It's not easy these days to find an executive who's bullish on his or her organization's growth prospects. But Robert Voltmann is just that. Voltmann is president and CEO of the Transportation Intermediaries Association (TIA), an organization that represents thirdparty logistics service companies of all stripes—freight forwarders, brokers, and intermodal marketing companies among them. TIA's membership has been growing for the past eight years, Voltmann reports, and he doesn't see that changing anytime soon. In fact, he aims to increase membership by a whopping 17 percent in 2009 alone.
There are a couple of reasons for Voltmann's optimism. First, he sees a large untapped pool of potential members. "We believe that at 1,200 members, we represent 10 percent of the industry by number—we estimate that there are 12,000 operating licensed brokers," he says. And he's confident the organization has much to offer members—online training classes, insurance and credit reporting services, and, of course, advocacy.
Prior to joining TIA in June 1997, Voltmann was director of policy for the National Industrial Transportation League—a position he took after serving as chief of staff to Interstate Commerce Commissioner Ed Emmett. Before coming to Washington, Voltmann worked for two economic development and area planning associations in Houston, Texas.
Voltmann met recently with DC VELOCITY Group Editorial Director Mitch Mac Donald to discuss the biggest challenges TIA faces today, the economy, and the call he has out to the oracle of Delphi.
Q: Could you begin by telling us a little bit about TIA?
A: TIA is the largest organization representing third-party logistics companies. We're at just over 1,200 members and growing. We have been growing in real terms year over year for the past eight years, and our plan is to double again over the next five years.
The association was established in 1978 by the 14 licensed property brokers that existed in the United States prior to deregulation. They decided to push for deregulation of the brokerage business and make that a provision of the Motor Carrier Act of 1980. The association from that day forward has always been about the free market and ethics. They established a code of ethics for the industry, and we have added to it over the years.
Q: Who are your members?
A: The majority of our members are non-asset or asset "light" companies. About a third of our members own trucks. Maybe two or three hundred own warehouse space or broker warehouse space. Maybe 200 are air freight forwarders, a similar number handle ocean freight, and we have more intermodal marketing companies than the Intermodal Association of North America (IANA)—because we have all the small ones.
Q: How did you come to be in charge of this organization?
A: I came to know the Transportation Brokers Conference of America, which is what it was called at the time, when I was at the Interstate Commerce Commission during the first Bush administration. Then when I was at the National Industrial Transportation League, I worked closely with the association. I actually tried to get the job before and lost out to Joni Casey. If I had to pick somebody to lose out to, Joni is a great person to lose to.
Then the position at IANA opened up, and IANA hired Joni. I lost that to her, too, but this is where I really wanted to be. I knew it was a diamond in the rough, and I believe that I have shown it to be a diamond. There is just a really bright future here. I have more than doubled membership. We have built an online university of training courses for our members. We have entered into an agreement now with the Institute of Logistical Management to double our online course offerings. We have an insurance company. We have built a very effective advocacy department. I am more excited today than I was in June 1997 when I took over.
Q: What are the key issues for your members right now?
A: Right now, one of the key issues is credit management. One of the reasons that the third-party logistics industry has exploded is these companies use their free cash flow to become the industry's bank. What I mean by that is they pay the carrier as quickly as the day of delivery but don't expect to be paid by the shipper for 30 to 45 days. So they are financing the freight on their own cash flow.
Well, that worked well enough in the days when the market was booming and you could check your shipper's credit once and then watch your own receivables from that shipper. But in this market, a shipper can go south on you in 30 days because you don't have a clear picture of its total finances. There were credit bureaus like Dun & Bradstreet that gave you a snapshot of how the corporation was doing overall, but there was not any entity looking at a shipper's transportation-specific credit.
We have been working for the past three years—actually since the last dip in the economy—to build shipper transportation-specific credit reporting. The company that we have been working with, Forius, launched a product on March 2 that's going to allow users to track how shippers pay their small transportation providers on a daily basis.
Q: What other issues are you tracking besides credit?
A: Long term, the biggest threat to the industry is from increased regulation. The industry has worked quite well since the mid '90s, when we ended economic regulation of the industry and concentrated solely on safety. But in the last Congress, legislation was introduced that would have required brokers, forwarders, and motor carriers to reveal all of their costs, all of their income, and every invoice.
This is a devastating thing in any industry. Sure, you'd like to know exactly how much Best Buy paid for that Sony television or how much the auto dealer paid for that car you want to buy. You wouldn't have to go through all this nonsense of negotiation. But in our free market, it doesn't work that way. It would have tremendous ramifications. That is a huge threat on the horizon, and we have increased our presence on Capitol Hill to deal with that.
A: A related issue is that of taxation. We fought a provision in Texas two years ago that would have taxed service industries at their gross revenue level, not at net cost.
Q: That would be a bit onerous, wouldn't it?
A: Yes, very onerous, and other states are looking at this same thing, so as an industry we have got to get our hands around this. We have to figure out how to mobilize the opposition at the state level because, frankly, no state wants somebody from Washington coming in and saying, "We are from Washington and we don't like what you're doing."
Q: Let's shift gears a little. What are the biggest challenges your members face in serving their customers these days?
A: Well, the biggest challenge right now is the lack of freight. Everybody is facing it. As a result, we're seeing the strong preying on the weak to get more volume—for example, they might be offering to pay the carriers even faster.
Q: I almost hesitate to ask because nobody wants to go out on a limb and make a prediction, but we have to go through the routine. Is there an end in sight to this freight recession?
A: I don't know. I'm hearing different things from the group's members. The members who are heavily involved in the auto industtry are really hurt. But I talked to a small member last week who does a lot of work with a box company—a cardboard box company—and its freight is picking up.
I have a call out to the oracle of Delphi, but she hasn't returned my call yet, so I am not sure. I hope it is soon.
Q: We all do. I recall market analyst John Larkin saying at your annual conference, "Every day we are in this situation, we are one day closer to being out of it."
A: Well, I think that's right. I recently went back and read Franklin Roosevelt's first inaugural address. In it, he told the people that things were not as bad as they had been in the past. We are not plagued by locusts and other biblical plagues that our forefathers persevered through.
Things are certainly better today than they were when Roosevelt took office. What we have—and what America in 1933 didn't have—is a modern sophisticated logistics and distribution system. In March 1933, in the depth of the Great Depression, we left food rotting in the fields because we couldn't get it to market. We don't have any of those problems. At the depth of the Depression in 1933, we had 25 percent unemployment. Today, we are pushing at 10 percent—or maybe a little less.
Anyway, we have great things in place. Now that we have passed the stimulus bill, everything should be good. It is time to start instilling hope instead of selling fear.
Q: The economic environment aside, what does the future of logistics hold? If we were to take a nap and wake up 10 years from now, what would the market look like?
A: Oh, man, if I knew exactly what the market would look like 10 years from now, I would be really fat, dumb, and happy.
I think it will look a lot like it does today but with more logistics companies. Over the past 20 years, shippers have shed jobs from what used to be their traffic departments. They are not going to hire those back. They are going to have high-level experts in their systems to oversee outsourced providers and work with them in partnership.