[Transcript] Leveraged Supply Chains – Episode 7: Eric Johnson (Senior Technology Editor, Journal of Commerce, S&P Global)

Andrew (00:05)
welcome back to Leverage Supply Chains where operators and builders turn AI and data into real supply chain results. If you're a mid-market manufacturer or distributor your inbox is probably full of AI for logistics and freight tech pitches like visibility platforms, marketplaces, bots, dashboards, all promising the world. But when you sit with your team,

I imagine the day-to-day often looks suspiciously like 2005. Email threads, spreadsheets, PDFs, clunky portals are still holding together global logistics, freight invoices, routing decisions, and tracking updates. Today, we're going to strip the hype out of freight tech. What has actually changed over the last decade? What does real 10X value look like? Not just a better slide deck.

and what finally pushes companies over the line to commit capital and resources to doing things differently. To help with that, I'm joined by Eric Johnson, Senior Technology Editor at the Journal of Commerce and Director at S &P Global. He's been covering logistics technology across shippers, forwarders, carriers, and software vendors for years, including hosting LogTech Live and writing the LogTech letter. We're going to talk about where he sees real ROI

how AI fits into all of this, the role 3PL should be playing as an innovation arm for their customers, and why so many processes still look like 2005, plus what to do about it.

folks who know the Journal of Commerce, but might not know your specific beat, how would you describe what you focus on day to day?

Eric Johnson (01:38)
Yeah, well, first of all, I don't presume that everybody knows what the Journal of Commerce is. So maybe a little background on that as well. So I work for a publication that caters to logistics industry and more and more because of recent policy kind of events toward the global trade and trade compliance world too. it's almost 200 years old, this publication. So there's not only a lot of gravitas and...

weight behind it, there's a lot of responsibility, right? Like everything you write means something in the history of this big institution that's been around this industry for a while. So I joined the Journal of Commerce a little more than seven years ago. I focus specifically on technology as it relates to sort of core, you know, processes and core functions that people in logistics need to worry about. So traditionally that's been.

you know, kind of these very historical legacy, I know it's a bad word, legacy categories of software that sort of appeal to people either on the shipper side, the forwarder side, a little bit less on the carrier and, you know, hard asset side, but for the most part, it's people coordinating the movement of goods from A to B, whether that be domestically or internationally.

Andrew (02:48)
Got it. Well, I mean, on that note, I mean, you're talking to shippers and forwarders and sometimes carriers and tech vendors every week. So from that vantage point, what are you seeing that an individual operator sitting inside a single manufacturer or three PL usually can't see? It has to be ⁓ a breadth, right?

Eric Johnson (02:56)
your name.

Yeah. So I think my, my advantage is that I get to go a lot wider than most people get a chance to, because I don't have freight. have to move. my KPIs have nothing to do with getting stuff into a factory or on shelves at a reasonable cost. It's all about helping those people do their jobs better. So the more people I talk to, the better I am at doing that. Where I

have to focus is not being, you know, talking to a million different people and only getting an inch thin on it. I need to really go super in depth on certain, in certain areas, you know, sort of bore holes into key wells of information to use a really bad analogy, which I'm sure I will use many bad analogies over our conversation, but because really there's an advantage to having a really wide aperture.

it's subject, right? You get to understand how a piece of technology, why a software provider is selling it, why a consumer, direct consumer of it might want to buy it or not, why other entities that work with that direct consumer, let's say it's a forwarder or a freight broker, the indirect beneficiaries of them investing in that are like shippers or their carriers or facilities.

So trying to get the impacts of that stream of impacts, it's not rocket science, but it takes a while, right? It takes a while to assemble the pieces so that you understand how that all works. So that's kind of my main focus is like, do I understand the impacts? First and foremost, understand what drives people to invest or not invest, but then what is the impact to them and what is the impact to the companies that they interact with?

So what am I seeing? It's super confusing right now. I mean, we touched on AI in the intro and I think everybody is wrestling with being overcommitted to it, which I suspect a very, very, very few percentage of people at this point are overcommitted to it. Most of the worry is being undercommitted to it. I would argue at this point, you know, where we're sitting in today's world right now and how fast it's moving.

Andrew (04:43)
Hmm.

Eric Johnson (05:06)
I suspect most people are in the middle 90 % in an okay position as long as their eyes are open. And as long as they're sort of ready to absorb the information that's out there. I think they can catch up to whatever they've lost in terms of to their peers, in terms of a gap. I think they can catch up probably quicker than they realize. So I I spent a lot of time in fall of 25.

just kind of walking people back from a proverbial ledge. you're not as far behind as you think you are, right? It's not, it's, you know, you're hearing a lot of chatter about this, but the reality is the person to your left and the person to your right doesn't have this figured out either.

Andrew (05:40)
Yeah, no, that's, I think that's very accurate. Some a conversational thread and anecdote, which I'm sure you saw as well. It's about mid this year, every customer that we talked to or every company we talked to ultimately was asking my president or our board has asked us to come back with AI because

someone next door to me in the room on a different board said this is what they're doing or this is what they're prioritizing so we need to as well. And so it's a very fascinating zeitgeist moment as well when it comes to feeling like you're being left on the bench

I actually would love to kind of dovetail that into the practical reference points to the listening audience here. It's, VP supply chain, $250 million industrial manufacturer, importing components, distributing finished goods, juggling a lot of suppliers and customers. how would you think about distilling that wall of logos and buzzwords when you step back? is there buckets that you've generally been seeing? Or are they still the same as they were in 2015? And just an AI flavor?

curious if there's some framework that you've been thinking about.

Eric Johnson (06:38)
Okay, so you asked that in a very interesting way. A lot of times I'm asked to talk about logistics or transportation. When you open that up to someone juggling a supply chain, which of course encompasses, but is not completely defined by transportation, it gets even more hairy, right? it's sort of like this blank canvas.

and all that comes with that. Like it's a blank canvas, great, you can do anything. Blank canvas, it's terrifying. I don't know where to start. I don't know what looks good. I need some sort of guardrails for what I'm trying to do. So I think I always start from the standpoint of no matter what, this is a lot think what people need to get their heads around when it comes to AI is don't start with what.

tool you're going to use, what is the problem that needs to be solved, and then work backwards to figure out what tool is going to be used. Or better yet...

Talk to a company that solves the problem and let them figure out what tool they're going to use. I, you you don't, when, when you have someone do work renovation work in your house, you aren't telling the contractor, Oh, don't you think you should use the miter saw here? Or, know, like you, you employ them to do the thing that they do. So I think there's a little bit of that going on. like, well, I, you know, I read the whole Wikipedia entry on miter saws. So now I know exactly what it can do. And he's like, well, I'm fixing your toilet. So miter saw isn't going to work here. So.

Andrew (07:56)
you

Eric Johnson (07:57)
Uh, think understanding what your problem is and working backward from there, whether it's a big, like end to end supply chain problem or a very niche process within some component of the supply chain has to be the starting point. And then at further, would argue the, the broader you try to address something, the bigger, the, the higher the bar to make it work. So.

Especially when you're dealing with something where you don't really have a strong understanding of the technology at play. Like if it's a TMS at this point, there may be fancier TMSs, there may be better, there may be more efficient, but most people in freight know what a TMS is supposed to do and how it's supposed to work. So if there's a better version of it, you can internalize that. If you're talking about like, well our agentic, you know, our agentic workflow problem is going to solve this like super highly technical.

issue, you don't have a framework to understand that. So the, the, the narrower you can address the problem or the narrow problem that you can address, the better you're a going to understand whether it's successful or not. And the better chance you're going to have success with it because there's just, you're, sort of like eliminating variables. Right. So.

Andrew (09:11)
Absolutely. I love that thread that you got on though around, I think something I saw also like in even like trade finance and supply chain, right? Where there's these companies who have been, or even DTC, right? It's like these companies who are like, well, we're going to reshape the economics around how this works and come to find out for about two to 3000 years.

That actually isn't true because it's a physics based problem set when you're goods, physical goods from A to B. So you can rebalance the equation of what you own and don't own, but it does come at a cost. I think when I was thinking about our conversation on...

You know, like what is winning and not winning? I think you're hitting it down the head of like, actually it's still the same fundamentals, right? And sometimes I think what we've been seeing, at least on my side, has been actually there's value of point solutions because you need to have clarity around what this agentic thing does because it needs to be able to solve a very concrete problem. And so it kind of is changing the landscape.

Eric Johnson (10:06)
I would even go so far as to say like the person you described that persona managing like hundreds of millions of dollars in the supply chain. is extreme. Like say you were a software provider and I'm not saying you, I'm saying the Royal you. Say you were a software provider and you knew in your heart that you had a platform that would literally transform this entire business. But you need it to be implemented across like

Andrew (10:20)
you

Eric Johnson (10:32)
eight divisions and you need to like wipe out existing systems and you need to like rewire people to work in this way. And there may be job cuts because you don't need so many people because it's so efficient and you may need partners, different partners, cause the partners don't add the right data. Like tell that to a VP of supply chain that you have to literally upend everything you're doing to get to a point where this will work better. Like that's just not practical.

in any way, like physically, it's not practical. Mentally, it's not practical. Emotionally, it's not practical. like, there's just so much financially, right? it has to start from like a little experiment and then let the thing kind of like germinate from there. There's no other way to do it in like a big global or even a big domestic supply chain. It's too hard to just replace everything or fix everything all at once.

Andrew (11:24)
Well, you know, it's interesting because it also kind of reminds me of this new wave of ERPs, And I think there will be probably some net new innovations in that category. But I mean, I'm sure you've seen this even beyond TMSs and Procure to Pay platforms, everything else. You talk about ripping on ERP and fundamentally changing behavior patterns of their system record. That's gonna be like a 10 to 20 year sell cycle, right? Like that is a...

Eric Johnson (11:44)
Thanks.

Yeah. Finance

people, finance people love having all of their like databases like completely changed around one day. Yeah. Right.

Andrew (11:54)
Yeah, and magically migrated and promise that it won't ever have any issues. Yeah, it's

a very fascinating concept. And I think you're right. It's that when there's black boxes involved in like how the magic or the potatoes get mashed, ultimately the best way to manage it, especially when you're operating a very...

I mean, and we know this, manufacturers, distributors, they work on margins, A very high volatile margin-based industry. Like you have to have a lot of confidence, When that's, think, to your point, simplicity wins, keeping it framework and easy. You know, there actually is one thing that we talked about in the pre-show notes that I thought was interesting, because you kept referencing what, I think two different frameworks of 10, but it's, we think about, or we have always talked about software needing to be 10X better.

an improvement of where the baseline is from a value ROI for these types of companies to transition. But also a different 10 is has that changed at all since 2015? I know we talked about like, you know, a decade ago of like what we think about. And so just kind of curious about like that 10x improvement 10 years ago model.

Eric Johnson (12:55)
Yeah. mean, so 10 is obviously just like a round number to like think back on. And especially since we're in, we're in the very tall end of a round number year. So, I mean, 2015 is an interesting time to think back

Andrew (12:58)
Yeah.

Eric Johnson (13:08)
So it's about two to three years after venture capital's fascination with logistics started. So was way too early to determine whether it was going to be successful or not. It was also way too early at that point for anyone in the logistics world to get their head around the idea of like a piece of software, like 10Xing some metric.

that they had been paying attention to or that they were being judged by. So, you know, if you go in, in 2015 to, you know, a VP of supply chain or, uh, you know, director of international transportation, you say, we are going to reduce your, this X span by 90 % over the next six to 12 months. They would have been like, great. Let me know when you're off of Ayahuasca, uh, and then come back.

And we can have a real legitimate conversation because that's impossible. Right. We just weren't there yet. Like everything was very incremental in growth. And that was, you know, it was this kind of back to this thing, like, where you don't, you don't like rock the boat too quickly, right? Like you want to rock it enough to change things around the edges, but if you rock it too quickly, it turns over. And so the idea that you would have that transformative an impact.

In a very short period of time, it just didn't compute. didn't seem real. If we go now, I think there is almost an expectation that the returns will reach something approaching that because there's been a decade plus of investment into this and collect all that collective investment should mean something. think expectations get raised.

2015, we were barely a few years removed from when people in supply chain didn't even trust cloud, much less like some of the things we're talking about now. So by 2015, they were like, okay, cloud seems to not break. It doesn't seem to be a security risk. I like that I can scale it up and down for my needs. I like that I get the advantages of everything that was built for other customers. I'm comfortable with that. I'm still not comfortable with you telling me that things are gonna be 10 times better than they were yesterday.

Now, know, 10 years on there is, there's incrementally higher expectations every year. And so I don't think it's that I wouldn't call 10 X like the price of entry now, but it's not an outlandish thing to go in and say that you can accomplish this because now there's a better understanding of, yeah, we really have been like super inefficient for a long period of time. And we just accepted that as okay.

Andrew (15:34)
Yeah, interesting.

And I think to that point of the accepting kind of the pain and kind of the, and it's very fascinating. think to your right, some of the companies that we've talked to and that I talked to a regular basis, I think they're even still not on the cloud. They have accepted that the cloud can work, but they just don't even have a pathway in the next two or three years to get there. And so it's very fascinating how I think people...

are disillusioned sometimes, especially I think when you think about the investment world around how they thought they could apply the same dollar velocity to the space, which I think has taken inherently more time, is that there requires some enforcement function. Obviously, COVID has been part of that. The tariff macroeconomic climate is part of that. But even within those, I'm curious, has there been any tipping points or kind of forcing function that you saw that like

put people in a sense of like, yes, I'm going to commit capital and resources to these, this new technology.

Eric Johnson (16:25)
Okay, well, I mean, you mentioned the pandemic, I think clearly, obviously, I mean, this is going to be such an interesting period for people who like follow capital, you know, movements and to study like, especially if they drill down into supply chain or logistics. So clearly very much a forcing function. However, I would also say like, think back, we all had this impression like a year or two into the pandemic that

things were never going to be the same. And, you know, people would move wholeheartedly, like forget about all the, all the ways that things were never going to be the same. Let's focus it on what we're talking about. Like they are going to think about what they do differently. They're going to think about how distributed people can be. They're going to think about what a machine can do. They're going to think about how they can collaborate in new ways. They're going to think about buying software in a new way.

Did it really change the fragmentation of the market? Has it created like dominant category kings? Do we see any company that in 2020 was kind of up and coming on the precipice and now has like a dominant share over a company in any category that was an incumbent previous to 2020? Not really. Maybe there's still a path for the next five years. Maybe the dust still needs to settle a little bit.

But I would argue the opposite. I would argue that if anything, something as disruptive as the pandemic showed that there's certain characteristics of global supply chains that are just the way they are. And it's up to the software vendors and the people who buy software to work around those fundamentals instead of constantly fighting against them. It's sort of like going out and being like, I could walk.

See, I'm going to tell you this is another bad analogy. I could walk 10 miles into the ocean if not for their waves. Well, okay. But there are waves. you know, waves exist. You can't make them not exist. Right. And so, uh, I think that's, if anything, that's what we're kind of coming to the slow realization around is there are certain foundation foundational things. And one of them is that the industry, don't think innately likes quote unquote category kinks.

Andrew (18:14)
You

Eric Johnson (18:34)
They like choice. They like competition. They like fragmentation. It suits them. It doesn't suit them to have every single company reliant on one or two companies like we are with email or social media or, know, name your thing that we're completely relying upon. So.

Andrew (18:52)
Yeah, I

mean, it's a, it's it's a control function, right? mean, like even with the AWS outages that happened what a month ago, a lot of companies that I chat with, This is why we have servers underneath our desks because I'd rather be the one controlling the outcome and the fate versus relying on someone else. And so I think you're absolutely right. There is not. Absolutely.

Eric Johnson (19:06)
Or they have backup, they you know, they have capacity with AWS and Google

or Azure or whatever, you know? So yeah, for sure. It's, I mean, that's a great example. You're right.

Andrew (19:13)
Absolutely.

But it is very fascinating when we think about it because I think that just like their carrier routes and 3PLs and suppliers, they like the optionality.

I think it's been interesting to step back a little bit on the market too of thinking through, although obviously investors, especially the early stage ones in venture want to grow at all costs and think about like that three to two next growth. I think there's something uniquely different when it comes to companies working in the physical space where sometimes you just can't move them faster than how they're going to move because it's tied to the physical good movement as well, right? And it's a very fascinating dynamic and dichotomy that exists.

You know, on this actually, on the AI front, and I'm very curious from your perspective, is there anything that you have seen lately that has had a little bit on like the 10x value where there's like ETA predictions or detection or, any automation? I'm curious, if there's something that you felt has been a bit of an outlier compared to what you've been seeing in the market.

Eric Johnson (20:12)
I think I'm naturally sort of, in a way paid to be skeptical of this, right? you can imagine I have a hundred people a month trying to whisper in my ear that they have the magic beans, you know? So it's part of my job to try to poke holes in it, but also I'm naturally quite optimistic. And I think I try to convey to the industry that

No one thing is going to solve everybody's problems. What you need to do is just be open, be critical, but be open, right? Like don't shut yourself off. Don't bury your head in the sand. So I see lots of little uses of, you know, like what would probably in the tech world be considered basic LLMs that are pretty interesting, you know, for things like truckload scheduling.

Andrew (20:53)
Hmm.

Eric Johnson (20:56)
or fleet dispatch or understanding when, where inventory can be pulled from in the moment in a way that a human being would never be able to like conceptualize like, this is closer to me, but it's actually better to pull this thing that just got overgrown line from some place that's twice as far because it never sells through there, right?

Andrew (21:09)
Hmm.

Eric Johnson (21:19)
I'm just throwing out some examples like that, but so there's lots of interesting things like that. Now you're talking about like something I would imagine that's a little bit bigger and maybe more transformative. I mean, I don't think people have a very good concept yet for how big. vision and the advances in that are in tandem with like feeding data to these models and what the combination of those would do. We'll do.

Andrew (21:20)
Hmm.

Eric Johnson (21:46)
terms of like knowing where assets are, knowing where inventory within those assets are. think we're, we're still really early in understanding that. and whenever you get into hardware, like you said, you keep, you've said a couple of times the physical world, whenever you get into marrying hardware that actually is adopted with software, that is like actually something that has a moat. Just like in the way that ocean carriers have a moat because they have giant

ships that cost a hundred million dollars each and terminals have a moat, know, ports have a moat because there's only physical space for certain places in the world where you can put ports. And when you start building that type of physical moat, that's, that can be very different and cut against what I was talking about before in terms of fragmentation. in the yard. That could be tracking.

trucks on a highway that could be watching thing, you know, the harder the environment to track it and capture information about it, and the more successful it is, the harder it will be to replicate.

Andrew (22:44)
there's like two threads that I thought was actually very interesting. was taking notes on and one is I keep coming back to, I was actually talking to an investor, a friend I've known in the industry for a while. And they've been very hesitant to deploy capital. And you know, I won't name any names, but I think the reason, the underlying reason why they said that was like, look, we see a lot of companies pop up.

and they're very quick to market. They capture this set of customer base, but come to find out the problem that they solve, the market isn't big enough for us to invest in. And so it leads to this very interesting question. And I think it's tied to this underlying thing that we've observed is that these existing software vendors and or tooling platforms, ultimately, I think where we have seen AI and alarms drive a lot of lift actually has been around reducing very unsexy parts of the workflow user experience friction.

It's like getting the data over a little bit faster or, but it's actually, it's not, it's not really a chat bot or copilot. Like everything that people consume. It's like, actually, if you can just get my data over there with a little less work and a little less exceptions.

Eric Johnson (23:32)
Mm-hmm.

It's almost like

RTA more than anything else, right? Yeah. Yeah. Yeah.

Andrew (23:44)
Exactly. And so it's

a very fascinating structure. And I think tied with that, what you're kind of describing, which is fun is, obviously, a 16 Z is a very famous investor, they have, they always hound on this idea of markets eventually end up in a barbell scenario.

where you have very asset light, extremely asset light of implementations of features and the other side of the rail or the bar you have very asset heavy.

like the actual ships on the ocean. And both of those are defensible, but everything in the middle kind of starts getting wiped out. And so it'll be interesting to see if that plays out true as well. But I think that those threads are kind of converging because we are seeing that, right? Hyper-asset light, which may mean that you might actually not be a feasible venture backable company in this new wave of gen AI native, or you're like asset heavy, I'm buying boats on ocean because that is defensible,

Eric Johnson (24:31)
this goes back to what we were talking about in terms of the somewhat misalignment between the venture world and the way people actually think and buy. I think we wanna be helping people like think about how they justify an investment in something.

I think there's a case to be made that they may be permanently at odds unless one side like literally changes their entire mindset because in order to get the return that a VC would want to get on that asset light model, you need people to make, you need a lot of people to make a big bet in a short period of time, relatively short period of time.

What we talked about before where the supply chain manager doesn't want to disrupt everything all at once they may want to make a small point or like process bet That's that's not going to break everything else If that that might individually be a successful business that's solving that need but that's not venture scale Because the market's too small, right? so

There's something needs to, something needs to change on one side or the other, or there's just going to be this permanent disconnect and that barbell in the middle is going to be the thing that tenuously connects them.

Andrew (25:36)
do think that there's inherently that model where when you get down to fundamentals, business principles, asset light, asset heavy, where is the AI actually the technology, the modern technology now kind of drive value.

it feels like we're seeing that divergence happening in this specific market, which will be interesting to see if it plays out to be true or not. There's a lot of assumptions that were made, I think, pre-COVID and pre-federal level and geopolitical changes that have happened over the past few years that no one would have predicted, but here we are. well, look, I think there's like one other note.

I had that I thought was interesting when we were in the pre-show discussion, which is you brought up something that I've observed as well, that the idea these organizations that companies like manufacturer distributors partner with, carriers of your PLs, actually are becoming and expected to be an innovation arm for these organizations.

And so I'm very curious what you've observed and how you've thought about it. mean, ultimately also because like this changes the economics and even the hiring strategy formation of these organizations around capacity and portals that they have to launch So would love to dive into what have you been seeing and how has that been evolving over the past few years or even quarters?

Eric Johnson (26:45)
So I would love to be able to take credit for that like kernel of information, but I've just, I've basically stolen it from someone in the industry and I keep talking about it because I think it's very accurate. So, and maybe this guy should be one of your future guests. There's a guy named Chad Olson, who was with a company called AVRL. And he told me, it's gotta be two years ago. He's like,

Andrew (26:54)
you

Eric Johnson (27:10)
essentially, cause he works with freight brokers and he said, essentially three PLs have become the innovation arm for a lot of shippers. And by that he meant, and this is what I'll describe and you can broaden it out. This is, that's a very like sort of specific innovation that they supply to a domestic transportation person at a shipper. You can broaden it out if you're a global three PL doing contract logistics, PO management.

inventory management, customs clearance, quality assurance at origin. You know, obviously the three PLs, global three PL can do a whole bunch of different things, but essentially what the shipper is buying from you is not just space on transportation conveyance and they're not buying services around that movement of freight. They're essentially.

paying to not have to innovate as much as they ordinarily would have to if they didn't use you. they're not innovating themselves and then handing these services off to you like, turnkey for someone to physically do. The expectation is the 3PL is innovating to do those things better. And all of that innovation cost is baked into whatever the 3PL can charge.

And that cost to provide that from the 3PL's perspective, it's not a cost plus model. It's a, what will the market bear at whatever given point you are in the market cycle? So right now, the cost to innovate for a 3PL is a much higher percentage of the revenue that they're gaining because the revenue is low because it's a low demand, pretty fluid market globally. So in the middle of the pandemic,

It was probably a much smaller percentage to innovate because the revenue was so much higher and the margins were so much higher. But the need to be that innovation arm for a large section, if not every single shipper in some way, never goes away. And in fact, it's probably exponentially increasing over time because development cycles are shortening and expectations are rising.

for service and tech. I think anyone who's in 3PL, who's in a 3PL or has worked with a 3PL, if they haven't consciously thought about that, which I suspect most have, if they haven't, they're probably hopefully nodding their head and going, yeah, that is true. That's the arrangement. Like you keep improving on my behalf, basically.

Andrew (29:25)
it's interesting because I think this also correlates to more macro trend.

of software engineering hiring that I've observed as well, where there's this rise of the revival of the old, this is honestly 2015, 2015 Palantir Forward deployed engineer, right? They actually want an engineer, this engineer deployed in there, but the reality what they're looking for is someone who is customer centric and product focused because ultimately the expectation, especially in supply chain is you need to be able to partner with us because we're paying you not just for the tool, but also for the content.

context

and knowledge to help do it better. And so it's interesting to think about that because I've seen that even with our customers where

You close a customer, you're on there and they're like, well, this is all great, but how do you guys recommend we do this? And I was like, well, that's interesting. It's like, well, the tooling aside, we believe that you could do it. The reason why is because we ultimately wanted to buy into what you're seeing across the market and similar customers so that we can do it better. And I think to your point, that's very much aligned with the innovation arm and the forward deployed engineer model as well.

Eric Johnson (30:28)
There's

all sorts of like threads we could do 40 minutes, 15 minutes, just on this topic, because you know, what you just described is there's all sorts of like benefits, but also some perils, right? Like, so I'm Sam, shipper. Uh, what you're describing a little bit is like sort of a managed service kind of arrangement where you're, I don't need just, I don't need the software. I don't need like customer service. I need someone on site to like help me run it better.

Andrew (30:31)
Hahaha

Eric Johnson (30:54)
Or, you know, even if they're remote, just basically, they need to be like a de facto member of my team, essentially. Cause my team can't get the most out of whatever it is we've bought. It's awesome, but we're only using 10 % of it and we need to be using 80 % of it. so that's great. However, you are, you're essentially giving that company. Yes. Nominally you're helping, they're helping you run things better. They're gaining information about how you run it.

Andrew (30:59)
Mm-hmm.

Eric Johnson (31:18)
but they're also gaining a ton of information about how you run it. And that will be used in some other way. The first thought obviously for most people would be, they're just going to use this to target all of my competitors and say, look what they're doing. We can do this for you to close that gap. But it goes way deeper than that, like building models, doing things that may disintermediate some part of what you as even as a shipper are doing. Right? Like, so.

You just have to go in like super, I would say like the pen, I've always said like the pendulum swings between from on a shippers reliance on his three PLs and the pendulum swings. Like when things are completely chaotic and out of control and moving really fast, they will admit to themselves. They don't have the in-house bandwidth or expertise to keep pace with all that. So you go to an outside company to help with that.

Then you start to get your arms around it. You try to bring as much of it in-house because ultimately you want things to be in your control. And then some new stuff happens and it gets out of control. then you're like, there's this constant, constant pendulum swinging of control versus outsourcing to get the best result. But you never, like no shipper ever wakes up and goes, we want to be a hundred percent outsourced on our supply chain.

because that's the leanest, lightest, most efficient model. mean, anyone who's doing that is like, you you're going to have a lot of questions to answer at some point. So the key is like, what is, should be like, what is the least amount that we can comfortably outsource that we can eventually take back in-house because things will get out of control again and we will need to outsource.

Andrew (32:49)
That's right. I think ultimately the decision logic has to be centered around, why do you willing to take off the table that's core offering as a differentiator and if you start chipping away at that core offering, I think that puts your market position at risk,

Eric Johnson (33:01)
the

whole software game in a sense from a shipper standpoint is exactly that. Like we are not as shippers best suited to hire top of the line engineers to develop solutions, even for our own specific problems. We are better suited to let experts do that.

Andrew (33:17)
changing topics a little bit, because I know that it's pretty relevant, I think, in the news cycle right now, but there's definitely a lot of policy and, shifts of trade, dynamics and rules and regulatory changes, and obviously the sacred and...

forsaken word of terraces on table. Like anything that you think has been observationally interesting for you in the past, few months around how people are selecting tech and what they're thinking about that maybe has shifted a little bit in the back half of this year.

Eric Johnson (33:45)
⁓ yeah, I would say two things spring to mind. ⁓ I in a past job, still in this industry, still working for publications covering this industry. used to do a, what was called a global trade management. strategic kind of report about.

where the market was. And I remember just year after year, this is like the early 2010s, year after year, basically the result was the same. was like more people need to invest in global trade management capability. They need better trade compliance tools. They need better restricted party tools. They need better sense of like which suppliers they're working with that could put them at, know, expose them to some sort of audit or penalty.

So the last year has made me really think a lot about the advice that we gave people 15 years ago. And it's very easy for me as a report writer to give advice. I don't have to sign a check, right? Like at some point you need to make, justify this. But I think we're now probably going to enter a period where there's a renewed interest in those types of tools. And by the way, the entire vendor landscape has completely shifted since then.

Most of the top providers have been acquired, at least once, not multiple times into bigger organizations. There's been a spray, a range of new like AI based sort of point solutions that address specific trade compliance or customs generation the void is filled essentially, right? That's what's happened. And, and,

So that's one area. I would say another area is that, most companies now are going to have to start thinking about getting a lot stronger and understanding where they could, where they need to source from or do business with and have a, like a metric behind it.

and be able to flex between those. So whether that means, this is something that came up in the pandemic too, is like, you need just in case instead of just in time. And I was like, well, no, it's never been about one or the other. It's been about the balance between the two, because you can't ever go to one extreme to the other. Then you're not doing your job as the supply chain manager. If everything is always one answer and not the other.

So I think that's become part of the calculus now. And then back to the innovation arm of the three PLs who are the people best equipped to help companies understand those trade-offs? Sometimes it's a three PL. Sometimes it's like a consultant. Sometimes it's a software vendor. Really depends on what your, your key pieces, where are you sourcing stuff from now? Do you have a good read on where actual negotiations are?

between the US government and the government where you source from? Or are you just reading the headlines or social media and you're whiplash from the way it's moving around? It may be that there's actually productive conversations going on in the background. So just this sense of understanding the state of play geopolitically and formalizing that a little bit more than just hey, you know.

Tammy and compliance heard that this might happen next year. No, I mean, it's moving way too quickly. You need to have like a formal structure around making decisions.

Andrew (36:48)
Absolutely. then, you you insert the AI LM side of it with the tech policy function of it. It just makes it such a crazy landscape for them to try to create a new framework for them to operate. Well, look, we'd love to wrap with a little bit of quick lightning round set of questions, something I enjoy doing towards the end of each of these episodes. You know, short answers, a sentence or two each, but...

know, first question for me, what's one freight tech metric you wish every executive at mid-market manufacturers, distributors track that almost nobody does.

Eric Johnson (37:18)
A number of, this is first thing comes to mind, of pilots or subscriptions that were turned on in 2020 that are still on that you've not turned on. It's sort of like streaming services that you forget you signed up for a while back and they're still accruing costs to you.

Andrew (37:30)
I love that. Yeah. Yeah.

Okay. Perfect. Love that. Hot or not, portals as a primary way shippers, forwarders, and carriers collaborate. And why?

Eric Johnson (37:44)
I would say not because ultimately there's one company that has more leverage than every other company in a supply chain. And it may not be the shipper. I presume most of time if it's a shipper of some size, it would be the shipper. But there's usually one company that has the leverage over everybody else and it's basically down to whatever they want to do. So I can't generalize and say portals will win the day.

Andrew (38:08)
Yeah, totally. Okay, finish this sentence. If you're still managing your global logistics out of spreadsheets and email 2025, you're...

Eric Johnson (38:16)
not as far behind as you think.

Andrew (38:17)
I love that. Okay, and then question four. In one line each, AIs are overrated for blank and logistics and underrated for blank.

Eric Johnson (38:27)
Overrated right now in terms of direct job replacement. think right now it's more of a attrition enabler than it is a replacer. Underrated for in terms of cutting down on inaccurate data,

Andrew (38:43)
I love that. Okay, and then last question before we wrap. It's one of my favorites actually. If you could give your younger self one piece of advice about evaluating tech vendors and just what you've seen in the market, what would it be?

Eric Johnson (38:57)
I mean, I still struggle with this every single day and I'm pretty old now. Try as hard as you can to disassociate nice people with people that have something that's going to change the world. Every nice person doesn't have the answer to solve world hunger. know, like it's, it's a natural human instinct to just gravitate toward people who are nice and generous with their time.

So just don't change how you do things. Just be super vigilant about not associating nice with meaningful.

Andrew (39:25)
I like that. Well, Eric, this has been super helpful and fun and obviously very enjoyable. And I'm glad we were able to catch up over this recording. Thank you for cutting through this very interesting free tech noise with us, for giving operators a more realistic way to think about 10X value, AI, the role of 3PLs and partners and how they should actually play.

For folks listening, if this episode helped you benchmark what 10x value really looks like or gave you better filters for the next AI sales pitch that hits your inbox, share it with your ops, logistics, and finance teams. You'll find show notes and the full transcript at the link in the podcast. Follow Leveraged Supply Chains wherever you listen and leave a quick rating review. It helps other operators and builders find the show. I'm Andrew Stroup your host. Thanks for listening and have a great day.