How To Scale A Brokerage With SOPs ,Outsourcing, And Applied AI | Episode 341

Your brokerage doesn’t need more shiny tools. It needs systems that actually match the reality of freight operations. In this episode with the Togo crew, we break down why so many logistics AI tools fail, what automation actually works for brokers, and how SOPs, process mapping, and smarter staffing can help teams scale without sacrificing service.

We also look ahead at the future of AI in freight brokerage, including data ownership, vendor lock-in, and why smaller brokerages that start building now may have the biggest advantage.

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Transcript

Welcome And Why Togo Matters

SPEAKER_00 0:19

All right, guys, today we are sitting down with the guys from Togo talking about automation, all the things that they can do, how to level up your company and and um you know get yourself to the next next step in your brokerage growth. Ben, what are your thoughts on the episode we just wrapped up there?

SPEAKER_04 0:34

I think it was a really good episode. One, because we weren't just it's not an advertisement. We're just talking about services of a sponsor. We actually get into the use cases of like outsourcing people as BPO. We also talk about tech, but it's not tech from like, hey, this company sells this, you should buy it. It's these are what other companies are doing and why. Here are the use cases, and here's how you can evaluate taking advantage of both technology and human beings and their experience as your business grows. And to me, that's a very different conversation than most other companies are having about both these topics.

SPEAKER_00 1:11

Absolutely. And stick away, stick around all the way to the end. We're gonna talk about what does freight brokerage look like five years from now as far as AI goes. So let's hop into it. All right, we're back with episode 341 of the Freight 360 podcast. We got the Togo crew with us today. So, you guys, if you guys have been listening for a while, you know Jordan, Mike, and Ed, uh good friends of ours. We've we've done a lot of work with them over the years, and we're gonna we're gonna have a great conversation today about a lot of things. But guys, welcome back to the uh to the show here. We're glad to have you guys on. In any order, feel free to hop in and say what's up. I know we got a packed room today.

SPEAKER_03 1:51

Thanks for having us. Appreciate it.

SPEAKER_00 1:53

Yeah, excited to be here. You know we can all talk over each other. We're good at that.

SPEAKER_01 1:56

It's our strongest skill. Appreciate it having this.

SPEAKER_00 1:59

That's right. That's right. Ben, what's going on down in Florida? I guess I could have asked Ed that too, but Ben, we'll go to you. I was trying to bring the vibes today, you know? Yeah, I like the shirt.

SPEAKER_04 2:09

Weather's still nice, it's still not summer, so like we're still in like the nice part of the year for another hopefully month or two.

NHL Playoffs And Philly Takes

SPEAKER_00 2:16

Yeah. Um, well, I'm gonna I'm gonna hop right into some sports chat here because we've got some we've got some hockey boys in the group today. So uh we're we're into round two of NHL playoffs right now, and you guys are Philly boys, so curious your thoughts on the Philly Carolina series so far. It's it's a 2-0 lead for the Hercs, but what are your thoughts? Two games in, down by two. Can you make it happen?

SPEAKER_03 2:47

As a Philly fan, I want to say yes, but Carolina's. There's always a chance, right? Carolina's really good. I mean, they're there's a chance. I I don't think I don't think we'll beat him. I think we could win a game. I mean, it's good that the Flyers are here. They're a young team, really shouldn't have made the playoffs a lot better than we thought they were, but Carolina's just too good. That's my opinion.

SPEAKER_02 3:10

Yeah, I I the difference between the Pittsburgh series and this series, just speed on the ice alone was insane in that first game. And then to see the Flyers come out in the second game and get that two-bowl lead was really uh encouraging, but at the same time, watching it to solve and Carolina do what they did kind of hurt. So watch it right back down to reality pretty quick.

SPEAKER_00 3:31

What do you guys have like in the Stanley Cup finals? I'm I don't know, I'm I'm kind of feeling like Carolina and the Aves. But that'll be my pick. Yeah. Do you see that the Colorado's game the other night was like they scored nine goals?

SPEAKER_03 3:47

I mean, last night they they were beaten up on them again. I don't know what I didn't know.

SPEAKER_00 3:51

What was the score last night?

SPEAKER_03 3:52

I don't know what the final was. I mean, I went to bed before the third period started, but they were up 3-1 and pretty much dominating. They're just too good. Yeah. Well it sucks for the wild and Dallas, the stars, because you gotta go through each other. I mean, they're probably the best three teams in a league and they gotta play each other in the first two rounds.

SPEAKER_01 4:12

We were just talking about that the other day. I do not understand how seeding in the NHL works.

SPEAKER_00 4:17

It just doesn't exist. It's really strange. Yeah. Super strange. Because they don't, um, if I understand it correctly, when you start in I mean, again, you gotta remember, I haven't followed NHL playoff hockey in 15 years because I've had no reason to. Um but to my understanding, like the when they seed it at the beginning, they look at um your actual not your not where you fell as a wild card, but your total points. Right? So you where as opposed to like an NFL, if you're a wild card, you're just gonna fall to the bottom. Is that correct?

SPEAKER_03 4:56

It's total points, but I think at some point um it went to conference seating instead of division seating, or vice versa. I don't know the exact details, but I think the seating system that's causing this issue with you know, Colorado, Dallas, and Minnesota is fairly new. I don't know if it's the first year, second year, but I think this is fairly new.

SPEAKER_00 5:20

Yeah, it's weird.

SPEAKER_03 5:22

Yeah, I think you'd have a free route, you know.

SPEAKER_01 5:25

I I thought I heard that basically they were trying to create more interest through like rivalry matchups early. So you get stuff like Philly Pittsburgh first round, right? Which was a great series, but probably not how those teams should have been seeded based on the actual results from the season.

SPEAKER_00 5:42

Yeah. Yeah, because I mean you look at it like the wild versus uh Colorado, it's a three-seed versus a one-seed. Like it doesn't seem like it makes any sense. So but you know, it is what it is. So all right.

SPEAKER_01 6:00

Hopefully the Sixers don't lose by 40 again. So yeah, we'll keep an eye on that.

SPEAKER_00 6:05

Yeah. Who are they playing right now? Okay, that's so that was that game one when they were down like 40 to 15 in the first quarter or whatever it was.

SPEAKER_01 6:15

A wonderful night in Philadelphia when we get to watch the the Flyers blow a two-goal lead and lose it over time, and and the Sixers lose by like 40.

SPEAKER_00 6:23

So the the running joke that we've got in Buffalo right now, because we beat the Bruins in round one, was that Boston Boston sports like had a trifecta like fall apart, basically, all it within a matter of a couple weeks, and it was like the Bruins lost to the Sabres, the um Celtics lost, they blew a 3-1 or a 3, was it either 3-1 or a 3-0 lead? 3-1. 3-1 lead. And then Mike Vrabel just who knows what's gonna happen with him as a uh as a coach. He hasn't he hasn't stepped down yet, has he?

SPEAKER_03 6:59

It sounds like it's gonna get worse for him, too. The uh whatever her name was, the reporter coming out with a story and and not going away. And you know, if you're the Patriots, you're like, oh, this is gonna go all season.

SPEAKER_00 7:12

Yeah. Red Sox are gut it too. Fire. That's what it was. It was like the quadruple thing. The Red Sox are terrible. They fired Alex Cora. Half the team is hurt. Yep. So we'll see. And I'm actually a Red Sox fan, um, but it's just I I think I've watched two games this year because it's just too hard. It's too painful. So we'll see. Well, I'm going to the Sabres game tonight. It's game one um against Montreal. I was kind of hoping to play Tampa Bay just because I think it's a it was a really good aggressive um rivalry, but um I just really hope because Buffalo is a border city, we do pull a lot of Canadian fans whenever we play like Toronto or Montreal. So I'm just hoping that Sabres fans bought a lot of tickets and we don't see a lot of red um red in there tonight. So hoping to hear a lot tonight, but we'll see.

SPEAKER_03 8:05

I think you guys win that series. I think you beat up on them.

SPEAKER_00 8:08

We'll see. Um, I was just happy to see the Sabres win a you know a series, and then um I have like no expectations after at this point beyond. But I mean, to your point about Carolina, like if I was I was saying with you guys like a couple weeks ago, like I'd love to see Buffalo Philly in the in the conference finals. Um, I think both teams um would both if you guys are gonna have a tough time against Carolina, I think the Sabres would as well. Um who knows? You never know. So Sabres are hot when they're hot and they're not when they're not.

SPEAKER_03 8:43

So they've been hot for a while now.

What Togo Is And Why

SPEAKER_00 8:45

Yeah, yeah. We'll take it. All right. So, Togo, you guys have for for anyone listening or watching, you guys have have seen the name, you've seen the logo. We've known these guys for a while, and I just kind of wanted to get into just for starters, kind of the background on on how this all came together, how you guys know each other, kind of your backgrounds, and then we'll get into some actual like practical use case of what you guys are doing because I think it's awesome. So um, whoever wants to take charge here, give us kind of the rundown on on Togo. And it's not to go, you know, uh, or for people mispronounce it, you guys probably have too. And um, in logistics, it it kind of makes sense. People might think that, but uh Togo, um let's talk about like the name, the origin, all of it. What do we got?

SPEAKER_03 9:32

Well, Togo is the name of a dog, it's a sled dog, which kind of leads to our tagline, which is you hold the reins, we pull the sled. But I'm sure Jordan Jordan's the best one at giving the Balto origin story. Um, if you want to give it kind of synopsis form.

SPEAKER_01 9:50

Yeah. Um, so in 1925, there was an outbreak of diphtheria in Gnome, Alaska. Um, and at that time, the the technology for planes was they they wouldn't be able to fly in those cold temperatures. Um the port was completely iced over. Um really the only way that they could access the town was by sled dogs. And this outbreak happens, they don't have the medication on site, and they ended up having to bring in medication from outside the town via sled dog relay. Over 900 miles of like some of the most treacherous terrain you can possibly imagine. Um, and it's actually where the Identorot race, which is run every year, comes from. The path of the Identarot follows the path that these sled dogs took to deliver medication to Nove Alaska and save all the people in the town. Many people probably know the name Balto, right? So there was a dog named Balto. He's got a step. Yes. He's a big hero, right? He ran that final 25 miles into town, made the delivery into Nove. Um but what a lot of people don't know about is that there was another dog named Togo. And Togo actually covered over 250 miles of the worst terrain multiple times, saved his, saved the rest of his lab dog team, saved his musher, um, actually pulled him out of water at one point, um, really did the bulk of the work and the bulk of the hardest work. Um but doesn't get any of the credit for it. And that really was kind of the ethos we wanted to bring as Togo is like we're more than happy to get into the trenches, do the dirty work, um, and let our clients be the ones who take the credit for it.

SPEAKER_04 11:22

That movie's awesome, by the way, if you haven't seen it, Nate. Like very, very good movie.

SPEAKER_00 11:27

I yeah, I I'm pretty sure I watched it as a kid. It came out in the 90s, right?

SPEAKER_03 11:31

I mean, I feel like the book's been around longer than that. Alto? The movie was probably the nineties. The movie 2019.

The Team Background And Mission

SPEAKER_04 11:37

Oh, 2019. Remake. Yeah, William Defoe was in it 2019. It came out like a handful year, well, now seven years ago, but very, very good movie.

SPEAKER_00 12:52

Oh. I uh I did not know that that there was a remake. Willem Defoe is in it.

SPEAKER_04 13:00

He's a he's like the main character. It the whole movie is him and the dog, basically. I don't want to spoil the ending, but the ending's even awesome.

SPEAKER_00 13:08

Like sad, but also still very historical thing as in the ending that they make it to Gnome.

SPEAKER_04 13:13

Well, that's not the whole story of the movie. The movie is more the dog and also what happens after with the dog, if I remember.

SPEAKER_03 13:20

There's like this whole group of people at the end that just want Togo and just want to give them all their business at the end. You haven't seen it?

SPEAKER_04 13:27

Yeah, everybody sends all their business over.

SPEAKER_00 13:31

Uh so okay, so talk us through how you guys put this together. I mean, we we've known you for years. Uh you help a lot of companies out with everything from staffing, process improvement, developing SOPs, implementing technology and automation, um, all the things that we preach on this channel of best practices, you guys help companies do. But how did how did you guys come together and decide, like, hey, let's make this into a an actual business?

SPEAKER_03 13:59

Well, we we all come from the logistics and supply chain space. The majority of us did 10 or more years at CH, spent time with other organizations, uh Penske, Reed TMS, which is now Werner. Um, they got four hours. Yeah, yeah. I don't remember that. Okay. Yeah, about I don't know, short term after we left. But there's a fourth partner, Alex. Um, Ed, myself, and Jordan have all worked together. Alex actually hired us into the industry back in 2008. Alex has been doing this almost 30 years. Um I mean, he was doing it before we even had He's a stud too.

SPEAKER_00 14:39

And Ben and I just did an episode last week on carrier sales, and like I just I keep thinking like I I have seen him in action and just hearing him talk and this the way that he trains and leads people in that and that aspect is is amazing. We'll come, we'll come back to that in a little bit because just based on how you guys actually implement um you know heads and putting bodies in seats and all that, but continue on.

The Real Problem With “AI” Tools

SPEAKER_03 14:59

But we didn't want to we want to leverage our experience in logistics and supply chain and have that be a focus area for us naturally, right? So we do work with a lot of brokers, a lot of shippers in their logistics department. Um but we wanted to make sure that our application was geared towards small and medium-sized businesses and wasn't solely dependent on the function of logistics and supply chain. But to the point of the name of Togo, we wanted to be a resource that is integrated, operating behind the scenes, helping you scale your business, become more efficient in a cost-effective way. Not a BPO, not an AI agency, not a management company, but all of those things geared towards uh multiple functions within small and medium-sized businesses. Logistics and transportation and supply chain is a heavy focal point because of that experience that we all have. Um but that's kind of how we got our start. So we work with construction companies, we work with small businesses of all types, but the logistics place is our one of our uh most dense industry areas. The idea was you know, yes, we can provide staffing, whether it be domestic or interaction. Yes, we can do applied AI and custom software development to support your processes in a custom way. Yes, we can do management and training of those people or your people as an integrated team. But we're not just doing it um with the limitations of not understanding the business. We do understand the business down to the entry-level seat. So we're able to do some pretty significant things when we get involved with brokers and shippers. And it's a lot of people.

SPEAKER_00 17:07

You know, whatever the task is, whether it's social media, content, marketing, whatever, editing of things. And we've tried firms, we've tried an offshore individual that we contracted directly. I mean, we've we've tried different methods, and it's like if all you try to do is add a body to replace a task that you're going to do, I think there's a lot of risk in um, you know, where things end up. Because I mean, we were 0 for two on attempting the.

Automate Like An Operator Thinks

SPEAKER_04 17:35

It's a really good, it's a really good point because I think this is all kind of similar things, right? Is that most tech is built by people that don't know how the job is done manually. So they just look at the fields and they look at what's getting processed and they approach it from that end, right? In like every business I've ever seen, right? Same thing with like, because we're talking about this in other contexts, like warehouse management systems, ERP systems. They're all built for this use case without any understanding of what it connects to. And then they go, here's some APIs and webhooks. It's connectable. Now this is an integration. But it's like, but this one like doesn't talk to this one at all in the way you need it to. And then you'll get on calls with them and you're like, but like, this is how a person does this manually. But the way you automated it, like misses all of the value of the person sitting here, like the oversight, the use, checking it, doing it. And they're like, but we made it faster. I'm like, yeah, but now I have three people I've got to pay to literally sit in front of your software, which was supposed to save me costs. You didn't really save me money. And I got to train the people how to use that thing. And like everything, because you were saying like construction and seeing this, seen this in insurance, right? Seen this in like literally almost every industry. And it's like most of software is built, like, hey, we're gonna build a software company, it's gonna be worth a lot of money, then we're gonna sell it. We don't care how it's used, we get customers, and then we're done. Like that is the model that Silicon Valley uses to build companies. They're not people that do the job. They go, This is a big market, we'll sell this, we'll make a bunch of money, and then we'll walk away. Like, we we joke that like even Microsoft, right? Like some of the basic things you use it for does not work the way it's used to anymore or it's supposed to, does not connect with Apple. Like the two biggest tech companies in the space don't communicate with each other. And like you're using Apple and Microsoft, and one will update and the other one just doesn't know until that happens. So, like it is literally everywhere. Because to me, when tech really adds value, whether it's reducing cost, increasing efficiency, or driving more revenue, like I've always looked at it as like, how does the tech do what the person does faster and better? Right. Like, yeah, maybe it's multiple people, but you really need to understand the process manually to automate it correctly. And that's this giant disconnect. Because, like as Nate was pointing out, the same things happen with people. We use huge firms with thousands of BPO, like, oh, we train these people. And then they come and sit with us, and we're like, you don't know anything about the industry. Like, I don't have time to spend three months with you to train you on understanding what you're actually doing. They're like, oh, but I can push this button and move this here. I'm like, yeah, but if you don't know how to read the thing, you're moving from here to there, there's lots of mistakes. Like, now I'll just pay somebody more to sit next to me. And that's what most people have done. Like post-pandemic, everyone rushed to get somebody out because nobody could get together. And as soon as that came back, everyone went, like, this doesn't work at all. I have like three people I'm paying. They barely do what one person does sitting next to me because they don't know the actual process, or just like the use of that thing. And to me, like that big disconnect is why most of those you don't get your money's worth. Two, they take too long, they almost never work, and you end up doing it over and over again. Where I've never run into that with you guys, with any of our clients. Cause like you're literally doing this job in your own brokerages. You literally know how this is working. You know what the big companies are doing, and you're able to automate it intelligently rather than just throwing tech at something and going, let me know how this works. Oh, hey, here's an FAQ section. Here's a bunch of videos to go figure out why my tool doesn't do what you're supposed to. Oh, go learn it yourself. But wait, it doesn't work. Like that's from TM. That's like literally every piece of software we use in the industry is some version of that mess, right?

SPEAKER_00 21:07

Can you guys give us like a real world use case of how one of your customers is leveraging you guys?

SPEAKER_02 21:15

Yeah, the thing that I think uh Before we get there, Mike, I just want to highlight that, Ben, because that was a really important point that you made. Our perspective is from the person in the seat dealing with the problem, not the person that's 10,000 feet away looking at the problem to solve it. So we're solving it from the right perspective of the operator, the user, and addressing it from that level versus, hey, let's throw all this cool tech at it, let's throw all this process at it. It's hey, wait a minute. Blocking and tackling, how do we apply this tech? How do we apply the people? How do we understand the process to then impact it from the seat of the user? Yeah, and like I didn't mean to cut you off.

SPEAKER_04 22:57

I want to add something to what Ed said. Cause like this still comes up all the time. There's this big tech company that has done really large projects that I work with and advise on, right? And like tens of millions of dollars in software development for huge projects, like transit systems in other cities and countries. And like I'll spend time with them, then they'll come back to me two weeks and they're like, look what we built. And I'm like, guys, like that's cool, but nobody will use that. And they're like, why? It's like because the data going into it isn't as good as the data over here. So, like, you spent a whole bunch of time building something that literally has no practical value above what I already have. Then they're like, Oh, like, okay, like again, it's exactly what Ed said. They're seeing it from over here and going, but everybody would use a pricing tool. And I'm like, yeah, but the pricing isn't a problem right now. Like, we can get that. In fact, I'd rather just feed the pricing model into what I have now than you build this for no use case that I'm just gonna buy another thing. Like nobody would purchase that. And that's just like literally everywhere.

SPEAKER_03 23:53

The big companies, too, that are doing these things, in my opinion, are just charging too much for it. They're they're doing it in a way where they're applying kind of the old school software approach where it's you invest a lot of money into a vision and a product and you push it out. You have all these people engineering it and working on it when in reality what AI is enabling people to do is to chip away at a much more cost effective and immediate ROI than that. And it's we can get into that, but uh the other thing. I wanted to add before I answered your question, Nate. Was the real thing we try to do is take accountability for outcomes. It's not give you a person, give you an automation, and let you do with it. It's why do you want this automation? Why do you want this individual? What do you expect them to accomplish? And we manage them, we train them. Can I add to that, Mike?

SOP Ninja And Predictable AI

SPEAKER_04 24:47

I want to add just before you go past that, because that is the practical thing that I was talking about from like big picture is like most people don't actually know what they need. They think they know what they want and they're like, I want to buy this. But when you ask them a bunch of questions, like even as a consultant, it's like, oh, I need more salespeople. I ask them six questions. I'm like, I don't think you actually need more salespeople. I think your salespeople probably aren't using a CRM in the way they should. You don't need more of the same thing that isn't working. Like, you need this, not that, right? And that's where you guys doing the job, you ask the questions to actually get to. What are you trying to achieve with BPO? What are you trying to achieve with tech? And then ask enough questions to see like, is this the right product or service, whether it's a person or tech to solve this, as opposed to another company that goes, Yeah, you came to me, I will sell you the thing I have. Take the thing I have. It's the only thing I can sell you. It's gonna fit that problem. And to me, that is like the literal conversations we have. I've had with you with clients, I know you guys have, that is very different from going to any other service that is just going to convince you that their solution fits your problem.

SPEAKER_03 25:56

Well said. I think, you know, it's it's really about helping, and that's why we're focused on small and medium-sized businesses. There are big businesses, you know, the billion-dollar plus companies that have so much infrastructure, have so much capital to spend, uh, have so many customers that they can afford to build the Ferrari from the start and hopes, you know, it gets around the track as fast as they want it to. For the small and medium-sized businesses, they're going through a transition right now. And it's largely driven by artificial intelligence. Not only is artificial intelligence changing the way we operate, but it's going to change org charts, organizational infrastructure. When they bring on Togo, more often than not, they're paying us monthly for what we're performing on their behalf. And as things evolve, Togo evolves. Their business evolves, and we help them kind of stay at pace with that evolution without paying for the Ferrari and knowing if it's gonna help them. You know, we could build them something like, hey, let's make sure that we're capturing all the information and communication associated with this account and making sure that nothing falls through the cracks, and we have a simple system of taking that communication and converting it into a task, into a chat function where the operational resources can now attack you know get through these tasks in the order of priority that we set or the client sets and measure how long it takes, how often they're doing it, and measure their performance. That's very simple and cost effective now. You know, you could look back two, three years, a company selling brokers would probably come in and charge a lot of money for that, and it would be its own product, own product. We don't have to do that. That's an easy way to develop efficiencies, to make sure things don't fall through the cracks, and enable offshore resources to make less mistakes, to improve their productivity, to take on more complex tasks. Another simple iteration of that would be okay, now we have these people in a chat. Now we have communications transferring into tasks into one place, a chat. How do we make sure that these operators are consuming as much as possible without confusing confusing SOPs? Or I have to do this for that account, but for this account, it's different. Well, our engineering team comes in and builds a simple bio. We call it an SOP Ninja. It's kind of a joke, but it digests all the simple SOPs specific to each client, specific to each carrier, specific to each vendor, specific to each department. And these uh operators can now uh talk to this in real time and get direction if they need it. So, hey, it's very different for this account than that account. You need to escalate to this person immediately, or a simple email escalation is fine.

SPEAKER_00 28:53

All of that's are you basically taking SOPs, training a like an LLM on those SOPs, and that way you have like your own little chat GPT that understands the kind of the left and right limits for this vendor or this customer.

SPEAKER_03 29:09

Is that it's really, really constricted to the exact language of the SOPs, but yes, it's not free thinking for that. That's deterministic, meaning it does exactly what it's supposed to do and it doesn't do anything else. Uh these tools in someone's business, we want to make sure that any sort of uncontainerized, not containerized AI isn't risky. So most of the stuff we do is very predictable.

A Brokerage Support Success Story

SPEAKER_04 29:38

And I want to go through like a use case on this, right? And I think this is like a common maybe misconception or misunderstanding on like how these tools work, why they don't work, and what can be done to work, right? Specific customer needs, right? You have two or three customers that might look exactly the same. I like literally just had this conversation last week. I'm like, you could have three customers that look like the same industry and same business, but could have completely different needs, whether it's invoicing, whether it's SOPs, whether it's carriers, pickup numbers, time windows. There's a whole lot of variables that like on the surface look exactly the same, right? Now, most of the tools you buy out of the box, let's just take a TMS, almost all of them are now offering, we will do automatic load building and it will learn your customers to build these correctly over time. But how that really works is it's just a plug into ChatGPT, for example. It could be any model. But imagine, like you're literally sending a document in and it comes back and you go, but that's not the pickup number that is. That's the BOL number, not that, and that's the wrong number. But there's so much data in those models, you're not actually training that model. So, and like I've done this. Like you could literally go to Claude, any LLM and or Gemini and go, no, it's that. It'll give it back to you and it'll still be wrong. Then you'll go, no, this, this, and this, give it a better prompt. It'll still be wrong. You do it again because you're not actually training it like a person. However, you can have an agent with an enclosed model, right, which is more like machine learning. Now, every time you train it on that just BOL for that customer, it actually learns because it's captive and it sits on like its own server. You're not trying to train this giant model that is billions and billions of dollars in giant server farms because it won't learn, because you're giving it like one tenth of one millionth of a data point that it got that day. Like it's literally never going to impact the weight of that model. But if you have a smaller model that is able to learn on just a narrow use case, it will improve until it gets that perfect. Then you can go customer by customer. And that's why most of the TMSs, when you try to connect the automatic load building, they get like 80% of it right. Then you'll go back to them and they go, We're working on it. They've been doing that for a year and a half because it's just plugged into a model. And then they'll say, Well, get your customers, all of your customers to just email you their load requests in this format, then it'll work. And then you're like, Well, you've never done this job because we service our customers by meeting them where they're at, not asking them to do what we need. You can't build a brokerage by expecting your customers to all send you the exact same tenders bills of ladings. Like they don't, Nate and I, we talked about this with the attorneys. Even the standard legal bills of lading and what verbiage should be in them aren't even done by the largest companies. None of that's consistent. That's why none of this stuff works out of the box. So when you expect it to just replace people building loads, it just full stop won't do it because nobody's actually looking at how it's working and how to actually problem solve to make it work for that use case.

SPEAKER_00 32:37

Yeah, take take me through. I'm gonna go back to my question from earlier. I I wanna, I wanna see or I want to hear like what how is an actual company leveraging what you guys are doing? Like in be as specific as you want to be as far as like implementing processes, AI automation, bodies in seats, training, etc. I'm curious what an actual like uh success success story looks like on this.

SPEAKER_03 33:03

So a simple one does not include any AI. So it would be best compared to a true BPO. We work with a logistics company, they're a third-party logistics company, a broker. They focus on specialized um step deck, flatbed, hazmat, just anything that's difficult. Um they're largely cradle to grave, but they do have some assembly lines created in some of the support roles, but for the most part, they're they're cradle to grave. And um they take really good care of their customers and their carriers. So there's no room for error. They're very thoughtful. They brought us in. We did a discovery call, we understood where they needed help, which was primarily day-to-day operations, uh, check calls, load building, you know, the standard things. Um we then absorbed their SOPs in their entirety, and we developed an L and D module.

SPEAKER_00 34:05

So did they have SOPs in place before you came in, or did you guys have to help create those or revise those?

SPEAKER_03 34:10

We had to create some, but they did have some. Sometimes the companies have them, sometimes they don't, and we create them. But once we get started, no matter what, we're continuing to upgrade the SOPs through an approval process, similar to like a change order or work change order. We'd submit it to the client, say there's a better way to do this. What do you think? They sign off on it, we implement the change, document the process in an SOP. How's the SOP?

SPEAKER_04 34:35

But in this scenario, Mike, on that one, just Nate. So, like when we've when I've done this with them, with one of our clients, like literally they're sitting here while the person's explaining what they do, because they don't have it in writing. They're recording it to have the transcript, then they would go and read it and then come back and go, okay, this seems like what you're saying, your job description is these things, give them the document. And then Ed and Mike or Jordan is gonna sit down and go, what if we did this and move this here and did this? So they're both creating it and helping improve it as they're designing what the solution they're gonna suggest is.

SPEAKER_01 35:11

One of the one of the common things that we run into, um, particularly working with those smaller businesses, is we come in and we start evaluating those processes. And, you know, what whatever it is, it could be load build for different customers, right? And it's like, all right, well, this number goes here. Well, why do you how do you know that? I just know it. I know my customers, right? That institutional knowledge is great. But if you don't have it on paper anywhere, you're setting yourselves up for failure, whether it's your people that turn over, whatever happens. Any one of us could get hit by a bus, right? And if that institutional knowledge goes with you, then you're you're harming your business long term. And that's what we really work hard at, right? When we come in, is to get those things on paper so that we can, to your point, improve process where needed, um, but also just to have that information living somewhere where it can be accessed by other people.

SPEAKER_04 36:01

I think it's also not scalable. Like you can't scale when you need to learn everything the person doing your job is doing to do it, right? That's this big bottleneck Nate and I run into with clients all the time. I'm doing everything. I can't get somebody as smart and as fast as me. And it's like, well, you kind of don't need them to learn everything you've ever learned. You just need to take chunks off your plate. But then to Jordan's point, Nate and I hear this all the time. Well, I just know this. Okay, well, you've learned it at some point. Where and how did you learn it? Probably by making mistakes. Let's just look at that chunk before we look at the whole pie, right?

SOPs That Unlock Real Scale

SPEAKER_00 36:33

Yeah, I think the the SOP concept is uh it might sound like, oh, I don't have, you know, people think I don't have time to put together an SOP. I'm just trying to grow my business. And it's like, the reality is you don't, you can't afford to not do that if you want to be able to scale. Like, can you can you build a business without having documented SOPs? Sure. But are you gonna be limited? Absolutely. Like I I think back to like one of my one of my first jobs out of college, I worked for a distribution company, Fortune 100, and literally like everything, it it was almost like if if I wanted to do any, like, how do I do this, right? There was an entire like part of the website or like employee handbook type thing that we had access to that was like searchable and um almost like it's own like a little Wikipedia of instructions. Um I mean, clearly, like there's there's by design a set method of here's how you do this. And with companies that have a lot of turnover and you know hire young out of college kids, like they've got to have some way to just plug and play people and give them the information. And like the military is a great example too. Like everything has doctrine and field manuals. And um, and when you make changes, like you mentioned, like a work change request or whatever it's called, um, those exist too, right? Where you make you make amendments or adjustments to that doctrine or that that SOP. I even did it like Pierce internally after kind of seeing what you guys had uh proposed a couple of years back with like different SOPs on just process documentation. I was like, I gotta create something internally for Pierce Worldwide because if we hire somebody new, like I don't have the time to explain every little nuance to them. I should be able to say, here's this. It's a list of everything that how it's supposed to be done with you know written documentation and screenshots if needed and explanations if there's a need to explain why we're doing something a certain way. Um, exception management, like, hey, this is the norm, but if it falls into one of these categories, here's how we do it differently, et cetera. And I feel like if you don't do that, you're limiting, you become you become like your own uh barrier to growth because you become the bottleneck of everyone's got to come to you and ask the same question because you know you're the only one that knows it and they can't go look it up anywhere else. So I think that SOP, I didn't mean to go down a rabbit hole there, but um, I would imagine you probably run into to either clients or people that you do discovery calls with that they have nothing documented or very little, and you're like, okay, well, this is where we need to start. Is that anywhere accurate?

SPEAKER_03 39:08

So we all come from we had long logistics careers. And we we got to a place where we were consulting Fortune 500, brokerages, three PLs, warehouses. So a lot of those like Fortune 500 high-level principles we can bring to the small and medium-sized businesses. And one of the processes we love and has been very effective is just order lifecycle mapping down at a level of granularity with your functional leaders. Get on a call, talk through an order lifecycle, start to finish with the functional leadership. We'll put it into a flow chart documented, you know, each swim lane and where the things go. We'll feed it back to you. You approve, deny, refine, then we'll document it into an SOP. So I want to go there to get you to the endpoint, whether we got to do the work or not.

SPEAKER_04 40:00

Mike, on what he just said, too, because we've used that that analogy in the past week with the client we're working on together, which is like when you're at a big company and you start there, it kind of feels like the company is telling you to do things that make no sense when you're there. It's like, well, why am I doing this like all of the time? Like, this doesn't make sense why I have to do this extra little step every time. And like, all life cycle is like, what happens with a load? Okay, customer sends you the tender, tender goes where, details go where. How does that get to the carrier? Carrier runs it, who's in charge of it, how to get the paperwork back. What does accounting need to check to be able to send the invoice and pay the bill, right? But then you'll go into a company and they're like, well, how does that work? And they're like, well, some of the time I do this and verify the rate, and then some of the time I don't have time to do it. And then you're like, well, then how does your accountant know, for example, that that's the invoice dollar amount to check? Oh, well, when I don't have time, they just walk into my office with a stack of paper and they ask me all the numbers and I tell them. And you're like, okay, so some of the time you do it this way, some of the time you do it that way. And they're like, well, yeah, like, okay, like that's why that's not scalable. You can't have somebody outside of your building to do this job because they can't walk into your office. And then they'll go, like, well, I don't have time. Or like, well, then what else are you doing? And then you realize some other thing they're doing they don't need to do, but should be doing this. And once it's standardized, and that's why I love that analogy of like the Fortune 500 companies, there's a reason that's standardized. Like just TQL, for example. I used to get frustrated because I'm like, why can't the accounting department just look at this document to verify it instead of me going through everyone to send to them first? And then later you realize it's like, oh, because a company that does invoicing for 4,000 brokers cannot have a hundred accountants. They pay$100,000 a year that know everything about freight. That's not feasible. They need to be able to go through an order of operations just to pay bills and invoice. That requires that to fall on the operation side, not on accounting. So they're just checking numbers and paperwork to make sure it's there. And that's why huge companies do that, because you can't get that big if it's not standardized. But smaller companies are just so used to doing everything and everybody jumping back and forth that they never standardize it, then they wonder why they can't get from 10 million to 50 million or 10 to 20 million or 20 million to 50 or 50 million to 100 million. It's some version of the same thing in every one. The reason the big companies do that is because it's literally not feasible unless it's standardized. Small companies don't want to do it, but they don't know how to get from there to there. And that's where I think your experience really helps the client understand why this is necessary and why they'll actually get more work done with less effort and less mistakes. But nobody ever wants to change. So they just go, give me the thing and I'll give you money. And you're like, Yeah, but if I give you the thing, it's still not gonna work because you're not doing one extra thing here. Like I literally give it to you. You can pay for it. It will fail miserably. You'll pay for it for another year in your sales agreement, and then complain that software never works. That's how most of the other shit works.

SPEAKER_02 43:01

There's a side benefit to that process too, Ben. And you kind of highlighted it a little bit, but one, you've got fresh eyes coming in in us, right? Outside perspective. Outside perspective, but also a lot of people don't take the time to sit down and look at that order to lifecycle themselves. And so they're not seeing glaring pieces that are because why they come to you is I already don't have enough time.

SPEAKER_04 43:24

You're asking me to go and evaluate what I'm doing. I can't I can't do that. That's why I need you. And then you got to kind of slow them down, just like Nate said, to get these things in place or they can't grow. Because Nate was just talking about this with me last week on like how quickly he grew pierced. And it's exactly what we're talking about. Standardization. People can go to see what they need to do for this task, not walk into someone's office, which is the other big problem every manager faces. I have an open door policy. Everyone's in my office all day. But why are they in your office? Probably because there's no other place for them to get the answer to that question.

SPEAKER_00 43:55

Or, you can see someone on every email that you think they might need to read index, you know they got a thousand emails a day and they can't get anything done because they're just reading emails. Yeah.

Staffing Coverage And Change Management

SPEAKER_03 44:03

Huge issue. The SOP and the design of it too. I mean, we take accountability for managing their calendars, managing their expectations to the customers' KPIs, and putting together the tools and the reporting infrastructure to do that. We also, after SOPs are built, after we understand what the broker or logistics firm wants from us, then we consider, you know, what degree of technology and what degree of of people are required to make this work. In some cases, it's both and it's human in the loop with while the tech builds, and you know, you start to remove the person long term if it's a fully automated thing. But we kind of map out that process and then figure out how many people we're gonna need, what hours they're gonna cover, and then we determine how do we achieve those hours in the most cost-effective method. We call it a utilization discount, but a lot of times uh we'll we'll take three people instead of or required one, and we'll have all three individuals working less time but cover more hours uh or more of a spread and reduce the risk of turnover. Have that knowledge um you know caught between three people instead of one, and that really helps get things off the ground in the beginning and and you know prevent any problems. But it also helps us digest tribal knowledge and nuance. If you can start digesting tribal knowledge and nuance, with every company has all of them, um then you can start building around that nuance in a standardized fashion. Whether it's through human beings, whether it's through AI or a combination of both, you can start doing those things. And that's where the BPOs, they're they're not cracking that. You have to get past that. Um there's a lot of things we do once it's in action, but uh our our goal is to take all of that off of your hands, but still give you the visibility and control of how we operate what we do. Um so you're not just throwing it over the fence like an outsourcing firm. You know, we're integrated, we're reporting to you, but you're getting uh much more engaged efforts.

SPEAKER_00 46:18

I'll I'll add this in too. And Ben, I think you and I we benefit from this by working with various different companies. But a lot of times someone who has spent their entire logistics career in one company has such tunnel vision because all they know is the way that they've done it. Like I've used the example, a guy I know, I met him like 10 years ago, and he came from a company that just did that they've moved uh produce loads. And he had a referral customer that did something that was like flatbed. And he's like, Well, uh, can we do flatbed? And I was like, What do you mean can you do flatbed? He's like, Well, my last company, like, all we did was produce. Like, we just moved like mushrooms and lettuce. And I'm like, you can move like almost anything. He's like, Well, that's just, you know, I just thought that's all we did because that's what I learned. And and that made me think, I'm like, holy cow, I'm like a lot of these people that start at a small mom and pop shop or maybe a larger company, but in a specific division, they only know what they know, right? And they're taught just one way of doing things and they don't have a third party or an outside perspective. And then going to a different company and and even now, like working with different agencies that move different kinds of um customers freight, you get a different perspective. And then Ben, when we deal with different uh clients on consulting and things like that, you can you kind of learn from them in certain ways and can offer similar feedback from your own outside perspective. And I think what's good with you guys is having the the background that you that you guys all have coming from you know ch through read and and and beyond, and working with different clients and seeing different things, you have that outside perspective instead of that tunnel vision. And I think that, you know, we talked about not having SOPs becomes a roadblock. Having that tunnel vision, I think as well. Like people are you you have people that we talked, Ben, we've talked to about like consulting or you know, changing things, and they're like, no, this is the way that we do it, and we don't need any kind of changes to X, Y, and Z. And it's like, you're gonna be the cause of your own failure, you know, single-handedly because you're not willing to adapt or change and adjust how things are. We see it with technology advancements. People don't want to adapt to you know advanced TMSs and integrations or tracking and just all the fraud that's out there, adjusting your processes to protect and prevent fraud. Um, I think there's a lot to be said about just having an outside perspective. That's why, like, even the best coaches out there have a coach or have a mentor, someone that they can go to to get an outside perspective from, because you're only seeing it from your seat, whereas you guys can kind of like you're in that 300 section looking down from above, and then you can come down and and sit in their seat, view it from over their shoulder, and then you know, make recommendations and and all of that. So have you guys had pushback from anybody? Or Ben, something to add in because I was just gonna say it reminds me if you guys had anyone push back like that. But Ben, go go ahead first.

SPEAKER_04 49:23

It just reminds me of that famous line. This is like probably 25 years ago. Donald Rumsfeld, I think, said this. He's like, There's the stuff you know you know, the known knowns, right? There's the stuff you know you don't know. So you know the category, but you don't know what it means or how to use it, but you can find it because you know you don't know that. And then the third is there's stuff you don't know that you don't know and you wouldn't know where to look, right? That to me is the value of outside perspective, right? Whether it's us working with small, medium, and large trucking companies, small, medium, and large brokerages, small, medium, and large shippers, small, medium, and large warehouses. They all have different reasons why they do what they do. But if you're just sitting on one side of that, you don't actually understand the reason why your customer might be asking you for something or your carrier. And to me, that's that perspective that they bring in for exactly that reason.

Avoiding Tech Lock In With Custom

SPEAKER_03 50:10

We've we've never really gotten pushback, uh, honestly. I mean, it's partially because our our number one rule when we bring on a new account, I mean, in every account, we're integrated to a certain degree. Short term or long term, we're integrated. And all four of us partners are engaged with that account. Obviously, we have personnel doing the brunt of the work, but we're engaged with that account. And when we approach the account, our number one rule is don't break anything. So generally what we do is we assimilate and we absorb the process the way they want it done. Even if we've mapped and created SOPs, we don't try to drive too much change. What we try to do is expose them to alternatives and and guide them to the right decisions for them. And a big part of that is there's a lot of brokers out there, you know, in the south of a hundred million a year range, I would say. Some of them are just complete all over the place, gunslinging, really have no approach, but they make money because they have really good service standards, really good relationships. Well, you can't come in and violate those relationships and say you're gonna help the account. Just because you could turn that engine into a refined one, you might violate some of those relationships. You absolutely can't do that. We understand how brokerages are built. There's also other brokerages that, you know, they're they're very methodical and they're well thought out. They just need a way to start automating it and getting it off their plate so their leaders can go back to driving the business on the relationship side, on the value proposition side, and not on the operation side. In both scenarios, we're meeting them where they want to buy and helping them get to that end goal without driving too much violent change. We've we've all led really big teams, uh, and change management is really difficult. We look at ourselves as kind of uh a vehicle that helps them through the change management at the pace they want to go, and that helps control some of the pushback we get. We've got we got some pushback from a construction account who recently just spent an obnoxious amount of money on a custom ERP system uh before we were involved. And we did say, you know, would you would you think about retiring the ERP system? Because a lot of the new functionality and automations you want to build are gonna have to operate outside of this ERP system. He just wasn't having it. He just spent all this money on it and he just won't go back on it. Some cost value.

SPEAKER_00 52:43

I mean, that's why.

SPEAKER_03 52:44

That's why I keep telling people stop buying long-term tech. Stop doing it. If it's, you know, a fraud protection tool, if it's a TMS, if it's a WMS, if it's an ERP, stop buying them because it it costs way too much. You're locked in for too long. And all of these automations are going to have to come from your control. Anything we build, our customers own it. Anything we build, we put in their systems, it's theirs. But you keep buying these techs, and it makes now we have to revolve around this center of gravity, which is a 12-month term. You're gonna have to pay for all your upgrades, you know, you're gonna have to wait for their queue. You're gonna have to, so it's like that we're limited. So there was some pushback with that one, but we meet that now. We don't hold back. We're not gonna say we know you're doing something wrong and not voice our opinion. We will voice our opinion, but once it's voiced, it's done. We're there to execute on your behalf at your pace. So we we haven't gotten a lot of pushback there. And we always have kind of this system of I don't want to spend that much money, I don't want to take that much time, I don't want to absorb that much change. Do you have a Fisher Price version? Yep, sure do. Let's do this one, see where it takes us. And we're very much in the weeds, we're talking to these accounts daily, weekly, monthly at different levels. And I mean, we are in tune with them. So there really isn't a lot of pushback, it's more collaboration. You know, for example, some of our accounts right now, we're doing uh an entire network analysis for them, an entire national network analysis, primary DCs, forward locations, fresh product, ambient product, frozen, frozen product, new channels. We're orchestrating the entire network analysis of a part as a part of the managed solution that we're providing them. So we're very much across the entire scope. How can we most enable people in that small, medium-sized business space? And um it's collaborative.

SPEAKER_01 54:46

So that the pushback is is kind of the other thing I want to add that that I think really helps us there is we really try to meet our clients where they are, right? Like we like to say that we're tech and solution neutral. So whatever your current ecosystem is, we're happy to play in it. We we're not gonna say, oh, well, you have to move to a Microsoft ecosystem because that's that's what our stuff works in, right? Like there's there's none of that. It's hey, you have to move to this specific solution that we've previously deployed because we already have it built and ready to go. Um everything is client-specific, everything is custom built to fit that client's needs. Um, and it really keeps things from us from having those those conflicts where they're like, well, that isn't the exact solution I want. Why are you trying to force this on me?

SPEAKER_00 55:30

And I think important, yeah. You have to.

SPEAKER_04 55:32

Yeah. And and also like everybody, well, I would say finance is seeing this because I think this is the new era of how we're gonna use tech and build tech more bespoke to the use case, right? Not forcing one solution to everybody. Because I think recently I'd read like almost a trillion dollars of value of legacy software companies has been wiped out of the market because they're like investors are at a certain point, like you're not gonna have to keep using Salesforce. Like you can build your own. That is gonna make this company less valuable over time. So investors are seeing this because they're incentivized to look into the future. But to your example, business owners are mostly tunnel vision to now. What do I need to fix this month? What do I need to fix this quarter? They're rarely looking at how is this gonna impact my business next year. And sometimes you could solve a problem this month and create a bigger, more expensive one six months from now or a year from now. And that person probably already knows they're gonna be there a year. They're just not taking that into consideration when they're solving the problem this month because they think they're mutually exclusive. And the reality is, is they're not. And they end up creating more work, spending more money, and actually not even solving the problem in the short run.

SPEAKER_03 56:44

Yeah, we have one account that is, you know, a Salesforce house. Makes sense. A lot of brokers use Salesforce. They were in the market for a new TMS, so they went with Ravenova because obviously there's the Salesforce connection there. And now Salesforce and Rabinova are implementing AI throughout their ecosystem. Just like Microsoft's doing, just like Google's doing. If I am a broker, really of any size, the last thing I want to do is get deeper and deeper and deeper into Revanova and Salesforce because in the event I want to customize, go a different direction, protect my nuance, protect my specific value proposition. I'm in deep now with them. And undoing that's really difficult, especially when Revanova now is enabling admin management through AI. They're enabling all these types of things that the Togo does, except you're now stuck in their ecosystem. So three years from now, you want to get out. It's very feasible to do what Togo's doing for you right now, you got to undo that. So for the people that that like that model, that's not what Togo is. What Togo is is the alternative.

SPEAKER_04 57:55

Well, also the value of your business goes down when you do that, right? There was a great article I put out there that is like, hey, if every brokerage theoretically, just for example, used one Microsoft's AI to build everything, just for an example, in Salesforce, right? Those companies sell for less money later. Why? Because you're not really creating any unique value. Like you're basically a plug-on of customers to the Microsoft. And now I'm going to give you less for your company because you're not really doing anything unique. And like the multiples on what these companies actually sell for are visibly lower. So you spend five, 10 years, 15, 20 years building a business, and then you lose half the value because you made this decision today without thinking about selling the business five years from now, and you just lost millions of dollars because you saved some money in the short run. And like that's absolutely happening like already across multiple industries.

Build Vs Buy TMS ERP Systems

SPEAKER_03 58:50

Here's a fun question for you. Five years from now, there's two businesses side by side, both the same industry, both relatively the same EBITDA, same customer miscs, same asset profile. And you're interested in purchasing one of them, which one will have the bigger multiple? The one that has a built-out artificial intelligence infrastructure and their own brain that digests their business as a whole and understands it as a whole, or the one that doesn't, who's getting the bigger multiple. So if you're gonna go down the path of you know the Revanovas, the Salesforce, the the infrastructure where you don't really control or own it, you have to recognize that at some point the company that does is gonna have its own intrinsic value. And you're pushing that value off to the big provider.

SPEAKER_04 59:44

I just don't the people you're paying, to the people you're literally paying. You're the customer. Like I met with one of the large companies that raised a bunch of money, like 20, 30 million to do this in logistics. And I was like, same use cases. How is this gonna build a load? How's it gonna learn these things? How's it gonna overcome the things that inherently aren't doable with other systems? They went, well, you start feeding us all your data, and we think in three to six months we're gonna be able to do this. And I, second question, are you paying me for the first three to six months or am I paying you? And they went, Oh, you're paying us. I'm like, but you just told me it won't work for three to six months. What am I paying you for in three to six months? They're like, because it will work. I'm like, but I don't get anything for that money. And your company got more valuable by me training your software, what my people are doing. You should be paying me and giving me equity in your company. And then when it works, maybe I'll pay you a percentage because I just made your company more valuable and you made my company less valuable and you want me to pay you for that? And the sales guy was like, Well, well, if you kind of put it that way, like we think over time we'll save you money. I'm like, that is the worst rebuttal I've ever heard. And I'm like, maybe they didn't explain to you, because you're the sales guy, what the big motivation is for the people that hired you, but that's what they're doing. That's what you're trying to convince me. And to me, that is a shit deal. So, like, I'll pass. Let me know when this works out of the box.

SPEAKER_00 1:01:01

I'm curious what you get. So, talking about like uh an off-the-shelf TMS versus having your own internally, where do you think where is like the either revenue or profit will go like on an annual basis? Like, where are most companies at when they decide it's a good fit to implement their own proprietary software versus buying off the shelf? Or does it does it vary? I feel like it's a seven-figure thing to build a TMS.

SPEAKER_03 1:01:38

What's the difference between a TMS and an ERP? The focus.

SPEAKER_00 1:01:42

A lot. Yeah.

SPEAKER_03 1:01:43

The focus, but it's all information.

SPEAKER_00 1:01:45

I mean, I would say a TMS is probably more probably more narrowly focused.

SPEAKER_03 1:01:50

It's just information coming in, being parsed and digested, and going out. I mean that that is what these software programs do. They're piled in with functionality. A TMS is specific to trans, a WMS is specific to warehousing, ERP is specific to enterprise, multifunctional. But at some point, it's going to be so feasible to create functionality under one umbrella, but that functionality might be slightly WMS, slightly TMS, slightly ERP, and that's where we're seeing it start. Is let's create an infrastructure. We need track and trace TMS functionality, we need tendering um functionality, we need a way to vet carriers and onboard carriers with TMS functionality. But it's really important, a lot of the companies that we work with, that they upgrade QuickBooks to cloud, which is a nightmare, and we help them with that too, and we bundle it under the same umbrella. So I I think the determining factor is if you are sizable enough and can afford an out-of-the-box TMS, it makes sense right now. You go with the TMS, you go with the WMS, you go with the ERP. But if you're not if you don't need that center of gravity in those areas and you can start building it in a way where it's some TMS functionalities, some WMS, some ERP, and it accomplishes all the goals you need in the near term and can evolve into something that's perfect long term. I think that's the differentiator. I don't know if that there's revenue or load count because it's just it's just becoming so feasible to replicate these things.

AI In Freight Brokerage Five Years Out

SPEAKER_04 1:03:36

Yeah, what it was before and what it is now is different because the cost to build is changing, I think, which is one of the big things. Like previously, I'd say it was probably like$50 million brokerage. You're considering building it, and it maybe probably makes sense around then. 10, 15% margins probably is where it used to be. But like to Mike's point, like since it's getting faster and cheaper to build, the the money is less, the time is less, and it's more valuable to your company to own all of your intellectual property, which is literally just all the information. So the incentive went up, the cost went down, the time shrunk. So where it was 50 million, maybe you start considering it 25 million at this point. Again, you have the transition costs and risk and things, but you build these alongside what you already have. And then once it's doing what you know, once you've tested it enough, then it kind of starts to make sense because you do need on staff engineers literally full time once you go that route.

SPEAKER_03 1:04:33

And I gotta think that's not really you don't. You can you can well, a lot of times we build it in a way where it amounts to a TMS at the end. But week one is let's get track and trace into a portal, trucker tools mapped, quickscope mapped, get the onboarding tools mapped, and now we have track and trace compartmentalized. That is a big function of a TMS. Okay, how are we gonna communicate with the drivers and customers in an efficient manner? And that plugs in. And by the end of it, you have your own TMS. But I think quickly we're going to have less uh TMS, WMS, ERP, CRM. And what we're gonna have is omni systems with the specific functionality that each specific company needs. It might be transportation functionality, might be warehousing functionality, might be finance, but it's under one roof. And when you approach the small and medium-sized businesses, it's very viable for them. A lot of these smaller brokers don't need big TMS. They could easily use Ascend, Co Factory, and they're out there trying to sign on with revenue, but it's wild. And they'll spend six months looking into that. And it's like you could just create this right now and use a send for the time being. Like it's it's wild the thought process because we're still stuck in five years ago. Executive comes in, bring in the systems, watch the needles move. It's not that anymore. I mean, obviously, we're pretty, I am at least convicted in that, but what is what is the need for definitions anymore when I can create the functionality that you need in the short term and bundle it into the package that you want long term.

SPEAKER_00 1:06:14

So I wanna I wanna wrap with uh a discussion on AI here. So curious, if you go back 2020, no one was talking about AI at all or as it pertains to brokerage. Or, you know, maybe you had some basic automation that was that was about the most the most, right? Every TMS now claims to have AI, this, that, and the other thing. I'm curious, where do you think, like five years from now, what does artificial intelligence, what is the its impact on our industry, freight brokerage specifically? Like, is it when it comes to like are some companies gonna go out of business because they haven't adopted? Are some going to, you know, excel because they were using it? I'm very, very curious what your each individual thoughts are on what it's going to mean, what what it's gonna look like operating as a broker in our industry, you know, five years from now or whatever.

SPEAKER_03 1:07:13

Did did you have something, Ed? I don't want to cut you off. I saw you ready to say something.

SPEAKER_02 1:07:17

No, no, no. Oh, good. Uh I my my point was gonna be uh out of the box systems are often underutilized as well. So now you've got a bunch of features that are inside of something you're paying for that you're not using, that you don't need. How much is that inflating your cost versus building something custom to achieve a specific goal, like Mike was alluding to track and trace? Okay, track and trace is my biggest issue right now. Let's solve for that. Okay, what's your next biggest issue that a TMS would solve for? Because you don't need these 50 other things that the TMS does that you're never going to use, right? Um, but to to your question, Nate, the the AI question. Um I I think it's happening now. I mean, you're seeing the larger companies uh with extremely uh extreme benefits to reducing headcount, increasing revenues, um, and and majority of that is coming through tech plays. Uh and and some of these mid to small size brokers don't necessarily have the focus um or the ability to uh put resources towards it. And that's where we come in to to help bridge that gap. Like, hey, you don't have to stay up to speed with all of the technology that's coming down the pipeline and how AI is evolving and what it could do for your business, we're doing that, you know, as a as a shameless plug there. But five years from now, you're gonna see some very big companies extremely lean because a lot of the AI is is doing the lifting, right? Um, but yeah, I mean, even outside of logistics, there's there's gonna be a billion dollar solopreneur here if there isn't already.

SPEAKER_01 1:08:46

Yeah, I think that um my my perspective, I I was certainly an AI skeptic. I thought this was a lot of a noise about nothing. Um, and I've certainly come around on um the idea. And what I think we're seeing is that Mike says this a lot, but I'll I'm gonna go ahead and steal his line. Um, your company won't get replaced by AI. Your company will get replaced by a competitor who embraces AI, right? So it's going to be the organizations that embrace the tools that are available to them now that are most successful in the future.

SPEAKER_02 1:09:16

The one thing I will say, there's a caveat. You you have to be responsible in this, right? Like everybody can go out there and buy something out of the box and throw it into your business and expect results. It's not the responsible approach. The responsible approach is are we AI ready? What does that mean for our organization, right? And how do we get there before we just start throwing AI aimlessly at problems that it comes out of a box and doesn't really apply to our business? Um, so so that would be my one caveat.

SPEAKER_03 1:09:44

Because even simpler in general gets categorized as an efficiency generator, a cost reducer, and a people remover. For a lot of those reasons, the small and medium-sized companies are, in my opinion, the best situation they've ever been in before. Because the horsepower that helped those big companies like CHTQL, you know, beat them, the the playing field's being level. If they're started on the journey right now, I think they're gonna be in good shape. I think though, if you're exclusively looking at AI for its ability to reduce costs, increase efficiencies, and remove the need for people, and you're not thinking about what it can do to your business's intelligence and your business's ability to grow, you're missing the ball. Efficiency isn't everything. We just had this, we one of our manufacturers is hyper focused on efficiency, and there's some nuance in there that's really good for the account. And my message to him was efficiency isn't always the most important thing. For example, you go to a white glove restaurant or a five-star restaurant, and they come in and they scrape the crumbs and give you a new napkin. That's a sump cost for them. They're not making money on that, but it's an experience the customer expects. It's worth the manual energy. Efficiency is not everything. If they start thinking about the brain, they start maintaining their data and not giving it to the big providers, but using that data to build their own intelligence. AI is going to help them grow and compete. It's not going to kill them. But I think the one thing is they should all be on that journey now. Whether it's as simple as communicating with a chat eye, which really isn't AI, or if it's simple automations that don't involve any machine learning or any set type of artificial intelligence, just start the journey. I think you're in really good shape. But if if they're bucking against it and it's like, ah, it's there to remove people, it's there to cut costs. No, it can make us much smarter. Much smarter.

SPEAKER_00 1:11:56

Yeah, I was gonna say, I've I've always kind of used the analogy of like it's a force multiplier, meaning instead of just replacing one person or one task, it allows the same size team to accomplish a multiple of what they can do currently without it.

SPEAKER_04 1:12:14

Well, right. I mean, it's like somebody comes in and goes, I wanna, I wanna cut my expenses, give me AI so I need less people. And it's like, well, why do you want to do that? Well, because I want to make more money. Okay. Then it's like, well, there's two ways to make more money. You're only looking at half of the income statement. How about instead of you laying people off to keep more money, you get AI or some automation or efficiency? So one person does the work of two, then you sell more. Now you make more money, didn't lay anybody off, and more money goes into your bank account. But that's again, tunnel vision versus looking at the big picture of like, okay, what is your real goal? Because they're just going like, I just want to cut expenses or I just want efficiency. But what is downstream of that? Like, why do you want more efficiency? Is it because you want less mistakes, or is it because you want to be more profitable? Is it both? Is it because there's errors here? Like asking those follow-up questions, get to like, what are you actually trying to get as a result of the thing you're asking me for? Because there's a lot of different ways to do that. You don't need to lay off people. And that's why, again, I do agree with some of like the AI industry going, like, you don't need to lay off people. We can make more stuff, sell more things for cheaper without laying people off when everyone's just going, but like, I'm gonna lose my job. Well, like, okay, but like you could sell more, like you could just move to the other side of the business that's either bringing it in or doing a worker service that people pay for, right? Like, there's more than just this one ask that gets you to where you're trying to be.

SPEAKER_00 1:13:43

Yeah, if you if you look at an income statement for a$10 million brokerage, right? And let's say they do$10 million in revenue annually, and at the bottom of that income statement, they have a net profit of$500,000. So we'll say they've got$1.5 million in expenses. Um, if you look at kind of the concept you just said, Ben, you can only if you're looking at just reducing costs by you know salaries or whatever, you only have$9.5 million that you can reduce. Whereas if you look at increasing your revenue forever and limitless. There is no ceiling there. You can do a billion, 10 billion, uh, obviously any number in between that as well. But the that's where I like the force multiplier concept instead of the body reducer, right? And you can you yeah, you can always right size your you know, right size your staff if you have overages, but wouldn't it be better and much nicer if you could just reallocate those people to be able to accomplish more and produce more and grow the top line instead of shrinking the expense side of it to try and detox your bottom line.

SPEAKER_04 1:14:53

Really funny, there was an article out this week. Um, they were talking about AI washing because all these companies are laying off thousands of people and saying it's because of AI. The real reason they're laying people off is because they can't sell anymore and have too many people on staff. And they're not gonna say, hey, I'm the CEO of this company, our sales are terrible, and only way for me to hit my quarterly earnings is to reduce expenses because we haven't found a way to sell more. We're just gonna blame AI and then get rid of these people so I look better on my quarterly earnings. Like that's happening everywhere, right? And it's exactly what you're saying. They're doing something for a different reason and then telling everybody that it's because of AI efficiency, which is like, no, like you just hired too many people and you didn't keep up with your sales. And you should have been doing better both of those things better over the past three years. You're not very good at your job, but now you have this fallout excuse that you can lay back on. Yeah.

Who They Help And How To Reach

SPEAKER_03 1:15:46

Yeah, the two things that like you know, the brokerage people that that listen in that small and medium-sized space, not the Robinsons, not the TQLs, it's what's happening right now. The thought process you should have is it's viable now to take on more market share from those bigger players. It's much more viable. Like you should be able to scale your business, not be concerned with losing it. And the second thing would be be careful who you give your data to. Because if you give your data away, whoever it is, it could be a TMS provider, could be fraud protection pools, could be you know automation or uh onboarding platforms, you're giving them the most valuable thing of the future, which is data. And it's feasible now to keep it. So I I think those are the two things that that I would say. I mean, it it's not a bad thing for small and medium-sized businesses. It's a good thing.

SPEAKER_04 1:16:40

It is because the bigger ones are going to be slower to cut costs because it takes them longer, because there's more overhead, there's more real estate, there's more computers on decks, desks, there's all of that, right? Like to your point, the way I keep looking at this, I'm like, okay, give me a brokerage with five people or 10 people. Okay, most big accounts, CH, TQL, Echo, they need 7% gross profit to break even. If it falls below that, they're giving loads back to their shippers, right? And I'm like, okay, but where's that 7% number come from? It's because of all of the overhead. That's pretty comparable across brokerages. You need at least 10% margin to be profitable. Okay, I can take a 10 person company and I can cut and get them to be able to do more work, right? Bring in more sales. And now I can probably be profitable at 9% margins, then maybe 8%. And I will steal all the market share off the TQLs, the Echoes, at a smaller company and grab it from them, benefit from it while I'm reducing costs. Because, like you said, I don't have this giant overhead. I'm not turning a battleship, I'm turning a speed boat and grabbing every bit of it every step of the way. And now I'm more competitive than the legacy companies that have been around 25 years because I'm more nimble. I can manage the variables because there's only 10 people now. And if I do it with the end goal in mind of I'm gonna take all of what they have, my processes today are gonna look like they will five years from now. So I don't have any of those stumbling blocks that they have because I'm already looking farther down the path as I take everything that they have.

SPEAKER_03 1:18:12

Yeah. Well said.

SPEAKER_00 1:18:14

All right. So who's the ideal fit type of company to reach out or work with you guys and how do they get a hold of you?

SPEAKER_03 1:18:22

You're you're not gonna see us at any logistics trade shows anymore, at least in the near future. Um We're pretty focused on the customers we have and getting more of them. So if they want to really reach out to any one of us directly, um contact us at harnesstogo.com is a good way to do that. LinkedIn is a great way to do it.

SPEAKER_00 1:18:43

We've got a link right in our show notes as well. So just check that out if you guys want to reach out. Who's the ideal customer?

SPEAKER_03 1:18:49

Ideal customer, I mean, for this this podcast, I would say, you know, anybody in the logistics services space or or shippers um, you know, that manage their own logistics with a set of brokers or carriers under the$500 million mark would be in Scope for us. Awesome.

SPEAKER_00 1:19:07

Well, we appreciate you guys coming on. Love to see what you're doing. It's it's uh it's always a good time. So any final things you want to add in before we wrap here, guys?

SPEAKER_03 1:19:18

I'm a Buffalo fan. I'm a Sabres fan. I'm on the wagon, huh? I'm on the wagon.

SPEAKER_00 1:19:23

Awesome.

SPEAKER_03 1:19:24

Not over the flyers, but we probably won't see each other.

SPEAKER_02 1:19:28

I'm gonna say go flyers, but uh definitely got me in the corner too there, Nate. I I used to uh have a Buffalo Sabres jersey back in the day because the logo was so cool when it was the black and red and silver.

SPEAKER_00 1:19:39

I've got one of those. So they they actually they brought it back this year. They had like I don't know, like nine or ten like throwback nights, like on Saturday, Friday and Saturday nights, they would do them where everything from the jersey to like the goal song, they would throw back to like the 90s version of it. It was awesome. So playoffs though, they're they're going with the blue and the gold. So I love that. We'll take any extra fans.

SPEAKER_01 1:20:03

Yeah, I feel like I feel like there's that connection between Buffalo and Philly, right? So for me, if if it's not the birds, go Bills, right? If it's not the Flyers, go Sabres. I'm I'm on board with you guys.

SPEAKER_03 1:20:13

Yeah, we I don't think we were even like 10 years old the last time Buffalo and the Flyers were both good. So yeah, any rivalry that was there is gone.

SPEAKER_00 1:20:22

Yep. The uh I think there was a stat, it was like the last time that the Bills and the Sabres both went to the playoffs was I think like 1999, something like that. Wow, really? Yeah. Wild. Yeah, that was like 08, I want to say.

SPEAKER_03 1:20:44

Yeah, yeah.

SPEAKER_00 1:20:45

Yeah. Crazy. Well, thanks for having us, guys. Awesome talking. We appreciate it. We'll we'll do this again. Uh Ben, final thoughts on your end.

SPEAKER_04 1:20:54

Whether you believe you can or believe you can't, you're right.