C.H. Robinson’s Bozeman looks back at Investor Day and next steps for the company

LM Group News Editor spoke with Dave Bozeman, President and CEO of Minneapolis-based global logistics services provider and freight forwarder C.H. Robinson, this week about various topics, including the company's first Investor Day under Bozeman's leadership, the company's operating model, AI, and tariffs, among other issues. Their conversation follows below. 

Logistics Management (LM): Earlier this month, C.H. Robinson conducted its first Investor Day with you as President and CEO. What were the key messages, or themes, of it?

Dave Bozeman: One thing we did was just to reinforce that things are different now at Robinson, and there are a couple of things related to that. Our culture change is really important, and what I wanted people to hear about that is that what happened yesterday and where we are today. It's important to really understand those things. And it was a thing where the company did what it had to do back in 2017 with digital entrants and having to deal with that. But we wanted to be clear—vocally, self-critical, and radically transparent—to everyone on what were the things that the company had to deal with. Now, fast-forward; you've got to be able to learn from those things, and then be confident in them. I wanted to kind of show the physicals, like, this is where we're going to go, these are the physicals of why you guys should feel good, about why we have the confidence on where we're going to go. It is red and green; I always say yellow is just a green going to red, so we just don’t do that. The main thing is about discipline and execution.

LM: What are some other key facets of the operating model?

Bozeman: It is about a being a company that moves faster and looks around corners, as I like to say. Our speed is different. We literally look at things and say, ‘a year is a month, a month is a week, a week is a day, and a day is an hour.’ And it's just faster in the way that we're doing things and in the market outlook that we that we put out there. We're 33 months into this thing, and no one thought we would be this much into the cycle of a freight pullback. The key things we look at—manufacturing, retail, and housing—those are the things that just have to pop. And all of those have been somewhat flat-to-muted, while starting to see some sequential uptick, but, for the most part, they are where they are, and what we decided to do is [focus on] higher highs, higher lows. We're just going to win at the bottom of the cycle, and we'll certainly be prepared for the top of the cycle. And that's why you saw us put out the $350 million-to-$450 million in incremental operating income, and go to the center of that at about, at about $400 million, but also offer some assumptions on growth, with the 0% being no growth at the bottom of the cycle, middle of the cycle would be 2.5%, and then 5% at the top. It's important for the analysts and investor community, whom put in their own models, to see how we wanted to shape how this is the world we're looking at, and this is our plan to deal with the various parts of that world born into it, and why we feel good about it, too.

LM: When we spoke earlier this year at the SMC3 conference, you mentioned how you were keen on leveraging your experience in Lean methodology, going back to your time at Amazon and Ford. How is that translating over to things at Robinson?

Bozeman: It's translating very well. As a matter of fact, I think the performance you've seen this this year, going back to when we launched this in January, I would say that our operating model was the material factor in that performance that you're seeing. The “why” for that is, number one, people need to be dialed into key kind of process indicators that are all in alignment. The key here is alignment, an enterprise strategy map that then ladders down into various divisions and then having a cadence is the key thing. We have a cadence that's not broken, in which we prosecute the business and not the person. If I have to tell you some of the secret sauce that we have to change here, it is when a person comes in and we talk about it. We embrace the red, that's the line, right? If people really wanted to understand why, it's unlocking this culture, to say, ‘Wow, Dave does not like taking this personal on me.’ And that's what our culture was. This is not about the person. This is about, ‘Hey, you are off. You're not on green. What do we need to do to get you on green?’ And by the way, that's a discovery. If we find a discovery of something broken, now we can innovate on it, and when we can innovate on it, that's going to allow us to be faster and look around corners. I would say that everyone loves that part. We are deploying problem solving now throughout the organization. That's going to take some time. That's why I said this is early innings, like the third inning, in terms of where we're going. I would say most people are linked in on it, but I'm also being real with you, in that not everyone's built for this. And some people are not here anymore. There are still some people who are leaning into this, and some, quite frankly, probably it won't be for them right as they go along. That's okay, too.

LM: Let’s shift over to some industry issues. How are you addressing the likely implementation of increased tariffs with your customers, in terms of how you are working with your shipper customers about it?

Bozeman: The way I view this is you have to go back and say businesses overall, coming out of the pandemic, really started to look at supply chains. The world didn't really understand supply chains until that happened. Robinson has been in pole position to really help customers get a lot more resilient on their supply chains. We've continued to do that. And, so, this is why you saw some nearshoring and things that happened. It didn't just start, this has been happening a bit coming in, and we've been right there in the front.

Going back to the first port strike, we were preparing with customers for that, and that carried over. We've had some customers tell us to continue on with that shift, to, say, West Coast ports, or front loading based on tariffs, to bring some things in. But you'd be surprised. It's not, as I said, really material. We deal with 95,000 customers. Was there some front loading? Yes, but there was some front loading before. Some of our export customers are moving out to the West Coast because of the potential strike that's coming up. And some have decided just to stay where they are as well. And, so, we meet people where they are, the various customers on what we're doing. The key point of this is, look, we're going to always have some type of tariff, potential port strike, or Red Sea disruption, periods of this kind of volatile disruption. That does kind of play into the value proposition of Robinson. We have the best logisticians in the world. This is what they do. We're always guiding people. And if they're going to move things to Canada or to Mexico, well, we've been in Canada 100 years, and we've been in Mexico 30 years, and we are guiding people on how to move their product.

From a tariff perspective, if it starts in a different part, let's say people are going to originate [source] into a different region. We've expanded into Southeast Asia, and so we're going to be there, and we're going to move those goods. I don't think we're talking about a situation where goods don't move. If you were talking about a situation where goods don't move around the world, well, you know, then Robinson would be affected by that. We haven't seen that since the Silk Road in China. Goods always move, and we're going to be there to move them. And we feel really good about that.

LM: Let’s take a look at brokerage, as it is such a major part of your business, given Robinson’s market-leading position. There is some sentiment that 2025 will be more of a carriers’ market. How does Robinson view things, in terms of the current state of brokerage and also expectations for 2025?

Bozeman: That is something we talked about at our Investor Day. First and foremost, I feel really strong about the case for brokerage, and I directly addressed this. If you go back to 2000, there was a roughly 7% penetration of brokerage, and then fast-forward to today, we're at 29% penetration of brokerage. That's going up and to the right. I deal with data, and not really feelings and emotions. Someone can say, ‘hey, there's going to be carriers or assets.’ OK, that might feel good. And in some cases, I'm sure you're going to see that, because there's a fleet out there. And, so, there's going to be some loading of that private fleet, for sure. But you have so many customers and so many various industries out there. We deal with manufacturing, retail, housing, and energy. At the end of the day, we've got this two-sided marketplace. We have 450,000 carriers, and we have 95,000 customers, and we also show up like an asset with drop-trailer and consolidation, and things like that. So, this is more than just a linear type of thing. Customers look and they need solutions for complicated things in their supply chain. The for-hire market has the scale, particularly Robinson. We have the scale and ability to solve these problems. This is why I don't think that there's a case that says for-hire or brokerage will be disrupted by, say, asset carriers. We don't see that in the data. And we deal with this, we have the biggest data set in the industry, we just don't see that, and that's not going to happen. Are you going to have some of it? Sure, and by the way, when the market starts to inflect, people just don't have the scale and compilation of skills to deal with that, and we do. And, so I think we'll be there.

LM: Let’s take a look at AI. How is Robinson leveraging the technology?

Bozeman: I'll start off by giving you this definitive comment. One, it's a game changer for us. Two, we're actually doing it, not thinking about it. I'll start with that. And three, I would say that we're transforming not only our company but the industry, when it comes to how we're actually deploying this. And for us, looking at life of an order, it just comes down to this: When you value stream map, and that is a lean concept of going in and understanding all of the value of how flow should happen, there's a lot of manual touches that happen in a life of an order, from quoting to tracking and a number of other things. For large language models and AI—which our engineers are actually doing—we partnered with Microsoft Azure for the technology, but our engineers make up our models, and we've gone in and attacked the manual portion of our life of an order, and it has been significant in doing that. That's not going to stop. Our digital bookings are over 50%. We're using AI to really generate quotes that we're now doing in around 90 seconds, and they're going back to the customer in a conversational manner. This would have taken hours before, so it's a significant change. But on top of that, it's not tech for tech’s sake that's really important. You saw that happen, and that didn't end up well. And so, for us, this is about our people. This industry needs people, and now they're empowered by this technology, and it really allows them to do solutioning for customers. And customers love that, by the way. We get the efficiency, but we also get that face contact in order to drive that. AI is huge. We could talk for hours about it. That's why it's a game changer. We're doing it. We're executing on it.

LM: With next March marking the five-year mark of when the pandemic kicked in, how do you think, all these years later, the industry has bounced back or leveraged the lessons learned from the pandemic”

Bozeman: It's really comes down to carrier capacity and demand. What we're seeing right now is there was just an influx of carrier capacity injected during the pandemic, so much so that the burn down is not significant enough to put that back into kind of normality, although we think that we might see that in 2025, in the form of some level of normality of carrier capacity.

The demand part is super interesting. The automotive vertical, for example, has always been JIT, and they bounce back to that very quickly, and they're going to do that. But the retail side of it is a little bit different. Some of it is that you have customers saying, ‘I don't want to get burned on that. I'm going to burn this off before I go restock,’ and things like that. Getting that whole demand part, you have the economy and Consumer Price Index and getting everyone comfortable enough to have normal behavioral buying and restocking, along with getting the capacity side right-sized, that then starts to put you in some normal market of freight going forward. Until all of that happens, we're going to win at the low and win and be prepared at the high, which we are, and we are fundamentally strong, prepared for the high. In our scale, you're just going to see more benefit as this thing inflects, and we feel good that we're winning at the bottom of the cycle now, especially with our balance sheet.