Scores of techies are rushing into freight brokerage. The new CEO of trucking giant C.H. Robinson reveals why being in Eden Prairie, Minnesota, is a secret weapon in the fight for engineering talent, and what he really thinks about the truck driver shortage.
- Bob Biesterfeld became CEO of C.H. Robinson, the largest brokerage in US trucking by market share, this year.
- The trucking industry has had a challenging 2019. This November, after a particularly rough earnings report, C.H. Robinson saw its biggest single-day share drop since July 2008.
- But Biesterfeld, who has worked at C.H. Robinson for two decades, is optimistic about the massive brokerage's future. He says the company will fare well in hiring engineering and data-science talent, maintain market share even as tech giants like Uber Freight enter the trucking world, and that the current trucking recession is cyclical.
- He also said the "truck driver shortage" could be addressed by better utilization of the industry's resources, as well as simply treating truck drivers better.
- Business Insider spoke with Biesterfeld in November, and we tried to learn everything we could from the trucking veteran who's now at the helm of one of freight's biggest players. Here's what he shared with us.
- Visit Business Insider's homepage for more stories.
Rachel Premack: One of the biggest announcements from your company in recent months is that $1 billion investment into freight technology.
How is that going so far?
Bob Biesterfeld: Things are going really well. I think one thing that's important to think about is, we've been investing money in technology for quite some time. We've talked in the past about people, profit, and technologies. So technology has been a really important filler for C.H. Robinson and how we go to market and how we serve our customers.
We've spent $170 million roughly in technology last year and we'll spend north of a couple hundred million dollars in technology this year, so this isn't a huge change from how we've been investing over the past couple years. It's certainly a step up but we see it as an important way for us to continue to lead in our industry.
'For many of our customers, this is their lifeblood': C.H. Robinson's tech spend will go toward new products and innovations, as well as infrastructure updates
Biesterfeld: We tend to look at our technology investments through a few different lenses.
The most important to us, being first and foremost the customers, the customers that we serve.
The second being the carriers that we work with so closely to help them and improve the yields in their businesses and help them become more effective. In many cases these are small business owners, or even some of the largest fleets, ensuring that our technology is helping them to be more effective and improve their yields as well.
As you've documented in some of your other articles, there is a lot of opportunity to reduce waste within the freight transportation market. We've been working on those things for a really long time.
The third area of investment, where it all comes together, is about driving more effective workflows, greater productivity, and access to information for our employees as well, because they're ultimately at the center of all of this. And, helping to guide the customers and the carriers to be more effective.
So, anything that we can do to reduce friction in the supply chain - from quote to cash - for any of those three groups of stakeholders is really what guides that technology investment.
About 80% of those technology dollars are driven toward innovation, new products, similar to the ones that we are likely to talk about with freight quotes.
The other 20% is targeted today toward infrastructure and architectural uplift, and some of those things that aren't quite as much fun or exciting to talk about, but the things that are really imperative and important to ensure that we've got the scalability and the stability that live behind these products.
Because for many of our customers, this is their lifeblood, this is their TMS, this is their technology that they run their business on, so we need to be live and operable a hundred percent of the time.
The tech investment will focus on hiring data scientists, designers and engineers - but those roles won't be in Silicon Valley
Premack: What kind of new roles, what kind of hiring are you looking to do within that investment?
Biesterfeld: There's all sorts of new roles that have come in as a part of that because much of that investment is going toward people.
Everything from UX designers, to software engineers, to Agile coaches. I mean it's what you expect to be hiring for. Data scientists, big data engineers, people that are more focused on the consumer and the mobile environment.
So, there's any number of roles that are coming in on a global basis. But clearly a focus on people with advanced analytics skills, data science, and the big data engineering. Those are significant areas of growth.
Premack: That makes sense. And within that, are you looking at hiring outside of the Twin Cities, or Eden Prairie where C.H. Robinson is based?
What I've been noticing is that, for instance, if you look at Uber Freight, which is based in the San Francisco Bay Area, you also see them hiring quite a bit in Chicago with your more traditional sales kind of hub. But then you see some other new companies, or even older companies in this field looking at hiring outside of the traditional freight hubs.
Do you see any new offices at remote locations, possible for hiring these kind of tech-driven roles?
Biesterfeld: I guess I would say that we're much more focused on the types of talents that we're looking for than the geography in which the talent currently resides.
We feel like if we want to stay with the focus on the true technologists, that would be focused more on the software engineering culture.
We've hired a lot of people that have come from the East Coast and the West Coast that have been really excited about the opportunities and the really cool stuff that they've had the opportunity to work on at Robinson, and solving really complex supply chain problems.
Many of those people that have been domiciled in Silicon Valley or in Seattle that have come to work for us in Eden Prairie, in Minnesota here, have found that, "Wow, my dollar goes a lot farther." It's a really high quality of life. That's pretty attractive, right?
So like I was saying, we're really focused on hiring the best and the brightest. Both people with industry experience and outside of the industry experience. It's been really good for us to bring in people from some of the big software companies and other high-level leaders from other industries to come in and put fresh eyes on the complex stuff that we get the opportunity to work on in terms of what our customers ask of us and where we mean to innovate and lead.
We're a global company as you know, Rachel, in terms of where our operations are. We talk a lot about our North American surface transportation business, but we've got global centers of execution and sales, as well as technology across Asia, across Europe, and North America, and South America as well.
So, specific to technology, while our biggest hub is in Eden Prairie here, I think we've got close to 700 people in our technology and engineering organization here, on our corporate campus. We've got centers in Kansas City, in Poland, and in Shanghai, as well as some smaller centers as well.
'It's very different economics': C.H. Robinson finds that tech talent is happy to move to Minnesota - and that many already reside there
Premack: Yeah, that's interesting. I'm from the Detroit area and sometimes I look online at apartments in my price range downtown there. Definitely a little nicer than my shoebox apartment in Manhattan.
Biesterfeld: Yeah, I can think just in the last few weeks and months as one gentleman that came in from Silicon Valley, another individual that came in from the Boston area, and a couple people have come in from the Seattle area. And you can imagine they come here and they say, "Hold on a second. I can do what where?" It's a very different economics.
The other thing too that's interesting about our Eden Prairie market, that I think is often overlooked, is that there's this perception that if we're not bi-coastal, we don't have access to technologists.
But if you think about the companies that are in the Minneapolis area, you've got Target, you've got Best Buy, you've got C.H. Robinson, you've got Medtronic, you've got Cargill, you've got General Mills, you've got 3M.
You've got a bunch of really strong Fortune 500 and large public companies, public and private companies, which just simply attracts all the talent.
Premack: So, how would you describe, generally, the challenges or the landscape for hiring tech talent at C.H. Robinson? It sounds like it hasn't been super difficult.
Biesterfeld: I won't say just at C.H. Robinson - I would say the shortage of technologists and engineers is a global challenge, right? Especially as fast as technology's moving right now.
So in order to attract the best you have to have a great opportunity for them to have meaningful work, to work on things that can make a difference in the world. And you have to provide a really rewarding career opportunity in order to attract, and most importantly retain, those people.
And we feel like we do a really good job of that. The supply chain that moves goods around the world - I mean there's nothing, frankly, a lot more complex than that. And how you do that in terms of the most effective, the most efficient manner, and how you can create value across that supply chain in different ways, with as fast as technology's been moving over the course of the last several years, we think that it's just a great place to be right in the center of.
The trove of data at C.H. Robinson makes it an exciting place for techie types
Premack: That makes sense. Two weeks ago, I was at the Logistics CIO Forum, and there was a panel with someone from UPS, some people from a few other brokerage companies, and they were talking about just this challenge of attracting more tech talent. It seems like it's definitely something that a lot of people in the industry are talking about.
Biesterfeld: What we continue to hear again and again, when we hire people into C.H. Robinson in an engineering or a data science role, oftentimes they've worked at other startups or they've worked at other places in the industry, and they're really smart people that have got really bold ideas.
But they come to us and they say, "Wow, we can actually execute on this stuff that we've been thinking about or wanting to do because you've got such a vast amount of data that nobody else has. You've got more shipments."
We've got 18 million shipments in our Navisphere system every year. Having access to that trove of data, having access to all that shipment information, having access to all that facility information. And then having that ability to implement at speed into the Navisphere platform, get it out into the wild, and let our people start to use those things quickly - it's sort of made for a flywheel effect, I think, that has helped us continue to bring talent on in a rapid and meaningful way.
What Biesterfeld thinks about Uber Freight, Convoy, J.B. Hunt 360, and its other high-tech competitors
Where would you say your biggest competitors are? Who are you watching most closely in the brokerage space?
Biesterfeld: There's something to the effect of 18,000 3PLs in the US alone. And there's very few that are better at scale.
Today, we're probably 70% contractual and 30% in the stock market. We serve customers from the largest global enterprises to the smallest mom-and-pop shippers.
So, I really try to keep us focused on solving problems for those customers versus getting distracted with which competitors we may or may not be competing with at any given moment. Because what I can't control is what my competitor's strategy is. What I can help to shape and control is what our strategy is.
I just think of if we continue to execute our playbook of having a global suite of services, with a really strong technology that's built by and for supply chain experts, by ensuring we've got the best people around the globe with our global network that allows us to deliver integrated services for our most complex customers that may want us to provide air, ocean, customs, truckload LTL, on a global basis, or having something like Freightquote that we just launched, which is the way that many of our smaller businesses want to purchase, which is ease of use, access to a large network, the ability to access LTL truckload and other modes. That's where I want us focused.
C.H. Robinson has dominated freight brokerage for decades
Biesterfeld: I've been in this industry for 20 years and competitors have come and gone.
If you look at the top 10 3PLs from 2000, it looks very different than the top 10 3PLs from 2010 or from 2015 or 2020. And it'll probably look different than the top 10 3PLs in 2025.
But the one constant has been our position as being the largest provider of 3PL services over that 20 years that I've been here. We've got really aggressive plans to serve our customers in new and unique ways that I believe will keep us on the top of that listing for the next 20 years.
Premack: It's kind of funny because I only started covering a year and a half ago. I've gotten so many interviews where people are talking about what the hot logistics trends were 10 years ago, and how everyone was pulling the alarm on like, "This is going to change everything. Watch out."
But then, ultimately, not all of those technologies seem to have made it.
Biesterfeld: I don't mean to be dismissive, either. There's obviously a number of new and emerging competitors that have entered different segments, whether it be in our global forwarding segments, or what we call NAST or North American Service Transportation segment.
And I'm sure that many of those competitors will be there five years from now and 10 years now, and they'll emerge to be good competitors. It's such a large and fragmented market place. In the US alone we've got a seven billion dollar marketplace.
We estimate that just in that small business tool that we launched, the Freightquote by C.H. Robinson, we think that our total addressable market there is somewhere in the area of 1.9 million customers, which makes up a $70 billion total addressable market.
I don't see this industry as a, quote/unquote winner-take-all. I think there's room in this industry for several players of scale. And I would anticipate that with the next five to 10 years, there will be more competitors of scale in the industry.
People have been talking about disrupting freight brokerage since the late '90s (at least!)
Biesterfeld: In 1999, 2000, the bear case, so to speak, on the 3PL industry was that the age of the internet was going to disrupt, and disintermediate, and eliminate the need for brokers. Because we're going to have all these load boards and there would be full transparency and the ability to trade and it was going to be great for everybody.
And that simply didn't happen. Most of those dot-com companies that started them promptly ran out of money and went out of business.
The 3PL market share continued to grow from what was 3%, at that point, of the total addressable market, to today being closer to 20%, with a run rate toward 30% take rate in the next several years. So, the 3PL space continues to grow.
If you go to say, 2005, the next five-year tranche, five to 10, you have the emergence of a number of large new companies in our space. Companies like Coyote and what is now GlobalTranz, and Echo.
And then you go into the next five years where there were a bunch of roll-ups, XPO was a series of roll-ups, Echo was a series of roll-ups, Roadrunner was a series of roll-ups.
And there's much more consolidation that happened in that time, and yet there wasn't significant disruption to either the margin profile within the 3PL space, or the growth rate of some of the larger.
And today, the next tranche of that is the quote/unquote digital upstarts. And the bear case is if there's large secular pressure down on the quote/unquote incumbents and we'll just see where that plays out over the next five years. So that's kind of how I look at it.
Biesterfeld says the trucking industry is 'healthy' despite 'precipitous decreases'
Premack: In most recent earnings call, you talked about how there's this growing fear of recession. There's this overcapacity we've been seeing on the trucker's side.
When do you see these pressures coming down a little bit? When do you see the trucking industry on the up and up again?
Biesterfeld: I didn't mean to portray a picture that the trucking industry isn't healthy. There's more freight in the marketplace today than there was last year. You've got a growing contractual marketplace and obviously a declining stock market base, but the contractual market is so much larger than what is the stock market at any given time.
Pricing levels have dropped given the precipitous declines in stock market rates, back to where we saw pricing in 2017. So we've taken the noise out of the quote/unquote disruption or unprecedented increases in pricing we saw at the end of '17 and then '18, and then the precipitous decreases that we've seen in the last five or six quarters.
If you look at the research that ACT has published, they would still say that there was about 7% more capacity in the marketplace than there was if it was a year ago time. I think ATA's numbers say that there's more like two or three percent more capacity in the market than there was at a year ago time. But the fact is both capacity with small carriers and large carriers is still up on a year-over-year basis.
When you think about trucking and all the factors that go into it, the cost basis is going up and not down. Insurance pricing is going up, driver wages are inflationary. You've got truck costs still going up, used truck costs going up. And you've got downward pressure from a rating pricing or pricing standpoint.
Biesterfeld: At some point, those two lines intersect, and the economics just don't work out for some participants in the market. (They will be) exiting and going to other jobs, whatever those happen to be.
That's the natural part of the cycle that's played out every time that we've seen some of this rapid run-up in pricing, capacity tends to follow it. Then we get to these periods of recovery in the cycle. Nature takes its course.
You retreat to some point where the rates favor the carrier versus the shipper, and that ebbs and flows.
Biesterfeld agrees that there's a truck driver shortage - but not for the same reasons that other trucking executives emphasize
Premack: I'm looking to write, during the next few weeks, about what leaders in the industry say about the truck driver shortage. The ATA is pretty outspoken about the fact that there is a shortage but then you see some economists saying that there's not a shortage.
Then, you see some other leaders in the trucking industry also say it's not quite as strong as the ATA says it is. So there's a lot of competing, different narratives around that. I'm wondering what you think about whether or not there's a driver shortage and how strong it is, and what are the ways to mediate that?
Biesterfeld: The truck driver shortage has been documented for the 20 years that I've been in the freight industry, there's always been some talk in some way, shape, or form, about a truck driver shortage.
The reality is that being an over the road truck driver is a really difficult job. You can look at the health statistics and everything else that goes along with that. You don't need me opining about that. The data is there.
Whether or not you think there's a truck driver shortage, I think depends on what your perspective is on how efficient that we can, as logistics players, make the industry.
If you look at ATA's forecast over the course of the next 15 years, you could draw the line out and say if there's somewhere between 100,000 and 200,000 truck drivers that we're going to be short, and that may be the case.
Today there's something to the effect of three million, I think, individuals that have class A CDLs, and somewhere in the neighborhood of 500,000 to 600,000 professional, over-the-road truck drivers.
If on average, there's 15 to 20% empty miles that exist today, we're certainly going out and pursuing how we take those empty miles out. I think depending on how effective we and others are at collaborating with shippers and carriers to take those empty miles out, has a real impact of how many truck drivers we're actually short.
Because if we can unlock significant amounts of the existing infrastructure that's there, it lessens that overall truck driver shortage.
Biesterfeld says brokers and shippers need to do their part to treat truckers better
Biesterfeld: We're simply not going to attract truck drivers to the industry until they start being treated better.
Part of that is our responsibility as brokers and shippers to ensure that we're being good representatives of the industry and treating these professional truck drivers with respect and with their best interests in mind when we interact with them.
There's a lot that we can do. I think the newer equipment is certainly making it safer and helping to attract drivers and making it more attractive. But we still need parking, we still need greater wages. I mean there's a lot of things that can happen to lessen the overall shortage of drivers, whatever you believe that trajectory or that future line could be.
Premack: That's interesting you mention the responsibility of brokers and shippers, especially so much of what I talk about when I talk to truck drivers is detention time and pay for the detention time.
Biesterfeld: Absolutely. Drivers need to make a fair wage for the work that they do.
I would argue that you might hear some people say that brokers don't pay detention, right? I've heard that case before. I would tell you that it's my opinion that I think detention is the very first thing that we pay on every single shipment.
Drivers are very smart and while it might not be a line item on every load, drivers know that when they go to a facility, they understand the characteristics of that facility. If they know that they're going to wait an extended period of time at that facility, they're likely going to charge a higher rate on a per-mile basis than if they were going to a facility that was more favorably rated.
So, it's really hard to identify the specific cost components of every shipper, but when I can tell you based on the research that we've done is that we know that those shippers and those facilities that don't act with the driver's best interest in mind and have high detention times and high dwell times, and self-front loading and those things, they pay a higher rate than the shippers are quote/unquote supposed to. It may not reflect itself in a direct accessorial cost of detention, but it's going to represent itself in that shipper's costs.
Biesterfeld reveals his biggest shock when he took over the CEO role earlier in 2019
Premack: You became CEO in May of this year. And you've been at C.H. Robinson for 20 years, correct?
Biesterfeld: Yeah. I joined C.H. Robinson June of 1999. I can't remember the exact date. So I'd been here just under 20 years when I took the job as CEO.
Premack: So, I think this is my second-to-last question. What's been your biggest surprise now that you're in charge of the company?
Biesterfeld: That was a question I wasn't expecting. Let me think about this.
Biesterfeld: The biggest surprise, I guess, that I would classify or I'd qualify, has been just the tremendous amount of support that I've experienced in this transition.
The employee engagement has been incredibly high - the excitement in the employee base for the opportunity to accelerate the pace of our development, to accelerate the pace of our transformation.
The support that I've received from John (Wiehoff), my predecessor, who did amazing things in the 17 years that he was in this seat, the support from the board, the encouragement and support from our customers to really commit to innovation and development on their behalf, and frankly, with all the industry noise that's been out there about disruption and dislocation and everything else, the sheer amount of customers that have come to us and said, "You guys have been the industry leader. You continue to be the industry leader. You continue to develop and deliver things to us as customers that extend beyond what any of your emerging competitors are able to do."
I think just that overall sense of support through the transition has been, I don't know if its been the biggest surprise, but its certainly been the most rewarding thing.
Biesterfeld doesn't have too many worries for the future of his company thanks to excellent employees. But he has concerns about the 'global access to talent.'
Premack: And then one other question that might surprise you. What would you say is your biggest worry about C.H. Robinson? What keeps you up at night about the business, where the industry is going, anything along those lines?
Biesterfeld: I'll be honest. I sleep pretty well at night.
I don't mean that to sound cocky or arrogant or anything else. But I have the opportunity to come in every single day, whether it be to our corporate office here in Eden Prairie, or out in any of our offices across the globe, meeting with our teams or the customers that we serve, or the carriers that we help to support.
I gain tremendous energy about the amount of passion that I see on our people. I see the energy and the effort that everybody puts in every single day and the pride that, frankly, that our team has in working for and helping to advance the number one company in our industry.
So like I say, I feel honored to be able to lead this organization. Knowing that I've got the team around me that I do and their commitment, I sleep pretty well at night.
That's not to say that there aren't economic things out there or talent-oriented things out there that keep me up at night. I think the global access to talent is a real challenge. The need for what I call the employee of the future and the up-skilling of talent.
I think those are the things that keep all CEOs up at night. I think the global economy and how that goes keeps all CEOs up at night. But of the things that I can control, I sleep really well.
This interview was condescended and lightly edited for clarity.
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