Blythe Brumleve:
0:05
Welcome into another episode of everything as logistics a podcast for the thinkers in freight. I'm your host, Blythe Brumleve. And I am happy to welcome in Martin Lew. He's the CEO over at Commtrex. And we're gonna be talking about the future of rail logistics. So Martin, welcome to the show.
Martin Lew:
0:22
Thank you for having me, blast. Appreciate you having me on your show.
Blythe Brumleve:
0:25
Absolutely. So So for folks who may not be familiar with you and your career background, you know, you used to work at JP Morgan Yes, as a commodity trader, which I think is super fascinating. So you kind of give us an, I guess, a peek behind the curtain of your career background?
Martin Lew:
0:42
Absolutely. Well, I would love to do that. So I was at Bear Stearns, initially and Bear Stearns, the financial crisis happened No way. And JPMorgan ended up acquiring a Bear Stearns and there are two organizations within bear that were really interesting to JPMorgan, there was the prime brokerage unit, and then the global commodities group. And I was on the global commodities, sort of side of the house. And I was specifically on the coal and environmental markets, trading desk. So two responsibilities effectively, it was trading physical and financial coal. So think, all the coal producers or utilities that burn coal, they need some commodity financing, to be able to finance their minds or finance during their power plants. And then on the other side of the house, I was the lead originator for environmental markets. So I was the person that was talking to at the time in the 2011. Friend frame, I was talking to utilities and other emitters or other sort of electric utilities about the cap and trade program, and how to sort of mitigate the potential risk with cap and trade and renewable energy credits. So funnily enough, fast forward to today, coal was very hot at the time. And now coal is sort of sort of on its way down, just call retirement plans and things have been happening for quite a while. And now environmental markets through via ESG has become something that's very important. And how I got to where I am today is, you know, in 2014, I saw that there was a real sort of inefficiency and void within the railroad industry. I was a shipper, we're moving five to 7 million tons a year. And what happened was, every time I would want to work on when I was looking at a deal and timing was the essence, we needed to find a railcar capacity transit capacity, we needed rates, to be able to piece together deliver costs for our deals. And it always took a long time to be able to get all those data points. And I was sitting at one of the world's largest banks, and you would think I would have quick access to that information. But there was no index for rail cars, there's no index for for freight rates. So there is no visibility like there is in trucking with load boards, there's no visibility that there is an ocean freight. So because rail was such a opaque market, I thought at the time that somebody is going to create a digital ecosystem that takes the supply and demand side of the industry and puts them into one digital platform. Because there are a core part of our investment thesis, the title is by 2020 50% of the workforce will be millennials and by 2025 75% will be millennials. And so at the time, as you're looking at where the puck is going, you're thinking to yourself, if that is the case, and millennials are moving into these these roles, there has to be a centralized repository or database that houses all this information that has all rail served, warehouses, terminals, ports, short lines, all within one database in one system. So that is no different than in your personal life going to Expedia, or Priceline to be able to find a hotel, and then a rental car. You know, there's no this should all be done within one system. So at the time, nothing existed as a source. So I took the leap of faith to go start a company. And really the very first thing that we wanted to do, we wanted to create a leasing marketplace and the storage marketplace. So in a bull market when rail was really hot, people would need to lease row cars. But in a bear market, like when COVID happened, everything shut down. Everyone's storing real cars. So we started with those two marketplaces. Then we launched a Buy Sell marketplace, because there were a lot of road cars are being retired. So people were scrapping row cars to our system. And then we launched a trans living marketplace about three years ago, which happened to be perfect timing, because right before COVID You know, trans voting was obviously a very important component of the supply chain, but it's kind of an underbelly of the supply chain, not everyone is aware of transcoding. So once COVID hit and people couldn't get their freight through, you know, your lax Long Beach, your Seattle Tacoma through your Houston ports, everyone was looking for other ways to be able to move freight inland. And trans voting is the is the mechanism to do that. So that's when our platform really sort of blew up just because everybody was looking to transit. And we happen to have the only marketplace in US, Canada, Mexico for translating.
Blythe Brumleve:
4:54
That's insane to me that a marketplace did not exist yet until just A few years ago, I Why do you think that there? That just I guess it feels like modern technology that should have already been here? Why do you think that that didn't exist prior Is it maybe just because these rail itself has just been a mode of transportation that's been around for so long?
Martin Lew:
5:17
I think there's a there's a few reasons, I think, the most important reason, and this is probably similar in other industries, but rail is a very relationship driven business. And the folks that manage the rail fleets on the shipper side, so that's the when I refer to the demand side demand side in our platform or the shippers, the three PL is the brokers that are actually looking for supply capacity. So on the demand side, relatively insourced, meaning there are in house rail logistic groups for your major shippers. And those folks that are nationals groups have been doing it for 1015 20 years, and they have relationships, you know, and they have the people that they know, so there wasn't this real sort of need. As far as the midsize to bigger shippers concern, the small shippers, there's always been a need. But nobody has tried to jump into this space and really sort of fill that void and really sort of, you know, effectively try to match up the supply and demand through a digital ecosystem. So that's one number two is technology. I mean, at the end of the day, you know, I started this business and launched the platform in 2017. And, you know, just like Uber and and other other sort of apps, you know, cloud technology really didn't start taking off until you know, 2010 1112. And really, you needed that sort of cloud based technology for a marketplace that just didn't really work. So that's number two. And then number three, and this is something that I did at the very beginning of the journey, is I went to seven of the largest shippers and, and talk to them and have kind of a focus group with them and ask them, each of them. You know, if we were to create this marketplace where you can go into a system and electronically connect with a shortline railroad, a classroom railroad, a transit or lessor would use the system. And all seven of them 100% across the board said no, they would never use the marketplace. And these are some of the largest shippers that I was speaking with people that are moving significant volumes. And so most people would think just on its face. If seven shippers told you, they would never use your marketplace, why would you go raise capital and continue to go do something and tell them when people are telling you they would never use it? The follow up question that would ask is, you know, how much longer do you think you'll be managing the group and being continued to be in real logistics, and clear across the board? For all seven of them? It was no more than five years from 2017. So that was the answer that I was looking for it was what's going to be the succession plan or what's going to change in the future. When the people with all the knowledge that have this knowledge all in their brain and in their head and have the context, when they leave those seats, and you have the next generation coming into the seats, the next year should come the seats, how are they going to be able to ramp up and get the knowledge and leverage those relationships because it's not just going to happen the demand side, it's going to happen on the supply side. And at some point, the industry is going to have a whole new set of fresh faces that know nothing about rail, if electronic or a database or repository is encrypted, so that you don't need to know about rail. If you want to source cars or storage or source transmitting, you can come into our platform. And you can learn we have these one on ones that teach you all about things about rail sponsored by folks like CSX and KCS. And Gallagher on insurance but the old thing is, I knew that the puck was going to go somewhere where you needed to have a standalone digital ecosystem that can be training wheels for anybody who's trying to move freight by will and you don't have to be an expert and moving rail has historically been something that has really been relied upon by people who have a deep industry knowledge.
Blythe Brumleve:
8:54
I love that aspect because we were talking before we started recording about you know who is really the audience of everything is logistics and you know, who are we really speaking to? And I was trying to explain that like, look, we I come from a truckload background and I know a little bit about rail but a lot of my questions are going to be are going to probably sound like very entry level because at the three pls are the four pillars that I worked at. Intermodal was always kind of like the the back office guys that the people in the back of the building that you know, the LTL and the expedited teams and the you know, full truckload they never talked to the intermodal guys, they just operated out on an island. So I admittedly don't know as much as I should about rail. So that's what this conversation is really going to be about is just, you know, exploring the the intricacies of this silo within transportation. And you had mentioned something earlier about, you know, asking seven different shippers about what they wanted, and I thought that that was interesting because I think it's that Henry Ford quote, you know, back in the day if I were to ask, you know, people what they want they would have said more horses, not actual car. And so I think I saw I think from from that lens of being able to look into the future of, of what's going on within this industry, I think we got to kind of maybe take a step back for a second, because from an overall perspective, what does what kind of freight is shipped on rail is it you know, obviously, you know, you had mentioned, you were a coal trader with JP Morgan, but what other kinds of commodities are shipped using rail.
Martin Lew:
10:31
So, when you think about rail, and this is probably not something that's very obvious to me that there's two sides to rail, there's the carload side of the business, which is think your commodities, your raw goods, your materials and think inputs into production of different goods. So, you know, think still, chemicals, plastics, lumber, of all those different products on the Carlos side of the business, Cole has historically been the largest by volume product that was moving on rail. And so because of that, I had a lot of exposure to it. And that's where I saw a lot of inefficiencies. Now. When you think about the other side of the business, which is the intermodal side, which you were referring to earlier. That's the other side of the business, which, you know, I think historically as well has primarily been controlled by IMCs. And I am C's are kind of the conduit or the third party mechanism for a lot of the shippers to be able to use to be able to manage their freight that's moving via intermodal in containers. But when you think about rail, you know, those are really two different animals. Because on the Carlos side of the business, what you need to what the term is for identifying specific types of goods is called a stick code. So the stick code, there's over 10,000 Stick codes that move so think about that. There's over 10,000 Stick codes on the Carlos side of the business. And there's really only a few different sizes of containers on the intermodal side, intermodal, very fungible, right, there's really only a few containers that you have to really be concerned about moving, and it's very scalable because of the fungibility on the carload side, a lot more technical requirements are needed, you have to have special types of tank cars or hoppers or gondolas, you need to have special types of equipment to unload the product, you know, whether it be a liquid product or hazardous liquid product, a gas, or be an actual physical product, such as coal or steel. And the reason why coal historically hasn't had, you know, kind of IMCs on the Carlow side is because it's not very scalable like it is with containers where there's just a few standardized sizes and those sizes, move on to certain type of trucks and then get drained and then move final mile. This is very different because weather at the very beginning of the journey, which is the McAuliffe at the coal mine, or at the sawmill to the very end of the journey, these Karla products that are moving are very specialized and takes, you know, typically specialized handling requirements to be able to to manage those products. So when you think about the business, those are the two sides of the business, there's you know, 1.6 million rail cars in North America and it's about half and half so about half of them are allocated to the Carlos side and half allocated to the intermodal side of the business.
Blythe Brumleve:
13:26
And you know, all this time I'm gonna sound like an idiot just by saying this but it anytime I heard somebody mentioned carload when it refers to intermodal, I literally thought that they were just hauling cars. I know that that probably sounds so dumb to the listeners out there who are experienced in rail, but like I said, this is a conversation around curiosity. So we're gonna explore
Martin Lew:
13:49
that your questions are great, and I would love nothing more than if everyone was educated about rail.
Blythe Brumleve:
13:56
This episode is brought to you by SPI logistics the premier freight agent and logistics network in North America. Are you currently building your freight brokerages book a business and feel that your capabilities are being limited due to lack of support and access to adequate technology? At SPI logistics, we have the technology, the systems and the back office support to help you succeed. If you're looking to take control of your financial future and build your own business with the backing of one of the most successful logistics firms in North America, visit SPI three pl.com to learn more. And so, okay. So, so, we know around the two different types, you know, you have the intermodal side of things and then you have the car load side of things right if I understood you correctly, Now, where does Where does rail sort of play a role in sort of the coast because from what I understand, a lot of the freight comes in through the ships through the ports and then get I would assume get hauled on a truck or you know drained or and then it gets to you know, Different rail lines and that supplies the majority of the the middle of the country transportation. Is that a safe assumption? Or is that completely wrong? Yeah.
Martin Lew:
15:10
That's, that's it's on the intermodal side. You're absolutely right. So all the containers that are coming in from, you know, Asia or Europe, they're translated and then drained and then either put on an intermodal flat car or they're put on truck to get to that final destination. The car load side of the business isn't as as fluid as that, because there is so many different types of commodities that are moving on rail. And typically, most of the products that are moving on rail are coming from somewhere within North America, they're coming from a coal mine, a steel plant, they're coming from a lumber facility within the US. So anytime you're looking at a move that's call it 500 600 Miles plus, now your now rail is very competitive against truck. It takes four trucks for every one carload, that's the, that's the ratio of four to one ratio. So you take four trucks off the road for every one car that you that you move. And so just by default, in order to really be able to leverage rail, you have to be moving a decent amount of volume to justify using rail. And then you also have to be moving, you know, at least over four and as soon as your miles for the economics to justify moving by rail. So those are your kind of two qualifiers, when you're a shipper. And you're thinking about how do I move am i doing long hauls, which really sort of lends itself to rail, and then also how much volume I'm moving around, because, you know, two dimensionally, very small, you know, the idea of less than container load, it's, you know, it's just can be very expensive. And the more volume move, the longer the distance it is, the more in the money it is for you to move freight by rail. That's, and at the end of the day, you know, really, I thought, and this is something, you know, I saw it down the road. And it actually is something that has become much more sort of accelerated with it within the shipper freight space is ESG goals, and environmental sustainability mandates that, you know, that companies are either voluntarily doing or, you know, if they're in a state that has a compliance program, or if they're in Europe, where there's a compliance program, you know, they have a certain targets that they have to meet sort of by, you know, by by by mandate. So, one of the fastest ways and one of the quickest ways to be able to minimize your carbon footprint, is to take some trucks off the road and put them onto intermodal, or take trucks off the roads and put them onto flatbeds, or put them into YouTube to liquid trucks. So, you know, there there are some real tailwind that rail has in some rural environmental, some benefits to move in by rail.
Blythe Brumleve:
17:44
And so when we think about, you know, sort of the role that that rail plays and just the overall transportation ecosystem, it is it still sort of the maybe you don't have the answer to this, but I'm just thinking out loud here. Is it still our most rail companies operating independently? Or are they operating as the you know, the department in the back of the building like a three PL that I was working at how we're, you know, I guess, sort of most rail companies structured who are handling the shipment side of things. So the the broker of rail,
Martin Lew:
18:19
I think it's probably very similar, they probably have an intermodal group or an intermodal expert that's sitting, you know, hopefully not in the very back of the building, hopefully, they have a window, and at least water cooler, you can drink water. But I think, I think what's happening now and and maybe this is a shift when you go to when you were, you know, seeing this is rail is becoming a lot more integrated into the overall supply chain strategy for shippers. So it behooves brokers to pls in any intermediary to be able to have somebody at on the desk that understands the interplay between trucks and rail. So there's kind of two parts of this. So there's the intermediary side of the business, where, you know, they're effectively doing the analysis for their shippers, should they move moving by rail, or should they move in by truck. And then on the other side of that is the actual shippers themselves that are managing the movement of their own freight and have their own in house logistics group. And historically, that has been managed in or insourced in house. So if you're a shipper and you're moving anything, so you know, it could have somewhat of significant volume, and it's important, you know, core part of your your your overall supply chain, you're typically going to hire somebody to do that for you in house, whether it be one a group of one or group a 10, or a group of 20, depending how much volume move. Now, what's happening there is there's a trend that's that we're really starting to see that's changing is a lot of these companies that are doing that are now really sort of taking a hard look to outsourcing their rail logistics to a third party. So we launched a rail logistics part of our business about a year ago. And then we just announced a partnership with rail link at the end of last year, which is owned by the seventh class on railroads to be able to help manage the physical logistics for them. shippers. But the reason why we did that was because a lot of the shippers that were coming into our platform, were asking if we could just manage their their loads for them, they would come in put a transit request in. And as soon as we said, Do you have a rail rate? Do you have rail cars, all the pertinent sort of, you know, sort of basic one on one questions and move by rail. You just see this like glaze over their face and says, I, what are all those things that you're asking me to do? Oh, and I need to get credit in place with the railroads, and they may not accept my credit. So there were all these different sort of hurdles that shippers had to jump over. And that was the reason why we jumped into the physical logistics part of the business because, you know, I think that the trend is moving in the direction where you're gonna see a lot more outsourcing of rail. And I think, eventually, you know, the folks that have been relegated to the back of the house, you know, may have an ocean front view window some day because of the big move to rail.
Blythe Brumleve:
21:00
So since you know, what 2020 mean, obviously, you know, it just threw a wrench I think into everybody's supply chain plans. And it's been just sort of this back and forth pendulum swing that's been going on, especially when it comes to rates and fuel prices and things like that are those same pendulum swings going on and rail to
Martin Lew:
21:20
the pendulum swings don't don't typically happen to that degree, like you've what you see in ocean freight, for example, you don't see a $20,000 container one day in the next, you know, next year, it's at$1,200, or $1,000. You have seven class one railroads, you have two in the east, you have two in the West to in Canada. And then you had one in the middle which is Kenzie Southern, but that is now merging with Canadian Pacific. So now you're gonna have six class of railroads. So you don't have this, this this this comp, competitive landscape like you do in ocean yet. They're the larger carriers in ocean, but they're also small to midsize carriers. And there's all these different ways that, you know, intermediaries can can participate in that market, which can create more volatility in the price swings. With rail, it's on a track and it's controlled by to or, you know, to on the west or to on the east. And so because you have very limited competition on the classroom, railroad side, rates are very steady, and they're very consistent. So you don't see that type of volatility like you do even in trucking, for example, because, again, trucking very open, very competitive market, it's not a closed market, you know, you can switch, you know, with no problem to any care you want anytime you want. Once you're served by a rail carrier, it's very difficult to rip out or find another location that's served by the competing carrier unless you're dual served by both carriers on that side of the side of the country. So because of that, there's a lot more of a standardized framework for how pricing rail works. And on the Carlow side of the business, every commodity every lane is priced differently, versus intermodal where a lot of the wholesale rates are going to the IMCs and IMCs are providing the rates ultimately to the shippers. But because of the nature of how carload business and commodities work, it's not as cookie cutter because every commodity has a different way it has a different handling requirement has a different level of expertise that's needed because of you know, it being hazardous or not hazardous. And then every lane is different, right? You have to manage the lanes differently because of you know, certain products or moving more in one quarter versus the other quarter. So network optimization is extremely important for the efficiency of rail.
Blythe Brumleve:
23:33
So how unrealistic would it be for me to say I want to start up my own rail line, like you mentioned that there's only six that are going to be within the country. And I imagine that barrier of entry is probably pretty challenging. Is there any use case for someone to say like me, like, Oh, I'm going to start up the next CSX? Is does that exist? Or is this just not a viable solution? So
Martin Lew:
24:00
class of railroads? No, they don't think another class where it was going to be created in our lifetime. Now, as far as the class two and Class D railroads. Those are shortline railroads. So those are think of the classroom railroads, they control the highways, and then the shortline railroads controls to the off ramps and the side streets and all the interconnectors. So as far as shortline roads are concerned, absolutely, you can go acquire a shortline railroad and you can build up the track in an area where there may not be tracks that exists. But it's not for class one railroads I mean class one railroad, that system is pretty much established and is a very sort of already sort of fundamentally structured network. That is not going to change now, where the shortline railroads really sort of help out with the rail system is other if there are certain areas that may historically not had a lot of rail traffic, but there's a new car manufacturing plant or a new smelter that's coming in or a new sawmill that's coming in. And there's a lot of traffic in that nine, you know, there provides some justification for either a shortline railroad nearby To be able to expand their track over to be able to service this business because their facilities gonna be up put on it or for, you know, even a short URL to be created, but there's less than 600 shortline railroads across North America. So even in the context of your class two and class two railroads, it's not like there's, you know, it's not like there's a very low barrier to entry. And if you wanted to start one tomorrow, you can go raise some capital, though some track in the ground, hire, you know, a few operational folks get a look at motive. And you're off to the races. You know, there's a lot of regulatory issues, there's a lot of operational issues, there's a lot of considerations that need to be taken place, because the way the classroom railroad manages or network will be a very, very important component as to how your shortline railroad will sort of effectively optimized around the network.
Blythe Brumleve:
25:46
I want to go back to your platform for a minute Commtrex. And you had mentioned earlier that you have the sort of educational like 101 videos for maybe shippers that are coming to the platform, and they're looking to learn more about rail, what are some of those, I guess, sort of entry level questions, or maybe topics that you cover with some of the one on ones that you're providing within the platform.
Martin Lew:
26:08
So when we created the Resource Center is, which is where all of our information is housed, actually, initially spurred from the idea of creating a rail newsletter. So we created our first newsletter about five years ago. And the newsletter was a very simple sort of mechanism for us to be able to take the analytics from our system, take the folks that we know and rail to be able to speak to topics, and then get it out to the rail industry rail community, which started out with 500, folks, and now we have over 10,000 supply chain professionals that are on our network. So what happened was, we started putting out this is we never had any journalists, it was all sort of, you know, effectively, our own proprietary data or information over leveraging the experts within within our ecosystem to speak to it. But very consistently, a lot of shippers were asking for certain types of information on how to move by rail, and they were buckets in either in specific buckets that range from leasing real cars, how does leasing real car work? Do I have to get into a long term lease? What are the different things I need to think about when I'm leasing cars, to translating, if I've never ever moved freight by rail, and I'm not going to put a spur in my facility? How does trans building work? So what we did is we created these one on ones sponsored by companies like CSX transport responses are translating, one to one. But the idea there is we want to go to the experts in these respective topics and have them talk to our sort of membership base about the basics and the nuts and bolts of rail. So we have a category for trans loading, which is really the mechanism for anybody that wants to ship by rail that doesn't have a rail spur in the facility, translating provides that flexibility, or is that mechanism for them to be able to use it transit in there's industrial development, if you're a shipper, and you're thinking about creating your own, you know, distribution center, your own facility, you know, what are all the things that go into that consideration? We have insurance insurance is a very important part of the business. And what are the basic types of insurance coverages that you need to be concerned about when moving freight by rail? All the way down to rail, one one basics. How does the railroad system work? You know, how does the railroad system work in the US and then we created a shipping by Mexico rail? Well, when I was sponsored by Kansas City Southern, and you know, if I wanted to ship freight from Mexico or to Mexico, you know, there's a lot more considerations that you have that happen that have to be sort of thought about. And none of these things are obvious. It's not like there was ever one place that was kind of a centralized repository for all this information. So all we were trying to do was take all these disparate pieces of information, put them into one sort of area, and then let people be able to consume that information on their own. And a lot of shippers tell us that when they have new hires come into their business, the very first thing they do is they send them to conscious one on ones because they're like, Well, why should I sit here and try to train train you on the basis, go to these one on ones because there's videos and these are actual companies that are doing this day to day that are that are teaching this. And the other thing that we've created was asked the experts, which is we take your cool folks that are experts in this and have them speak to real, you know, real live topics that shippers care about.
Blythe Brumleve:
29:21
Well, you mentioned a couple of things that I kind of want to go off on on discussion points with so what's the difference between shipping rail in the US versus shipping rail and Mexico?
Martin Lew:
29:31
Shipping rail in the US is going to effectively depending upon what part of the country you're moving in, you have different options, really shipping rail and Mexico you have Kansas City, Southern and Thermax. And those are your two largest railroads that move product there. The regulations are very different. You're talking about Mexico regulations versus us regulations. Even in Canada regulations are different depending upon the type of product that you're moving. There's a lot more ish He's related to customs. So you have to have a customs broker involved in your move and understand what type of manifests and what type of paperwork is needed in order to move, I think you're subject to a lot more variability in the type of regulations that you're exposed to in Mexico, you know, at the, at the whim of the government, they could sort of put an embargo in place. So they could, you know, create a new tariff that that wasn't expected. And all of a sudden traffic could stop until a you know, political issue or regulatory issue is worked out. And you know, there's a lot of value to shipping in Mexico, just because we're shipping out of Mexico, just because the, you know, the economics around sort of building or developing or producing things in Mexico is highly favorable relative to other parts of, of North America. And I think shipping in Mexico is something that if you're looking to, you know, build certain products, or if you're an automotive or a certain industries, it absolutely makes sense to have to be there. So, when I'm thinking about shipping Mexico versus us, I'm thinking typically, when a shipper is asking me about that, my first response to them is, you should definitely talk to somebody at the railroad who has expertise in this, we can teach you to the one on ones the very basis of it. But very quickly before you start leasing tank cars before you start getting arranged in place to move the cars, I think it's very important to understand what all the potential outlier events that could happen, that potentially could, you know, impede the smooth flow of your product in and out of Mexico.
Blythe Brumleve:
31:31
So I think for a lot of folks, especially on the truckload side of things like like, like for me, you're familiar with the customer, you're loosely familiar with the customs process for truckload freight, is it very similar to rail on on, you know, I guess inspections and things like that, as far as like what's crossing the border on a rail line?
Martin Lew:
31:49
Yeah, I can't speak to how similar this is, I don't know, the trucking side as well. But I it is, it is a very highly regulated market, and depending upon the products are moving. So if you're moving hazmat products, there are definitely gonna be a high level of scrutiny when you're crossing the border. And that's no different than going from US to Canada as well. But, you know, customs processes, the customs process, so I wouldn't, I wouldn't think that there'd be that much variation in the process. I think at any level, I would think it really sort of depends on what product you're moving. And then you know, who you have sort of facilitating the move for you. So if you're a three PL or broker and you've ever experienced it, probably for a shipper, it probably makes no difference whether you're moving, you know, product from you know, Guadalajara or Mexico City to us, or you're moving from Chicago to Newark, New Jersey. But if you're a shipper and you're trying to do it yourself, and you're trying to manage that entire sort of move and find a transmitter in Mexico, get a rail rate with a with a railroad in Mexico, then figure out what to do once it gets to the border where they get stuck at the border, and you can't get those cars would have the least that you have for the rail cars doesn't permit you to take those cars into Mexico, not every lessor wants their cars to be taken over the border of Mexico because sometimes real cars do get lost. And if it's stranded in Mexico, much harder to you know, be able to go find your car in Mexico then be able to go find your car in South Carolina.
Blythe Brumleve:
33:11
Yeah, cuz, you know, I'm just thinking there's a show on National Geographic that I love to catch a smuggler, and they're always you know, at those sort of, you know, border towns, and they'll pull I mean, if they suspect a truck, they they just make it pull over to the side of the road, they get the dogs out. And they're, you know, checking for, you know, any kind of drugs or like antiquities or things like that. So I just thought that would be, I don't want to say funny, but that would be super fascinating if that was going on, on the rail side of things like, Hey, we gotta unscrew this, this cart and push it over here. And then this one's over here, you got the dogs running up and down. And I don't know if that exists, but it would be pretty, pretty crazy. If it if it does, yeah,
Martin Lew:
33:46
and I think that's gonna be, I think you're just that's gonna be a growing trend, you're gonna see a lot more products coming out of next year coming into us into Canada. I think the reason you know, the, you're gonna see that sort of area of the of the freight market grow is because of all the nearshoring or onshoring, that's happening. So a lot of companies are moving a lot of their manufacturing facilities to Mexico, moving away from different places in Asia. And as that grows, they're going to need to figure out a way to be able to very economically and efficiently move that product from Mexico to the US or to Canada. And if they're moving at any sort of distance or volume, rails can be the cheapest way for them to do that.
Blythe Brumleve:
34:27
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Martin Lew:
35:53
Absolutely. So very simply translating is the movement of goods from one mode of transportation to another. So it's going from rail to truck, truck to rail, barge to rail, ocean freight over to truck. So it's anytime you're having a product or a good that's moving from one mode of transportation to another. So the reason why it's so important is because think about how many different touches there are in a move from first mile oh it to last mile, how many different people have to touch that that particular product, and how many moves are happening just on one mode of transportation, you typically if you look at any product, it's probably you know, depending upon where it's definitely if it's coming internationally, obviously, it's coming by water. So that's one mode, and you have to transfer that container or that good from freight to either a truck or rail. So just anything being imported into North America, by default, our definition has to be translated into North America. And then within North America, the way you create flexibility within your supply chain is to diversify your modes of transportation. So if you're 100% truck today, and you know, you want to be able to create some diversification in your your supply chain sort of strategy. One of the ways to do that, you know, whether it be for ESG reasons, whether it be for economic reasons, whether it be just to minimize your exposure to one, just one mode of transportation, if you're not going to build a spur into your facility, if you're you know, you're going to transloading is the only option because the goal is to be able to get your products as closest to your customer as possible via rail, so that you can have a very short haul for that last mile piece of the move. And right now, what I'm seeing a lot from shipping, or what we're seeing a lot from shippers are shippers are really rethinking their strategy as far as transcoding concerned. Because what they're what they would happen with COVID was they had maybe one major Dc on the east, maybe one major Dc on the west, and then all of a sudden, all this capacity constraints happened and congestion happened and the rates are moving up and develop, they couldn't keep up with all the dynamic changes that were happening. Rail is less volatile, as I explained earlier, and it's very steady, the volumes are fixed. So you know, if you have a portion of your supply chain dedicated to rail, I would say that that can be, you know, a way to be able to mitigate some of this exposure to this high volatility sort of pricing or high volatility of exposure to not being able to even move your load. Because, you know, in during COVID, I had a lot of supers that were calling us saying, hey, my carrier is canceling loads on me because I don't want to pay another 25 to 30%. And I'm wondering, can I move this freight by rail instead? Because, you know, I don't have anybody, any local carriers that are willing to pick up my loads. And I think you know, there's a rail spur that's down the chute for my for my facility, can I use that. So in that in that instance, where they don't have a facility, so by rail, the only way they can move by rail is to transport it. So they got to find its transit facility, trucked into there and put the product on rail and then move it to wherever the end destination is.
Blythe Brumleve:
39:04
And when you're saying rail spur that just means almost like it's just coming off of the main line going directly to a warehouse or to another facility, correct?
Martin Lew:
39:13
That's exactly right. So rail service facility. That's exactly right. And so
Blythe Brumleve:
39:17
with, you know, a lot of the things that you were just talking about with trans loading, and almost sounds just like a new, completely new perspective for how these businesses how these shippers are going to be tackling their future supply chain not only like ESG goals, but also just shipping goals overall is that sort of the I guess, the future of what rail Logistics is going to look like?
Martin Lew:
39:37
I truly believe so. And I was at TPM last week. And during TPM, I spoke to several big box retailers. And many of them were really sort of interested in trying to integrate a transit strategy into their current supply chain. They've never really thought about it until COVID hit. But now you know the C suite and all these companies are saying, you know how are you rethinking The supply chain strategy that we currently have, what are you doing? Whether it be was a catalyst is to save money and cut costs. What are the catalyst is diversify exposure? Where what are the catalysts is to really sort of figure out how they can get to new markets, or to new customers that they haven't before on in a cheaper way. Translating is really what's what's, what's the mechanism that people are sort of okay, well, I've never really done that, before I've done 100% My moves to truck translating is the only mechanism that you can do it. And if you think about the railroads, you know, and they're in growing their footprint and growing their the traffic is right now, a very important objective for all the railroads is to figure out how to convert more truck lanes to rail lanes, and how do they grow that is they grow that to transiting. Think of it that way, visualize it, think of it as nodes in a network. Think about, like an airlines, the more sort of regional airports that an airline can service, the more passengers they can service, the more markets that can have access to the exact same analogy as the airlines, you're putting more regional sort of data points or nodes in the network, so that more customers can be served by rail.
Blythe Brumleve:
41:11
And it sounds like I mean, with all of this, you mentioned the phrase earlier, you know, skating to where the puck is going. It sounds like you've really positioned with all of these things that are going on within the market and where the the market seems to be shifting to sounds like you've positioned your company Commtrex into kind of a perfect position to be not only the data source provider, but the solution provider and the information provider.
Martin Lew:
41:33
Yes, and thank you for saying that. Because it's you know, at certain times during the journey, it certainly sort of questioned myself whether it was you know, going this direction was the right move or going this direction was the right move. And I knew that we were onto something with transit. And the reason why we even started translating is because translating was built in within our services directory. And we were our data scientists were looking at all the data. And he said, What is this translating thing that is getting two and a half times more views, more searches, you know, more inquiries than anything else in our platform. And then as soon as you start digging into Insert, talking to shippers, and transmitters, and terminals, and ports, and railroads, you started really figuring out how important this this of this, this, this component of the supply chain is, you know, to the overall sort of consistent move or flow of goods. So that was a huge indicator to us. And that's why we created a standalone marketplace for and then the other indicator that was I think was very bullish for us was that we were able to partner with all seven class one railroads. So you know, all seven class one railroads put their, their their terminals or their transmitters on our sort of our transit marketplace, so that they can create more visibility for shippers to be able to find their sites and create more connect with the, with the railroads, and with the shippers in those certain markets. So, you know, to the extent that, you know, I can say I had a really good crystal ball, but my crystal ball was really data analytics, and a lot of conversations with shippers, and a lot of conversations with terminals and railroads. And, you know, historically transmitters really sort of, didn't even really have commercial teams, they they really did have were a, you know, a fairly small team, they're operating themselves. And then once they're full, they really never were marketing the cells out to the market. So it was very difficult. There was no easy way to find transmitters. So, you know, once we built a platform, we saw how much traffic we were getting, you know, three, four years ago, even pre COVID. You know, I knew we're onto something special.
Blythe Brumleve:
43:32
Yeah, I mean, you put it extremely well. And it this has been a really valuable discussion, lots of tons of insight. And I know for some listeners, and maybe maybe some some folks out there, you're probably wondering like, oh, you know, there's all this stuff going on with East Palestine, you know, Norfolk, Southern, all of these things that are going on safety wise, which is obviously very horrifying. But that is more for discussion on experts from the operational side of things from the safety side of things. Neither of us are experts in that regard. So I kind of just wanted to like point to like the elephant in the room of yes, we want to have these discussions, but it's probably best for another episode and other podcasts for somebody who is definitely more focused in the operational safety aspects side of things. So for those listeners, I will get to that very soon. I'm currently scoping out you know, visitors for that. But for the sake of this discussion, this is more on the tech side of things and how this historic really mode of transportation has really evolved and how your company is helping to evolve it into the 24 cert for 21st century with a you know, especially on the data and analytics side of things, which is just seems to permeate through all modes of transportation within the industry. And it's creating a lot of different discussion points. And you've actually been privy to some of these different discussions. You mentioned that you had moderated a panel at manifest the future of logistics, that's actually where we met. And this discussion is happening because that's where we met. So give me a little bit of insight. You've been to a couple other conferences before after manifest So give me sort of the, I guess the sense or the overall temperature in the water of how the rest of transportation is reacting to rail as it kind of comes into this new era.
Martin Lew:
45:13
So there's a few points on that. At manifests. And probably most economists I go to, there are very few people who understand rail. I think, I think at manifest, I was probably one of less than a handful of companies that were relative nology focused at the at at the conference, and this was manifests was a supply chain technology conference, I probably would say, it's probably the same for TPM tech or even at TPM when I was there. I didn't see the railroads were there, there are a lot of free fields in IMC that were there. But as far as just companies that are, you know, I wouldn't say exclusively, or primarily focused on rail technology, that there just wasn't a lot of presence there. So, you know, I think issue one is just awareness, I think just being able to understand, oh, this other side of the world rail is something that I can be utilizing for my supply chain. How does that work? Because trucking and ocean freight are extremely different than rail. I mean, you couldn't get more of an antithesis, you know, very close network, it's on a track, there's a small amount of people who are small amount of players that are managing your freight. It's very specialized, in some sense, depending upon if you're on the cargo side or the intermodal side. But what I'm hearing a lot of is, how can I move from 100% exclusive just truck to figuring out what part of my supply chain makes sense for rail? And the question I get a lot of times is, you know, when I call up a railroad, and I want support, you know, I don't always get somebody to call me back, or it's very difficult sometimes for people to explain, and it's for good reason. Because if you're a smaller shipper, you know, rail is more conducive for people who are moving long distances to a higher volume. So if you're a small, smaller volume shipper, you know, it may not make sense for you to have one or two Carlos moving manifests. Now, with that said, you know, maybe it doesn't make sense, you know, versus the race that you're getting on the trucking side. So the education component to rail is something that I think a lot of people that want to move into this space are missing is how can they get more educated on it, because if you're a supply chain manager, or you're a transportation procurement manager, and you're making the case, to your C suite, or to your management that they should move by rail, and they're starting to ask you very granular questions about how everything works and the processes and, you know, probably most importantly, what are the risk factors that I need to be concerned with, if I'm now going from truck to rail, you know, you are effectively you know, kind of putting your name on the line with a company to, to move this to this mode. So you want to make sure that you fully understand all the different dynamics of it. And I think once people understand it, and at least have it and they had the structure down, I think people get very comfortable with moving by rail, because it's a very safe, I think it's a very environmentally friendly mode of transportation. And it's a very consistent mode of transportation, it's very, very consistent, you know, you have products that are going to move in, there's, you know, there's there's a lot of things that happen sort of, you know, weather wise or climate wise, or there's, you know, obviously derailments that happen, but those are very few and far between, for the most part, the rail nevers move very consistent very smoothly. So for shippers that want a consistent large volumes that are moving to the long distances, I think rail is a good option. I think most people right now are trying to figure out, you know, do I do that myself? Do I outsource that to a third party logistics company? You know, do I do a test shipment here and there? Because at the end of the day for everybody, you know, on your, you know, listening to your podcasts and everyone that we work with? It's all about the delivery costs. Right? And, you know, what is the cheapest delivered cost to get my freight from origin to destination is the big question. And, you know, if you're not taking a hard look at rail, I think you're probably not doing justice to your to your company, because the really only two ways to move things on land, and it's rail and truck. And if you're ignoring one of the two, you really are missing out on on something that potentially could be a value to your to your shipment to the strategy.
Blythe Brumleve:
49:25
On the on the truckload side of things that you know, there's all kinds of news, you know about autonomous and automation and AI, you had mentioned that you were maybe one of maybe five, you know, rail technology companies at these conferences. Is any kind of like automation AI autonomous like, Is any of that going on in rail?
Martin Lew:
49:48
Yes, there are folks that are testing out AI at different layers of the supply chain. So folks are testing AI out on the safety maintenance side of the business. They're testing it with being able to spec row cars, inspect locomotives. We are using AI we are right now sort of testing out AI to be able to point out different congestion points within the network to be able to help shippers identify ways that can be optimized in their rail moves more, we collect a lot of supply and demand data. And because this is all sort of proprietary datasets to us, and no one else has, we take that data along with other datasets. And we're trying to layer AI on top of that to effectively create a copilot for shippers that can help them you know, help me help help them make decisions, when they're struggling with you know, should I move Mr. Russia in that direction? Should I even move at all, you know, there are enough inputs that that can be collected to help someone make a higher probable decision that's going to point them in one direction or the other. But I think AI is something that's going to be table stakes for not just folks in rail, but for every industry within the next, you know, 123 years, probably sooner than later, particularly now that you have, you know, technologies out there that are effectively, you know, very easy to use type of technologies like your chat TV, teen type technology, which people can use, I was going to be my next question, as that is a technology that people are going to use, right? That's your copilot right? And that's going to change the way search is done. It's going to change the way queries are made. So ai ai is definitely being looked at it. And as far as autonomous. Really, you just have a locomotive that's moving, you know, anywhere from, you know, 3040, all the way up to 130 140 cars. There's two conductors that sit in a train, and do I ever think that they're going to be autonomous? Probably not, you're always probably going to need humans in locomotives, you know, and to be able to manage the shipments. And really, that's around safety reasons, right? They just really, you know, you can probably trust technology with autonomous trucks for probably shorter haul moves, maybe even longer haul moves at some point when the infrastructure is there across the US. But if you're talking very short, standard moves on trucks, probably great and very safe rails on a track. So in theory, could it be used potentially, but I think the freight that's being moved is at such high volume. And, you know, as we've seen in other developments, there's, there's there's so much potential outliers for outlier events to happen, that I think you're always gonna have humans that are involved with locomotives and moving shipments by by rail.
Blythe Brumleve:
52:30
100%. And I think you had you had touched on it a little bit with like the, you know, the jet chat GPT sort of information era that we've entered into, do you see any kind of technology in Rails specifically, that is utilizing like a language model, like a chat GPT.
Martin Lew:
52:49
And not to talk my book here, but I mean, we were trying to effectively create the database as a repository for all information needed to be able to move freight by rail. So, you know, could I foresee a day where somebody comes into our system, and has, you know, kind of autopilot that will help them answer all these questions using the natural language cruise? You know, visibly or a type of GBT? Absolutely. I think that every industry, not just transportation, if they're going to stay competitive, they're going to have to think through, what am I going to need to do to stay competitive? What am I going to need to do to make things easier. And at the end of the day, you know, when you think about chat, GBT, or any of these other AI extensions, or tools that are, you know, have a similar concept, which right now, I feel like there's hundreds of them that are being released every month around around around AI, I truly think that, it's going to get to a point to where there's so many data points and so many inputs, and there's so much information that can be all sort of combined into, you know, one sort of database that, you know, humans, if they don't have the ability to lean on that type of technology, or that type of sort of lever, the folks that are using that as a lever are going to have an edge come competition wise, because of that not having the technology because everyone's going to need to be on an even playing field. So right now, it's such a nascent product, you know, probably very few people have ever used it. But you know, come two, three years from now we're seeing this podcast and we're talking to each other. I think it's going to be as common as you know, people refer to as Google, you know, for searching.
Blythe Brumleve:
54:32
Absolutely. I couldn't agree more and that's where the data set or in your own proprietary data really will come into play in order to to almost put like a chat GPT like system on steroids. So it's, it's I've heard it said from like a marketing standpoint, marketing software and things like that, that if you don't have or not planning some kind of an AI component into your current SAS product, then you're probably going to be dead on arrival within just a few years because that's how so rapidly all of this tech is evolving. So it's kind of cool to see that you guys are already thinking about it on the on the rail side of things, especially for an industry that is, you know, such, I think, a historical place in this country and really across the world. So, you know, as we kind of wrap up this interview, or is there anything else going on in in rail that you feel like the audience should be aware of or pay attention to?
Martin Lew:
55:26
I think just overall, I think rail is trying to be a more sort of customer friendly, or shipper friendly sort of mode of transportation, through partnering with companies like Commtrex to be able to proliferate information and educational sort of resources through our classroom or through putting their locations to register locations on a system like us. I think everybody that's in the railroad industry can agree that we need to make things much more simplified and easier, so that you don't have to be an expert to move by by rail. I think, you know, not only our system, but there are other companies out there that are trying to figure out ways to make that easier. So that's number one. And the second point, I think, overall, is really, you know, the sustainability story. I think that is a huge tailwind for rail today. And then moving into the future, I think, you know, if anybody is really trying to set either voluntary or they have to meet compliance, mandates for their carbon emissions targets, rail has to be a part of the conversation. So anybody who's thinking about sustainability, whether it be because you know, it's in front of me, and I'm just kind of getting, you know, trying to get familiar with it, or because I've been asked by the C suite to put together a game plan. I think rail and this is probably for your audience as well, I think more people are going to try to figure out how to convert more of their truckloads to intermodal loads just to be able to reduce your carbon footprint. There were some, you know, major ups and four pillars that have already came out in the news and said, you know, by certain dates, we're going to reduce our carbon emissions footprint, and how we're going to do that. And we're going to convert x amount of truckloads over two intermodal loads. And I think that's going to, I think you're gonna see a bigger trend of that of people trying to figure out how they can grow that that footprint via rail.
Blythe Brumleve:
57:16
Very well said, and I just want to kind of, as I was thinking, and as your as you were talking, I was thinking, you know, back to like cartoons and like Looney Tunes or something for that example, that when you see a typical, like, rail on on or train it within a cartoon, it's like the cartoon characters taking coal and shoveling it into the oven of the train. Is that what fuel powers the train? I know, I'm interested in the interview with one one more fifth grade level question. Yeah,
Martin Lew:
57:47
diesel, diesel is the primary four. So it's okay. Okay. Absolutely. It's not not. I mean, people are, they're looking at ways to be able to to be more sustainable sources. They're testing out electric locomotives, a hydrogen locomotive, naturally gas NGLS that have contributed locomotives. It I think the railroads have a real sort of impetus to be able to try to figure out how they can create a more sustainable way to move freight, even just through creating technologies that will, you know, effectively reduce emissions while the train is idle. So the engine is running when a train is idle. So there's different ways that there's technologies that are being developed that can, you know, effectively reduce the carbon emissions while trains are idle. But yeah, you know, good old gasoline is the way that these these locomotives are run today. So it's
Blythe Brumleve:
58:35
not like a Bugs Bunny that's set up, you know, in every rail line all over the country, shoveling coal into the train. That's good to know.
Martin Lew:
58:44
Maybe in some part of North America, there's, there's somebody that's shoveling coal into the terrain, but no, not not, not the level of scale.
Blythe Brumleve:
58:53
All right, Martin. Well, as I end this interview with the you know, some of the smarter questions sarcastically speaking, of course, where can folks you know, if they want to learn more about Commtrex, if they want to, you know, maybe experience some of the one on ones that you have within your platform? where can folks follow more of your work, follow Commtrex, all that good stuff?
Martin Lew:
59:12
Yeah. So you can go to Commtrex.com That's co m m, tr, e x.com. There, you'll find our marketplaces, you'll find our Resources Center, you'll find all the data information that we have with respect to the one on ones you can find me personally on Twitter at LW underscore Martin or follow us on LinkedIn. You know, we're we'd love to have more people sort of subscribe to our platform because we're always pushing out proprietary information and data and insights from our from the industry. So I think even if you aren't moving by rail or have no plans to a rail, just having exposure to rail, I think could be you know, just you know, obviously up your game as far as being a licensed professional
Blythe Brumleve:
59:54
100% and actually just wrote If you heard me typing, I should just wrote a note to include a link to your newsletter. that are in the podcast show notes. So if you're listening to the podcast, I will make sure that I add all of those links to Commtrex to to your Twitter and then also to the newsletter that you have that that goes out to I think more than 10,000 subscribers is what is what you mentioned. So we'll include all of those resources in the show notes just to make it easy for folks if they want to get more educated on how to move the freight on rail. So Martin, thank you so much for sharing your your insight. This was a super fascinating discussion.
Martin Lew:
1:00:25
Thank you, Blythe. Thank you for having me. And thank you to the audience for for listening to us and I look forward to working with you more.
Blythe Brumleve:
1:00:36
I hope you enjoy this episode of everything is logistics, a podcast for the thinkers and freight telling the stories behind how your favorite stuff and people get from point A to B. If you liked this episode, do me a favor and sign up for our newsletter. I know what you're probably thinking, oh God, another newsletter. But it's the easiest way to stay updated when new episodes are released. Plus, we drop a lot of gems in that email to help the one person marketing team and folks like yourself who are probably wearing a lot of hats at work in order to help you navigate this digital world a little bit easier. You could find that email signup link along with our socials and past episodes. Over at everything is logistics.com And until next time, I'm Blake and go Jags
