um get yourself connected into every podcast you can spend time listening as you drive read everything you can about the freight you haul so understand the demand for the freight you haul if you're in the produce market you need to be reading everything you can and understanding why produce is down 25 percent year over year this week you've got to be well connected through the media you've got to have good business partners and and by that i mean really good financial advice pay the money for a good accountant so they can do monthly p l's make sure you understand uh what your trip costs are welcome to life by the mile delivered by brakeworks one of america's fastest growing podcasts actually produced by trucks indicted to tell stories

welcome to this exciting episode of life of the mile delivered by freightworks i'm your host butch maltby we have got an incredible episode today for everyone that's wondering what's going on in the freight and logistics marketplace you know we we we have somebody that is uniquely equipped to answer that question dean croak you he was with us before as we broadcast out of any uh m uh matt's which was an incredible time he is the principal analyst at d.a.t now listen it's important for you to know most of you know who he is but it's important for you to know that you know he has had a long and storied career in so many different arenas he he knows trucking he knows logistics operations telematics data science business intelligence everything related to measuring what's happening in the marketplace now listen after pioneering the deployment of the trucking industry's first predictive models in the mid 2000s as one of the founders of fleet risk advisors he also developed a specialty in creating operational insights and freight markets using vast data sets and visualization tools to operationalize the data he's got a bachelor's of business and transport logistics his trucking experience is not just in the ivory tower however or in some kind of academic setting he also has his days uh as an over-the-road driver in his native country australia where in the process of covering over 2 million miles he owned and operated some of the largest road trains in the world he was also the general manager of the australian trucking association played a key role in the development of the truck safe and fatigue management program both alternative clients compliance programs which have been cited in the fm csa's recent beyond compliance initiative you have a long and distinguished vita but you know what people love about your interpretation of what's going on in the marketplace you make it real dean so let's uh let's let's make it real in this episode let me just start out with a open-ended question what in the world is going on yeah um one of the things that we've become and i've specialized in is being able to tell stories about data and butch i learned a very hard lesson working with a good friend of mine at one of the large truckload carriers we were providing some data analytics and we listened to this long presentation lots of slides lots of charts you know months of analysts and he looked across the table and said so what now what exactly and i'll i'll never forget those words he said i get it i i trust you i know you know your stuff but what do i do with it now help me operationalize that data and that was 10 years ago so i've spent the majority of my time in the us in particular using data to tell stories so that people can understand how to make that next decision because i think we all get the data is very powerful but what everyone gets to it's it's it's the stage everyone gets to it takes a little bit longer for some people but they say tell me what to do with it i don't have time i don't have time to study the chart just tell me what to say to the driver so i've spent a lot of time in the in the analytics space using telematics data to predict things like who's going to quit who's going to have an accident who's going to get the best mpg data is incredibly powerful and uh and it tells a really good story about the you know how drivers feel because you know we don't have a data point for a sick child at home in the you know the as400 green screen system or whether it's a more modern system but you have a data point that points to it and it could be they're turning down more loads or they're requesting more home time or they're having more time off duty sleeper cab there's if you look at data hard enough and long enough you can tell a story with it and i think it's just become incredibly powerful today um you know i was on a show this morning we were talking about um dwell time for carriers and one of the things that came up when we did some free-form text analytics we used some what they call natural language processing software and we looked at all the words that drivers use when they're sitting in the truck waiting on a loading dock and it turns out that the word waiting is highly predictive of a driver having a preventable accident when they leave the loading dock because they're frustrated frustrated and angry and they haven't been paid for the first two hours of unloading so telling a story about data is absolutely fascinating and some of the data points that we are looking at right now are a little bit daunting if you're a carrier that's not getting full cost recovery of the fuel surcharge you know i think the sort of the the most exposed carrier right now uh and keep in mind spot rates line hole spot rates have dropped 82 cents a mile since the start of the year they're under they're about 1.96 a mile this morning on dat's line hall network that's down 82 cents a mile since the start of the year that's extraordinary numbers we're right around break even for the small carrier whose costs have gone up about 50 cents a mile in the last last year so profitability has changed dramatically i'm really concerned about the carrier that doesn't understand their operating cost and who is not getting any of the fuel surcharge or full cost recovery of the fuel surcharge or even half of the fuel search how many carriers is that i'm sorry dean you're concerned about that how many what percentage of carriers are in that dark place yeah yeah i think you know we've had um the data shows we've had something like 110 000 carriers joined the industry in the last year you know total carriers and i'm just pulling up the data now so we had a hundred and um in terms of the number of carriers most of them were uh owner operators so we had something like 30 i think it was 32 yeah 32 of the capacity added in the last year were owner operators so and i think to answer your question the ones that are almost exposed are those that this is their first freight cycle so if you've been through 18 19 and 16 17 freight cycles i think you would have taken the advice and put money away for the rainy day probably paid off the debt for your truck and trailer maybe you bought a second trailer you know maybe you've got a flat bed lying around so you can switch modes but you've certainly got a lot more flexibility in how to weather this storm but i think the carrier that's come in and paid double what they should have well should have is a relative term but if you think about paying double what you would normally pay for a used truck to come into this business in the last year and you've paid a hundred and the average for a four-year-old sleep attractor was 118 000 earlier this year whereas in the great recession to pre-covert area it was only 30 to 50 000 right so you're talking about a big job if you paid that kind of money in the last freight cycle insurance everything's gone up i think that carrier is incredibly vulnerable as to the percentage i'm going to say it's something like about five percent of the owner operators out there i think are exposed really exposed to this but what we're seeing butch right now of course is this capacity migration one of the numbers i think we talked about in the last show was you know when you get to to run your own truck and trailer and have your own mc authority and have your own permits and of course pay your dat load board subscription fee that takes about 50 cents a mile right so if i if i'm at least on carrier for a large fleet the average there i think is about a dollar 72 as a national average so if i have a dollar 72 and i add 50 cents to be my own as an independent i'm up around 2.20 a mile break even now in the last 18 months we've been way north of 220 a mile on the line hall but we've cut we've come back down under 220 a mile break even in the last month so right now carriers have got a decision do i not pay myself the salary i've been paying myself just to keep the doors open do i park the truck and trailer and go and drive a combine harvester in winter do i go back to working for a large truckload carrier and just park my truck or do i park the trailer and go and tow someone else's trailer so we're at we're at a decision time and of course there'll be some carriers that five percent that will hand their vehicles back into their finance companies because the margins just aren't there that they were when they first started the industry so we've seen this incredible decline not i mean it's not news to people that the market turned i think what's news is how fast it turned and of course this was exacerbated by the russian invasion of ukraine and then the massive spike in fuel prices but rates were heading south before that you know so this is a normal market cycle it's just a lot faster well and what i remember from our last conversation dean and it was so insightful that so many people that didn't have experience in the cycles jumped in during this solid season of exemptions and alike and all of a sudden they're thinking this is great i love this industry and they they thought it was sustainable but it's not is it right no you had uh i mean the fuel surcharge was like 40 cents a mile this time last year today it's up around 70. um you know it's for a lot of carriers with the fuel prices up around i think the national average is 563 it's over 6.40 here in new england if you look at the math it's about 85 cents per mile so it's about it's almost half of your operating cost is fuel alone go back to this time last year it was about half that so it was pretty i won't say it was easy trucking's never easy but it was a lot easier to make a good profit margin and i did the math on this but i did the math on what you would have made this time last year you were making about a 55 cents a mile gross profit margin with rates and fuel where they were a year ago today that's down to about 30 cents a mile so you know it's it's dropping dramatically if if i'm a carrier that's not getting any of the fuel surcharge and just getting average line haul i'm actually losing 34 cents a mile now i will i will make that up by not paying myself as much of a wage as i would have normally so i'll keep the doors open but carrier profitability has absolutely plummeted in the last little while and i think for a lot of carriers that you know were enjoying the good times last year this is a real shock to them because they won't have good business partners they won't understand their operating costs and i guarantee you they won't have taken i won't say my advice but most people's advice including me put money away for the rainy day because it's going to come and it'll be severe i literally wrote those words 12 months ago because it's the inevitability of this market is is is so that we we know that we go up and then we come down dean let me ask you this question for those carriers that find themselves uh with an ox in the ditch right now what are the lessons that can be learned that they can appropriate to these inevitable cycles that will come in the future what should some of these carriers be talking about internally what should they be looking at in terms of fixed and variable expenses and like what kind of insight would you give them

without doubt watch shows like yours get yourself connected into every podcast you can spend time listening as you drive read everything you can about the freight you haul so understand the demand for the freight you haul if you're in the produce market you need to be reading everything you can and understanding why produce is down 25 year-over-year this week we're off to a really slow start in the produce season even in the southeast produce season where it starts rates are down about six cents per mile instead of up six cents a mile so you've got to be well connected through the media you've got to have good business partners and and by that i mean really good financial advice pay the money for a good accountant so they can do monthly p l's make sure you understand uh what your trip costs are uh a lot of carriers don't know that they have fixed costs of 240 a day on average that's fixed costs without moving a wheel and you'll hear this talk of well i'll just wait it out i'll wait overnight to get a better rate tomorrow well then you've got another 240 on top of that to dig yourself out of so what we're seeing right now carriers lessons learned are they're moving they did about 8 fewer miles last year because the rates were higher so what they're doing now is and should be doing now is do another trip per week do another trip every second week so run more trips and take the focus off the rate per mile and put it on the revenue per tract a week and try and keep that revenue coming in it means doing more trips more miles not laying over as much and and running lanes that you haven't run before because sometimes a lower rate out of a market gets you into it now that's interesting that's counterintuitive isn't it right exactly yeah because a lot of carriers will hold out you know carriers are playing chess all the time you know they're always thinking multiple moves ahead because it's not whereas the broker might be saying well i'm talking about a load well if i'm talking about this load i'm also thinking about the next load and the load and the load after that because i want to get home on saturday so i'm always figuring out where do i need to go to get the best rate and is it where i would normally run so sometimes i've got to take a lower rate to get into a market with a higher rate so that's how carriers are thinking and that's what's changing this time around obviously they're trying to reduce their deadhead miles because they're not getting you don't get the fuel surcharge on empty miles so you're trying to reduce your empty miles be more strategic about what lanes you run and be prepared to run to different destinations to get better revenue per tractor week so the rate per mile is not always the ultimate thing because it's if you're running into atlanta for example and you've got traffic on 285 or 400 it doesn't matter what rate you're getting if you're going to sit there for four or five hours you're not going to make much money so all those things come into this and i think what carriers are doing what happens because of the pandemic are shows like yours shows like ours on tuesday there's a lot of people now that have some really good content that you can you can watch weekly and have your finger on the pulse so that's that's the sort of thing that i'm seeing carriers doing differently and i would highly recommend that they stay connected to the industry because i think this mistake they make is they they kind of sit in their social media echo chamber and all that does is reinforce your own negative views or positive views whatever okay yeah i think get you know get out of those echo chambers and start listening to other points of view as it relates to freight because sometimes you might be missing the big picture and uh you know we're not always the best business managers and what i say we as drivers you know we're great at operating a truck tying loads down but the business of running a business you really need good business partners and good input and you to do that you've got to listen to a lot of people to get that right dean that is so helpful now let me ask you this question these this confluence of all these forces at work in the market right now what has been the primary impact in the whole brokerage arena it's very interesting it's a great question we just had a big broker symposium this week with all of our top customers it turns out that brokers have increased their share of the contract freight market which is again counterintuitive but because brokers have this wonderful ability to find capacity that's their core business is to tap into freight networks that shippers can't see for maybe volume or loads that are out of the ordinary maybe it's on a lane where there's low volume or it's a specialty load or it's a or what we've seen in the last year a lot of lanes pop up that weren't in routing guides they weren't in the rfp from last year because the ship came in from asia to mobile instead of los angeles and suddenly there's all this volume in mobile alabama and and the shipper didn't negotiate a rate in last year's rfp so that has been a real hallmark of the pandemic is all of this volume so remember a lot a lot of volume came in from asia on on vessels that were leased by 3pls and truck companies smaller vessels to get their customer volume in well those ships can get into really small ports and and what we saw was a lot more volume popping up in areas that just didn't have contract rates so that's the sort of thing that i think carriers have been benefiting from in the spot market that's why we've seen double the volume of freight in the last year in the spot market is because you know there's been a lot more volume move to spot because there weren't rates already established in the routing guide so it naturally falls through the routing guides out into the spot market to get moved of course the other thing was just the urgency i think the big thing that we've seen shift in the last three months because a lot of people said why is the market turned so quickly well obviously fuel prices went up but when fuel prices went up and shippers started to get with fuel surcharges suddenly the cost of transportation became really burdened and burdensome to the shippers because it's hard for them to pass all of it onto consumers they have to have to absorb this so what's happened is they've said okay so for the last year we've been moving whatever we could whenever we could if we could get a truck and we had 10 pallets it was loaded and gone so what you had was this inflated demand where it appeared we had all this freight but it was just the same volume of freight moving on more trucks fast forward to a high fuel surcharge now you've got the same volume moving on fewer trucks because now they're sending less ltl and part loads and consolidating these 53-foot trailers as they always should have been so that's why you've seen the demand taper off and of course trucks are moving through freight networks more fluidly we've got more trucks in the market so that's those sorts of things are changing on a weekly basis and that's why we've seen such a rapid turnaround in this market in the last three months and of course as quick as it could go down we could see it turn around and go back up the other direction which inevitably will uh what we don't know butch is whether the seasonal forces of mother's day memorial day road check week this week um independence day the seasonal we're in a quarter of incredibly strong seasonal forces that normally push up demand and spot rates mother's day didn't move the needle rates went down it's fairly isolated around florida from all the flowers that come in from ecuador and colombia but we'll see if road check week road check week is an interesting one the 72 hour bit started this morning and of course you've got a part shortage on the factory side but the parts shortage is affecting all of us that own trucks i've got a friend who's sitting the week out because he's got a cracked windshield in his 379 peterbilt because he can't get a replacement so think about all of the parts shortages whether you've got air filters oil filters sensors you know you don't have a bunk heater like you know the large truckload carriers are struggling to get their freightliners to live with bunk heaters

okay in summer but that's going to be a problem come winter if we don't get that fixed so i think there's a lot of carriers that are sitting this week out because they can't get parts not because they don't have good gear it's just because they can't get parts now we'll know at the end of this week if road check week had a material impact on spot rates like it did last year last year it was an incredibly strong driver of spot rate directionality rate spiked last year i don't know what this not carriers normally keep rolling when rates are low they've had uh and this is this is missed by most people carriers had one of their and i'll quote todd ayman from atps carriers had their best year financially in three decades last year incredible so so you know with low fuel and high rates my only hope is that carriers you know put some money away for that rainy day um you know pay down some debt from these overpriced trucks and it can weather this storm by talking to drivers i think that's the case for this for the vast majority they'll be able to weather this storm with low rates and high diesel costs no that is so good to to hear and of course your insights are ones one of the things i really appreciate about you dean so much is that uh it's unusual to have people that have motivated abilities and god-given gifts in analytics that also understand the human dimension and i'm not a biologist and i'm not a physician but i will commend to you a part of the brain called the corpus callosum and it's that thin that thin piece of membrane between the two hemispheres the left and right hemispheres and typically we stereotype people as being more left brain or right brain but if you have a very active corpus callosum being which you do it means that your trans-hemispheric communication is extremely good and it is by the way i need to ask you this before i forget it i love your puppy in the background who is that that's uh that's charlie i've got charlie and oliver two labradoodles one's 14. uh that's oliver he's three he's my little guy i love it right over your shoulder it's charlie is that who it is oliver sauntered over and then like he was exiting off of an interstate just found his place to park and it was really sweet now listen let me ask i wanted to i'm going to change gears for a minute and our time our time runs quickly whenever we're together and i really appreciate it we've got eight minutes left uh one of the trending of course uh online sets of videos is elon musk talking about artificial intelligence the impact it's going to have on our world talk just real quickly about ai as it relates to the world that you're in and and a marketplace leader in what do you think is going to happen there what is happening what does the future look like yeah we've been we've been using artificial intelligence for a long time in the trucking industry you know it wasn't ai is kind of a relatively newer term uh but we've been using that sort of technology to understand multiple data sets simultaneously for probably 15 to 20 years so it's it's not it's not new i think what's new is we've now got a lot more data at our disposal so i think that you know we we the the volume of data we've got access to increases exponentially every year so the more data you have the more patterns you can find i'll give you and when we started our startup company in 2005 we would go into a large truckload carrier and they we would literally extract all of their data from their payroll finance fuel telematics dispatch we would extract all these data fields we pull in like 3 500 discrete data fields like how long the driver had been there how many gallons of fuel the truck used how many training events they've had we would extract this over three months into a separate database in atlanta and then we would build a predictive model to predict who was going to have an accident so but fast forward to 2012 that software that we were using from ibm spss uh now is free online not ibms but you can buy the same technology online and free and you don't need someone to come in and ship all your data offshore for three months or anywhere you could get literally use this free software and do what we were doing in three months in three hours so ai has accelerated how quickly we can manage you know multiple data sets and i think what what they're really trying to get to is the execution of the data it's what we started with is what do i do with it because people don't have a lot of time so how do we automate the um you know in the broken world we're talking about how do we match loads automatically how do i match carriers to networks of freight and find the right carrier with the right number of hours of service and the right you know the right home time requirement how do i do that without all of this manual intervention of phone calls and emails and texts and that's what ai i think will really help it won't replace people because i think the fear is ai will replace a lot of the things that we base our experiential you know being on it will allow you to do focus on other things that are more fulfilling and more profitable for the company and leave a lot of the mundane repetitious work that you do to some sort of computer matching algorithm that automates a lot of that decision-making process so i think that's where it takes us in the in the freight breaking world which is a good place interesting you know in in in the sense of understanding that good consultants as you really are a consultant our brokers their guides and their assets do you find that you're able to coach people on how to interpret data so that they're not disproportionately dependent on an expert always you know what i'm asking always interpreting what's there are you able to teach people how to see the dashboard and come to interpret what it means and what to do it's it's the most important part like it's the after ai and predictive modeling and predictive analytics and it's the business rules engine that says how do i use that data like so i've spent as part of the reason i've been able to very successfully implement predictive models into trucking companies and tell a driver manager show a driver manager why this driver is at risk of an accident is because i can operationalize the data and talk to them in their language so it's it is the most critical part of any data analytics product or technology is is how you actually use it so yeah it but it's a very rare skill there aren't many people that have lived in the world of trucking and lived in the world of data analytics because you've got to be able to i've got to be able to sell what a ai data suite is telling me to a guy that's been at a company for 30 years who is a vp and whose experience is based on his real world experience not what some computer's telling him because to him that's a threat because the ai is going to reshape everyone's view of history because the data will go through and find out what's really going on not what you think is going on based on what you've seen so it can be a very threatening technology it's as much about the human interaction and managing people's perception as it is the actual data set i would say it's more important to manage the change that people fear than anything else when it comes to i'm going to send you a link to the journal of neurology it's your corpus callosum i promise you you've got a highly developed corpus callosum dean uh this has just been a a delight again and and for those of you that are wondering this is uh dean croak he's the principal analyst at dat and and really uh in ways that aren't faint praise i'm going to say this i believe that your approach to data the application of data and what it can mean for the bottom line of enterprises large and small is inimitable you you really have your finger on the pulse of what's happening in the marketplace it's tremendously important for drivers driver managers anybody in trucking and logistics to understand that you can discern what's happening and it actually reminds me you know i'm a person of the book and there are there's actually a scripture in first chronicles 12 32 and it refers to the tribe of issachar who understood the times and knew what to do and dean that's really that's really you and so we are so grateful listen those of you that are subscribers to life of the mile delivered by freightworks uh great keep encouraging people to come on board and become part of our team subscribe like share and engage that allows us to have people like dean back on and uh and as we look towards the future we look forward to having you on now listen you know we don't end any of these transactions with your conversations without giving you a gift i can't remember what you got last time but i'm going to sound like a qbc infomercial host and give you some opportunities so we had this hat i don't know if you got that at mats is that the one you got uh it's similar to that i think that's that's one the other and of course this industry is hat friendly the other is this freightworks one cap and then the third option which a number of people take is we have a genuine yeti mug uh it's out of the yeti family there it's got life by the mile it's got the freightworks logo so we've got your address so which one of these should we send to you

i think the the hat with the number one on i've got an unusually large head because of that uh thing in between my hemispheres so it's because you've got a lot of data that you store in there and that's why you're so winsome and glib at points with the data uh dean this has been just an incredible time again and for whatever your day holds we hope and pray that it's it's good and it's safe uh dean croak principal analyst and more marketplace pundit when it comes to trucking and logistics we love having you on we had such good feedback on your last episode we'll look forward to doing this again this is life of the mile delivered by freightworks make sure you like subscribe engage and share we'll keep coming back to you with great information and insights like dean has given us today thanks for watching this episode you know life by the mile delivered by freightworks is one of the newest largest and fastest growing podcasts actually produced by a trucking company now we want you to like and share this episode if you'd like to see more episodes click here and make sure that you subscribe to the channel by clicking here we'll see you there

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