1030. #TFCP - Best Practices To Minimize Cargo Theft!

It's not trending because it's kind of been around forever, but cargo theft is not slowing down. I think it's getting more and more intricate out there and we're going to talk about that. And how do you prepare yourself for it as an organization? So I have the founder of Zipline Logistics, Mister Andrew lynch, on the show. Andrew, thank you so much for joining me.

I was a carrier sales guy there and my co founder, some of the feedback he was getting from customers, which for us really boiled down to the reality that there really was no specialization in logistics solutions providing back then. It was Alan Lund. It was Robinson command had come about, Coyote had launched. But there wasn't anyone out there really trying to carve out a tight niche outside of just sort of modal providers, right? There's LTL specialists, there was rail specialists. But we recognize that for me on the carrier sales side, I was a high performer. I had this great network of really high quality carriers that gave me outstanding service. I didn't have to track them every minute and stay on them all the time to make sure they perform.

They were just good quality providers that sold me their capacity at a good price. And that folks internally at Robinson would work with me because they knew that I was a reliable provider of service. And my partner, you know, from his standpoint, was like, hey, every time I put a shipment on the board that's going to like Walmart or Costco or something, you know, somebody books it. And then I've got to call that rep and be like, hey, you know, if you're an hour late, it's going to take three days to get you unloaded. And my customer is going to have a fine and they're going to be pissed.

And it was just like, hey, why don't we just, you know, sort of refactor this whole thing through the lens of serving that, you know, really large demographic, right, consumer goods products that end up on retail shelves. So, you know, that was our inspiration, and we really stuck by that vision. You know, 17 years later, we're still chasing it.

We had nothing but an SBA loan for $150,000 as our burn, and it was go start this business from scratch with no credit. Banks had stopped lending altogether, and we had to really bootstrap it. I mean, by definition. And what it created in us were some really good habits and really great discipline. So we couldn't grow too fast. We had to be really careful about how we grew because our receivables financing was so limited and scarce that we had to be really careful.

Hey, if you bring this customer on and the margin is really low, and we have to pay our carriers in 21 or 23 days in order to keep our credit rating, you know, going as a really small, you know, provider with very limited credit histories, we had to be really, really disciplined and intentional about what type of business we brought on, you know, and what kinds of arrangements we made with carriers. And, I mean, we had to do things like, my co founder's mom was a high school english teacher. We had to borrow, like, 100 grand from her pension in order. Because were growing too fast. We brought on business that we couldn't. We couldn't pay our carriers fast enough.

So a lot of those hurdles early taught us a lot of really valuable lessons about running your business and about maybe flying too close to the sun or being careful to learn not to fly too close to the sun early on.

But I also look at it now kind of going back in, it was like, well, damn if I can turn revenue and survive these last four years in our economy and just the industry as a whole, I'm like, I, I think I, like I'm not in the clear, but like my mind, my mentality is, it's like I'm very prepared for challenging situations because, and I think that's kind of what you saw. There were so many people who came into this industry in 2021, 2022 when the freight market was easy and nobody, like people were just setting everybody up from a customer standpoint because they're like, we just need capacity. If you can, if you have a pulse, you're going to get access to our freight at that time.

And now that's changed and I think, you know, to kind of tie in our topic of conversation today that really exacerbated our biggest issue. One of the biggest issues in our industry right now, which is freight theft where it was the Wild west there, man. And like people didn't know who was getting loaded on what. Double brokering, identity theft, fraud, all of that stuff is all tied into this here. And I think that where we are today is a kind of a direct reflection of what that market was a couple of years ago. And I'd love to get your opinion on this, you know, because you guys just recently, you just gave a speech or you put out an article here recently about this topic in general.

Theft really aren't on the list. It's really a broker problem. And when it comes down to why is this a broker problem? If you think back to those times of mid 2020 through kind of the end of 21, yeah, it was desperate times. It was hard to find capacity. The demand for freight services was way outstripping the supply. But you also, as a broker, had an enormous amount of leeway on cost and on service, right? You, you didn't have to, you know, sacrifice your qualification requirements in order to grab that truck because at the end of the day your customer's gonna understand if you call them and say, hey, there are just no drivers for this thing. Right? Yeah.

Or your customer was gonna call them and say, hey, I'm sorry, I know I told you I thought I was gonna buy that truck for 1500, but it's actually 1900. There's, you know, there's little I can do. Right. It's a pandemic as that understanding sort of dissipated and the freight market really kind of fell through the floor versus its supply network. Suddenly everybody went back into this mode of commoditization. And I think if I had to, I like to try to really get to the root of things a lot. It's just how my mindset tends to work. When I think about the real problem. The real problem comes down to the commoditization of freight service, right? And we do it to ourselves. Mostly we do it to ourselves as an industry.

We don't allow ourselves to say no to business often enough that isn't buying on our value sets. And we don't allow ourselves to go to market with a focal point of our values and say, hey, look, I sell high quality service from high quality capacity providers. I don't try to water down their value proposition by driving their rates into the ground and trying to make them operate below their costs. And I sell that service to people that value really great communication and visibility and high quality service and results. And for us, that discipline that we created of running our business through the lens of efficiency and efficient use of capital, it really always kind of came down to, every time we stepped outside of that core value set, it stung.

I can tell you we're going through it right now just like probably lots of other folks in the space. During COVID we brought on some business that turned out to maybe not match our value set as much as we thought it would. Right? You know, these were folks that needed capacity then and were willing to, you know, pay for great service and pay for great visibility. But when the market turned, they went back into commoditization mode and we tried to make our, you know, square peg fit in their round hole and it just doesn't. Right. And as a result, you know, we lost money in order to try to, you know, adhere to our value sets or we had to turn around and renegotiate or ask to get back business. And that's really difficult. Right. It's a hard thing to swallow.

And so when I really look at what the root is and where it's happened to us, where we've been victimized, are those exact situations. It's a time of desperation, that desperation, whenever you look at the daily freight market, you know, supply and demand balances anywhere where you see a massive, you know, demand imbalance over supply, that's where you're going to see opportunities for fraud. Right. It's just, it, you know, it's predictable, it's obvious. And, and I think if you really, you know, look closely, you can see what the root is.

We can't continue down this route, though, because service failures are inevitable when it comes into this. Because when we tie in fraud and cargo theft and everything, has that hit that level where they're like, all right, we got to stop because I think, I forget the exact number, but I think it was travelers insurance released. It was like a couple hundred percent increase in freight theft in 2023 alone.

We know that you're coming to us and telling us that we can rely on a relatively stable marketplace for the next twelve months, looking forward with maybe a little bit of seasonal bumpiness or perhaps we build in a couple hundred basis points of budget just to make sure that, you know, the second half of 25 doesn't bring us a big surprise. But that are showing up with that reason that hey, we came to capture savings when we knew it was there. We're not going to push for it because we know we really need to protect for service.

But I mean, I can certainly tell you that we still have lots of those bids that come through where it's going to be a three round bid and you know, they're going to choose the lowest cost provider on every lane and you're going to get a target rate that comes back to you in round two. That doesn't make any goddamn sense. And you've got to, I think the onus is on the broker. At the end of the day, shippers, honestly, large and small, we mostly serve the small and middle market from a consumer goods perspective. But we have some really large shippers and some of them are the most values driven and most kind of partnership focused customers that we have. But by and large they're siloed, right?

You've got a finance department that is saying, look, if I'm a consumer goods brand, my margins getting beat up, right. It's hurting. My costs are up, my costs for capital is up. And I need you to go find savings everywhere that you can. And the onus is on us to show them the difference between cost and value. And, you know, really to be willing to say no when we know that, you know, what it is that shipper is trying to buy doesn't match with what we as an organization sell.

Because again as, and then if you bring the scope out just a little bit further, you look at credit card debt, it's at an all time high. Delinquencies are at an all time high right now in the United States. So if you look at some of those macro factors, all of that is tied into that decision making thing. But then again, does that breed that ultimate mentality of desperate times call for desperate measures? And then this is where you see freight theft increase out there. Cause people are like hey, I'm gonna steal this truckload of whatever because the street value so high, I can go sell this for $2 a box on the street, you know, and stuff like that. So like are we creating that environment as the economy is operating the way that it is right now?

And that's just not a place where our industry should be. And it's like the standard right now. I mean I feel like everywhere I'm looking it's just someone having to make the choice between making a profit and delivering on a promise. And so you know, I think there are a lot of parties that can work this out together. But I do think that the onus does start with the three PL industry. Because at the end of the day we're the ones who say yes or no to business. We are actually the market makers at the end of the day. And I think really interesting to your point on everyone's level of desperation right now. I've tried to walk this through with some shippers.

When I talk about what next year looks like, because I think it's being a little bit overlooked that everyone is desperate. When I talk to my team, were joking earlier about sonar and freight market and looking at all of these tender rejection indexes, and look, the fact is, all that stuff is important. Those are all leading indicators. What they're leading indicators of is behavior. And what you sell against in this industry is competitive behavior. Right. If I'm selling you a value set that says that I'm going to deliver you service at all costs or I'm going to deliver you retail performance at all costs, you know that my pricing isn't going to be the same as the person that says I'm going to deliver you 18% savings on your rate spend. Right. Just two different things. Right.

Everyone is so desperate, trucking companies included, that when this market does start to turn in earnest, and I don't think that we're close to that at all, unfortunately, from a capacity balance perspective. But that when that opportunity comes, trucking companies have an obligation to chase money. Like there are no relationships that someone will sacrifice their organization's health over. At least I hope, nothing, right? Because that's a poorly run organization. The fact is that almost every trucking company in this country, outside of maybe the, you know, the mega four or five, is operating on such thin margins or negative margins that the moment they see the opportunity to operate in the black, they have got to do whatever it takes to get there.

And that is what I think is going to cause the greatest disruption over the course of the next 18 months is just. I think that it's going to take a long time to get to that point, but when it gets there, it may be much less of a trickle and much more of a flood.

And it's easy if you just want to cold call people and get onto the distribution list methodology, right? Like, oh, then you spend all your day quoting, but you're not actually winning any business. You're not actually growing. You're not paying for your seat. And I think that is where I, because I personally think that the exodus in the industry is going to come from the brokerage side because I think a lot of people, you know, again, if you look at the back to what were talking about, you know, receivables and credit card debt being at an all time high, I think that there's a lot of businesses that are built one or two key accounts. And what is that financial health of that organization looking like? Are there risk? Because, like, dude, I pay attention of this stuff, man.

Receivables are aging big time out there and they're large sums of money. And that's like what pays for people's p and l throughout the year. And then again, I think that also breeds into desperate times where they're looking, they're like, all right, how do we get this? You know, and then lines of credit from banks are going to get rescinded and cut in half and everything else. Like, it's going to come down to survival of the fittest. And I think that this breeds where we're kind of at as a whole. I think desperate times are really out there for a lot of businesses. You know, this just as well as anybody. Like, this isn't easy. You know, like, nothing about running a business is easy.

And you have to go out there and think about that as you're kind of, you know, really working in this market and in this environment because I think a lot of individuals out there need to be prepared. Like, this could very well go on for 2025 and 2026. Nobody knows.

And listen, I made the mistake during 2023 of really holding firm to, hey, this market's going to turn around and I've just got to wait it out. I've got to keep the wheels on the bus until this thing comes back. But eventually the reality's got to set in and you've got to reset to your core values and go back to the folks that buy what you sell and just focus on delivering on that, on those fundamentals. And if that means that, you know, you're only $100 million business instead of a $200 million business, well, that's okay because it means you're still gonna be here in 2026 when the market does finally turn.

Because I think, you know, my honest opinion on cargo theft, Andrew, is it's not going anywhere. It's like, and here's my thing. I know this might hurt some people's feelings, but you guys, criminals don't care about the law. Just, just in FYI, they're going to do what they're going to do no matter what. They're going to get more and more crafty in how they do things. But again, you as an organization, if you refuse to do, to breed that behavior inside of your company, right. Like, and then especially I think the most telltale thing is, and this, is this going to prevent it? Absolutely not entirely. But if you actually have a carrier selection process that you follow and you, because, like, here's the thing. They're looking for easy, all right? They're looking for easy.

Who's the person who does not care about their job. I'm going to accept their load no matter what. But if you push back, if you know your details of your shipment, if you start questioning the carrier a little bit, like, hey, what's this going on? Is this going on? Is this going on? You're going to naturally deter a lot of that because a lot of fraud. They're looking for the quick buck and that's really it.

And so what I would say is that like, you know, taking a load for too cheap in a hot outbound market when your business is struggling to maintain profitability or to pay its bills is the equivalent of finding yourself, you know, walking through Central park at 03:00 in the morning. Right. You've got to look at how did I get here? What decisions did I make to put myself in this position and just absolutely do not set yourself up from a sales, an operations perspective to be in a position of desperation where not covering a shipment will cause you to make a decision that could cost your business. You know, it's survival. At the end of the day, these claims can be enormous. Ours certainly was.

But they never actually found out that it was on their exclusion list and they're doing that. Right. I think it's a lot higher than people think. And same with brokers too.