From Ship to Shore to Store: Mastering Logistics with Giles Taylor

Aaron Sheehan: Fantastic. And it's always a pleasure to talk to someone else who spent significant time at sea. I was in the Navy myself, and I've done my share of not doing exactly what you were doing, but watching the motor vessels go by the side of the ship while we were sort of invaded because we'd be stuck in the same spot for a long period of time. So it was always nice to see...

You used an acronym that I think a lot of people might not be familiar with: TMS. Can you define a little bit what that is? I know we have non-ops and logistics folks listening, right? A lot of our customers are basically buyers of freight forwarding, brokering, and logistics. They're concerned with the ops, they're concerned with the logistics. So, what's a TMS?

Giles Taylor: Sure, that stands for Transportation Management Software. Sometimes people call it system, but really, it's a software. So, there are three tiers of those: tier one, two, and three. Tier one and tier two being the top of the line. You know, it's got all the functionality. Tier three being more of a solution software, like yard management or parcel, something very defined. And then tier two is in between those tiers. So, they move it up there a little bit functionally. They get a little bit beyond one function or three or four functions, but trying to get to that tier one level. In simplest terms, a transportation management software is going to operate your routing guide. It's going to automate it. It's going to say, hey, this matrix that used to be written out, it's going to put in and make it more sophisticated and then automate it basically. So you're going to be able to execute what you think you can do, like use the right carrier at the right time for the right freight.

One of the things that people don't seem to understand sometimes is that not all carriers are the same. But you look at, say, national LTL carriers, they're all a little bit different. Some are better than others. Some are really good in certain industries, some are not so good in other industries. Some like big freight, some like small freight. So, you really need to know that. And you can program that into a TMS to pick the right choice every time. One of the things I like to mention is that I read an article last year, I think, about the adoption of TMS, and it's still a bit slow. It seems to be big companies, probably because they have the money to buy them. However, with the SaaS solutions that have come out, the online solutions that have come out, it's become more affordable. So smaller companies are now able to afford it, they have these transactional pricing structures, or subscription pricing structures. So it's a little bit different from having to buy the old thing.

Aaron Sheehan: Yeah, I think I understand quite a bit. And I think a lot of our customers are using them, whether they're in their warehousing operations or not. Whether or not folks listening to the podcast are super aware of the details, or maybe they are—they're the ones doing the procurement, doing the running of the TMS. I thought that was a good explanation. Yeah.

Giles Taylor: Okay, just a couple of heads up. So anybody who's thinking about buying one is... You know, we have this two-phase approach to TMS. So, the first phase is to see if it justifies the price that you can pay for it, there's a good ROI there. And then phase two would be the identification of what the right solution would be, and then sourcing it. So don't go into phase two unless you can justify it, right? So we're saving some shippers some money, we're losing some money, I guess. But it's the right thing to do.

Remember, the old software that we deal with is a functionality game. So, when you're trying to get to tier one, typically you have more functionality than tier two and tier three. Like, so you could do more international hazmat, you're going to know maybe a little bit of trade management and all that type of stuff. But you may not have that. You may have like a simple domestic LTL truckload operation. So, you don't necessarily need to buy the Mercedes, if you will. So, be cautious of that.

Aaron Sheehan: That makes sense. I'm guessing when you're trying to decide if I need a TMS and which one to buy, you as a consultant would be asking questions around volume, diversification of carriers, and lines of packages, because there's some point at which the scale of what you're shipping helps justify the TMS. Whereas, if you're not doing a lot, it probably may not justify itself.

Giles Taylor: TMS is selling more, but you may not need them more. First of all, a lot of companies may not know what they actually have in the way of freight, as it relates to a TMS. What kind of sophistication do I need there? I mean, they're definitely helpful, as you can justify just the capture of data. Like, everybody still today, having this business for 40 years, everybody still is talking about data or lack of data. And this is one vehicle to help you get better data and be able to manage that data a little bit better.

Aaron Sheehan: We're big fans of that here as an eCommerce platform that captures an enormous amount of data and then surfaces it for reporting purposes. I find that the number of people who wish to be data-driven is not the same number of people who invest in the solutions needed to be data-driven. I think it's an easy thing to say, and maybe the hardest thing to do in your life, here. Yeah, so this is all interesting, and certainly to a nerd like me because I love this stuff. I'd be interested in hearing maybe a quick story about one of your customers, or maybe something from your history where Trans Solutions came in and helped solve a pain point. Put a human face on it. We'll move out of the acronyms and put a human face on it.

Giles Taylor: Well, let me give you two examples, because we have two sides of the business. You have the sourcing side and the engineering side. So, an interesting project we did a few years ago was for a large food retailer. And they were bringing most of their freight in prepaid and add. You're familiar with that term, right? So you pay for the goods, and then they put the freight on top. And that's the add. And they were trying to control costs.

They thought maybe we could do this by bringing that in, make it collect payment. So, we did an initial assessment of the pricing. And it's very difficult to get because it's sometimes hidden, you know, it's buried in the invoice, and things like that. So, there's a lot of calling and persistence to get that information from the vendor. And so we did an assessment of a small sample, and we saw that yeah, they were not paying market pricing. So, once we identified that, we went to work, and it took about two years to converge. There were about 15% collected at that time, and we got them to about 85% plus by the time we were done. But we were able to convert that source, that truckload, it was a combination of dry goods and reefer goods, and save them millions of dollars. So, that's a little bit beyond the typical sourcing project because we do this kind of evaluation and see if we could do that. And then this whole conversion to collect shipments was a little bit of work.

On the engineering side, you know, I'm an engineer, I've formed the company that way. And I think like an engineer, even if it's a sourcing project, nice, the geek army. But we had a company that was very familiar with tier-one material. It's a very low-cost item, like sodium and talc and things that are made of everything. And the cost of the goods is very low. So transportation can play a pretty big effect on that because they tend to be heavy. And of course, pricing tends to be weight-based, right? Even in truckloads, you're going to pay more for a heavier load, than a lighter load. So, they were sourcing products from material from Montana, and they were bringing it into the northeast, over the road.

And that was such an issue, then in the wintertime you have to have chains coming out of some of those areas. And they'd have to put the chains on a pallet. They needed that pallet space for that one pallet of the material. So, that's how tight pricing was. So we just reevaluated the whole supply chain, and we converted a lot of it back to rail car, a little bit to intermodal, and then the rest stayed over the road where it makes sense. And then we also put a dedicated fleet on the other end to deliver the goods in the geographic in the northeast. And that worked out pretty well, since they were able to elevate their margin by lowering their cost of transportation.

Aaron Sheehan: I love that. And I know our listeners love that. Because, yeah, this is a low-margin business, I think that we're all in, if you're selling bulk B2B relative to consumer goods. A lot of times direct-to-consumer retail. So, yeah, I think that's the holy grail right there: do more with less.

Well, and so one of the things I've heard over the years, I've worked with a lot of companies who are trying to optimize their shipping costs, and there's plenty of opportunity out there to go and have audits done, and claw money back from your carriers. There's opportunity to invest in automation, there's opportunity to get subsidies from some of the carriers for investing in technology. And UPS has a pretty, pretty big program there. There are others out there. One of the things I have heard for the last, I don't know, 10 years, a carrier will go to a merchant, will say a distributor, and say if you consolidate all of your shipping with us, we will give you a better rate. And it's interesting because there's any place where there's a commodity, or what's perceived as a commodity good, there's bundling and unbundling. It seems to be sort of the great elastic rubber band that just, like, swings back and forth all the time. And I see it in the payment space with credit cards. If you go to a credit card company like Stripe, or any of those CyberSource, right, large ones, PayPal, they'll, if you run, let's say, your brick-and-mortar store, your point-of-sale cash register card credit card transactions along with your back office call center ones along with your eCommerce ones, you bundle them all together, you pay fewer basis points on every transaction through the magic of bundling. And I've seen the same pitch made by shipping carriers. And I will say that most of the time when I have seen someone do it, they have then regretted it. But I don't know why, I've just heard angst about it afterward. What are your thoughts around this sort of, like, this value proposition of bundling with a single carrier?

Giles Taylor: You probably saw that big smile come on my face when you introduced that challenge. They're so... Here, go to www.trans-solutions.com, click on "free resources," select "ebooks and white papers," download our paper on "five things parcel carriers don't want you to know." The number one item is: bundling all your spend with one carrier will not get you the best pricing. Well, I'll be darned! Look at that. That's been the play that they've used. They're not unique there because all the carriers want to do that. Truckload, LTL, they're a little bit more specific. But FedEx and UPS, they want all your business. They're pretty similar companies, but they're not exactly the same. They each have their own advantages. But here's the thing: if they know what your business, your spend is, then they're going to go after all your spend. If they don't know, then they're going to ask you, but you can give them what you want. But the reality is, and we did a project last year for a pretty big company, you know, they basically control the market. And we took a look at their pricing. There was $80 million spent on parcel to FedEx, and we looked at the pricing and said, wow, I'm surprised there's not better. Like, this is a lot of stuff, and in this good business, I'm surprised there's not better.

So, we started looking at our benchmarks. And we had to find a benchmark with a competitor, $10 million spent is what had the better pricing. The $10 million spent.

One of the advantages that third parties have that play in this space, in the NAFTA pitch, Trans Solutions, because we do, is that we see a lot of rates. And when we see a lot of rates, and we see what the spend is against them, and kind of the freight profile, the density, the product, all these different profiles or demographics of it, we're able to see the world that the average shipper doesn't see because they only see their rates, right? So, they maybe have a little bit of history coming up and coming from another company. But if you're only looking at your rates, how do you know who they are? We think that's employed by the carriers to get you to give them more business.

Aaron Sheehan: Right, and then the switching costs, I imagine, become much higher for them if you wish, then after you have bundled everything, to break off a piece of that and bid it out. That becomes more complicated. Are there strings attached to that bundling. Are there things that make it more difficult for you to unwind after you've made that decision, from a technology standpoint or from an operation standpoint?

Giles Taylor: When we run into a client that has a lot of accounts, like say over 200, right, they have, like, service offices around the country or something like that, that's a little bit trickier. And I can't say that we haven't had both. The next thing, UPS will pull a hard line on that, like, "Hey, you want to walk away from us?" And we're walking away from the rates, you know, in 30 days, or in 60 days or something like that. But it is the exception because the carriers, we don't want to burn that bridge, we want to get back in there. So, if they burned the bridge, they're not going to get back in. But if they don't, then they know they have that opportunity. And I see that time and time again. We did a project last spring for a big semiconductor company, and they were a FedEx customer, like forever. And we took it out to bid, and we saw a big opportunity to give it to the other two because there was international business there. And we lost business, literally, what happens at that point. The next week, they're trying to get an appointment with six people that are highly senior management, you know, and, like, "How do we put this back together?" And so, they could have burned the bridge there. But they didn't burn the bridge, and they actually came back with some progressive pricing, and things like that. And it looks like they might be getting that business back a year later.

Aaron Sheehan: For them Iguess the takeaway is it's a shipper's market, and you have more leverage than you may think you do as a shipper, making these decisions.

Giles Taylor: Yeah, who knows? Just be objective about this because there are two sides to that. There's the money side, and what they don't know. That's very important. But, like, here's a reason to put all your eggs in one basket. I don't think it's a good reason. But it is... Everything is... You go through COVID, you go through the Suez Canal issue, and things like that. If you have all your money, and it's a substantial amount of money with one forwarder, for example, you're going to get maybe a little bit more tender loving care. Okay.

Now, the opposite of that is if you don't have diversity, then you're stuck with that. So that can play right into your service that you're able to offer your clients. So, if something happens, like last year, or was it two years ago? Expeditors had that data breach, they basically shut down. If you're 100% with that, what do you do? You go back into somebody else, so handling freight, and you can pay a premium. So, coming from the operation side of the business, I like to have diversity. Personally, I mean, I liked it back then because there's always disruptions. You need to be able to prepare for the worst, and you're not going to have that preparation if you're solely sourcing. That makes complete sense.

Aaron Sheehan: And I imagine there are some people who have a lot of dependence on maybe the Port of Baltimore at this moment who are wishing they had a more diversified strategy. We were talking about that before the recording started. Big news in the logistics, big news for a lot of people, including Baltimore commuters, but also just in the logistics world itself. Yeah.

Giles Taylor: So, here's something to consider. That is the number one port in the US for cars. And cars come in, or what they call a "roll-on, roll-off." So, the meal of the ship comes down, goes on the dock, and then basically, roll on, roll off. Yeah, along roll up. Exactly. So, not all ports can handle those kinds of shifts. So, this is going to be a disruption in cars. It can tell you that.

Aaron Sheehan: Okay, let's move on to a different topic then. One, I think it's a little near and dear to my heart. When we talked before, Giles, you said that you taught at the Navy War College. Go Navy, beat Army, always. Obviously, the War College, yeah, slightly different than the academy. But you teach supply chain, specifically, I think you told me that you taught on the future of the supply chain. So, I'm going to ask you a really easy question. What is the future of the supply chain?

Giles Taylor: Been doing that for about five years. And you know what? Firstly, that was building the deck for that class and just some guest lectures, or go in there, and do it for this master's program, put a bunch of research into there, like, what's happened with warehousing, what's happened with trucking, ongoing, blah, blah, blah. And after that presentation, and then into the second year, I realized a lot really hasn't changed, right? It's already happened, if you will. Get warehousing, there's far more automation there than there is in transportation. Right? You know that they have a WMS, warehouse management system, they have robots there, they have pick-to-light and frame dispensers, and all kinds of stuff like that, and they've had that for a long time. And that sort of really hasn't improved.

If you go to manufacturing, there's a lot of automation there, a lot of robotics, and they're pretty saturated, too. So, the two areas where I see supply chain changing is basically AI and ML, machine learning, is going to really enhance what they've done already. They're going to eliminate people where there's redundancy and where there's redundant work, and they're going to make it more accurate, and connectivity is going to get better. And I think that's going to all come together, there's a lot of money being put into that. Track and tracing systems are getting much better. So now you can have multilayer and disability with them at a reasonable cost. I don't know if you remember when RFIs came out 25 years ago, and nobody could afford them. They're like getting more affordable because it's really good technology. And you know, QR codes and things like that.

And the other area is probably warehouse land is getting more expensive. Even though you find a lot of warehouses in certain parts of the country, they're kind of like old farmland, like Columbus, and grow port or whatever it may be, Nevada, what have you. So, that's going to go vertical, I think, instead of having, like, standard clearance of, say, 20 to 17 or 22 feet or something like that. That's going to go up to 50 to 60 feet, I think, and people will be removed from that process. It will be all automated. So, we've seen a little bit of shift there right now. It's the old technology of people to product in a warehouse.

So, you go out to the rack, you go out to where the product is located, you pick the goods, and you bring them back to a packing station. What's shifted there? And that was really, I think, pretty much started by Kiva, if you remember them. They were bought by Amazon. And that's that little, you have this piece of static shelving, you know, by 18 or 24 by 24 inches, and it goes and brings it to the packing station. We see a shift there, too. So, it's eliminating people, right? Instead of having to walk out there, which takes a long time, now the machines are doing that for you, bringing your TOC of packers, and things like that. So, we definitely see that. Well, the same thing is going to happen with warehousing storage, but like really on steroids. You have an electric, automated lift truck, if you will, going up or you see getting the goods, bringing it down, putting it on a conveyor, going to the packing station. So, that's where we really see it. But as far as transportation goes, we think some of the processes that are kind of back office, if you will, like freight billing or auditing, or tendering bills of lading, or transportation management, or even trade management type of things will get much better. And it'll be accurate, and you won't need somebody filling out 13 forms, that type of thing.

Aaron Sheehan: Got it. So more automation, fewer people. I've had several conversations around these lines lately. There's an episode tI had a co-founder of an AI company, and we got into talking about automation of distribution centers and warehouses. I encourage you to listen to the episode with our Simon Rakosi, available wherever you find podcasts. But what are the points that he made on the episode that we recorded is that the automation is often uneven when you go to implement it in the facility. And so, it'll be surprising sometimes.

You'll automate one piece, and that one piece of your process will become hyper-efficient, but it will then cause bottlenecks elsewhere, as the rest of the facility suddenly struggles to keep up with the throughput of the one piece that you've done. And that you can actually end up adding more human beings to your facility for a time. You'll get a lot more throughput, but like the navigation of unevenly applying automation and robotics to the process has some interesting unintended consequences to the overall profile, how many people you're employing, and how you're organizing and doing your engineering around processes.

Giles Taylor: You have a saying: If you don't know what you're correcting before you automate it, you just got to automate chaos. Garbage in, garbage out. The only thing I missed on was, and I think this is an important topic, is in the management of information. That's seeing a big shift right now. Not sure if you're familiar with mesh networks. But there's a handful of companies that are excelling in that, but the old school is, and it's the predominant one today, is everything runs through the ERP, enterprise resource planning, we're kind of normal. You got a warehouse management system. But the problem with that technology is it's a bottleneck, right? Everything has to flow in and out of that. And, like, the example that they use, Aaron, like you have this fast-moving, new automation here, and it gets stuck somewhere. Well, it can get stuck right in the ERP because it can't pick up all the nodes that the new technology has.

So, with a mesh network, you probably know about this with your Wi-Fi at home. They have the standard, we put the router on the first floor, that's a whole house. But now you can plug it into the wall and picks it up from there and expands it out to that area. So, it's a mesh. So with the mesh network, you just think of it like this mesh, or this net, that goes over the whole supply chain. And all these pods drop down into all this information, like vendors and customers, and warehouse management system, transportation management, they're all talking to each other. That's the wave of the future.

Aaron Sheehan: That's amazing. Yeah, I agree. I had a mesh network in my home, actually, not quite as sophisticated as the enterprise-grade technology, but surprisingly good when you have a split-level ranch with really bad signal propagation from the upstairs to the basement. So, I want to ask you the final serious question, and then there will be a bonus unserious question.

Giles Taylor: Was an easy one that turned out to be hard.

Aaron Sheehan: I know, right? Well, I'm full of surprises. This should be an easy one, and then the surprise question will be super easy, I promise. And we haven't discussed it ahead of time. So, the final serious question is: what's one piece of data that, if you're a shipper, you would benefit in knowing about your own business that you probably don't? What's the diamond that has not been excavated inside of most people's businesses?

Giles Taylor: That is a super hard question. I'm glad about that, actually. Wow. Well, you know, I started this business on the motivation that I had, or the frustration I had. As you say, it's the lack of data, and having to make decisions. And as an engineer, you don't like that situation. You want to know what the facts are to come together to cause the results, or the answer. You don't get that. But one thing I think hasn't happened, and most people don't know really, is what the true cost of providing service is.

That can be broken down to products, and what it costs, nearly. If you take an e-tailer, we'll give you a little history here. I used to do this calculation every year when we had a catalog for retailing. And we had a cigarette warehouse, we were in charge of shipping and handling. Because we wanted to actually make a little money on that, and sometimes in catalog, that was going to be a profit center. Yeah, it could be the only money you're making. So you had to get that right. So you know, you're going to lose money on some things, and then you're going to make money on other things, and then you're going to make it on it. Now it's hard to calculate that down to the product, right? Like, if you have really good data, you get your weights and dimensions on everything. That's a really good start. But to really calculate the landed cost of something, I don't think people put that effort into that. I think they want to do it, everybody asks about it. But they don't necessarily put that effort into it and may not have the information to do it, either. I think that's the one piece of data, if you can corral that and really understand what those costs are, you can streamline your supply chain.

Aaron Sheehan: Know your costs. It's the first rule. And it's the data is never granular enough to make product-level decisions inside your catalog. That was a great answer. I will now ask you the final question, which is completely unserious, which is: what is one piece of media, a book, a movie or a TV show, an album that you've consumed? I don't like using the word consumed, but I can't think of a better one in the last few months that has stood out to you, not your favorite of all time. Just something you've seen, something you've read that you're like, oh, that was really good. So the last guest had a novel that he'd read that stood out to him. So take anything.

Giles Taylor: Gone to total fiction on the personal reading. I don't think there's any one thing. Like, don't be guided by one particular thing. There's too much going on today. You need to get multiple inputs. First thing I do in the morning, as I read trades, I read the Wall Street Journal. I'm just seeking out information. And you know, a lot of it is repetitive, and they're saying the same thing. But then there are these little gems in there. Sometimes it's a one that's a little bit different. I'm going to look into that one. And sometimes I don't, but I'm always looking for like the exception. Like, what's a little bit different theories? I've been doing this for 40 years. Well, things haven't changed in 40 years. And I like to search across a lot of media to come to my own conclusion.

Aaron Sheehan: Only fair. So, there's not one novel or anything that you've read that stood out to you?

Giles Taylor: This book ever written is Lonesome Dove.

Aaron Sheehan: Yeah, the miniseries is pretty good too. Giles, this has been fantastic. And I think we could probably keep talking about the supply chain, and all of the consequences of paying attention to it, or not paying attention to it, to our customers and our businesses. We need to run. Thank you so much for being here. Really appreciate your time on the podcast, and good luck with all of your future endeavors at Trans Solutions, and in teaching people about the future of the supply chain.

Giles Taylor: Pretty interested in this stuff. Thank you for having me. I really appreciate you giving me the time, and anytime, just reach out to me if you have any questions.