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Spencer Shute, a consultant with the supply chain and procurement consulting firm Proxima, is a procurement professional with an analytical focus. He has extensive experience in supply chain operations and sourcing within the retail and manufacturing industries as a category leader. Shute has implemented procurement best practices throughout multiple organizations, driving process efficiencies, rate transparency, and cost savings.
Shute has previously managed a North American logistics supply chain, negotiating all contracts, developing partnerships between carriers, auditing all freight payment practices and monthly accruals, and implementing network optimization projects. He consistently utilized analytics to drive business decisions, including mode selection, consolidation, and management of freight term conversion projects.
Additionally, Shute has experience in leading teams and initiatives in a variety of logistics categories, ranging from transportation to packaging to performance management, at companies such as Wayfair, Gates Corporation, and Staples.
David Maloney, Editorial Director, DC Velocity 00:00
How will President Biden's executive orders affect freight markets? Supply chain companies continue to be hot acquisition targets. And in spite of the pandemic, sustainability remains a priority.
Pull up a chair and join us as the editors of DC Velocity discuss these stories, as well as news and supply chain trends, on this week's Logistics Matters podcast. Hi, I'm Dave Maloney. I'm the editorial director at DC Velocity. Welcome.
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As usual, our DC Velocity senior editors Ben Ames and Victoria Kickham will be along to provide their insight into the top stories of this week. But to begin today: U.S. presidents have extraordinary power to influence markets and the economy. Recently, President Biden did just that with an executive order to support fairer competition among American businesses. What will the effect of that executive order be on supply chains, and freight markets in particular? To answer those questions, here's Victoria with today's guest. Victoria.
Victoria Kickham, Senior Editor, DC Velocity 01:46
Thank you, Dave. Our guest today is Spencer Shute, a consultant with Chicago and London-based supply chain and procurement consulting firm Proxima. Spencer is here to talk about, as you say the Biden administration's recent executive order on promoting competition in the U.S. economy and its implications on the supply chain. Welcome, Spencer.
Spencer Shute, Consultant, Proxima 02:06
Hi, Victoria. Thank you for having me.
Victoria Kickham, Senior Editor, DC Velocity 02:09
Thank you for being here. As Dave alluded to, I'm going to narrow this a bit and start by asking you sort of what effect this order will have on the freight, ocean, and railway industries in particular?
Spencer Shute, Consultant, Proxima 02:21
So, overall, the executive order will have little impact on the freight market near term. The executive order only encourages the Federal Maritime Commission, or the FMC, and the Surface Transportation Board—the STB—to fully utilize their current powers to investigate unjust charges and fees. However, it doesn't give the FMC or the STB any new powers, as those would actually need to come from Congress. The FMC has announced, after this, that they are going to audit the top nine carriers for demurrage and detention fees and make sure that they're being applied correctly, but beyond that, there isn't too much impact overall. It also goes a little bit further on the rail side, and it does encourage the STB to look into open-access rules to allow railroad companies to operate on tracks that are owned and operated by a competitor. While this could open up competition among rail providers, it's unlikely to be a near-term realization as well.
Victoria Kickham, Senior Editor, DC Velocity 03:21
We've been covering a related issue, the congestion at U.S. ports and its ripple effects throughout the supply chain. How will this order affect or influence that issue, if at all?
Spencer Shute, Consultant, Proxima 03:33
Again, the executive order on this doesn't directly impact congestion at ports. It's a much broader challenge that will need to be addressed from a holistic approach. What it does do is it ensures that the detention and demurrage fees are used appropriately. But it won't necessarily impact congestion immediately.
Victoria Kickham, Senior Editor, DC Velocity 03:54
What about supply chain companies and other organizations? You know, what impact will it have there?
Spencer Shute, Consultant, Proxima 04:01
So, I think this could be an interesting one going forward, particularly in the trucking industry. Part of the executive order did talk about noncompetes and encourage the FTC to look into those a little bit more robustly. If they choose to do so, that could actually impact the brokerage firms a little bit more, as they're pretty known to have noncompetes in place. Broader than that, within the rail perspective, it does put a little bit more pressure on the merger between Kansas City Southern and Canadian National to create the first Canada-to-Mexico railroad. That could be at risk, because they are focusing on looking at consolidations or they want to keep more competition in the market.
Victoria Kickham, Senior Editor, DC Velocity 04:45
We've seen rising logistics and supply chain costs over the past year, obviously, along with rising costs for so much else. Will this order have any effect on what is right now a very expensive logistics and transportation market, do you think?
Spencer Shute, Consultant, Proxima 05:01
No, not an immediate impact on companies. It's unlikely to be felt by consumers in the near term, primarily, because right now, what's driving these rates is the demand is far outpacing supply. We don't have the containers in place, the logistics in place to move containers fast enough and to get them to where they need to be. So, this executive order does not address those concerns directly.
Victoria Kickham, Senior Editor, DC Velocity 05:26
What message does the order, you know, send to business leaders and to the broader supply chain if a lot of the effects, as you say, are kind of not immediate, and maybe down the road? What message does it send and what should companies take away from it?
Spencer Shute, Consultant, Proxima 05:42
I think the message overall the Biden administration is sending is that they're working to put the power back in the hands of consumers by driving competition across all business sectors. It's similar to—we tell our supply chain leaders to diversify their supply chain, introduce competition among carriers, and leverage the strength of the your suppliers to truly optimize your network. That's what the Biden administration is trying to do. They're trying to make sure that there's fair competition and fair and just rules in place. However, it's only encouraging them to utilize the rules that they currently have today.
Victoria Kickham, Senior Editor, DC Velocity 06:18
Thank you. You know, I'll just close by asking, you know, any final thoughts on how this will affect the supply chain overall, or any sort of best practices and things that companies should watch going forward?
Spencer Shute, Consultant, Proxima 06:32
Yeah, so I definitely think this executive order is a step in the right direction in terms of putting in fair competition. One thing that's really important to remember is, all of the ocean liners are not operated within the U.S., meaning that they're all foreign-owned. So the impact that the U.S. has on the overall rates is fairly limited at the moment. It really just encourages the enforcement of laws that are already in existence. However, I would keep an eye on a new shipping bill [The Ocean Shipping Reform Act of 2021] that has been presented through Congress by a representative from California. What this does is, really, it strengthens the FMC's oversight and rule in the overall process, and it really takes a look at the 1984 and the 1998 shipping acts that really took away some of the regulation and starts looking at putting more regulation in. However, this is just the initial draft, so it's really hard to say what the final draft will look like, and I would really just pay attention to what that looks like going forward so that we can really understand how that might possibly impact the overall shipping market, which would likely have a larger impact than what the executive order did today.
Victoria Kickham, Senior Editor, DC Velocity 07:45
Thank you. Yeah. So more to watch and a lot to pay attention to. Thank you, Spencer, for being with us today. I really appreciate it.
Spencer Shute, Consultant, Proxima 07:52
Yeah, appreciate being on.
Victoria Kickham, Senior Editor, DC Velocity 07:55
We've been talking to Spencer Shute, who is with supply chain and procurement consulting firm Proxima. Back to you, Dave.
David Maloney, Editorial Director, DC Velocity 08:03
Thank you, Spencer and Victoria. Now let's take a look at some of the other supply chain news from the week. Ben, you reported this week about continued merger and acquisition activity amongst supply chain companies, including a rather big deal yesterday. What can you tell us?
Ben Ames, Senior News Editor, DC Velocity 08:19
It sure was a big deal, Dave, to the tune of two-and-a-quarter billion, with a B. That was the price tag that Uber Freight, which was of course, in the original online freight brokerages in the digitalization wave, paid in order to acquire the third-party logistics provider Transplace. There are a number of things that could be significant for the freight sector about this merger. It's of a big enough size that it could really affect the sector. But one point, sort of from a high altitude, is that it brings together three of the biggest trends we've really been following in logistics today, and that's, one, the rise of digital freight matching—the DFM apps that shippers and carriers can operate over their smartphones. Two, the huge acceleration of e-commerce growth that started during the pandemic and is putting enormous pressure on every part of retail and manufacturing supply chains. And three, the growing presence of big-money investors— talking about venture capital and private equity firms—buying up companies in the logistics technology space. So, those three things all came together yesterday, because as we said, Uber Freight provides that digital freight matching. And this deal was really done, in part, to address the stresses that Uber Freight said that shippers are encountering with capacity constraints in the trucking market—a little bit what Victoria was touching on with our guest just now—and escalating transportation costs. And because Uber Freight, which is itself partially owned by a private equity group, bought Transplace from its owner, which is a private equity group, in this case, Uber Freight's investor is a firm called Greenbriar Equity, and Transplace had been owned by TPG Capital. These are other names that people specifically in logistic sector might not be familiar with, but they're really the ones who are behind the scenes, providing the backing, the financial backing, and the ownership.
David Maloney, Editorial Director, DC Velocity 10:21
Do we know how this deal will affect the two companies' logistics services, the actual functions that are used by shippers and carriers?
Ben Ames, Senior News Editor, DC Velocity 10:30
Exactly, because at the end of the day, you know, all these details are interesting, but it really comes down to moving freight. So, it's early, of course, to say, but Uber Freight did say that its brokerage will continue to operate independently from Transplace's managed transportation services division. Uber Freight said that would ensure the highest-quality service for shippers. And one of the biggest impacts could be that it finally allows Uber Freight to become profitable. The unit has consistently lost money. In its most recent earnings report, Uber Freight lost $31 million in earnings in the first quarter of this year. That was on $301 million in revenue. But its parent company, Uber Technologies, has been willing to put up with that, because Uber Technologies makes three times as much revenue from its ride-sharing service and six times as much revenue from its meal-delivery service. So, it's been really concentrating on growth for the freight division, as it continues to expand its share there. But Uber Freight said that buying Transplace, even for that two-and-a-quarter billion dollars, will help it to break even by the end of 2022. The reason is that buying Transplace will let it serve substantially more customers, expand into Mexico, and also gain capabilities in the intermodal and customs-brokerage bases. So, really a lot of ripples from this one decision yesterday.
David Maloney, Editorial Director, DC Velocity 12:02
Yeah, well, it's continuing to show the importance to our economy and lifestyles. It's easy to see why supply chain companies want those sought-after investments—for good reasons. Thanks, Ben.
Ben Ames, Senior News Editor, DC Velocity 12:12
David Maloney, Editorial Director, DC Velocity 12:13
And Victoria, you wrote about how even during the pandemic, sustainability efforts have not taken a backseat among supply chain companies. What more can you tell us?
Victoria Kickham, Senior Editor, DC Velocity 12:23
Well, that sustainability continues to be a hot topic in supply chain circles. A recent study from MIT and the Council of Supply Chain Management Professionals shows that it has become even more important over the past year and a half, despite the challenges of the pandemic. The group's State of Supply Chain Sustainability 2021 report showed that most companies were undeterred in their efforts to create sustainable supply chains over the past year, and that for many, the Covid-19 crisis either accelerated their efforts or helped raise awareness of the importance of sustainable business practices. The study authors noted that this is surprising, because you'd think that the last year and a half would cause companies to divert all their attention to combating the pandemic and put sustainability on the back burner, but that didn't happen. They found that many companies were able to continue and even accelerate their sustainability efforts, which include initiatives aimed at addressing environmental issues, of course, but also social and safety goals. Just to give you a couple of quick statistics from the report, more than 80% of survey respondents said the pandemic had no impact [on] or increased their firm's commitments to supply chain sustainability, and 83% of executives interviewed for the report said that Covid-19 has either accelerated that activity, or at the very least increased awareness and brought urgency to this growing topic.
David Maloney, Editorial Director, DC Velocity 13:52
Did anything else stand out?
Victoria Kickham, Senior Editor, DC Velocity 13:55
Yes. The study also found that the momentum on this issue seems to come from large or very large companies, those with between 1,100 and 10,000 employees, and that smaller companies reported that they were more likely to pull back on their sustainability efforts in the past year. Many of those smaller companies—that'd be small and midsize businesses—said they weren't engaged in sustainability efforts even before the pandemic, and as a result they were even less likely to do so during the crisis, and the authors said this is, you know, most likely due to strained financial resources. So it seems that the larger the company, the greater the resources. That seems to be a key issue or driver here. Another interesting aspect I found about the topic in general, is that the report showed that companies' overall commitment to social and environmental issues was similar between 2019 and 2020, but the interest in some areas grew markedly this past year, and those include human-rights protection, worker welfare and safety, and energy savings and renewable energy. So, again, these are all issues we've reported on and talked about here in the past, but just some more information to show that this topic of sustainability is not going away.
David Maloney, Editorial Director, DC Velocity 15:10
Yeah, well it's certainly good to see companies in our industry also being good neighbors who are concerned about bettering their planet as well as the life of others, so thanks, Victoria. Appreciate it.
Victoria Kickham, Senior Editor, DC Velocity 15:21
David Maloney, Editorial Director, DC Velocity 15:22
And we encourage listeners to go to DCVelocity.com for more on these and other supply chain stories. And check out the podcast Notes section for some direct links on the topics that we discussed today. Thanks, Ben and Victoria, for sharing highlights from the news this week.
Ben Ames, Senior News Editor, DC Velocity 15:38
Always glad to do it.
Victoria Kickham, Senior Editor, DC Velocity 15:40
Yeah, you're welcome.
David Maloney, Editorial Director, DC Velocity 15:41
And again, our thanks to Spencer Shute of Proxima for being our guest. We encourage your comments on this topic and our other stories. You can email us at email@example.com.
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We'll be back again next week with another edition of Logistics Matters, when we will discuss the ins and outs of building a fleet of electric vehicles. Be sure to join us. Until then, please stay safe and have a great week.