Supply chains: Freight markets coming off last year's peak, C.H. Robinson CEO says

C.H. Robinson CEO and President Bob Biesterfeld joins Yahoo Finance Live to discuss earnings, supply chains, and the outlook for ocean and trucking markets.

Video Transcript


BRIAN SOZZI: Logistics and transportation services company, CEH Robinson is riding the momentum of the red hot logistics industry as supply chain pressures weigh on businesses and consumers. CEH Robinson CEO Bob Biesterfeld, joins us now to discuss. Bob, good to see you again here. I was reading a recent analyst note following your quarter, says CEH Robinson is in the sweet spot of the current market. Explain that for us.

BOB BIESTERFIELD: Yeah. Good morning, Brian. It's great to be with you today. In second quarter, we had record earnings again. And it was really driven by margin expansion, as well as volume growth in our two largest service lines of both global forwarding and North American surface transportation.

I think what that analyst note is likely referring to is the fact that most of our truckload business in North America is managed in 12-month annual cycles. And when we see periods like this where the cost of purchase transportation starts to decline, we see margin expansion within that business.

BRAD SMITH: And so from what you've seen thus far and how you're kind of navigating some of the broader macroeconomic headwinds that other companies have had to address over their earnings, where are you seeing that show up in your business? And is that at all kind of a detriment that you see kind of going forward into the latter half of this year and even early next year?

BOB BIESTERFIELD: Yes. So we're fortunate. We serve over 100,000 different customers across different industry verticals across our suite of services. And so as we look forward to the balance of this year, we do think that the overall freight markets are going to continue to moderate a bit off of the peaks that we've experienced in the past couple of years.

But the markets, I think, will get us to a point of more normal, which we haven't seen for a while. And so, when we look at things like the average number of loads available to the average number of trucks, look at container capacity availability, we think that the supply chain, while it'll still grow in the back half of the year, will make it easier for our suppliers to engage with that and take some of the disruption out.

JULIE HYMAN: Hey, Bob. It's Julie here. You just mentioned that your contracts tend to be 12-month contracts. And I do wonder if you're getting any pushback from your customers. I mean, we're hearing from many, many companies, retailers in particular that are now seeing rising inventories of merchandise. So are you seeing any attempt on the part of your customers to try to renegotiate in some cases because maybe they don't need as much as they did when they signed the contract?

BOB BIESTERFIELD: Yeah. We work with over 7,500 unique retail customers and we work very closely with some of the largest retail customers in North America to help them to manage their inventory, whether that be moving that inventory out into secondary markets, looking at reverse logistics, or distribution of that product, we're working very closely with retailers. But the thing that we can do, I think, to help them best is to ensure that the quality of service that we deliver them, that they're getting their products on time, in full, when they order them, and when they expect them, that's our role within that retail supply chain.

JULIE HYMAN: So what can you tell us about the status of all of that, right? Compared with where we were a year ago where it was really tough to get people, what they wanted, when they wanted it. Where are we sort of in that cycle? I know you said in the latter half of the year, things are going to improve. What are they like right now?

BOB BIESTERFIELD: So as we look forward, there's a few different components as we think about the retail peak as an example. We think that the overall ocean markets will start to see softening compared to where we were last year, likely to see some pricing continue to come down on the water. Domestically on the trucking side, there's more capacity available today than there was 12 months ago and better supply chain fluidity. We still have challenges with the infrastructure in the US ports and we're continuing to see some delays and some long-dwelling containers, both on the East Coast and the West Coast that we'll have to continue to help our customers work through.

BRAD SMITH: And how are you looking right now on staffing to actually work through any of the backlogs that you do face? I mean, from everything from trucking all the way to what we're seeing at the ports right now.

BOB BIESTERFIELD: Yeah. So our unique business model is completely non-asset based. And so we don't own the trucks or the trains or the planes or the boats that freight moves upon, but we leverage our people, our process and technology to help our customers to execute their supply chain strategies. So from a staffing standpoint, we've added several experienced logistics professionals over the course of the past year and we're helping our customers to augment their staff so that they can be really successful in this environment. There still is, obviously, a labor participation rate that is below where we were pre-pandemic, but encouragingly based on the jobs report last month we saw that unemployment got back to the lowest point that it's been since the beginning of the pandemic.

BRIAN SOZZI: You mentioned, Bob, on your call you have seen some softening in consumer areas and construction. How severe is the softening?

BOB BIESTERFIELD: Yeah. We saw growth in retail, as an example, during the course of the first quarter. And then from a volume perspective domestically, we saw that retail business start to taper kind of down low single digits in terms of volume in the second quarter. So not material necessarily, but it certainly was a trend within the business where we saw that volume start to decline a bit.

JULIE HYMAN: All right, Bob. Good to catch up with you. Really interesting stuff. Bob Biesterfeld is CEH Robinson's CEO. Thanks so much for joining us. Appreciate it.