Lightning like Steve McQueen I'm in the fast lane when the light turns green and I built tough I ain't nothing but grit cause I made rugged blood, sweat and spit yeah, like a horse I fly for a bumpy ride I like to play hard but I work harder and I weather the storm cause I'm built stronger.
What is up, ladies and gentlemen, we are back. We are live. It is a freight coach podcast, the top podcast in transportation coming to you guys every single weekday, 830 in Pacific, 1030 Central, to break down some industry headlines, but most importantly, provide some actual insight into what you can do with all of this information. If this is your first time tuning in, welcome. This is the real side of freight, ladies and gentlemen, and I say that before every single show. And what I mean by that is I only speak with transportation professionals because at the end of the day, you guys, I want to talk to the right individuals who have done what you're looking to do or who are currently doing what you're trying to achieve.
So you can take that information, apply it, utilize it, and see a meaningful difference in your business and your life. All right, ladies and gentlemen, I got a very special guest for you guys here today. You know, the freight data market, data industry insight, all of that stuff, it's all over the place right now. But, you know, what does this data even mean? Where does it come from? How did, like, how do you digest all of this stuff to kind of make any of those decisions? And I got a very special guest for you guys here today with cast information systems. I got Mister Jeff Carlson on the show to break it all down. So, Jeff, thank you so much for taking the time to meet with me today.
Thanks for having me on it. Looking forward to the conversation here.
No, absolutely. And so Jeff first, and I always start off almost every show like this, and especially if it's a newer guest to the show. How'd you get your start in freight, man? Like, what brought you into the industry?
So I'm going to date myself here just a little bit, right? I came into, I graduated from college in 1983 and was hired by Koch Industries at that point. And they sort of moved us around. And I landed in a spot called the traffic department, as it was called at that time. And this was just as the saggers deregulation started to kick in. And I started to find some interesting options here, too. And especially too, I started to look at and say, you know, as they start to deregulate, it's going to go from kind of more of a heavily regulated marketplace to where business can actually take place here. And so I spent a few years there, went to Canadian Pacific Railroad for ten years, was in a couple different groups there.
Actually ran a small three pl for dart logistics for a little bit before kind of getting into the freight payment side, where I joined us bank back in the late nineties to build what at that time was called powertrack. And so I kind of joke about it sometimes, too, is almost by accident. I didn't graduate college thinking, like, in today's world, wherever I, there's logistics and supply chain degrees, there wasn't back then. And so it was just sort of a funny journey in a lot of ways. But I really enjoyed the time, though.
No, it's, you know, it's funny. I think what was hilarious to me is a, you live in Arizona now, and like, when we met and you just kept, were like, oh, and then we also have the Minnesota connection and everything else because you raised your family in Minneapolis. It's, I swear, Minnesota is like a mini transportation hub out there, you know, and everybody comes out of that. But so, you know, after doing this, and then you got your start at Cass here, man. So I think, you know, a lot of people, at least from my perspective, you know, I've been in the industry for a long time. I've seen your guys as freight indexes come about. So, like, who is cast information systems, though? Like, how did you guys kind of get your start with all of that?
Yeah, absolutely. I'll kind of take you back to the very beginning of cast for a second here, too. I mean, we started as a bank back in 1906 on Cass Avenue here in St. Louis, and we kind of just kind of started growing from there back in 1956. We actually had a couple of our clients at that time that asked us to take some things off of their plate, mainly the freight bills. And so that's actually when we started our freight payment business, is 1956. And then, you know, it's just been evolving from there. I mean, from that side here. Cass has really been growing to support a lot of our large global clients and shippers and carriers across the board and everything here, too.
So we really kind of look at ourselves as kind of a freight payment business, which is one thing, business process outsource, but what other value can we bring to our clients here, too? Right? Because we are handling a lot of dollars and a lot of data, and it's really, how can we kind of take that and sort of turn it into something that's valuable to the marketplace.
So how much is it coming from? Like where the index is kind of brought up from your guys's, you know, shipper customers out there, like saying, like, hey, what is going on out there? How are our pricing? Like, are we aligned with how the rest of the market is? Because I think that's one thing, you know, it's always going to be on everybody's mind. Right. When it comes down to it is, hey, am I paying the exact same as my competitor to move the exact same freight that we're producing?
Yeah, absolutely. It was before my time when it started up here, so about 20 years or so ago. And it was really kind of, to your point, it was really kind of what we started to see. Right. We're handling a lot of dollars and everything, too. And a lot of our customers were starting to ask those questions and we started to realize that if we could actually pull those numbers together, both on the overall spend as well as on the truck haul spend, we've got some information that's valuable to the marketplace. What is, we see both shippers and carriers actually looking at the cash rate index to understand what's going on, you know, from that standpoint.
And a lot of times it's fairly static, but, you know, as of, you know, 21 and 22 and into 23, and today it's been very volatile, as you know. And so, you know, we've seen more and more people really kind of looking at it from that standpoint, trying to understand what's not just happened but what's happening or potentially going to happen down the road here, too.
Yeah, no, I'm going to drop this link in the chat for people to check this out because it, this is, I read and I know you guys are featured in a couple of news publications that are out there, but if you guys go to this link out there, it shows some of these indexes. Right. And what I think is it's wild to see the longevity of it, right. Like it goes all the way back to 2010 and then, you know, through today on this, on the website here. And what I, you know, for me, because I always say it like this, Jeff, it will always tell a story. Data will always tell a story. And that's one of the things that I love the most about the overarching indexes. And I say this a lot. Right.
Like when it comes down to, like, forecasting where things are, you know, like, I understand the value of a national average. That's out there because naturally there has to be one. But you can't make your individual lane decisions based on what the national average is. And you know, from a forecasting perspective, I think a lot of people, and it doesn't matter whether you're a big business or a small business, you need to look at this because like, you know, a lot of these things that are out there, I mean, if you look at some of the cash freight rates, if you go down to the bottom of this and you know what, I'm going to try and share my screen here and so people can see what we're working with. But, hold on 1 second here. There we go. All right.
So if we're looking at this in particular, right, like you want to talk about, you know, people are always talking about freight rates right now, for example. Well, they're still kind of above where it historically was from 2020 to 2010. And, you know, so, but it, but again, it's like if you see this and then you can see the spike, right? Like you can see what was going on in 21 and 22 and then even, you know, where it dropped off in 23 here. So it's like when you're going out and you're looking at, you know, future forecasts and if you're looking at like, how can rates stay the same? Or what are the trajectory that they're going like? Or, you know, another thing, have we actually reached the bottom that's going on out there? And this would tell me that.
No, we kind of haven't yet. Right. Like there is, you know, like, I'm not hoping that this happens. I want to be abundantly clear. But if you look at the last 15 years of market data based here on the rates that are going on, like, it could still drop down. And then, you know, because I also saw another post out there about, you know, and I think I saw this on your guys, the expenditures as well, right? Where it, no. So I wanted to ask you this. Are the expenditures coming from carriers or is this coming from your guys's shippers, that you guys are working with on what their freight spend is?
Yeah, it's coming from the shipper side and really kind of looking at it, you know, as we audit those bills and we bring it into the system, our cash ports, we start to understand what that data is. And so this is pure expense on the shipper side here to the carriers.
Yeah. Okay. So I mean, again, though, I think when it boils down to it, you know, because I'm looking at a lot of that data that's out there and here I'll stop sharing my screen. But, you know, when you're looking at that and you're trying to see, like, where are things trending? Where, where is it going to go? Because I think that's ultimately what's on everybody's mind out there in the market. And, you know, a lot of the shippers that I work with are like, you know, they're almost just as like, hey, what are you guys hearing out there? Are things going to change? You know, like they're almost expecting a shift to happen, but they're also obviously, from their standpoint, they're not going to push for it. Right?
Like, I don't know anybody who's going to be like, yeah, I'm actually really looking to increase my expenses in the next fiscal year.
Exactly. It's, it's interesting because, again, you know, as we've talked about here a couple of times already, you know, for the most part, things have stayed static, a slight, you know, increase typically, you know, trend line upward with inflation and everything here, too. And then Covid came along and if I recall right, the numbers for 2021, we saw like a 38% increase in expenditures in 2022, a 23% increase in expenditures, and then 23, actually a decrease of 19%. And so you kind of look at that. I kind of look at that and say, okay, a couple of things happening. One, you've got just the freight rates trying to re level to prior to Covid. So that's kind of that downward trend and everything.
Right now, we're kind of looking at the rates and saying that, you know, still probably see a decrease in, let's say 23 was 14% and 24, we're looking at probably like an 8% inferred decrease here, too. So slowing down and, you know, it's kind of starting to come down to also, you know, you do have fuel that's starting to level out and decrease here, too. So that's a benefit, too. But we're still seeing, you know, kind of the spot rates a lot of times being under what the operating costs are for the carriers. And so that's a concern here, too. So you see a lot of carriers, we still believe there's going to be a bleed off of excess trucking capacity from outside here. Just given kind of some of the other data that we're looking at here, too.
Yeah, I think that a lot of what I'm seeing out there right now is, you know, the cost to run a truck is going up, right? So it's like, you know, I got a lot of drivers who listen to the show and, you know, it's like, I see their posts, I hear from them out there. And, you know, and especially if you're looking at it from a, you know, fraud and an identity theft standpoint as well, which is only increased over this timeframe. Right. Like it hasn't slowed down at all. And, you know, then you add in nuclear verdicts and everything else on top of it, the cost to ensure very well could increase as well.
So it's like when you're out there talking to some of your clients, Jeff, are they more like, we understand that, like, there could be a mass exodus of capacity at some point and then that will be kind of a catalyst to skyrocket rates. Because again, I think ultimately it just boils down to simple economics. Right? Supply versus demand is really, if you want, in its most simplistic form. Yes, it's complex, but I think in its most simplistic form, it is truly supply and demand out there.
Yeah, it is. And you start to look at it and it's like I said, I think between the castrate index and some other data points that we've got access to here, too, we do continue to see that supply of especially dry band and refurb, too, I should say, also coming down here a bit more and everything, too. So it's, you know, we expect to see not a huge bleed off, but we do see a bit of a bleed off of capacity here at this point until it levels out a little bit here.
Yeah, I think that, you know, and it's kind of natural, right? Like, I mean, at least from my perspective, I think, you know, when what we're really still dealing with what the, you know, Covid market brought into the market, right. Because it was, I mean, a lot of people got in because money was high, but unfortunately, a lot of people got in at elevated interest rates, elevated truck purchase prices, trailer purchase and all of that stuff, then the cost to operate is exponentially higher. When you look overall with the inflationary numbers that are out there, right, like, what does it cost to buy tires and everything else and to maintain that truck?
So it's like, I don't ever want to call something a perfect storm, but I think a lot of people are kind of getting a taste overall for what you signed up for when you went into business ultimately, because it's like, it's always you know, when you're thinking about it and the market's high, you're like, oh, I'm going to come in and I'm going to make all of this money. And, you know, that happened, but it was very short lived. And I think that this is kind of one of those, this is reality. And I think based on, you know, your guys's data that you guys have over the last 15 years here, you guys, and that's why I want people to check this out. Like it's telling a story of like what if what we're going through right now is the norm, right?
Because I mean, based on the data that you guys have, this was the norm for about ten straight years up until that spike, which again, you have to remove that if you're going out there and forecasting.
Yeah, and that's the key, right. It's how do you normalize the data at that point to your, you know, to your statement there? Because you do have to kind of take a look at it and say, okay, you know, average transaction sizes are decreasing not necessarily because of the length of line haul or anything else here too. It's just strictly where the market is. From that side of here, we are seeing at least spot rates starting to work their way back up again, not from the insane levels they were just a little while ago. And so, I mean that's kind of also telling us that there's a balancing of the marketplace going on right now at this point, too.
What's a key data point that you guys look for or maybe you guys deliver to your guys clients like, hey, it looks like things are starting to shift. Is it an internal data point from their part about like say tender rejections where, you know, people are just rejecting the contracted rate at that point?
Yeah, I mean that's a good indicator always, right. You know, because if I recall right here from another data source I was looking at, I think for August, tender rejection rates were like four and a half percent or so, with the exception of reefer that was sitting about nine and a half percent or so just because of not enough capacity in that area and everything too. But that's always a good indicator, right? Because again, it's going to be, spot rates are great if you got them and they're low as a shipper, but if you've got a spot rate and nobody takes the load, what do you really have from that side here too? So starting to see that part of start to play in here.
But again, seems like there's still enough capacity out there where we're not seeing a huge number across the board, especially on the drive hand side of rejection rates being high.
So what's something, I mean, because you said like 4%, what's an alarming increase, do you think, or what's an increase in that to where the everyday person who's out there listening to this show can see this and be like, hey, like, it looks like this is happening. And then is there a certain amount of time? Because I think sometimes people get a little bit too granular and they're like, oh, hey, this week this happened. And then it falls back to where it was.
Yeah. And that's where, to your point, that's where it's important to kind of look at an overall trend line and make some assessment here, right? Because you are going to get spikes up and down and everything or two. We always kind of look at it that say 5% and below is a decent rate and everything, you start trending up towards that 10% or so rejection rate, then your confidence level on the rate that you actually have as a shipper starts to decrease quite a bit. And so, I mean, that's the concern right there, too. And so I see a lot of shippers that are really using, you know, a lot of combination of contract rates and spot rates still with our client base here, which mainly Fortune 500 clients. And so they definitely need their contracted rates.
And they still rely on the spot though, too.
Do you ever think that, you know, and especially like with advancements in technology that's going on out there? And, you know, again, you don't have to share anything that you don't want to about any of your, you know, private conversations with some of your clients. But, like, do you think the days of annual or maybe even biannual rfps are going to go to the wayside just based on how fast you can compute data and kick that out where they can almost get more of a quarterly or a monthly RFP? And yeah, they might have 10,000 lanes, but data gets just punched back so quick they can make those decisions.
Now that's an excellent point right there. And we do see different companies and technology companies that are kind of driving that way, right? It's kind of like, okay, instead of doing the annual RFP where you've locked yourself in for either a really good rate or kind of a bad rate, all of a sudden, why not do a monthly or quarterly? And we are starting to see that. I'm not seeing it like fully executed across the board here. But I am seeing the technology come into play where, you know, a lot of companies can do that. And like you said, whether it's across all lanes or maybe it's select areas for that ship or where they want to lock in supply in a certain region that's hard for them to.
But then across the other 70% of their lanes go out for just kind of a monthly or quarterly bid.
Yeah. And that's something that I've experienced in my career. You know, working with some of the larger enterprise shippers are, is, you know, some of them are doing, you know, mini bids or they'll do a rebid, you know, if the, you know, depending on how the year is trending. Right. And I think that, you know, from my perspective, it's not necessarily that it won't happen. It's just, I mean, I had one year, I think it was in 2016, whatever that big polar vortex was that froze, you know, half the country for like four months. There was like three bids that year. You know, we did our annual bid and then it just triggered so many. But it was because prices kept going up.
They had to shift because, hey, they had to go from, it was fine to ship on a drive in, but now they're like, hey, we got to go to weather protect because the freeze is just not going away. Blanket wraps not working anymore. We got to have this tempted 65 or 70 degrees now because of freezing and everything else. So there's a lot of other triggers that go on out there that happened. And, you know, and that's why I bring it up is because, you know, and I feel like obviously with everything that's going on, weather related in the south right now as well, where I think a lot of companies out there look at these as like, hey, our expenditures are going up. How do we capture this in another market to bring it down?
Because, you know, ultimately, people have a business to run, people have a budget to adhere to, and they're going to make those decisions based on that. And I just see, you know, whether, you know, with AI or, you know, shipper tmss and stuff that's going on out there, I almost that in due time or it's only a matter of time where the annual bid is just going to go away and it might even go down to a monthly basis.
Yeah, I totally agree with that. And the other part here, too, that I've been seeing a couple of other locations from a technology standpoint here too, is we talk about spot rates and the sensitivity, what's the rejection level? And everything here, too, technology companies that actually then provide a score to that aspect here, maybe it's from one to 100, you know, and if you're sitting at a higher number, you've got a high degree of confidence that you know that rate's going to be supported. But as it starts to slow down and go to a lower number, then the strategy would be, okay, I'm going to take this off the spot market now, go to a contract, right?
And so you could even see some iterations of bids along those lines here, too, where it's kind of alternates between spot and contract along the way here, too.
Do you see it? And again, you might not know this, but you might as well. But like, do you see the average length of haul starting to decrease with kind of like, I call it the Amazon effect, where it's almost like, it's like the hub and spoke model. I like it. And I've said this before, I truly feel like we will almost be all hub and spoke within, I don't know what timeframe we're talking about, but I feel like the Amazon effect is going to be there and the days of the long haul trucker are going to be obsolete because it's going to be so regionally focused at that point.
I don't disagree with that. And everything here, too, it's interesting. I was looking at some numbers for another purpose here a couple days ago. And, you know, you start looking at, you know, transportation. We're not, we can't develop our market, in other words. I mean, we don't manufacture something, right? We are serving people that are manufacturing things and people that are buying things on the consumer side, you know, e commerce was one of the few areas that was up very significantly, I think was like almost 8% or so year over year in August. And you start looking at that though, too.
And you go to your point, you know, a lot of it's maybe made overseas, you know, then brought over to the port of La area, had its highest July Portobello did here just a couple months ago as far as the volumes go and everything here too. But we do see kind of a lot of hub and spoke, though, once it makes it into the states, because we may come in vessel, intermodal train to some location and then to your point, hub and spoke at that point then too. So definitely I would agree with that statement.
Yeah, I truly think that's exactly where things are going to evolve into just, you know, and I think a lot of it is like I'm seeing a lot more consolidations, mergers on the manufacturing side of things. Right. Like, again, and I'm saying this with confidence, you guys, because like, I solicit shippers literally every single day and I have seen a large increase of parent organization routed. Parent organization does all of this stuff and we all know who the big corporations are out there, so I don't need to publicly state their names. But I think that's what's kind of going on. And, and I think that it's going to continuously evolve in there. And I just think that the days of how the industry used to operate are evolving at a rapid pace. And that's just not from a technology perspective.
I think it's the end user. It's us in our real life, you know, like our consumer buying patterns and everything else, where, I mean, how many times do people sit down and they're like, hey, I don't need to go to a retail location now and possibly buy six things. I can just buy this one thing on Amazon and then, oh, later on that day, oh, I forgot markers, now I'm going to buy them as well. So I think it's, our consumer patterns have evolved and adapted so much. And with the rise of e commerce, I think that hub and spoke style model is going to be more relative out there and it's going to be more regionally based freight. That's going to happen. I truly feel that way.
I can't disagree. Like I've said, we do see e commerce growing significantly and there is no, the brick and mortar stores are not coming back right at that. They don't have the same high level and everything here, too. And again, because there's so much that can just take place in a short haul for the trucking side, I do see that, you know, changing, will long haul trucking disappear forever? No, but it's going to be freely reduced.
So, no, absolutely. And I'm right there with you. Right. And I'm that again, I want to be abundantly clear. That's not me saying truck drivers are going away. That furthest thing from the truth. I just think that the days of, you know, going from California to New Jersey aren't going to be as high volume as they once were back in even right now. I could see that kind of evolving out there. But, so from your perspective, Jeff, what are you guys doing? Or what are you guys looking at from an information standpoint on how are you guys going to continue to evolve the index to maybe make it even more granular or something like that. How are you guys approaching that?
Yeah, that's a great question. And everything, too. And it's really got a couple pieces to it. One, you know, we're constantly adding new shippers. So again, new information coming in and everything here, too, across multiple industries and everything here, too. And then it's kind of, how do we kind of also grow out? You know, we've got the castrate index and we got the truckload index. How do we possibly look at breaking it out into other modes then, too, that are also very specific, right. Getting it granular like that because they're each different. And so I really kind of see that kind of evolving as we go along and also just from the data is great. And you sort of mentioned it before, too. Right. But you have to have somebody that can interpret it, right. And so really kind of making sure.
And for us, we actually also go outside to get that interpretation, to kind of get some more expertise in there that we may not have across the board. And so it's not just, if you read the cas rate index, it's not just, you know, from cas, it's also coming from a gentleman from act research, you know, giving his insight, too.
Right.
So it's really kind of like, how do we make that marketplace broader so that we don't just all of a sudden put something out there and people, to your point, all of a sudden react, knee jerk, either up or down. You know, it's really kind of, what's our forecast? You know, kind of looking like here, too.
Yeah. And I think that's, you know, ultimately what I think we're almost in a, we're not, we're almost, we are in a society where it's like instant everything, right? Instant food, instant information through social media and other platforms and everything else. And, you know, and it was the same, you know, just like at the ports last week where it was like, you know, rush, complete reactionary thing. And, and it's like, well, it was resolved in 70 some hours. Right? Like, ultimately, I'm not saying it wasn't a big deal, but, like, you know, sometimes you need to wait, and I'm saying that from a data perspective here, the correlation is sometimes you just need to wait a couple of days for things to calm back down and level back out, and then you realize the whole, no, not everything's, you know, changing overnight.
And now all of a sudden there's going to be all this abundance. And, you know, ultimately, I think a lot of companies out there need to realize that the way you operate in a lean time when things are tough is how you need to operate when it's better. Right. And it's not the, you know, I just, I'm learning this in business. Right. You, when money's coming in, you think it's always going to come in and you start adapting your spending patterns that way and your budgets. And then some things change and you might lose 30% of your revenue overnight. And now all of a sudden you're slashing everything and then you realize, like, oh, maybe I don't need all of that stuff.
So I think, you know, again, some of these times, albeit very challenging out there from a business environment, is a very, it's a quality teacher for you in the long run because, you know, every dollar matters. I bootstrapped my businesses here. Dollar, I got to turn every dollar of revenue into $15 of return, essentially. So it's like as much as these times can be challenging, I also see the value in them in the long term of like, I don't need it. You know, I don't need to do that. And I think that this is what can benefit people in the long run here. But Jeff, I want to be mindful of your time. I know you got to go out and speak here as well. And I just really appreciate you joining me.
How can anybody reach out to you to find out more about what you guys got going on?
Yeah, check out our website, casinformation systems.com or casinfo.com. And, you know, definitely can reach out to us that way. And, you know, always happy to talk and feel free to always just reach out to just to have a conversation. I always find it's beneficial to just have a conversation sometimes and just learn from each other.
So.
Yeah, no, absolutely, Jeff, I really appreciate it. As always, you guys. Or if you guys can't find Jeff or Cass, just hit me up. I will gladly put you guys in contact with them over there, but that is going to be it for today, you guys. We will be back tomorrow. 08:30 a.m. Pacific 1030 Central. I appreciate you guys. I love you guys and we'll be talking to you soon.
Thanks.