Market update with Doug Waggoner, CEO, Echo Global Logistics

Logistics Management Group News Editor Jeff Berman recently caught up with Doug Waggoner, CEO of Chicago-based 3PL Echo Global Logistics. Waggoner offered up insights on various logistics and supply chain trends and themes, including: freight economic conditions, capacity and rates, M&A, technology, and cross-border logistics, among others. Their conversation follows below. 

Logistics Management (LM): How do you view the current state of the freight economy, in terms of what the key economic indicators are telling us, at the moment?

Doug Waggoner: One of the things that we look at as the economic indicator that correlates with our industry is the ISM’s (Institute for Supply Management) manufacturing PMI data, which is currently at 48.0 (a reading above 50 signals growth is occurring) and has been under 50 for the better part of two years. If you look at our verticals that we play in, much of it is in the industrial manufacturing one, and we continue to be in an industrial recession. We just did an analysis and found that there is a huge correlation between spot market prices and PMI data. When you start to see it [PMI] turn positive, I think that serves as a prognostication that the freight market is going to improve, but thus far, it hasn't.

LM: Like always these days, there is a fair amount of tariff-related activity going on, like the recent U.S.-China pause and the implementation of reciprocal tariffs, among others. How do you look at these types of things as they relate to supply chain implications?  Also, what are you hearing from customers?

Waggoner: It tends to be episodic, in that it depends on the company, the shipper, and the commodities they are importing. By and large, I have not heard much, to be honest. We saw some puts and takes with the West Coast imports, and there was a bit of a pull-forward bubble, and an air pocket afterwards in the June and July timeframe—which sort of average each other out.

LM: With West Coast imports, specifically at the Port of Los Angeles and the Port of Long Beach posting record numbers, do you think that may serve as an indication that the 2025 Peak Season has already happened?

I think everybody sort of got over the Trump rhetoric, and he keeps giving [tariff] extensions, and we keep doing business with China, and now supposedly we have a deal. So, I think a lot of the tension and the concern and the people rerouting freight has subsided. And people, I think, generally, are optimistic that we're going to get through this. It'll be business as usual. Now, how that equates with the normal seasonality that we see, I don't really know. I think there was some pull-forward of inventory so that that could lead to the so- called air pocket. Maybe that's what we saw after the July peak. But as to if we still have the Peak Season that we would expect, starting at the end of this month in September, that's anybody's guess. I think what really matters comes back to the ISM numbers, in terms of something that represents growth in our economy. I think I am actually bullish, not to get political, with some of the things we are doing with regulations and investments in the United States and also some of the manufacturing coming back home. Those things do not create a result overnight but over the coming quarters it will start to create an effect. And if we can get interest rates to come down a little bit, I do think there will be some inputs to the economy that will be very bullish, but we're just now seeing them implemented. We haven't seen the results yet.

LM: Speaking of bringing manufacturing back home, how is Echo progressing with its operations across the border in Mexico?

Waggoner: For us now, it's hard because we're just a microcosm of that market, but we're seeing actually big growth in that market. Now, how much of that is because people are near shoring and how much of it is because we have a new operation down there, and we're staffing it up and growing it. It's hard to separate those, although, when I was down in Mexico with our people down there, they're telling me that Chinese companies are opening up in Mexico every week, and they're forming these partnerships with Mexican companies. The Chinese are smart. They saw the writing on the wall when Trump got elected, and I think they started moving some of their manufacturing to Mexico right away. And we're starting to see that. We're having meetings with new businesses in Mexico all the time, and quite frequently, and there are Chinese participants in those meetings.

LM: How are things going with your counterparts in Mexico, as it relates to cross-border freight movement?

Waggoner: Selfishly, it's been very positive for us, because we're investing down there. We're adding facilities and people, and we're getting better penetration into the market. And there has been a trend towards near showing long before the tariff noise came up. We see it as sort of a target-rich environment. We feel like we're penetrating that market. We've got growth numbers to prove it, and we're excited about it.

LM: How far along are Echo’s business efforts in Mexico?

Waggoner: We've been doing business down there for a while. We've added a lot of people and a couple of facilities. We have one in Mexico City and one in Monterey and are building our carrier network. We're also implementing some specialized technology for the Mexico intra-country brokerage business. Those things are all sort of being rolled out now. Even though we've got pretty good growth, it was on a fairly low base.

LM: Regarding tariffs, how are your customers viewing potential increases in inflation and prices should more importers start to pass along the tariffs to customers in the form of higher pricing, coupled with inventory front-loading, prior to tariffs being implemented, too?

Waggoner: It's all over the board. We've heard about people that diverted freight into Canada and Mexico to avoid the tariffs on an anecdotal basis. We don't just don't have granular data that would be statistically significant. Some of the anecdotes are that people are absorbing the costs, and hoping to pass some of it on later, but initially choosing not to do so, I think. I talked to one customer in the pool supply business recently, and they're absorbing all of those increased costs, and it's biting into their profits. They're making that decision to maintain their market share.

LM: Earlier this summer, Echo announced its acquisition of FreightSaver. What are the plans for future M&A efforts by Echo?

Waggoner: I think it is conceivable we will do another deal in 2025. What I would tell you is that in the last three months, there seems to be a lot of small companies coming to market. I'm seeing sometimes one, two or three per week. I don't know why that is because, generally, people don't want to sell their business in a trough. Now these tend to be companies showed some growth, probably because they're smaller companies. But it has been amazing to me. After a couple of years of virtually no M&A activity, suddenly we're starting to see a lot of opportunities. We pulled the trigger on FreightSaver, and we're actively looking at a couple of others. If we can get it across the finish line, I think we could announce at least one more in 2025.

LM: What are the biggest benefits in acquiring FreightSaver?

Waggoner: We like the team. We've known the team for a long time, and we're very comfortable that it's a great cultural fit. They've got a book of business that has virtually no overlap with ours, so it's very additive. They're a very scrappy, entrepreneurial company. They've got very high growth for a company their size, and we're basically buying a portfolio business. We're buying a team that we know and trust, and they're very good with managed transportation. We've got a brokerage segment of our business, and we have a contractual managed transportation business. They do a lot of managed transportation, and they do it the same way that we do. They're a good fit with what we do and how we do it.

LM: How do you view the current state of AI within logistics?

Waggoner: For Echo, I think you can probably take some hints for the rest of the industry, but we've got a full-court press on with AI. We've always spent a lot on technology and data science, but then along comes this new technology called AI, and the tools are out there that you could actually implement it very quickly, and it's pretty economic to do it. The hard part is you've got to change your business processes and put some thought strategy behind what you're doing. We have probably 10 immediate use cases in our business that tend to be more process-oriented and behind the scenes. So, it's not necessarily something customers would see, but it's something that makes us operate more efficiently and more smoothly. I said we have about 10 active use cases we're working on, and we probably have about 25 on our roadmap. I think it's going to transform Echo and probably the industry, but there's so much that can be done with AI if you can connect it with your own data and make better decisions and empower your employees to be more productive and to be more efficient.

LM: Looking at the truckload brokerage market, how are you seeing things, at the moment, given that volumes and rates are largely depressed?  

Waggoner: Well, it's still a soft market. We haven't really seen a recovery. It's not getting worse. It's not really getting better, sort of. It's a long, wide, U-shaped trend. But the distance between a soft market and a tight market is not all that great, and capacity does continue to come out of the system as carriers fold and close their doors. And when we see things like a spike in West Coast freight in July, capacity gets tight overnight, and rates go up overnight. So, when we have a demand catalyst, whether it's an improved economy or the ISM reading moving above 50, bullishness, more American manufacturing, or any sort of catalyst that spurs demand, I think you'll see the market turn quickly. It's just that we don't have that catalyst at the moment.

LM: How would you sort of size up market activity through year-end, what are your expectations?

Waggoner: We are seeing mid-single digit volume growth, and same with revenue. We are seeing some growth now, probably we're just taking some market share. I don't know that everybody's in that same boat. It's hard to predict when the market turns, and it is going to require that catalyst. It could be macroeconomic activity. It could be that you get a hurricane in the right geographic location that disrupts supply, then that upsets the balance of the national freight infrastructure and generally creates a little bit of havoc that I am. Keeping politics aside, I do think there have been a lot of pro-business things out of Trump that will take some time to play out, but I would think that by mid-2026 those things are making a contribution to the economy, and whenever that happens, there's more freight.