Supply chain issues will remain until labor shortage is fixed: C.H. Robinson CEO

Yahoo Finance’s Brian Sozzi and Julie Hyman speak with C.H. Robinson CEO & President, Bob Biesterfeld, about the state of the logistics industry, supply chain outlook, and more.

Video transcript

BRIAN SOZZI: Holiday season is fast approaching. And that means presents for all, maybe. The pandemic has continued to place extreme pressure on global supply chains, causing bottlenecks at ports and delayed packages. Finding workers to service all the demand out there has also been a major problem. Is there any relief in sight, though? Bob Biesterfeld is the CEO of logistics giant C.H. Robinson and joins us now.

Bob, good to see you here. I know it's busy time, so thanks for taking some time to come on with us this morning here. What is the state of play in your business right now on the ground? What are some trends you're seeing?

BOB BIESTERFELD: Well, good morning. It's been, obviously, a very interesting year in the supply chain. And as of right now, as we look across the landscape, whether it be surface transportation here in North America or, obviously, on a global basis when we look at air and ocean, we continue to see challenges. We continue to see very, very strong demand in the market being met by a very constrained capacity environment, which is leading to the need for greater supply chain planning and thinking differently about how to ensure that the goods that are-- we want in the store for Christmas and your lead in for the holidays are all there when we need them to be.

JULIE HYMAN: So Bob, just following up on that, I mean, we keep seeing stories all over the place that stuff is stuck, right. Ships are stuck off the coasts. There are trucker shortages that are keeping things from getting where they need to be. What's happening with you in terms of on-time deliveries, in terms of flow and goods, flow of goods? What kind of sort of temperature check can you give us?

BOB BIESTERFELD: Well, I think what you're seeing is absolutely correct. If you start with the ocean, unfortunately, service reliability on the water has never really been lower than it is today. And so we're seeing service reliability in the range of 35%, in terms of on-time on the water. Whereas at this time last year, that was closer to 80%. And once that product gets to port, we're seeing, whether it be in Long Beach or on the East Coast ports, unfortunately, the product is having to wait before it can get unloaded.

And then we're met with, as you mentioned, a driver shortage here. You know, we're seeing less truck drivers today than we had pre-pandemic. We're down some 25,000 drivers. You know, there are estimates that say we're going to need to add over a million truck drivers over the course of the next decade, just to meet the needs of the existing demand. So it's a great opportunity for companies like Robinson to help shippers think differently about supply chain resiliency and to help plan more effectively.

You know, in a time of great truck driver shortages, like we had in just our most recent quarter, we added over 7,000 new motor carriers to our network, which is the largest network of motor carriers here in North America. And so it allows us to help customers to continue to flow those goods and ensure that product is where they need it to be for the holidays.

JULIE HYMAN: How are you guys getting creative with getting people to operate trucks? Is it a matter of somehow improving the lifestyle? Is it a matter of pay? Is it a matter of other types of benefits? What are you guys doing?

BOB BIESTERFELD: You know, C.H. Robinson is a non-asset based transportation provider. So we don't actually own the trucks. But what we do that's unique is we aggregate trucks across all fleet sizes, from the largest publicly traded fleets that people are familiar with, down to the smallest motor carriers. And so, if you really think about the US trucking industry, it is an industry of small businesses. Over 95% of the trucking companies in the US have less than five trucks.

And so what Robinson does is we bring together technology and industry experts across the globe to aggregate that long tail of small trucking companies to help them look like one big technology enabled fleets. Large shippers just simply aren't built to interact with all those small carriers. And so we leverage our technology. We enable those carriers to use our technology, which they're adopting faster than ever.

Technology usage by small motor carriers is up over 70% year over year. And so we're able to connect the over 73,000 motor carriers that we work with, the over 133,000 customers that we work with, and really help them to leverage our scale and our information advantage, in order to plan the supply chain more effectively. You know, when we came in this year, and we talked to our customers, the number one concern that they had was access to capacity. And we work to deliver on that every single day through our investments in tech and building those relationships with carriers.

BRIAN SOZZI: Yeah, Bob, you are spending large sums of money in tech, and you have been. Where are you spending the most, what areas?

BOB BIESTERFELD: Yeah, we've doubled our investment in [INAUDIBLE] over the course of the last couple of years. And really, we take a really simple lens at that. We, first and foremost, want to invest in technology that our customers will find valuable, that will help them to solve their most complex supply chain needs. Last year, we launched a incubator that we call Robinson Labs to work directly with our customers, m to solve the needs that they had.

And as I said, the things that they are most concerned about, access to capacity, right. And so access to capacity, we launched a product for them called Procure IQ, which allowed them to rethink the age-old process of annual bids and to look at the characteristics of their freights and ensure that they had the right procurement process. The second thing that we heard from our customers that they were really concerned about sustainability and emissions and building sustainable supply chains.

So we launched a product for them called Emissions IQ, which for the first time allowed them to visualize the carbon output of their entire supply chain on a global basis, where we then consulted with them to help them to continue to deliver more effective, more efficient, and greener supply chains. And today, as we led into this, we talked about the market disruptions. And we know that there's only certain things that we can control and that shippers can control.

So we wanted to enable them to do that. We know that ocean freight and access to trucks and pricing will continue to be high. But we wanted to help shippers to understand their behaviors and how they could best benefit the market. So we launched a product called Market Rate IQ, which allows them really to break down all of their pricing and understand how they can change behaviors to outperform the market.

BRIAN SOZZI: Bob, quickly before we let you go, when do things get back-- when do things get back to normal? When do we start to not talk about bottlenecks in supply chains?

BOB BIESTERFELD: You know, I think it's a great question, Brian. And today, from where we sit, it's not an easy one to answer. There just simply isn't a silver bullet. You know, there's been a lot of talk about the ports and how do we lessen the delays at the ports. Should we have 240-hour gates at the ports? But it's simply not that easy. Because the constraints extend beyond the ports, the availability of chassis, to the availability of trucks, to the availability of rail containers.

And even once that product leaves the port, we've got labor constraints at every node of the supply chain. And so really, to me, this comes down to labor. And we need to solve for the labor participation rate. We need to get more people working in the supply chain. There's a tremendous labor shortage at all points of the supply chain. So until we can solve for labor and the continued demand associated with replenishing the inventory cycle, I think we're in this situation for a while.

BRIAN SOZZI: Unusual times to be sure. Bob Biesterfeld, CEO of C.H. Robinson, good to see you. Have a great rest of the week.