (34:09):
That'll get me in trouble, But I'm a Chiefs fan
and I am a Royal Span. I know that's been
a roller coaster up and down, and they've got a
couple of good years here and there over the last
thirty but the Chiefs have been a whole lot of fun,
except for last year's Super Bowl. And my daughter who
lives here in the New York area. She's dating a
guy from Philadelphia, and so we never heard the end
of the Eagles walloping of the Chiefs in the Super Bowl.
(34:32):
But it's been a fun run with Chiefs.
Speaker 1 (34:34):
Yeah, I'm a Giant fan, so it's been tough, especially
with the Eagles doing so well.
Speaker 2 (34:39):
I love sports, so that's my other hobby. We have
five kids, and I've coached youth soccer and baseball for
about a nineteen year period. I finally hung it up
last year and my youngest son is a junior in
high school and he plays on the school team. But
he needed better coaching than I could offer, so well,
it was time to hang it up.
Speaker 1 (34:58):
Well, that's awesome that you had the opportunity with your kids,
so you know we're coming up at the end of
the time. I always like to ask you this question
of our guests, do you have like a favorite book,
either in transportation or leadership that you know, either you
read recently or it's just close to your your heart.
It really spoke to you.
Speaker 2 (35:15):
I read some books, you know on on business. One
of my favorites is It's been out there a long
time and it's it's good to great by Jim Collins,
and I like it because it's a very pragmatic, practical
book speaks about a data driven type culture and mindset.
So I like that book. But honestly, I spend more
time probably reading about the economy. I love reading the
(35:35):
Wall Street Journal and BBC News, Bloomberg. I'm all over it,
and so I'm driven by just staying current on news
and trends more so than books. But Good to Great
was always a good one.
Speaker 1 (35:48):
I just actually listened to that on my commute to work.
I did book on So you know, you mentioned the
LTL certificate, So so how long does that take for
someone to do? Usually? Oh, probably at their own pace.
Speaker 2 (36:01):
Right, it's self paced, it's online, self pace, so some
people can do it. Some people will choose to do
it over a two month period or three month period,
you know. Others if they were to pour themselves in
full time, I'd say they could probably get through it
in a week, maybe a week and a half.
Speaker 1 (36:17):
All right, So very cool. Well, well, Andrew, it was
really nice speaking with you and learning more about the company.
I really want to thank you for your time and
insights today.
Speaker 2 (36:26):
Thanks Lee, I appreciate you having me on my pleasure.
Speaker 1 (36:29):
And you know. I want to thank you for tuning
in and listening. If you liked the episode, please subscribe
and leave a review. We've lined up a number of
great guests for the podcast, so please check back to
hear conversations with C suite executives, shippers, regulators, and decision
makers within the freight markets. Also, if you want to
learn more about the freight transportation markets, check out our
(36:50):
work on the Bloomberg Terminal at Bigo and on social media.
This is Lee Glasgow signing off and thanks for talking
transports with me.
Host
Lee Klaskow
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