Good morning, everybody. Welcome to our Eaton Prairie campus and thanks for making the investment to come join us here. I know that's a big investment of your time and we're really excited to have you here. I'm Tim Gagnon, Director of Investor Relations and Business Analytics. I'll be facilitating the agenda today with the leadership and we've got a lot of content to rate through.
So I'll just open up here with the first few minutes of what to expect for the day, and I'll hand it right off to John to kick off the morning. Before I do that, I'm just going to take care of the obligatory Safe Harbor statement. I'll read that quickly. As a reminder, comments made by Robinson leaders or others representing C. H.
Robinson may contain forward looking statements, which are subject to risks and uncertainties. Our SEC filings contain additional information about factors that could cause actual results to differ from management's expectations. On your tables in front of you there, we've provided an agenda for today and for those listening on the webcast, you'll also be able to see the agenda as well. And I'm not going to go through the agenda in detail, but you'll notice a few things. There's a few breaks in the day.
So we've broken up the day into a few sections, a couple of morning sessions and a couple of afternoon sessions. So there'll be opportunities to take a few breaks during the day. And again, I'll turn it over to John here in just a moment to kick things off. I also wanted to just take a moment to mention that beyond presentations that we'll be providing that you see on the schedule, we will also be offering a Q and A of many Q and A forums, and I'll outline that for you now. At the end of each of the presentations, we will allow three to five minutes for Q and A, call it one, two, three questions.
And I'll be facilitating that, trying to keep us strictly on the timelines for the benefit of getting through all the content as planned. So at the end of every session or presentation, there will be a Q and A, a brief Q and A. Also over the lunchtime, which is scheduled from twelve to 12:45, all the leaders will be throughout the dining area, which will be right next door. So we'll also be we'll have access to conversation with the leadership during that time. At the tail end of the day, and you'll see on the agenda, thirty minutes allocated to an open forum Q and A where we'll bring all the leaders up to the front.
We'll just have an open forum Q and A that I will facilitate at that time. So prepared content, we'll have a lot of that for you and also provide you the opportunity to ask some questions as well. We hope that works and has the right balance of give and take between being able to answer your questions and for us to also deliver some strategic messages around the business.
So that's all I had
to kick things off. I'm really going to turn it right over to John here to open up open conversation this morning with a review of our intent for the day and some strategic thoughts as well. So, Tim? Thanks, Tim. Good morning, everybody.
I want to echo Tim's comment and say thanks for making the journey to inquiry. We thought we'd be kind and have this in the spring in May. We got lucky. It did snow a little bit on Monday, but it's breaking back today. So for those of you who come from the East Coast, thanks for making the journey and spending the investment of time.
This is this is here twenty first. Andy Robinson has a company. Of Investor Day as we've done significant acquisitions or correction. The headline theme for why it's a good time for us to be doing this today really just relates to the overall degree of change in the industry. Everyone in here would probably agree that our industry is changing faster than ever.
The competitive landscape is changing. St. Robinson is changing. The content that Tim referenced and what we're going to lay out
for you today is just to
give you our perspective on how we see things in our strategic planning. We're increasing just like everybody else is. I would say the opportunities and the threats are as high as they've ever been in the time that I've been at Robinson. They need to get consumed by the threats and the changes in the competitive landscape. We're also really excited about the opportunities.
We want to lay that out for you and talk about where we see opportunities, where we see the potential to grow and how we're going to go after the market. That's why we want to do this today. That's the primary headline that we're hoping to take away. For those of you who don't know me, I've been with Robinson for twenty five years. I was the CFO for the first couple of years of that life cycle promoted to President push that in in 'ninety 'ninety nine nine and and I've I've been been the the CEO CEO for for the the last last fifteen fifteen years.
Years at Robinson. Okay. When we think about this opportunity and the threats that are out there and the changing landscape, I want to start by grounding you on some of our enterprise thinking and how we go to market as an overall organization. One of the messages that I hope you feel and hear today about the opportunity side of what we're going cover to is that while the industry is changing and there are challenges that we have to deal with, one of the things that I feel the most optimistic and confident about is if you rewind over these last twenty years and look at our industry, probably the most positive trade off
to the changes in
the competitive landscape has been the concept of addressable market. When we went public twenty years ago, there was a lot of conversation. I think we were one of the first companies in this industry, especially on the joint broker side of it, to become public. And at that time, there was a lot of discussion about a small niche and where C. H.
Robinson would fit and what our limits would be in the industry. Over the last twenty years, there has been an evolution of the competitive landscape, the formation of Transplace when all the large carriers got together three or four years after we went public, a lot of traditional competitors who have come into the space. You've seen most of the analysts kind of project that retail market share has gone from 6%, 7%, maybe up into the mid teens now. A lot of the changes that are happening in the industry today are really premised on 100% addressable market within the 3PL sector. A lot of the digital transformation and changes that are going on are really going after the entire transportation and supply chain.
A lot of the initiatives that you're going hear today are really focused on global supply chain services and things that we're doing. So from a very high level, the kind of core tug of war that we feel in today's environment is the opportunities and threats to the SWAT analysis both being incredibly active. And really the way the overall way that Robinson is reacting to that is we're playing offense, continuing to go after market share as aggressively as we ever have. We think the opportunities are going weigh the threats for us. We believe that we can continue to create value.
We still think our financial goals that we laid out three point five years ago at our last session are achievable, and he's going to recover those and share them again with you. We want to really focus today on how we're going to market, the changes that we're going through, how we're investing in technology and digital transformation and how we feel that we can continue to win and go after those opportunities in the marketplace. The headline of how we do that starts with our mission and vision statement. The mission statement we've had for a while it focuses in on people, process and technology and serving our customers through that retail model. We've been doing it for one hundred years.
We've been emphasizing it for the last twenty years as a public company, and we feel it's something that we're very good at and consistent. Our vision statement is newer. It's a little bit more aspirational around being the world's most powerful supply chain platform. We do believe we're a platform company. Twenty years ago, this people may have laughed if that was our vision statement.
But today, you'll see in your examples of where there are a lot of very significant corporations that are relying on our platform for global visibility for a lot of their freight execution. You can access our platform for transactional services. There's a lot of it that's fully automated. I want to walk you through today and get you inside our heads around how we're investing in our platform, leveraging our platform. We think of the platform as people process and technology.
It's all three of them. And that's what our vision is, is to continue to build a more and more powerful offering in the marketplace that we think we can pursue the opportunity this year. People process and technology are the words that I emphasize in our mission statement. They define the pillars and the vision statement. I want to spend most of my time kind of kicking off how we think about these things and when you think about Robinson and the things you're going to hear over the remainder of the day.
These are three of the areas where we think there is the most enterprise leverage in Robinson. After the divisional leaders present, you're going to hear from the functional leaders and Angie and HR, Chris with our customers and innovation and process, which we had on the technology side. These are three areas that unite all of the services and divisions of Robinson in a way that we think we can create, we are and we continue to create enterprise leverage and efficiency and competitive advantage in how we work things together. If you think about digital transformation, technology disruption, things that are driving a lot of the change in the lead competitive landscape, I think a lot of it really ties to these three concepts and how they work together to change in the marketplace. When we think about transforming Robinson and a lot of the messages that you're gonna hear today about how we're preparing for the future, it entails each of these three kind of working together to go into the future.
From a people standpoint, one of the messages that Angie will share is we have a very young motivated workforce. We're very proud of our culture. We think it's a competitive advantage. A lot of digital change is impacting those jobs, but we feel very good about our teams and our competitive advantage. While certain jobs are being automated and eliminated, other jobs more important than ever, we feel really good about the competitive advantage that we have in our team.
Process has a lot to do with innovation and how we interact with our customers and create customized value. And then the technology is pretty straightforward around how important that is to the platform. This building that you're at is about four years old. We use it often. I'll be in front of a group like this again tomorrow.
It's the first time I've seen everybody, most people wearing suits in this room. But other than that, this has been a great tool for us to think about how we move forward and work together. So I'll tell you what, Sharon, I know that a lot of you have questions around this competitive landscape, new competitors, digital transformation, how all of these things work together. A couple of observations that I want to share along is when I look back at the last twenty years and I think about how we've been changing and how we've been succeeding and gaining market share,
we've grown from a couple
of billion in revenue to 13,000,000,000 last year and how we think about it going forward. When I think about digital transformation and the challenges and the opportunities that we have going forward and how these things are working together, I would share that historically, I think on the technology side, anything, when we've been wrong, we've probably been too quick to market. And if I look back on the ROI of a lot of our technology, I've got many examples of where we invested aggressively in the industry or the marketplace wasn't ready for it. You're going to see today a visibility tool around tracing and tracking technology and real time visibility in the supply chain. One of the tools that we're really proud of fifteen years ago, we had an investment in a mobile company that was working with location services and real time tracking and tracing.
We ended up writing off that investment because the data costs were too high and the ROI just wasn't there, okay? Cost on a lot of this technology is coming down very aggressively and that's what excites us about some of the opportunity. A lot of these things that we've been working on for a long period of time, the ROI on them and the adoption rates are really changing and moving much, much quicker. We probably created more API maps in the past that got thrown away because our customers were not ready to implement them. If you think about API technology and where it's going, the implementation rates are so much faster today.
When Jordan talks about managed services and where we're going, the acceleration of some of the adoption rates and capabilities is really sort of a fun thing. So when I think about how people process and technology work together, the technology is very important. But I know because there's so much technology coming into the marketplace right now, if you didn't think that, that might be Rabbit's Sense Achilles' Hale or Purion. I really don't think that's the case. So I think the algorithm, the mobile app and the different technology tools that are out there, we feel very good about where we're at in the lifecycle and understanding of those and how as things accelerate that we can take advantage of them as well as anybody.
On the people side, we've got an adaptable workforce. We've got a young workforce. We feel pretty good about how we can change there. Process side of it, frankly, is probably one of the most challenging things. If you think about disruption in other industries, the willingness to buy market share, the willingness to change pricing terms, the breaking of rules, if you will, in order to sort of change industries and do things.
To me, that's probably the most threatening part of kind of the changes in the competitive landscape and the way things are at. So what we want to do is give you the pieces today around all of these, around how we focus on people, process and technology and what we think is important. We think they are competitive advantages for us. We think we're well positioned to continue to evolve all of them. And I believe that the synchronization of these three and how we work together as a team
our customers is probably the most important
element that's underlying all of them. This is not new to us. Process and technology is approximately 20 ago. This is what we've been living for one hundred and twelve years. It's what we think we're good at.
It's changing faster than ever. Hopefully, we'll share some perspectives with you today about what we're thinking about these and how we plan to be successful in the future. It plays right back to our mission, what we want to be as a company. More slides for me. Last next slide is just around when you listen to our five divisional leaders today.
So obviously, of the important things that we did a quarter ago was implement segment reporting. In today's format, you're going to see our five divisional leaders come up and talk about how we go to work and explore our business segment into the various areas that we compete with. Another primary reason for wanting to have this day is to make sure that you're aligned with our thinking in terms of
our structure and how we're going
to market and computing in these transformational areas. It's really important we spend a lot of time on it, and I think it's something that will serve us well going forward. There's commonality, just like people process and technology are common leverage points from an enterprise standpoint. There's commonality across all our services and divisions. You'll see in the presentations that we have relatively small market share in everything that we do.
Part of the reason why we're playing to win and playing offense is because we do believe this addressable market is expanding, and we think there's a lot of opportunity out there for us. So you're going to see a repetitive pattern of while we're proud of our $13,000,000,000 of revenue and our presence in the marketplace, very, very large market, we feel very good about those opportunities that we have to go after to continue to get market share. These three bullet points have been with us since the beginning too and really reflect the commonality across those divisions around where we think we can add value: growing market share innovating and creating new solutions expanding and optimizing our global network the optimization of the global network has a lot to do with productivity internal processes around how we're making things more efficient and how we're doing things in a more effective way. These are common themes that all of our divisional leaders will be addressing in different ways. So this is my last slide that kind of ties together our team.
I think C. H. Robinson's leadership team today is the strongest it's ever been. We're very proud of it. I think it's a competitive advantage, structure and leadership matter.
And to be able to hear today, understanding our go to market strategies, how we're holding ourselves accountable how we're defining success and knowing the leaders that we have in place to go after those five divisional presidents who are now on the website. Andy is going to talk next and consider the financial model of financial returns. We'll talk about our financial goals and segment reporting returns. The divisional leaders will all cover their area of the business. And then we've got the functional leaders, Chief Commercial Officer, Chief Information Officer and Hill Resources on
the people process and technology side.
So that's the way that he is going to shape up. And our General Counsel is here, he'll not be presenting. I think that's a competitive advantage as well too. We feel like our risk management and processes are as good as anybody's and it's a big part of shareholder creation. So Ben is here as well too if you have any questions for him around how we manage that side of it.
So I'm going pause there. Drink from a warehouse to kick things off. But again, we feel very good about our competitive position, and we want to share that with you today and talk about how we see things unfolding in the future. To how share with and
see
the benefit of the folks on the webcast. If we can turn the microphone we've and ask the question, we can start right here if you will. And I have Brent in the back as well and maybe add. And I'll facilitate I think the headline answer to that is innovation. We've got to have innovative ideas.
You see around this building, you'll see some innovation labs. We try to build two main ways, customer led innovation, where we're doing business reviews with our customers and trying to solve problems collaboratively. Chris will talk about our collaborative solution model and how we work with them to make sure that we're staying on the front of solutions and innovation. And then there's the internal research or sort of R and D element of it, if you will, to make sure that we're doing our own data analysis and analytics to come up with better ideas, the way to move things forward. So I think just like a lot of manufacturers or other industries, the way the world is changing puts pressure on us to be an innovative leader and to make sure that we're adding value to our customers through those innovative solutions.
Yeah. Wanted to hear some on the network offices. Question. And actually that cuts to one of the core reasons why we voluntarily started doing segment reporting and I think the way that we're going to present the information today is helpful. We do believe that our global network
We have around two eighty offices around the world that do our different services. In something like global forwarding, having a local presence, local language, local connectivity is extremely important. Make sure we'll talk about how we've been expanding our network. The most recent investment, PPC in Australia, already having a very positive impact by having greater ties to the local region and that global network. Within North America, where we've been this market leader for decades, we keep around 150 locations and today have a little bit fewer than that and do not really have intentions to continue to open operational centers.
One of the things that digital processes has changed is there are more and more of the steps in our transactions that can benefit from scale and scaled centers. So hope that Easterfield will talk about in North America, some of our initiatives where we're actually moving our network to more dense locations. Many of you have visited Chicago Central a lot more Kansas City or some of our larger locations. You can see some of the benefits that come from scaled productivity. It also helps to have subject matter experts in the room when you have those more dense centers with bigger customers that you can stratify your talent a little bit differently.
So within each part of our business, managed services is a whole another story around controlled commerce and how that network works out. One of the things that we believe is that enterprise metrics on Robinson from an operational standpoint are probably less helpful than they were ten or twenty years ago. You really do have to break down that collect information that we're sharing with you. In the first quarter that we just released, while it wasn't our finest effort in terms of bottom line results, you do see a lot of long term trends
that you're going to continue to see
in terms of talent being added in managed services and IT groups, leverage to be more productive in other parts the network, and we are trying to share better metrics around how to think about our diversified services in doing that. So the structure of the network is a competitive advantage. We still believe in local presence within each of our segments and services that we're offering. We do think there are very important variations in terms of how we go to market and leverage those advantages. It's a great question.
And I would say, again, in my opening comments that historically, when we've gotten excited about a lot of these tools and have invested heavily in them and brought them to market, we've run into a lot of change resistance and a lot of challenge around getting them implemented. I think the scale and momentum that's coming today and hitting so many other industries that the environment is probably much riper for faster and broader adaptation and adoption of all of this stuff. So that's kind of the attitude that we have is we think it's going to be different. We've heard that people are going to adopt much more aggressively. But kind of I guess the core thing that I've laid out, I think our customers in general are excited about it.
They all want to try to create competitive advantage through their supply chains and leverage their opportunities. So it's not hard to get an audience and to engage on these topics around how we drive efficiency and how we drive costs out of the marketplace. But the process part of it really is the challenge. How we make sure that we make it usable for them, that we make it so that it can be implemented and that we create value along the way too because there is a lot of cost associated with the adoption of some of these tools. Hopefully, today, we'll give you a good flavor of what we're thinking about some of the more important elements of that and how we're going to work.
Do have a busy day and Tim's going keep us on to ask questions right now. I'm going to pass it over to Hendi at this point. But again, there'll be several more Q and A sessions in Thank you, Tim. Thank you, John. Thank you all for joining us this morning.
We do appreciate you taking the time and making the effort to come join us. We know that obviously air travel has become a lot more interesting as of late. There was a report that two investment bankers were drug off the United flight, so some good news. No. I'm just kidding.
Thank you. Again, my name is Clark. For those of you that don't know me, I've been in the industry for nearly twenty years and have had the good fortune to be a part of the Robinson team for the last two. It's an incredibly talented, as John mentioned, senior leadership team. We have 14,000 people across the globe.
So it's a really good story and we're glad that you're here. We know that it's an exciting time in transportation. We know that it's a complex world. We know, everybody wants to talk about, there are a lot of people that are coming into this marketplace and trying to take their share. And what's really good is that what you have with C.
H. Robinson are the best people. What you have with C. H. Robinson are the best processes.
Finally, you have the best technology. And we're going to spend the rest of the day kind of walking through those. All of us work hard every day to deliver best in class services for our customers. We work hard every day to deliver best in class results for you, our shareholders. John mentioned it.
We've been around for one hundred and ten years, and this year, we will celebrate our twentieth year as a public company. We believe we have a unique story to tell. And as the other leaders come up today, we think you'll agree. I've mentioned that the fact that we've been public for the last twenty years is good to support because there's
a lot
of companies that have been public and are no longer public. We've been public for twenty years, and I'd like to start the discussion on the financials to really focus in on the results that we've produced over the last ten years. They're impressive. They tell a great equity story and we believe they set the stage for us for continued success in the future. So starting with the chart on the top left, from 2006 to 2016, we more than doubled our net revenues from $1,100,000,000 to $2,300,000,000 a compound annual increase of just under 8%.
We've done this when global GDP good as it was in 2006 and 02/2007. We've done it when global GDP was as we all remember in 02/2008, 02/2009. Quite frankly, we've done it through periods of so sorry GDP as it has been for the last eight years. And importantly, as John mentioned and you're going to hear throughout the rest of the day, we've done this as competitors have and will continue to enter our marketplace. Over that same time period, we've grown net revenue margins as well.
At the 2016, we ended 110 basis points above the ten year average. We've been able to achieve net revenue margin expansion by growing scale in our core truckload business as well as expanding domestically in the LTL space, the intermodal space. We then further grown our net revenue margins by expanding globally into our global forwarding presence. Mike is going to spend some time today talking about that. Acquisitions have played an important part in contributing to just under 2% of our net revenue growth during this time period.
More on that in a moment. If we look at operating income on the top right, we've accomplished similar results, growing to nearly $840,000,000 in 2016. Margins matter in our world, and we are proud of the fact that we have set them far high in the industry. As a percent of net revenue, operating income margins have averaged 140% for the last decade. There have been and will continue to be fluctuations in that metric, but we believe our variable cost structure as well as our pay for performance culture and compensation will allow us to remain at the top.
One of the larger areas of increases in SG and A and therefore a drag on operating margins has been the acquisition amortization that we've taken on as we've acquired companies to support our growth. You'll see in a moment, but the incredibly positive impact these acquisitions have had on a metric that we know is important to you, which is free cash flow. Over the last decade, net earnings per share have more than doubled, went from $1.53 per share in 2006 to $3.59 per share in 2016. We've been successful in driving operating income and net revenue at essentially the same rate. However, in order to return more higher amount to our shareholders, we've been able to successfully lower our effective tax rate and repurchase shares.
In a few moments, I'm going to highlight an interesting statistic on net income conversion that we think you'll appreciate. If you want to turn on the slide shows our cumulative return to shareholders of $4,900,000,000 over the last decade, setting the stage for what I'd like to discuss next. We talked at length to our shareholders and we talked at length to people such as the analyst community that talked to our shareholders as well. And we know one of the things that you value most is free cash flow generation and free cash flow return to shareholders. The dark blue line on this chart shows the impressive cumulative free cash flow generation by C.
Robinson over the last decade, going from a starting position of $300,000,000 in 2006 to over $4,300,000,000 in 2016. This is actual cash flow, meaning cash flow from operations minus CapEx, not a proxy for cash flow. Over that same time period, we returned an even greater amount of money to you, our shareholders, increasing from a starting point of just under $180,000,000 to over $4,900,000,000 in 2016. The yellow line on the right is an interesting one and it's what I referenced a moment ago. It shows the net income conversion to free cash flow.
Over the last decade, we've generated a total of
$4,600,000,000
in net income. During that same time period, we've generated $300,000,000 in free cash flow. Put it another way, almost every dollar of net income that we've generated has been converted to cash. Cash that we've used to further grow the business, cash that we've used to reward you, our shareholders. This is one of the great powers and great benefits of the company, the model and of our people.
The good news is that it works in many economic conditions. So we talk about the income statement and the cash flow statement. We'll spend a little time talking about an important item in our balance sheet, debt. Next page, this page shows how over that same time period from 02/2016, we started in a net cash position of roughly $350,000,000 During that time period, we've transitioned that from a net cash position to nearly $1,000,000,000 of net debt. We've used both the strength of our business model and the results that our people generate to leverage our balance sheet, to simultaneously grow the business as well as return capital and therefore drive up returns on equity.
We continue to be comfortable with our current debt levels, and we would further be comfortable going above those debt levels should the right opportunity arise. One final slide on capital deployment before moving into segments and strategy. Here again is a longer term view of where and how we've been deploying capital both organically as well as M and A. I mentioned earlier the importance of mergers and acquisitions to drive both operating results as well as free cash flow. You can see that since 02/2006, we've deployed $1,300,000,000 in mergers and acquisitions.
We've acquired three companies during that time period of note. Obviously, the largest ones that Mike will talk about is Phoenix International. We did that in 2012. And in 2015, we acquired a company called FreeClub. Bobby is the one we'll talk about that in the NAV strategy.
And then finally, at the 2016, we acquired company called APC, which is our North Australian and New Zealand operations in the mobile forwarding space. I think those are a tremendous benefit and a tremendous add to the overall organization. We've also, as John mentioned, committed capital to organic growth. I would point out again that these figures are cumulative. In the last decade, we've only spent $490,000,000 in capital expenditures to produce the type of free cash flows, produce the type of net income that I mentioned earlier.
It's interesting to note that there are companies that are out there today that are in our space that spend more than that on an annual basis to generate their returns. We talk a lot about the business and the importance of leadership and the importance of the work that we're doing as an organization. And for the first essentially eighty quarters of us being public, we reported it as one segment. Starting two quarters ago at the 2016, we began to report a segment. We did that for several reasons.
And I think they're important to note and to call out. And you can see the impact of it on our slide here on the left. The rationale for going to these segments was because we believe that the characteristics of those divisions that we have, their operating results, how we lead them, have all changed and developed over the last several years. And as a result, we thought it was important for you, our investors, see how we actually view the business, how we deploy capital and how we drive earnings growth as an organization. For example, in 2016, our largest segment, MASS, North American Surface Brands, generated two thirds of the revenue for the overall organization.
This so, as you can see on the right hand side, at a 17.4 net revenue margin and over 40% operating income margin. The remainder of our business, Global Forwarding, Robinson Fresh, Managed Services and European Surface Transportation generated the remaining one third of our business, but did so at materially different net revenue margins as well as operating income margins. We think as you go through the day, you're going to enjoy hearing the stories from these leaders as they run their businesses. A few words on enterprise strategy, mergers and acquisitions before going into my final slide. From a macro perspective, our strategy remains intact, right?
We have and will continue to seek out attractive and accretive acquisition opportunities across the globe to help us fill in geographies and help us fill in and complement our existing services. We've been very successful in doing so in the past. We've taken the time to fully vet these acquisition candidates, and we spend an appropriate amount of time integrating the companies once they're acquired. We believe that our criteria, which I'd like to spend a few moments on going through, are very important to how we look at acquisitions. And the first one is cultural fit.
At your very premise of your business, our people, process and technology, when you go out and look to acquire companies, you want to make sure companies that you acquire have the right cultural fit for your organization. It is absolutely critical to our success. Second one is, as I mentioned, is strategic fit. As we think about the globe, as we think about our services and as we think about our strategy, it is really important for us to be mindful of what is happening today, uniquely important what is going to be happening in the future. We think about things like technology, we think about things like digitalization and we think about global trade simultaneously when we go to decide where we're going to deploy capital.
The third criteria is business model. Again, as I spent the last few moments talking about those free cash flow returns, it's important for us when we evaluate these candidates to ensure they have similar free cash flow characteristics to ours. There are other companies that are out there that have a different business model, but what we've presented and what you our shareholders have asked us to do is to make sure that the acquisition candidates that we look at share similar cash flow characteristics. And finally, valuation. Valuation is important.
You as our shareholders in this room look to us to be very good financial stewards of your capital. And we do so in a way that generates when we do an acquisition and some of these acquisitions were bought out of a process, so we paid market clearing prices. But we did so because we knew that we can extract additional value from it, things such as cross selling, things such as integration and the like. So we're very pleased with our results in the past of our M and A strategy. We believe that it's the right strategy going forward.
We have a dedicated team that is looking at an extremely full pipeline right now. But doing that, we're only looking at the deals that add value to our shareholders. We will be very disciplined as we've done in the past on how we go to execute those deals. Strategy wise, follow-up with what John has said, you're going
to hear
it all day long from the rest of the leaders, we're investing in our people, we're investing in our process, we're investing in technology across the globe and continue to be the industry leader. As a senior leadership team, we're aligned around these subjects in digital disruption, marketplace disruption, the existence of all competitors. We continue to hear every day some of our investors in the sell side, so and so so. They're still competitors. We've been in this business for a long time and are very aware of the competitors that are
out there.
They're always going to be there. There's going to be new ones that enter. Like e commerce, things like last mile delivery. We as a senior leadership team get together very frequently to help set the strategy for the organization as to how we're going to develop the right plans and the right processes to win in this marketplace. These are the issues that you all are focused on and we're focused on as well.
And we believe that you'll leave here today with a much better and a much deeper understanding of how we're doing this. And finally, before turning it over to you all for questions as well as over the rest of the senior leaders to walk through their businesses, we're affirming, as John mentioned, our long term growth targets. For the first time now that we went to segments, you can see it by segments. So you can see there, North American Surface brands, we believe, will continue to grow in the long term net revenue of 5% to 10%. We believe the Global Forwarding organization will continue to grow at 10 plus percent.
We believe that Robinson Fresh will grow between 48%. The other one you're going to really, I think, for the first time, get a deeper insight into Jordan and the TMT group, the room with European service trans. We're very comfortable and very confident in our ability to grow that part of the business, 10 plus percent over the long term. So that's a viewpoint from the operating segments. When you roll that up into the overall corporate, we while we acknowledge that 2017 is off to a difficult start, as Scott mentioned, We've been speaking and that's really coming from the cyclical side of our business.
We believe we can grow our net revenue and operating expenses in line through the combination of lowering tax rates and continuing our share repurchases. And we believe long term EPS growth rate is 10 plus percent. So I wanted to thank my colleagues today. I wanted to thank all of our employees across the globe that are helping us produce these results. Thank you all again for coming in and listening and I'll open up for questions.
Thanks. And Scott, the long term earnings rate of 10% plus, little bit better than the ten year average, is there an assumption of more acquisition going forward, buyback going forward? And then when we look at the long term revenue growth targets, can you give a little bit of color revenue and yield? A lot of questions are now, but I'll try to pardon me, remember all of them. As it relates to I'll go with the reverse chronological order, the gross revenue is highly impacted by fuel, right?
So fuel being up 25%. And you saw in the first quarter, as an example, gross revenues were up roughly 11%, and that was primarily driven by fuel and volume. Our volumes were up across the system 13%. In a cyclical environment, which impacts the net revenue, it was down obviously because of the impact of the pricing environment. We think about the gross revenue growth, we know that there's going to be an impact, both positive and negative, across all those different things.
There's a cyclical element to our business. The secular trend is, we've been talking about for a time, is the continued desire to take market share, as John mentioned. So we're going continue to do that organically. So there's going to be some fluctuations along the top line as those factors impact. Acquisitions will continue to play an important part of that.
As I mentioned, over the last decade, we grew at 8% on the top on the net revenue line and 2% of that was driven by acquisitions. I can't give you a specific answer. Don't know where I think it would be appropriate to say 6% is going to come from acquisitions because we're out there evaluating the acquisition opportunities every day, some are larger, some are smaller. And we're going do what we think is the right opportunity for commercial. When you translate that into below the line, the more income that we generate outside The United States, the lower our fixed tax rate.
We selected NPV 23 at the beginning of last year. As a result, the way you think about it is roughly any dollar that we generate outside The United States generates an extra roughly 25% rate. Every dollar that we generate inside The United States currently is at 37%. A combination of, as Mike and the team will get into as we drive Brazil from outside The United States, lower effective tax rate and we will continue to do share repurchases to help drive our EPS. I'm not going to steal Bob Summers because he's got a great piece on it, but I will kind of address the thematic and the trends and the themes that we're seeing and why.
If you go back to that slide, it's important to break out our net revenue and go to operating segments, reportable segments. You think about NAST, even within NAST, there's truckload, there's less in truckload, there's intermodal and there's merchant services. So as we continue to grow, truckload is unless we start with truckload, there is a cyclical element to that and we're obviously not in a very difficult time. In the long run, there's value and benefit that we, as a intermediary, as the 3PL offer to our shippers. We're getting a lot of statistics today, but we're connected to over 200,000 organizations.
There's value that we bring to shippers and helping them procure capacity. There's value to that very, very fragmented marketplace that allows us to bring that to
the shippers. John mentioned it
and we'll talk at length about it is that technology is there. Yes, it's important, but it's still not being actively implemented on behalf of our shippers. They still want somebody to manage that business on their behalf. There's a value that they'll pay for. Simply, in transit visibility, that's great, that's stable stakes, but what happens when something goes wrong?
There's a value that we bring to that. The same on the shipper side. And as those margins fluctuate, and there will be a fluctuation, they're under pressure right now. We've diversified. We have more LTL business today than we had a decade ago.
And obviously, as we all know, the margins that come in that LTL space are higher than truckload. What's unique to, I think, our opportunity there is combination of all the things that we do with our core customers helping them manage their supply chain, converting from truckload to LTL, from LTL to consolidating into a truckload and vice versa. So we feel very comfortable about our ability to manage margin expectation by depreciation. Think about intermodal. That's why you think about emerging services.
Margins on our emerging services tend to be higher because they tend to be more specialized from those services that we provide.
Yes.
Well, if
there's a range, that's a good question. Again, I feel Bob is under, but there's a range for a reason. We know that given the fluctuation and the variability around it, but I think that's actually the great news of the story, that we've been nearly an hour into the meeting, we haven't talked about ELDs. Bob's going to talk about them. When we think about when there's supply chain disruption that's out there in the marketplace, you're going to see margins expand because regardless of how good technology is today, it's still not there.
It's still not at the point where shippers, carriers are comfortable turning it all over 2.5% and just saying, okay, we're to start moving freight that way. There's still a lot of work that our people are doing to manage that. And we believe, I think history has proven us correct, that when there is disruption, when you get to the top end of that range, when there's kind of what we saw in 'eleven, 'twelve, 'thirteen time frame and that kind of mediocre GDP, that stable market tends to go towards the lower end of that range. David Vernon from Bernstein. If we look back about five years or six years ago, out the financial crisis, you guys are dropping about zero four two dollars zero four three dollars in every net revenue dollar and operating income.
If you're asking today, we're looking at about $0.35 $0.03
6 Obviously, you've been taking
a lot of share, obviously, you've been doing a lot of acquisitions. What is it that gives you the confidence that by taking more share and buying more companies that you're going be able to stabilize that sort of Yes, great question. And how do you think about the cycle and where we are? Why I went back to that ten year average? I mean, we're pretty close to where we were in terms of that ten year average knowing there's variability, particularly in the net revenue margin.
So when we get the benefit of margins expanding, would you take both volume and it's at a higher price, you can drop more of that to the bottom line. And today, what we saw in 2016 was that we went after market share when prices were going down. This green little chart that we produced as part of our earnings, it shows that since 02/2008, it went unfortunately from a kind of a eight year high, as you mentioned, coming out of the financial crisis in 2014, 2015, right back down to the lows. And as a result, it negative had impact of the compression of our margins and what we were able to drop. They're still really close to what the historical average has been.
So we believe that as we continue to grow, when we take that market share and the pricing goes up on that market share, it's easier to keep it once you get it. And when the pricing does go up on that market share, you drop more of it to the bottom line. When you then have that, you're able to offset a lot of the other close association with either doing an acquisition, integrating acquisition or the amortization associated with it. PPC is a good example. We talked about it.
It added about $3,000,000 to the SG and A just in the first quarter alone or two quarters in having acquired that company. So while the costs are there, they're fixed, and that's not going change over the next twelve years or however long we're amortizing it, sooner it is that we get will continue to rise. We sold this when we acquired Phoenix. We sold when we acquired FreeQuote. It should be either way, because you all know when you do the acquisition, you get the cost and the leverage comes one year, six quarters out into the equity.
Ask Major Susquehanna. There's a perception that number one, do you think that's your perception of your strategy? And if not, what opportunities do you have to take the portfolio in North America where you can really supplement where you're already a leader pretty much everywhere? I'm going go on reverse Toronto. If think about the opportunities, and Bob is going to talk a lot about them, but e commerce, last mile, we're continuing to make both organic as well as evaluate inorganic opportunities.
North America is the largest economy. So you would imagine, given our relative market share, that we're going to continue to make investments in North America. It's really interesting because if you think about not to go too deep into the accounting weeds, but clearly, we're expensing a lot of our IT costs right now since it's an existing system. So it's not being capitalized and put on the balance sheet. It's actually being expensed, which does have a negative impact to our EPS and a lot of things that you all are rightfully concerned around.
We're making investments and that's directly being expensed in the next three periods. Obviously, you do an acquisition, you just put it on the balance sheet and advertise it. We continue to make investments in North America, particularly in The United States, in Canada, in all aspects of North America. Thinking about it, and I would say that the strategy is really customer driven, customer led and increases customer relationships later on today where we're winning on a global basis. And I know everybody talks about what we do in North America and that's important.
The investments that we make are really being driven by the needs and the desires of our customers to deal with a global provider, non asset based global provider with one instance of the group in terms of their systems and their technology. Technology. We are making investments today and have made what we do to make them to drive our overall results both in North America as well as outside of North America. It just so happened that some of the results or some of that investments that we've most recently made happen to be outside The United States. I will comment on the strategy.
I'll comment on ours. And like without slipping back to those slides, I'll reference them as our investors, we believe, talking to them and talking to others that the non asset base is a good one. We also believe that it's a good one for our customers. If you think about the 132,000 customers that we have and the 70 some odd thousand providers we have across all of our different services, what's really interesting is for us to be able to say to them, we're going solve your problem regardless of the way in which it moves, regardless of the asset, regardless of the division, regardless of any of those other things. Maybe if you owned assets, you as an investor in that asset would want to everyday maximize utilization and the return that you would generate on that asset.
We look at it and say we've got to maximize the services that we provide to our customers and resolve having the best technology and having the best people and having the best process. It's really important to helping our customers solve those problems. Complexities around global supply chain are infinite. They're only getting more complex and not getting easier. Technology is going to help us.
It's going to make our smart people more effective. And you're seeing that in terms of, as John mentioned, the metrics around volume versus headcount is important to us and we track it. But going in and saying now, hey, we own assets because they're very dispersed. They're very, very scattered throughout the entire world. Just knowing one of our customers' needs at any time and trying to fit that into the assets that we own, we just don't believe it's appropriate for our strategy.
Hi. Good morning, everybody. Normally walk through the aisles and presentations, but I guess that's not gonna be an option. Hey. I'd like to welcome you to our twenty seventeen Investor Day.
I've really got four goals for today. First is to revisit, kind of level set the roof on what NAST is, the services that we comprise and what our network looks like. Second, I want to provide an update to this group on some of the transformation efforts that have been underway since the last time we met. So going back to 2014 and some of the steps that we've taken, maybe to address some of the questions that have already come up about what our network looks like and how those services evolved. I also want to talk about the market opportunity that
we see in front of us and
talk about how we intend to attack that market opportunity and continue to expand our leadership position. And finally, I'll close my half hour or so with some room for questions, but I do want to take time to share what you should expect from us, right, what are the things you should expect from us in terms of the trends in our overall business. So let's start with our services. As you know, about 99% of the revenues in North American surface transportation are generated from truckload, less than truckload and intermodal. Each of those core services has a unique story.
When I think about our truckload service offerings, I'm proud to say that we move more truckload freight than anyone else in our industry. That's a differentiator for us. Truckload, we serve over 40,000, 47,000 unique customers and those customers range from the smallest manufacturers to some of the most complex global companies in the world. When the majority of our truckload freight is dry van, we're proud of the fact that we also maintain one of the largest service providing temperature controlled transportation as well as flatbed transportation. So our truckload service offering is a diverse portfolio of services within itself.
LTL is one of the great growth stories within Robinson. Twenty years ago when we started in the LTL space, was really about reselling common carrier LTL capacity. Today, that's still a big part of our business, LTL is comprised of really specific consolidation programs for strategic industry verticals like food and beverage, like automotive and like retail. LTL has continued to become one of our largest services in terms of volume. Today, we serve close to 90,000 unique customers with our LTL service.
What was once somewhat of a manual process is almost now a fully automated process. With the acquisition and the integration of Freightquote from a couple of years ago, we now have the ability to deliver a fully automated LTL solution to our customers that allows the customer to go online, place an order, have that shipment track all the way through to the carrier delivery without any human interaction. Now that we've integrated that Freightquote technology into Navisphere, we're able to continue to expand that service across that customer base.
So intermodal makes up about 2% of
our overall revenues within NAST and albeit the smallest of our three core services and certainly of strategic importance to us. Having those strong relationships with the Class I railroads allows us to sell an integrated service to our NAST customers, which is a further point of differentiation for us. In Andy's comments, he mentioned this concept of emerging services. While emerging services only makes up about 1% of the revenues of NAST, what emerging services is really our team, it's our incubator. It's where when someone asked the question earlier about where does the innovation come from, where that customer led innovation and our employee led innovation come together.
And we fund those emerging services ahead of the revenue contribution, we can bring those next services to market for the benefit of our customers as well as return to our shareholders.
So given the importance
of truckload to our overall network and our overall service, I thought I'd spend a bit of time talking about The U. S. And the North American truckload network and how we interact with those carriers. So I know this is a bit of a busy slide, but I want to walk through it with you. So based on the research that we've done, we estimate there will be about 206,000 active or higher motor carriers within The U.
S. What this slide attempts to do is to fix how those motor carriers are distributed across the size
of those
businesses. And what you see is that about 29% of the four higher motor carriers in The U. S. Own less than five pieces of equipment. These are very small businesses.
You see that close to 90%
of the trucking companies in The
U. S.
Own less than 50 pieces of of equipment, equipment, also smaller businesses. Just 1% of the trucking companies in The U. S. Actually own more than 50 pieces of equipment. When I think about how we do business with these motor carriers, we do business with about 25% of those smaller carriers.
We do business with virtually 100% of the carriers with greater than 50%. It's the smaller carriers that move about 85% of the freight that we move for our customers. So this is important to think about this question of disruption, this question of digitalization also plays into the ELD question. So what happens when, right? That's the question that everybody asks.
Well, we feel that we have a large carrier base that's untapped within The U. S. Carrier base. Even though we're the largest, we have huge untapped carrier base to continue to work with. If market conditions shift, we can shift between smaller carriers and larger carriers.
Our effort within this carrier base to have technology solutions that deliver value forward to our customers as well as back into these carriers. The smaller carriers, the smaller businesses have less technology than do the larger carriers. They have less efficient networks than do the larger carriers. So as we think about investing our technology dollars on behalf of the carriers, we do that in order to make these carriers more efficient. We do that to make these smaller carriers more connected.
We do that in order to help these small carriers connect to freight and run more efficient businesses. Keeping in mind that many of these small carriers have up to 20% of their miles running empty. They come to us because of the network effect that we can help them to become more effective. I think it was Tom earlier that asked the question about our NAST footprint. We talked about it historically about 150 offices, sometimes operating somewhat independently, right.
Our NASS footprint has continued to evolve and has continued to change. This is one of the things that's gone on since the last Investor Day. Today, we no longer have 150 offices. We've made some decisions in geographies and regions where we had offices in close proximity to bring those offices together to consolidate. We do that to gain leverage and to gain scale.
We've also made decisions around some of those offices that were in non strategic underperforming locations to close those. But the evolution of our NASS network isn't necessarily about the number of offices that we have at any given time, it's really about how we've chosen to lead, structure and organize our network. So today, don't talk about 150 or 130 independent offices, What we really talk about is good scaled regions and the freight forward acquisition. That's how we view and that's how we beat our NASS network. By doing this, it's allowed us to be more agile, allowed us to develop and deploy technology with greater efficiency and greater acceptance.
It's allowed us to drive strategic change through our business models more effectively and with greater ease. What we've also done over the course of the last couple of years within this network is we changed the internal structure of what an office looks like. So historically, we were more of that what we would call in the business the cradle to grave model. Essentially everybody did everything. It was very difficult to measure performance.
It was very difficult to measure efficiency. It was very difficult to attract and retain talent when people wanted a specific career path. We've moved over the course of the last few years to a much more specific role based model or function based model. We put focus on having a career in sales, a career in account management, a career in operations, a career in the carrier job. By doing that, we've been able to provide greater career paths for our people and we've been able to provide very specific performance metrics.
These things have made a difference. Today, this NASS network, as I said, is made up of eight regional centers. This is a network that moves over 11,000,000 shipments per year. It's an immense number of shipments that flow through this network. This is a network comprised of almost 7,000 employees that generated over $8,700,000,000 in revenue in 2016.
The evolution of our network is not complete. It will continue and I'll talk more about what that looks like. But as we look at our network in the future, there will really be three main components to it. It will be scaled operational centers, exist today, but they continue to grow in size. We're moving task oriented processes into those scaled operating centers to make a lower cost for higher quality environment.
By scaling those tasks, we can also simplify, centralize and automate
those tasks and
extract cost from the model. The other component of the future network will continue to have sales offices. Having those offices close to our customers is extremely important to us. Having the ability to sell locally and be present in the communities that we serve is extremely important to us and we see it as a competitive advantage. We will continue to scale the carrier procurement function, scaled centers, virtual lines like you've seen many of you have seen in Chicago or Kansas City.
Sales, carrier management and operation centers will be the core components of that network. But I do want to reinforce though that the network is comprised of people. If I go back to John's opening comments, the people part of our people process and technology is still really important to So let's talk about the results of this. Good to say that we've changed the network, we've got to be able to put some points on the board. If I go back and make some comparisons to the 2014 until today, there's some very specific results that we can see.
Our salespeople are making 43% more sales calls and conducting sales activities today than they were at the 2014. People ask me, why is volume growing? Why is market share growing? Of the simple answer is that we're selling more today than we ever have in the past, 43% more than we were in 2014. When we think about productivity,
orders per
person per day or loads per person per day are up 11% for that time period. Through the specialization of that carrier job family and the people that are negotiating rates and managing those carrier relationships and dispatching shipments, we're booking 23% more freight today than we did at the beginning of 2014. Aggressive statistics. The network transformation has delivering scale and delivering advantages. We also talk about organizing ourselves differently and centralization of functions.
One of the areas we've put a lot of focus on is bringing together common processes and leveraging learning algorithms around truckload pricing to become more effective. Through the centralization and standardization of that process, this year over year, we've improved our win rates on large transactions and large truckload opportunities by over 400 basis points. That's significant when we see literally billions of opportunities of truckload goods coming through our opportunity fund. Gaining scale, one of the ways we look at that is what is our personnel expense per order? Happy to say that over the last nine quarters that personnel expense per order per shipment that comes to our system has declined on a year over year basis.
So all positive signs about the foundation of the work that we've been doing. Now, obviously, the financial results for NASS haven't been where we wanted them to be or expected them to be over the course of the past few quarters, but I'm confident that the work that we've been doing to lay this foundation will help us to achieve the future goals that we share with you. The other thing that I want to leave you with around this concept of transformation is that with all of the conversation and all the talk about digitalization and digital disruption, the work to digitalize the NASS network isn't just starting today, it's been underway for the past several years. If you consider a snapshot of what digitalization looks like for NASS today, can you go back please? Think about the fact that in any given day, there's over 6,000 motor carriers engaged with our Navisphere mobile carrier app that we launched last year.
There's over 16,000 motor carriers engaged with Navisphere carrier online. These are motor carriers that are looking for loads, providing automated electronic status updates, helping to manage their business. In any given quarter, there will be over 50,000,000 searches from those two devices, those two mediums, carriers in our system looking for loads, 50,000,000 times a quarter of carriers in our systems looking for loads.
Beyond that,
we've worked on extracting processes from our offices, trying to automate
internal processes.
Last year, we had over 98,000,000 processes like driver status updates, location updates that flow through our system in an automated manner. That's up 40% on a year over year basis. So the digital transformation of NAST is underway. I'll go back and talk about FreeQuote again. We had over 5,000,000 shipments tendered to that FreeQuote model with no touch, order to delivery.
The staff is not up here, but I think is really important, with all those carriers interacting with us via the web and via mobile, we can see that there are over 1,500,000 instances, 1,500,000 loads last year where a carrier went online, viewed a load with one phone call, talked to their managing carrier rep to book that same load. Some might say that that's archaic and some might say that you're still involving a phone. I'll tell you that that one phone call in many cases would ensure that we meet the quality expectations of our customers and that we deliver on the expectations. Times that one phone call, is highly efficient by the way, is the thing that allows us to make sure that that carrier has the right equipment and can execute legally and on time the things that we expect them to do. So let's talk about the next slide, which is opportunity.
What gets me excited about the opportunity to lead our NASS network is simply the enormity of the opportunity that exists in North American logistics. Looking at just The U. S. Alone, there's an over $725,000,000,000 logistics spend. If you consider the markets, the market size that I just shared with you of NAST being at $8,700,000,000 or less than 1% or just over 1% of that total spend.
If we consider just the for hire segment,
we're about 2% of that spend.
So the $725,000,000,000 spend comprised of customers of all sizes, right? Small customers who lack technology and infrastructure primarily play in the spot market because of the behavior of their networks. We've gotten the most large, complex and global customers we interact with that are highly automated, highly integrated. We have the opportunity to provide services as we do today across that customer spectrum. To match that millions and millions of potential customers that exist out there in a marketplace that we only have 2% of with this completely decentralized carrier base that I just shared with you, over 200,000 carriers, you layer in the fact that there's inefficiencies built into both sides of that model.
That's where we see the opportunity for NAST to continue to be. I think it was John or Andy that said we consider C. H. Robinson has been a platform. NASS has been a platform, but how that platform connects and automates and it drives value for both sides of that equation will continue to evolve.
But I want to stress again, it's not just about the connectivity or the digital side of it, it's about having the expertise, it's about having the experience, it's about having the ability to step in and solve problems when things don't go according to plan. We've been doing that for years and we continue to do that moving forward. Frankly, when you look at this, the market opportunity and how great it is, I see this almost being the reason why those non traditional competitors that we're talking about are coming in. Not about the 2% market share that Robinson has, it's about the tremendous market share that exists out there broadly and the opportunity to continue to organize and drive value more effectively to that. So we see that opportunity.
We believe that we have a unique opportunity to win and expand our market presence there because of the installed user base that we have, because of the one hundred and twelve years of experience that we have and because of the trust that our customers put in and our carriers put in us every day. The fact that we've been growing market shares as aggressively as we have for the past several quarters, I think is a testament on our team's ability to win. I think it's a testament that even in this extremely hyper competitive marketplace, we are still winning. Yes, there was margin compression over the last couple of quarters. That is, I believe, a cyclical thing.
You all cover and we all see many other competitors in our space that also experienced significant margin compression over the past couple of quarters. Those same companies didn't take market share at the same rate that we did. So let's talk about what we believe about the future. It's going shock everybody, but we do think that e commerce is going to continue to change the supply chain, right. As e commerce changes consumer behavior, consumer behavior changes the supply chain.
Today, see the supply chain continue to become shorter and more transparent. People expect real time visibility to come into Orion motion and next day delivery. We also see the supply chain becoming more global and more complex. Within NAST, we can execute on both sides of that. And by integrating services with the other business leaders that you'll meet today, we can solve for that global solution by integrating our services and delivering that together.
We believe that data asymmetry matters. I want to go back to where I started about the size of our network. 11,000,000 shipments, in order to execute and win 11,000,000 shipments, we do a lot of quotes. So we capture millions and millions of sales quotes both winning and losing inside of our model, which helps us to think differently about how we predict price. Having those 11,000,000 shipments helps us to think differently about service expectations and quality.
Having those 11,000,000 shipments gives us access to hundreds of millions of supply chain events throughout the supply chain that we can capture and feed into machine learning to learn and become more prescriptive, more predictive and more intelligent. So we really believe that those that have that data advantage and harness that data will win. We feel like we're in a really good place there. We believe that the speed of technology development advancement are going to continue to drive change in how business is executed, right? We're at the forefront of that technology development.
We've been doing that for years. We do believe that automation will continue to advance and we're going be able to deliver new service models at lower costs than we've ever thought it was possible. We believe smart people still matter. All advancements aside, people like dealing with people that can solve their problems. And I've been confident in our NAST team, like I said, of almost 7,000 associates that we've got some really smart people that are part of our competitive advantage.
And finally, we believe that, that 3PL space is going to continue to grow. 3PL space has obviously outpaced the overall growth rate of the marketplace over the past several years. And we believe that, frankly, some of these new entrants into the marketplace will even further cement the importance of the 3PL market space and will help to redefine where we can play. So I want to share with you a bit about the vision for the NAST organization. John shared with you our enterprise vision.
Our NAST vision is very closely aligned to that. As we talk to our teams internally, I think it's important that we have the same internal message as we have externally. When we talk to our teams, we talk about leveraging our history as the original 3PL. I think we're the only company that can say that we're the original 3PL. Building upon that history as the original 3PL in order to create the capabilities that relentlessly reinvent the industry.
It's a bold statement. But it's what motivates us, it's what gets us out of bed and what gets us to work every day. It's coming in to create the capabilities that relentlessly reinvent the industry for the benefit of our customers, for their carriers, for our stakeholders and ourselves. So there's kind of four core tenants and how we intend to do that. These four tenants are going to guide our investment strategy.
These four core tenants are going to guide where we spend our capital internally. Four core tenants are going to guide where we add human capital to our model as well. So first, I talked a bit about our network and our model. We're committed to continuing to reinvest our model, not just transforming, but reinvesting that model. We're going hold on to the things that have made us great for the last one hundred and twelve years, but also not be afraid to shed some of the things that maybe got in the way of accelerating change in growth.
That's about reengineering our process, about evaluating our footprint, evolving that network and thinking differently about how we deliver service to both customers and carriers. The second core tenet is around delivering world class execution and customer experience. World class execution has been a core part of what's made Robinson successful for a long time and this is a commitment from us internally to double down upon that. World class execution is how we'll do things internally. Customer experience is how the customers will experience that on the outside, whether that be as simple as how we answer the phone every day to how we develop our technologies to be world class, how our customers experience them, how they leverage our analytics to make better decisions about their business.
The third piece, and someone asked questions about this earlier, how will we invest in our core services in North America? We I mentioned earlier, 99% of our business is generated by truckload, LTL and intermodal. We know that there's still opportunities to expand the services associated with truckload, LTL and intermodal. We'll do that organically. We'll also look to do that through acquisition.
We also know with supply chains change and some of the things that we talked about in e commerce, there's opportunities to continue to invest in those core services and expand those core services in the verticals where we may not be today. We're strengthening our ability to serve the ever changing supply chain. Finally, I talked about a bit a bit about this, but leveraging that data, we have an immense amount of data that we feel that we can use even more effectively in the future, leverage machine learning in different ways, either bring AI into our business and drive better decisions for ourselves, drive greater efficiency and help reshape what we offer to customers. Later this afternoon in the technology demonstration, you're going to see an example of how we've expanded the Navisphere platform in new ways that can redefine how we go to market with our customers. So I'll close and hopefully leave a couple of minutes for questions.
But I'd like to share just
a few things that you should expect from us within NAST.
First and foremost, as I said, the digital transformation of our business is not just beginning, but it's also not complete, right? So as we move forward, we're going to continue to focus on taking market share. We're going to continue to focus on taking market share because we want and we believe that that's the right thing for our business. But as we take that market share, you should expect us to do that at a rate ahead of our headcount. It hasn't always been the case.
In the past, within Robinson, if you look back, headcount growth and volume growth have trended pretty closely together. Moving forward that volume growth can come at a rate above headcount growth as we continue to find ways of leveraging gain scale on our model. As we increase our technology in NAST, the technology investment in NAST, you're going to see us continue to stand up new self-service modules for both customers and carriers. You should expect us to continue to deliver more digital processes, grant processes that have been human managed or manual in the past. We can see the opportunity in front of us there and we're hyper focused
We will continue to look aggressively at M and A. We have a full pipeline and we're continuing to look at ways that M and A can help build upon the success that we've had with Ennas, whether that be accretive new solutions or technologies or strengthening the core. And finally, we are committed to creating that value, creating unique value as a competitive differentiator for people, process and technology. I'll pause there, Tim, and I think you're ready to open it up for questions. All right, we'll start here.
I just slide
up at the beginning. Let's start with kind of the ELD question and the CareBase question. First thing I would say about this carrier base is there's obviously a lot of questions. We hear questions about the health of the small carriers and what is going to happen with the small carrier when ELD is coming. The one thing I would say about small carriers is that on a quarterly basis today, we're adding about 3,000 new small carriers to the Robinson network every quarter.
On average, the fleet size is about 2.5, right? So we're not adding 3,000 fighters, we're adding 3,000 more operators to small companies. But through after a really easy sign up process, those carriers go right to work for us. Typically, that group of new carriers every quarter move about 15,000 to 20,000 loads for us in the first quarter if they're with us. The direct question about ELV is the answer to me the answer probably is that, well, I don't have a crystal ball.
We do believe that there'll be some disruption to the overall network. When you think about some of these smaller carriers because their networks are less efficient, simply have so many empty miles, I think there will be disruption there. I don't have a good round number if
it's going be a 3% disruption or 4% disruption or
5% disruption. But in general, we think that there will be some disruption to supply chain due to loss efficiency from those carriers. With that being said, we also believe that over time, the network will adjust to that just as it always has, whether that was if we go back to the 2014, where we had Snowmageddon rates went up, supply was constrained, things found equilibrium over time. So we can't believe that the market is working with full justice. The other question to you.
One other quick question on results of the business over the past trailing quarters. Frankly, so much of that is cyclical around margin compression in the core North American truckload business over the course of the last three quarters. Brian Ossenbeck from JPMorgan. So you wrapped up with talking about new self-service modules, digital processes. Can you give us some numbers on LTL and how much of that is automated?
From start to finish? I was hoping you can give us some context with the LTL business you mentioned.
I mean, the closer being part of just
a follow-up, you know, how how far along is it from point to point with touch? And just kinda give us some So I'll answer that a couple of different ways. The first is just if you think about the operations and execution, kind of the inside of the things we have to do to execute. A little over half of our truckload business today is transacted between carriers and Robinson in an automated In terms of the true auto tender freight matching allowing carriers to sell select shipments and we see that having an application for a broad base of our business. I wouldn't say it's the entire business.
But if I were to if I were to give you a round number, I'd say it's an opportunity for 20% to 30%. But again, that's somewhat for we're testing and learning in different beta test right now, Brian. There's We've we've tried that with with the module and we're we're in and out of it over time. So we're we're really trying to get the we're trying to find the answer to that exact question internally as well. Right now, Brian, to figure out where we can leverage that.
We are looking at doing some data testing to figure out the acceptance based on carrier size based on customer type. It's certainly one of the things that's in scope of our focus. One more question here with Morgan. Thanks, Bob. Carol Marckens from Stifel.
Just a question on the whole vetting process that you go through to qualify carriers in an environment where safety is so important and compliance with hours of service is important. But there is a wrap against the brokerage industry broadly defined that many of the six fifty, 700 mile, seven fifty mile likely to move legally within one day. Private hours of service are settled routinely in the brokerage industry. What's your view on all of that? How do you make sure that you're dealing with compliant carriers?
And if those carriers can no longer pin the rules in certain circumstances, gonna have to adapt to the sourcing process that
still serve their customer needs.
So we have we have maintained virtually the same but the strategy. The question of think ELB has come in here again as ELB has become more mainstream, kind of the balance of how much information active between the carrier, LP provider and the industry at that point and how much information do we want to be impacting back and forth? What are some of the potential risks around things like vicarious liability by having that information? We certainly on every single shipment that we tender to our carriers, we tender those shipments to them with the expectation that they're going to handle those shipments quickly. And we do the best we can to validate that on the front end that they have the hours of service available and that we are accepting that understanding the terms.
So today we're not capturing playbooks from drivers. We don't feel that that's our expectation. That's the trucking company's responsibility. Thank you, Bob. I'm sorry, I know there's a lot more questions.
Again, we'll have other forms through the day. Tom, Andy, Bob, thank you. Good morning session. We have time now for a fifteen minute break and we're pretty much right on schedule. So 10:45, we'll be back in here and get started.
I should note and I should have mentioned it earlier, these slides are available on our Investor Relations website. So they'll be posted out there for some time to come as they are posted on the webcast as well. So they'll have that as a reference. So we'll see you back here at 10:45. Audio.
+1, 2345. Testing audio. +1, 245. Testing audio. +1, 2345.
Testing +1, 2345. Testing audio. +1, 2345. Alright. Nice job.
Just staying on the clock. Probably a few people coming in. Let me introduce Mike Short, the President of our Global Forwarding business, same format here through the next presentations, although a little bit shorter time. We have four in this next block here. It will probably a little bit more challenge to stay on time, but I'll do my best to do that.
And with that, Mike, I'll turn it over to you. Thank you, Tim. Good morning. Pleasure to be here, and thank you for taking the time to listen about our our business. A brief history of myself since most of you don't know somebody in this room is I started in this industry, this exciting industry back in 1997 with a company called DCL, which was an ocean export consolidator.
Today, they're called Vanguard Logistics. In '98, I went into sales management at Phoenix International and and worked my way up to vice president of North America until 2012 when we were purchased by c h Robinson. I stayed as Vice President of North America with C. H. Robinson until 2015 when I became President of Global Forwarding.
That's a little bit about myself. The last twenty years, the industry has changed for sure, but the fundamentals are the same. There was less volatility in the market back then, but customers still wanted value they wanted visibility. But I feel our competitive advantage is our team culture and that is increasingly rare amongst the multi nationals within our industry. This slide here shows you a little bit about our footprint, but our industry is not just containers and airline pilots.
We relentlessly transact across global languages and cultures to deliver the services our customers need. We provide visibility to the supply chain and manage spend and risk in an ever changing environment. This is done in our core services of air, ocean and customers and customs with over 4,000 employees in 31 countries. While we are almost exclusively a company store model, we do utilize exclusive agent in about 6% of our moves in areas of the world that require a high degree of local market specialization to best serve our customers. We will continue our double digit net revenue growth through expanding our market share and pursuing many of the initiatives laid out in this presentation.
But first a quick history. Robinson started getting serious about Global forty in the mid-2000s and we doubled down with the Phoenix acquisition in 2012. This explains our net revenue milestones as we hit $100,000,000 in 02/2008, dollars 300,000,000 in 2013 and $400,000,000 will be surpassed in 2017. That will happen with the help of recently acquiring APC as well as a focused sales strategy. Acquisition integrations in our industry are extremely tough, but we have shown that we have what it takes to make it successful with both the Phoenix and the APC acquisitions.
This is proven by our volume growth since 2012 as well. In 2012, we moved 450,000 TEUs of ocean freight and 100,000,000 kilos of airfreight. In 2016, we moved 700,144 respectively. So that's a growth rate of 55% in ocean freight and 37% in air freight. We are very proud of the progress that we've made in the last few years and our volume gains are outpacing our competitors at this moment.
As you can see, we are very strong Transpact, but we are making key investments in our people, our technology and our network to expand our strengths. An investment example is having product experts available at all time to assist our customers as well as our employees. I will speak about Ocean and Air in the next two slides, but I wanted to talk about customs now. We have in house licensed custom brokers in every location and in some locations we have multiple. We ensure they are trained and audited on a regular basis to keep up with the diverse custom regulations that allows us to manage our customers' risk.
In addition to growth in our traditional Air and Ocean Customs brokerage service, we've recently had significant gains of volume with our cross border brokerage product achieving year over year double digit growth percentages for both U. S./Canada and U. S.-Mexico trade lines. The freight forwarding market is estimated to be about The next two slides here will show that we have plenty of room to grow.
Compared to our competitors, we have been in the forwarding business for a short period of time. In that time, we have become number one from China to The U. S. We will use that experience to guide us to grow market share globally. We are gaining traction in India, Europe and LatAm by having discipline in sales.
Our carrier strategy is one that has our volumes balanced across the alliances. Our carrier management team ensures this and maintains our relationship with the carriers and currently is made up of about 23 people globally. We differentiate ourselves from our competitors by not having low margin warehousing and by having smaller volumes in low margin lanes. Our air product has the highest growth rate and volume out of all of our products in the last couple of quarters, with the last quarter alone being up almost 30% without including the ABC acquisition. We are taking market share from our competitors.
This can be attributed to the Air initiative we started two years ago that involved educating our sales force, centralizing our pricing strategy, adding experienced talent and strengthening our gateways globally. As we continue to grow Critical Mass, we will also increase our margin in this product. Our market share is very small, allowing for continued growth. We are expanding what we have learned in the other initiative in North America to the rest of the world to accelerate our growth as well. Additionally, we have invested heavily in our consolidation and de deconsolidation infrastructure by expanding our Chicago warehouse to 230,000 square feet.
Our long term goals are to accelerate global commerce, leverage scale and grow our global presence. We accelerate commerce by making supply chains more efficient and reliable. We provide solutions that will speed new products to market, give customers constant access to the data that matters and give global reach. We leverage scale by connecting people and creating networks. Aside from our global office and agent network, a large component of that is our global relationship with our carriers that we take great pride in.
Supply chains are global and ever changing and so are we. Our people view our customers' supply chains globally to make sure that we are effective. These five initiatives on the screen are what we are focused on for 2017 to achieve our long term growth. We will continue to utilize our proven integration process to fully integrate APC into our network and onto Navisphere, our one global system. We continue to capitalize on our global customer portfolios and cross sell global forwarding to our service lines.
This year alone, we are on pace to generate about $20,000,000 in net revenue from those cross selling relationships. I already spoke about our initiatives, but I won't address it further here. That leads me to digitalization. Technology is an important piece of the puzzle. The positive startups in the industry and their focus on data can undermine the role that a fast network plays in the global supply chain.
We will continue to develop cutting edge technology that makes it easy to do business with C. H. Robinson. But we win because of our people, process and technology. The digital transformation that is happening in our industry cannot be ignored.
Digitalization for us means incorporating all technology into a solution that provides ease and business intelligence to all of our customers. Our people stand to gain from digitalization.
They can shift their focus from
task and into building and transforming their customer relationships. Ultimately, will lead to a deeper customer relationship and more efficient operations. Some of the current technology products that we are working on within Global Forwarding is unified vessel. Unified vessel is where we update, there's a change in a vessel sailing, we will update the vessel and that in turn automatically updates all the containers on that vessel. In some cases, we can have hundreds of containers on a vessel.
The other one is proactive supply chain management. So we do that a lot through PO management. We look at the milestones that are important to our customers and we manage those milestones based upon things that could potentially disrupt it or that has disrupted it. We make a plan together with the customer. The other is Navisphere Rating.
Navisphere Rating is an online platform that gives us much faster response time to quotes and at the same time eventually will start once that quote is accepted, it will automatically download into the file for less data entry as well and less mistakes. And last is one global system, one source of the truth, one data entry point. So these projects and more to come are created at all levels within our company. We support the elevation of these ideas through innovation days and have global participation. We recently had an innovation day that led to more projects enhancing our people, process and technology.
The process started with about 400 ideas. Those ideas were voted on and narrowed to the top 10. The top 10 ideas were presented to leadership and we chose the projects that we wanted to take to the next level. So this process creates a unique opportunity to not only make us better, it allows our employees at all levels to give guidance in our future direction. So to sum it up, we've just began to scratch the surface of this vast global forwarding market.
We will continue to grow through efficiencies, aided by digitalization, by having disciplined sales, using our proven integration process to make additional acquisitions where it makes sense and to focus on our customers. Thanks Mike. We'll open it up for questions. Yes. Great, thank you.
Just going back to your comments on cross selling, 20,000,000, dollars I think you said in net revenue this year from cross selling initiatives. Is there more to go there over time as you move forward? And then thinking about the MAP and opportunities for expanded share, Is that something really to really expand in a kind of perspective or really what do you need to have some acquisition in some of these larger lanes to really get the scale you need to focus Thank you. We do think that there's much more room to go in the cross selling. In fact, we've purposely taken it very slow to make sure that we are strong operationally, that we know what they're dealing with Robinson and then another sector really understanding what they do and what they need.
We've purposely taken it slow. We just recently actually have proactively started to go out and get more of that business. There's a ton of room to go there. And the other question, every market is different globally for sure. But we do feel that there are certain markets, Europe is a perfect example where scale means everything.
And that seems like a logical place to start focusing on something we can remain competitive. We still have and I mentioned this last two years. We have a lot of interest in Mexico as well and Ravi? Thanks. We recently seen a
couple of e commerce giants, global
e commerce ads vertically integrate I'm wondering how you see those guys kind of participating in this business over time. Do you think it's going to be mostly internal? Or do you see them being external players as well? And how are your kind
of customers talking about them or
approaching them? And where do you think you guys can differentiate versus the standpoint? We take the stance, I mean, that's a good question. We take the stance that we still value the human interaction with our customers. That's valuable.
Think that the technology side of that e commerce, I think is going to change things, change how we do things. And I think it's going to change a piece of what we do. I think that as complex as a global supply chain is today from a compliance standpoint and just all the different points that you have to interact, we still value the human interaction that we have today. Tom Wadewitz with UBS. If you look across ocean forwarding, air forwarding and customs, where do you think there's the most out of touches and inefficiency today and the greatest opportunity for technology to drive productivity for C.
Robinson and potentially You know, I I feel like the the the area for for the most improvement would be on the ocean and the air side from the data entry standpoint. Data comes to us in many different forms all the way up to. And I think that there's a there's plenty of room for us to to improve in in that data entry sector for for both area and ocean customs. Today, We feel is is is probably the highest technology that we have today. So to answer the question, I believe air and ocean would be the area that we can improve and and create more efficiencies the most.
We Ken Hoexter from Merrill. Just talking about, I guess, maybe the Amazon disruption that you're probably getting at given the size and as they move in, it talked a lot about the capacity they're buying on the ocean and try to get customers to come in. Is one off, are you seeing that already? And then is this the same as the core truckload business where it's about small providers and fragmented market? Or is this more about just simply capacity and pricing, not just on global trade side, but more on the specifics on the ocean.
Amazon is also a very big customer of ours. Work together well with them and again, I just feel like as you try to monetize that, I think it's going to be very difficult in a global supply chain. With the ocean pricing, I feel that we've been very, very volatile in the last year. It's getting to a point where it seems to be starting to stabilize a little bit more with the alliances. But we stay close to our carriers and we have a really good relationship with those carriers and we have people that that's their only job is to understand what the future of pricing is going to hold and we try to negotiate the best we can for our customers.
David Vernon with Bernstein. Could you share with us kind of the breakdown of that 60% of your ocean net revenue, much is full container and less container? And whether you think the creation of these alliances and concentration of more supplier power if those carriers start to go direct to customers and invest in direct moving technology. So how does that percent, probably around 85% is or 80%, sorry, 80% is the rest of LCL. Was I'm sorry, the second question is around the ocean carriers themselves going and investing in direct capabilities.
Obviously, the steam ship industry doesn't make any money. Forwarding has a relatively good return.
To the extent that
the suppliers kind of control a little bit more of the capacity and start to think about how do they go directly to that group of customers that orders have traditionally served, do you see that as a risk to your long term business? We do not. In fact, what we've seen in the marketplace is actually the opposite. We're seeing those people that used to be sales going direct to the carriers I mean more to the forwarder side for the customer service. A lot of what we've actually seen there is cutbacks on the customer service side of a carrier to the point where they're not getting response time, can't they get a hold of anyone, so they're coming to us there.
Ten years ago, we probably our largest customer on the MBO side was would you think about Ferron Ocean? What percent I'm not sure on the data in our market for both air and ocean is very difficult to get. I'm not sure on the percentage that is going through MPOs is correct. What Amazon has done is different than what a BCO would do. They're actually starting their own MBOs.
So they are an MBOs and they have their own airplanes as well, lease and spend. That's different in the fact that they could actually sell an MBL service. So exactly what we do is so that's different in that regard from the. It's just their own freight. Again, back to technology, our outlook for the foreseeable future is really that we put a stock on our people.
And we think that they're going to be a part of that regardless of blockchain or the technology that comes about. You. I will introduce Jim Lemke, our President of Robinson Fresh. Thank you, Tim. Good morning, everybody.
A little bit of background. My career in the food industry really started when I started making groceries and stock and shelves back in high school and college. I feel like I got an early education in consumer demand and how it affected grocery supply. And while I don't necessarily feel like I planned it out, I think it perfectly positioned me for the last twenty seven years here at Robinson and the last fourteen years leaving Robinson Fresh. There's been talk about segment reporting here today.
Andy and John both mentioned the new segment reporting. And I suspect that historically the reporting for the Robinson Fresh division has made it a little bit difficult to see the total value and contribution to the company. So I'm excited today to talk about that and also shed some light on the value that we provide to our customers in marketplace. Robinson Fresh, as I mentioned earlier, C. H.
Robinson's original business similar to the way that we aggregate carriers
and capacity.
We've been aggregating small and medium sized growers for the last one hundred and twelve years. And Bob mentioned the original 3PL, while produce is the original deregulated freight and we've been managing shippers and receivers control needs for a number of decades. All of us travel, we're all on the road a lot, we're all also consumers. Consumer demand for fresh has really been on the rise lately. And so I'd like us all to just consider for a moment because we eat a lot of food away from home, we eat at home, etcetera.
And if you think about the food that you've eaten, you'll eat some lunch today, there's a lot of fresh food in that lunch, you've had a lot of fresh over the last week. Think about where those ingredients come from in the supply chain that they've had come through. You know, there's a there's a buyer somewhere in the world working for some company that had to decide where to
source it from, who to buy it
from, how to get it packaged, how to even get it on the field and on the truck and somehow to get to our stomachs. And so there's a lot of complexity in that and you add in the regulations and trying to keep everything in high quality. So this creates a lot of excitement and opportunity, but also a lot of complexity. So that brings us to our simple value proposition. And it's really that buyers and sellers throughout food industry come to us because they're overwhelmed at a complex supply chain.
And they work with our people to help them reduce complexity in their supply chains. And then if they more of our people will offer them a new supply chain. And by partnering with us, they're able to then focus on their business and their customers and we manage their supply chain behind the scenes for them.
I'll let you familiarize yourself with
the slide for a moment here via dots on the slide represent our sales and supply activity. You can see there's larger circles in North America where some of our core business is emerging areas in South America, Europe and Asia, which is both sales and supply activities occurring there. In order to move that supply around the world, logistics experts are moving over 2,000 shipments, surface based ocean and airfreight every day. And they're working with suppliers and receivers to try to figure
out how to optimize the
shelf life on that product. By having strong relationships with people who ship over 100,000,000 pounds a week fresh produce from over 35 different countries. And so a large portion of that is in our 12 strategic categories. Over the years, we simplified the mix of business that we sold to our customers. So when you go to lunch, you'll see a display of our 12 categories in the other room.
And after you check that out, I'm sure you'll agree we have great products. You already know that we have great logistics. But I would tell you what really sets us apart is how we bundle that together. When you mix the expertise of fresh, put it with our great logistics programs and then you bundle it all with our value added service, it's because the bundling is what ends up increasing our value and our revenue per transaction. I'll talk a little bit about how the bundling translates into results.
We finished 2016 with total revenues of $2,300,000,000
Products and services business made up about 60% that and
the remaining 40% came from our transportation services. And like the rest of the company, we have a high return asset free model. The 2016 net revenues $235,000,000 and we contributed another $76,000,000 of operating income. So over time as we continue to see this fresh demand and this complexity in the supply chain increase, people are looking for solutions for that. We do anticipate that the transportation and services aspect will most likely outpace our product growth.
So we've been generating
these kind of results, strong results for a number of years.
Historically with the way we've reported, it's been a little bit difficult to see this complete picture for our segment. But now with Robinson Fresh segment reporting, it opens up the opportunity for everybody to see the full value that we contribute. And we are really proud of the returns and I'm proud of our unique model that are over 900 employees within our division. We guide to the large global brand names that we work with every day. They push us to be innovative, they push us to be leaders in our industry.
And oftentimes when we're innovating, that creates a path for a number of areas of C. H. Robinson to take advantage of. And I would also tell you that as they push us to be innovative, as we grow and invest in our plans, we're going to continue to optimize and put up a strong operating margins, preserve those as you speak today. A little bit about the industry we work in.
The fresh food industry is composed of retailers, producers, wholesalers,
food service organizations,
restaurants. 63% is a mix. It's our largest revenue segment.
Companies across the world from the global grocery industry represent about $8,000,000,000,000 total sales and that whole industry while their same store sales are fairly flat, the fresh food contribution in those store sales are up
to the tune of 40% of
the business within those stores is now fresh compared to ten years ago where it was 28%. So we're riding this wave of continued fresh growth. There's also some things like mergers and acquisitions over the last five years. It's been 11 of them with the top 75 retailers. This causes some stress to the buyers and buyers decide they want to hand off more business to some of the large global vendors and vendors to help them manage some of those global supply chains.
We've been involved in some of those. So today even though we have relationships
with 24 out of the top 75 global retailers, it's less than 1%. That's a
lot of market share yet to be gained in that global opportunity.
Second largest customer segment is food service. In
The U.
S, it's
approaching a $1,000,000,000,000 industry and not sure everybody knew this, but in 2015, the food service industry actually surpassed the grocery industry in total sales. We're all part of that with eating on the road often and there's continued growth anticipated next year. So our relationships in this food service industry tell us they need a number of things in their supply chain. They need more item level visibility. They need more functionality from an inventory and replenishment perspective.
They need some consolidation and they need contract management other aspects like that with their distributors. And that's perfect for us, because our managed procurement service or MPS we call it does just that. MPS utilizes our technology platform on behalf of our customers, managing over $1,000,000,000 of business, dollars 1,000,000,000 total services, dollars $05,000,000,000 of services through MPS for the restaurant industry. MPS is our fastest growing service within Robinson Fresh today and it's really laden with very fast supply chains. This is in minutes and hours versus days that some other supply chains run.
And so
we're very excited about the continued growth there.
So what's going to allow us to succeed with these opportunities? John pointed out earlier that there's innovation going on in the different segments. We've got
different competitive landscape going on and
that's especially true for Robinson Fresh. For us, when we look at any one service or activity across our value proposition, proposition. We've got a competitor, whether it's a large grower or a carrier or what have you, and that's naturally across our service or our supply chain. But when you put together that value proposition, put it into action with multiple years of fresh expertise, expertise, global fresh logistics and bundle that together with our platform. That's where we find nobody else that can compete at multiple regions.
So that's really our value proposition and action for the food industry. We've always been known as a produce company and that business will continue to grow and it's going to continue to be profitable.
But our vision does push us
to aspire to do more and to grow our global market share. And as we look out into that future, we'll be focused in really four fronts. Of leveraging our temp control expertise to become a global leader in fresh logistics. And also as we expand each of our 12 strategic categories,
we don't want to just satisfy that fresh demand. We want to be able
to lead and offer choices that our competitors can source and deliver the products that we do. Expanding our services globally is paramount to achieving more market share with those top retailers that I mentioned. And as we expand our market share that adds value not only back to us, but also to the suppliers that's moving their products. Finally, continuing to commit to world class sales and account management organization. This will allow us to
be the destination of choice for top talent in
the industry and help secure our future and ensure our sales plans.
So I talked to you about Robinson Fresh
and our business. Went over the new reporting, our strong performance and the way that we're going to continue to measure that going forward. I talked
about our
expansion plans domestic and core of North America to global and the strategy for ensuring that performance. I hope that you have a stronger confidence in what we're contributing now to the rest of the organization and we increased competition? Is there an opportunity to potentially grow that? And then maybe think about the global growth initiatives and the opportunities contributing to growth? Yes.
So a couple of questions there. I would start out by saying that our business, as you have all been aware of our activity from a truckload perspective, truckloads in Vegas service within our transportation area. And we have a number of similar, but a number of different competitors in our truckload business and really for the portion of our business also because we focus primarily on Temperature Control activity. And I mentioned earlier about the rising of consumer fresh demand that creates complexity for a lot of people and requires us to have a little bit more expertise
in managing those coal trains.
So there's a lot of newer competitors in that space and we look for continued growth. I'm sorry, the second part of that question about acquisition, I think it was or at. So much like Andy and others had described earlier,
the pipeline is full of
opportunities and we continue to evaluate. We certainly want to build out our structure our foundation for being able to provide the services that we do in North America. We continually are looking at all areas in Europe, South America, Asia, all of them are on the table and that's where we're going to continue. To. I mentioned the top retailers, they need global providers that have their touch points around the world.
And it's really important that we have not only capabilities
and expertise by country, but also the
people have that knowledge of the local marketplace. Whether it's a net negative or plus, I think what we've been doing is strategically looking at where we need to find more supply in order to
supplement
declining supply that was occurring. So in our watermelon business, for example, we shipped from Mexico, East Coast, West Coast Of The U. S. And some areas in Central And South America. And so we're kind of already ahead of that diversification before that supply ended up having some declines.
So we ended up losing some supply with some growers here in there, but we had already added some other growers in the country. So we can see as big of an impact. And then how this last six months or so there's been a lot of reason. Lakes are awful again and so we're back in
this cyclical
environment. That's going to last. So I don't see that as hurt us enormously, but we certainly have been looking at it and making sure that we do respond or respond. Thank you. Goodness.
Alright. Next, have Jordan Cass, our president of managed services. Everyone. My name is Jordan Cass. I'm the president of our managed services division.
I've been with C. H. Robinson since 1999. So some of you may recall the American Backhauler acquisition in Sage Robinson. Focus at Sage Robinson since 1999 has entirely been on creating and growing the team's portion of the managed services division, the largest component of managed services.
With that in mind, I feel like I'm in a really good position to tell you the story of managed services and answer any questions that you have. Today, I'd like to focus on three things. I wanted to begin initially with a story of how we began H. Robinson. And I know it's a look back, but I think it's useful to cover the history.
I think it's a good way of eliminating what it is that we do for our customers. And then I think it also is really helpful in painting a picture of an innovation that was created inside the framework of H. Robinson. After we talk about the history, I want to take a look forward. I want to go towards the future and I want to talk about some megatrends that are really driving growth and interest in our business and they're also having a profound impact product roadmap for technology platform atmosphere.
And then lastly, I'm going to wrap up with a discussion on a newer. That sounds good to you guys. I'll jump in and we'll start with the history. As I mentioned earlier, our business began in 1999 and I think all of you here in the room looking around, you likely remember that that was the peak of the TuckDong boom and everybody was trying to figure out how to capitalize on the Internet. In our little corner of the world and logistics and supply chain, nobody had quite cracked the code.
We set out on a journey to figure out how to bring that technology into the marketplace. As we did that, our approach was to go out there and collaborate with our customers and talk to shippers about how they were managing their logistics. What the slide behind me is showing that what we found was that there were these two really polarizing approaches to logistics management and even supply chain management. On one side of the equation, we went and we talked to companies and they said, hey, above everything else, we want to in source and we want to retain control of carrier selection and carrier management. That's important to us because we want to own customer experience.
At that time, though, they also said, even with that retention in the carrier selection and carrier management, we don't always have the talent we need to drive our logistics forward. The other thing that they told us at that time was if they did make an investment in technology, the issue that they had, some of you may recall this at that time, was that there was a high capital investment, long time to implement. So it was really hard for these guys to generate return on investment technology platforms. On the other side of spectrum, we went and we talked that we have the opposite strategy, right? We're not going to in source, we're going to outsource.
And we're going to do that with the traditional SPL. As we talk to those shippers, what we heard from them typically was, I would say typically, but any portion of them would say, hey, we still want to retain control of carrier selection and carrier management. We actually turning that over. They wanted transparency of the underlying rates. They wanted transparency of the underlying carriers.
Having said that, they loved the talent that the 3PL brought to the table and they liked the fact that the 3PL was responsible for the technology strategy. So we took both learnings back to C. H. Robinson and what we really said was, there's a gap in the market. There is not anyone who has brought a technology platform forward to the shipper and allows them to directly connect to their core carriers digitally while still retaining of and actually carrier management and then giving them talent to make the most of the software platform.
And we were the first to introduce that to the marketplace in 1999. And yes, as we began as a startup within Robinson today, I am pleased to announce that we are no longer a startup. Last year, we managed $3,000,000,000 on behalf of our customers. The platform is global, so we did that in 170 countries. We did it across all modes of transportation and we managed more than 10,000,000 technology transactions in our key regions.
So that is a little bit about who we are today. Now I'm going to switch gears and I'm going to point us to the future. And I want to cover three megatrends that are really driving the growth and the interest in the business. And again, as I mentioned, they're really shaping the technology roadmap. The first trend that I want to talk about is globalization.
I go to a major shipper and I say, what is your growth strategy? To a team, almost all of them will tell me, hey, we're going to grow with populations, right? This idea that there's 7,000,000,000 people on the planet today, there'll be 9,000,000,000 by the year 02/1940. But that population growth is not here, right? It's going to be an emerging market in places like India, China, The Middle East and Latin America.
Very few of these shippers have the infrastructure, people, process and technology to enter these markets. So they're turning to us to provide them with the capabilities to service these emerging markets. The second trend that I want to talk to you about has to do with talent. I think many of you here know that there's a talent shortage in supply chain. You've likely heard that.
And there's a lot of statistics out there on that topic. I'm just going to cite one today because I think he does a really nice job summarizing That is if you're a shipper out there in the world and you're looking to hire a supply chain professional, today for every six supply chain jobs, there's actually only one trade supply chain. That is very important to our core strategy because if you go back to our history, I mentioned that our customers were very focused on the gap in technology, but they also highlighted that they still needed talent to drive their core processes forward. So our decision not just focus on technology, but to also bring talent in many ways that has driven significant growth and significant differentiation to our model because when we compete against software companies, we can differentiate with the talent. The last trend that I want to cover is something that we call multi channel logistics.
If you take nothing else away from this trend, it's the idea that the argument we would make that supply chains have fundamentally changed. When we started the business in 1999, if I went to a shipper, if I went to a professor, if I went to a supply chain practitioner and said, hey, draw me a picture of your supply chain. This is the picture that they noticed it's super linear, right? Supplier, manufacturer and distribution center customer. The argument that we would make is that this picture is completely outdated and that today's supply chain, firstly, as we've discussed, is global.
Secondly, it's something that we call multi channel. So I'm just going take a minute to walk you through the complexity of this slide. Today's shipper, don't go distribution center to customer or distribution center consumer, right, what they're going to do is they're going to bypass their DC and they're going to go straight to your home. At the same time, they're going have another channel. They're going to need to bypass the DC and this time they're going to go to a retailer.
They'll also still have traditional channels in place. Our customers still will use a distribution center and go to a customer, but they likely now have fulfillment centers. They probably have cross docks. There's probably a 3PL network as well. And then because as we've discussed, supply chains are global, probably using our customers transition point at Freeport Trade Zone.
The implication is that if a supply chain is multichannel, it then needs to be able to leverage every mode of transportation to service their customers. Today's shippers now use LTL, intermodal, truckload, air, ocean, all parsing. The complex picture behind me, that is truly what today's supply The implication is that supply chain visibility, like clean control, this environment, it is a much bigger challenge than it ever was before. Therefore, our platform Navisphere, which is one of the world's only truly global platforms, right, it services all regions, it services all modes of transportation, that is driving significant growth and significant interest in the managed services business.
But recall that customer symptom, right? They're still looking for talent to operate the technology because of supply chain gap in talent. So our decision to not only offer them technology platforms, but to pair it with our control tower network that sits on top of the modern day supply chain, that is driving significant growth, that is driving consistent interest in our business. Moving us on. This is the last topic I want to wrap up with innovation.
And as I talk about innovation, I want to spend a little bit of time additionally talking about our customers. When you look at TNC's business, our customers, we've always focused on market. The we've always biggest consumers in the world, our customers, our companies like Microsoft, like Ocean Spray, like Delphi. Having said that, we've always felt that if we would have gone down market, right, to the small or mid sized shipper, that's a market that's entirely underserved. There are not a lot of technology platforms that are out there that are focused on getting that size shipper to their carriers.
Therefore, we are pleased to announce that we have brought FreightView to the market. FreightView is our platform for the small and mid sized shipper. FreightView is innovative for many reasons and Megan North is with us today. She is the Director of FreightView. She's going to keep a peek at that technology live later on.
But what
I would submit for now is that what is really interesting and innovative about FreightView is that a shipper can get online, they can swipe their credit
Okay.
It for me guys. At least before Q and A, want to remind you that we talked about three things today. We spent some time talking about our repair history and this innovation that was created within the framework of C. H. Robinson.
There we talked about the mega trends that have shaped our strategy, our product roadmap and our response to that is really driving the growth and interest in managed services and then we wrapped up with a discussion. Again. Chris Carroll with Capgrasse Management.
So can you explain
the pricing of this? I mean, you're selling software? Certainly, if we were working with a shipper and they just wanted to buy or purchase a self-service module and use our technology, they they could. But the overwhelming majority of them are buying the technology platform and it's paired with a dedicated team people that is operating that technology as an extension of their staff. So they're retaining control of carrier selection, the customer is retaining control of carrier management and that we're just executing against their plan.
The business model is such that we are essentially a subscription. The shipper can choose most of them choose fee per transaction. They like the variable cost. And others
want something that's a little
bit more fixed than they might might choose choose to to do. Do. Tom first, I think we have time for both. Just a question on FreeFuel. As I remember back to some conversations with Tim Barton before FreeQloat was acquired, they were developing FreeQloat, but I don't think they had launched it.
What did you have to add to that system before you felt it was ready to be launched? And how the customer reception been so far? We didn't have to add too much to the platform. I think they had a really great vision for it. Megan will talk to you about that vision and the product roadmap later today.
I think Megan's team really just been proliferating that. As you likely recall, what they were doing was taking APIs, they were the first to really directly connected to the LL carrier community. I think most of the tweaks, frankly, from my perspective was around the go to market strategy and how to really drive carrier satisfaction through the platform, how to monetize the platform.
The TNC
experience and what we did with that is very akin to what we're doing with. George. A couple of questions. It almost sounds like you guys are moving to a SaaS like model. And if that is the case, can you just kind of help frame what that looks like in terms of growth and margins and such?
I mean, know you guys put up the earlier growth slide, roughly 10% CAGR is not very slow to what you can potentially do. So just talk about kind of the financial impact of that? And second, pardon me here because I'm making super simplistic, how hard is this to do? Because like when we talk to a lot of these startups in the space, they say they have TMS as well and they have tech teams as well. Kind of what's the secret sauce that that differentiates kind of your offering from some of the other ones out there?
I think in many ways, you answered your question. And what I'm gonna try to connect and fast. Overwhelming particularly, I think about my customers, right? They're the biggest of the big. They're not only their source of supply chain talent, they're under so much pressure to do way more work with way less resources they can hire, right?
So our ability to bring dedicated experts has really created a differentiation and more competing with apps. I also think that technology is unbelievably important. We're continuing to invest in it. The world is changing much faster, and we're going to be on top of that. Having said that, the differentiation point, you know this from SaaS, right?
At some point in time someone breaks out, they innovate and then the rest of the tech players catch up and then it then it quantifies, right? Start dealing with the margin stuff and all that kind of stuff. We wanna differentiate on expertise. What our customers are really looking for is a 10 to 10 supply chain optimization, and that takes real supply chain, be with George. And gentlemen, for giving me the opportunity to
give a fifteen minutes introduction to our activities in Europe. I joined C. S. Robinson twenty months ago. And before that, I spent thirteen years service plans in DHL, where I was the last ten years managing director in various countries, The UK, Ireland, Belgium, Netherlands and Germany.
So I
had quite an exposure to European market, I would say. I'm quite excited that I had the opportunity to join C. S. Robinson because I believe that the brokerage model, combined on the basis of people's process and technology, provides a great opportunity exactly now in the European market. And my purpose today is in the next forty minutes to share that insight and belief with you.
I'm going to share I'm going to show you our footprint in Europe. I'm going to size up the market opportunity a little bit. Then I'm going to spend quite some time on the competitive environment and explain why I believe CSW obviously is in a good spot there and then to close off with what our strategy and plans are for
the future to capture that opportunity. So
if you look at our network, we are in surface trans currently present in 13 countries with 22 offices. About half of our employees across Europe, which are about five sixty four are actually active in European surface trans. We've been in Europe already since 1993 and our network currently is based upon major acquisitions we did in 1999 with NorMinter in France and Spain and Apreo in Poland. And we are headquartered in Amsterdam. There's two things I would like to call out on this slide beyond the bullet points that you see on the left.
First thing is we've got a pretty lean setup of our activities in Europe. Our offices really consist only of sales,
customer service, account management, carrier
management, no back office functions whatsoever. All of them have been centralized, shared service centers, which is the main one being in South Poland. That gives us flexibility to scale up our activities. That gives us a cost advantage into the market. And the shared service activity, we actually saw across all four divisions in Europe.
So that means that we're really lean and mean for growth in that sense. So that, I believe, gives us a competitive advantage to some of our peers who do not have that capability, particularly based on the technology that we have. And the second point I want to call out is there's always a discussion about how many offices do you actually need in a market like Europe. Now what I can say is we are not going to have a proportional office network in Europe like we have in
North America because I believe
with technology advancement, you do not necessarily have to cover every single region in Europe. However, due to the cultural difference, it is important that we have proximity to our major carrier base, predominantly in Eastern Europe as well as to our customer base that is all across Europe. So we will continue to consider going into geographies where we do not have the direct footprint in order to get that proximity to various end customers, but it will not be in the hundreds of offices. So if we go down to the market, the size of the market opportunity, I'm going to give you four pieces of information. You have to be aware that the European data on the transportation market is not always
as transparent as maybe here
in Europe, sorry, maybe here in North America. So these spaces, you have to get to just the needs, a single one of them. So first of all, the pie chart shows on the inner circle of the market. On the outer circle, our CFR is in position, and it becomes pretty much clear that we are absolutely focused on truckload brokerage. So we do not at the current scale we have want to be distracted by too many other services such as LTL or intermodal.
We stick to the full truckload brokers because we believe we can scale up in that service point. On the right hand side of the chart, see the size of the market, which is estimated the 3PL market is estimated around €340,000,000,000 of which roughly twothree of 70% are domestic, so in our country, and onethree is roughly cross border. We have close borders outpacing the growth of the domestic markets in Europe by roughly double the speed. We are focused on cross border traffic because we prefer long distance transactions. So our average mileage per transaction is 600 miles.
So that gives, if you know the geography of Europe, pretty much lets you cross borders immediately. And therefore, that is where we believe our speed spot is. Growing faster, that average length of haul will come down because you'll obviously have to grow also in shorter hauls, but we will still try and stick
within that longer haul perspective.
That is our sweet spot of the market. So if we move on then to the next chart, on the left hand side, that is the truckload market, including intermodal. So it's not exactly like for like to the previous chart. It's a 3PL truckload market, including intermodal. And it shows the level of fragmentation that we have in Europe, which is probably very similar to the fragmentation that you see in North America.
But what you can also see, if you go through the top 10 names on this list, we have less than 30% of the market share. You don't see typical brokerage companies in there. Most of them are actually integrated service providers. And I'll come back to that, why that is an important notion to understand our opportunity as a broker into that market. On the right hand side, you see our geographical scope.
Again, on the inner circle, you see the markets. On the outside circle, position in there. It's a bit difficult to read because of the color scheme. But if you take the top five markets that we are active in, which, in our case, is Poland, France, Spain, U. K.
And The Netherlands, which are our top five, they generate about 83% of our net revenue in those markets, but it's only 43% of the total market. So that gives us quite a sizable opportunity
to grow. And the
most notable opportunity is obviously the German market, which is the largest Europe. So why do I feel that we have a great opportunity at C. H. Robinson in the competitive landscape and at this moment in time in the European market? I mentioned the integrated service providers earlier.
If you may see the history of the transportation market in Europe, that obviously we have two levels of deregulation in a way. We have deregulation within single country markets and that we obviously have the creation of the European Union to create one single market on top of that. And that two speed approach led to the fact that a lot of our competitors have actually grown within country borders. Therefore, in order to get scale, they scaled up by adding services, not necessarily by scaling up within the single service. So a lot of the
large players actually came with
a one stop shop approach to try to grow that within country markets. And when the European market became more and more prevalent, they obviously scaled that multi service model into other markets through acquisitions. That created quite a
service brand and a level
of complexity to deal with. At the same token, our customers are using the growth of the European market to basically create scale and therefore being able to buy best of breed instead of having to buy one stop shop. And that opens an opportunity for a best of breed player in truckload brokerage that we are to move into that market. The second main notion I want to give you is that European the European mentality has been traditional in the sense that we love to work with asset heavy carriers in the past, and that is only surely
over the last
sort of ten, fifteen years has opened up to a more subcontracted model. But there is still a high gearing towards assets in that sense. So the brokerage model was a difficult model to sell, let's say, thirty years ago. It is increasingly easier to sell these days. And actually, the new entrants in the market on technology side are doing us a favor because suddenly, and I hear it today as well, they basically create a market space in Europe by making it on bulk to basically have a supplied technology driven model.
And the third notion I want to give you on that slide is that there are brokers in Europe. But many of those brokers actually grew to help the asset heavy carriers to deal with their empty mileage. And their customers are forwarders. So they broker between forwarders and carriers. They don't broker between shippers and carriers.
And that basically and now that there is maybe a need for brokering between shippers and carriers, they struggle because if they do, they cannibalize their own business, right, bypassing. So in that sense, we feel from the left
hand
side of the
traditional competitors, we
have a pretty good
solid competitive position. And on
the right hand side, these new technology providers basically help us technology based providers help us to create a market set because we've got that technology ourselves, but we also have the forwarding capabilities to move the freight, not just to match. And I feel that in that sense, we are in a sweet spot now in the market where we can position ourselves. That is being recognized. So there are competitors also with North American experience considering entering the market. But on a day to day basis, this is the scope where we deal with.
And with the scale that we've created over the last twenty years and the technology base that we've got, I'm pretty excited be part of this team and leverage this opportunity. So how are we going to do that? And that's my final slide. So I think we have, as I said earlier, a very, very solid base to build upon. We've got this one system, which was mentioned multiple times today.
And in the European market, where our competitors tend to grow through acquisitions across multiple services, that is almost a unique system. That is a competitive advantage. It helps us to be able to source outsource our back office and shared services. It helps us to have high transparency. It helps us to create data to be smarter in pricing.
So having that technology is in my belief in the European market an even bigger competitive advantage as it is already in North America. We have great talent in our team. It's a relatively young team. And we recruit them from universities and polytechnics like we do here and focus a lot on attitude and analytical skills. And then we train them into the logistics industry.
And that is a
different approach than many of our peers and competitors. And what I also want
to point out is an important part of our baseline is that we actually are a true broker with a buy side and a sell side, which again versus traditional competitors in Europe, that is not necessarily the case. So even if orders would have that technology, splitting between a buy and sell side is still a challenge to go after. So that means that on this baseline, we focus a lot on creating organic growth, speeding up that growth, leveraging this opportunity. And I think the crucial point that I want to point out is focus. In order to scale up fast, we have to be extremely focused.
That means we're going to focus on cross border truckloads, as I mentioned. We want to have the highest possible interchangeability of equipment, which means standardized equipment, we have access to
the largest pool of carriers possible.
It also means that we automatically have to focus on certain industries where we are really strong at, so that which are utilizing this piece of
equipment, which is
normally industries with high volume, relatively low value of cargo. And then we focus on corridors. Uses the empty mileage and that obviously gives us the opportunity to leverage our bikes. We keep growing, so it's a very, very sharp focus strategy that we're following. Once we've created scale, we will start to leverage into other services.
That brings us to the last building block at the top. We will, once we created more and more scale, start venturing into other services such as LTL and intermodal.
That is not our priority today.
We obviously want to leverage the technology creation that particularly in this building and within the North American framework is available to us and that we can leverage and use. And we're obviously working on expanding our footprint, as I mentioned on my first slide. In that focus, we will both consider opening new offices as well as considering M and A activities. And as we see fit, on the opening of offices, we at the moment focus very much on Eastern Europe, where we see a faster growth than the average of the UTO-twenty seven countries. We also see a high adaptability of the brokerage model that we have, and there's relatively low investment risk.
So that is where we think. So in the last
twelve months, we opened offices in Bratislava, in Slovakia, in Erkuszak and just recently progressed Romania. There we will continue to focus that way. In the more
mature markets, we already have a presence
or we were looking
more closer if we like broker models that fit our business model to better exercise. There are not hundreds on the market,
but there
are certainly a few and we were tracking in
to see opportunities.
That is our strategy and I feel really excited about being able to lead our team into this opportunity. I think with this model, we're at
the right moment in the right place to do that. And with that, I hope I could do a little I guess, I wanted to maybe understand the market and maybe what you're changing about the market opportunity for you? I think as I look at the last couple of years, European truckload has been a focus for a while. What sort of dynamic that you're seeing now that makes better opportunity you
would like to succeed?
I think markets are obviously defined by consumer behavior, by customer behavior. And I feel that the willingness to work with SO3 providers who do not have trucks in the garage to show and say, you're going to show here is the truck. I think that has changed over time. So the market context in which we operate is more favorable at this point in time, I believe. And certainly, this whole discussion about these new technology entrants helps that discussion.
So I think that is one notion. The second notion is that we, in the European market, there is very much a contract notion on the customer side, so secure contracts, secure capacity over 12 time. But fluctuations in demand
are now putting pressure
on those contracts. So we see now suddenly tenders that are annual tenders, but then you get mini quarter four tenders on top of it, the cost to manage those peaks. And you can see changes in behavior in that sense, and that opens the door to our brokerage model where we can actually follow the line. And on the buy side is although capacity constraints, we do have occasionally, we still have quite a large reservoir of carriers on the Eastern European side, low interest rates, so ability to buy trucks. So there isn't and so low barriers
of entry.
We have a very, very broad carrier base. For a company of our size,
we have 13,000 carriers in
our database. That is for a company of our size quite a lot. We tend to keep that carrier base as broad as possible. Those two things, demand change and the carrier side will
Last question here. So you I think you described some of the market changes. What about changes in St. George Robinson? Mean, it does seem that maybe
Well, that's a bit hard for me to comment, I suppose. I mean, you always have to see the context in which you can take decision. And I just tried to describe the context that we currently have
today that are perceived to
be very favorable where we want to go. I think if you want to take away one notion to me, to ask your question, it's a very, very sharp focus on
where we want to grow and then be
very, very disciplined. And I feel that when this opportunity is there, you need to know exactly where you want to grow and how you want grow. So yes, we want to open offices like in the past, but we're very careful to see where we do it and where we don't. We want to grow fast and we
want to capture a lot
of customer opportunities, but we're not taking any opportunity. We're very selective on what type of opportunity. So that's not all I would say. I think we're sharpening our focus and sharpening that focus
is maybe that a view again. Thank you, Arun. Just before we transition to lunch here, I'm just going to provide a couple of details for the next forty five minutes before we return. First, as mentioned earlier, lunch is right next door. It's there's two sides to the table, so enter on both sides, and the seating is right in that room.
We have forty five minutes, so from noon to 12:45. You're on your own time, if you will. Beyond the lunch area, the area where you came in and right in this proximity here that I'm pointing to is available to you. So we have a theater. We have an innovation center.
There's coffee and drinks. You can mingle in that area. If if you're not in the I know most people will be most of the time in there, but there are some areas to pull up your laptop if you need to and make a call. So the next forty five minutes, it's yours as you will in those kind of the areas, you know where the restaurants are. We will kick off with technology right after lunch with a familiar face.
Mister Limbaugh will kick us off after lunch, and we'll be starting right at 12:45. Thank you.
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Can you use your mic? We need somebody's mic. You'll get it back for the Q and A. It's just Cooksey needs are you Are you through? All right.
Here we go. Hi. How are you? Thank you. All right.
As mentioned, we're going to kick off with technology. I'll turn it over to Mr.
Lindblum, who
many of you know from years past and Chad leads our technology. So without further ado, we're going to jump right into technology for the next forty five minutes. One thing I will mention, once we get into the demonstrations, we are going to allow questions, although I'm hopeful that we can coordinate it well and stay on track with our time. But our experience is it works better to be a little bit more interactive with that. So when you have a question, just put your hand up.
We still have to get you a mic for the folks on the webcast. So we'll handle the demonstration questions in that way.
Okay, you. Thanks everybody for coming. It's great to
see some familiar faces after a couple of years away, I guess. For those of you who don't know me, I'm Chad Lindblum. I've been at C. H. Robinson since June 1990.
I was in the finance area, became the CFO in 1999, was the CFO until about two years ago. At that time, I moved over to technology. Technology, like you've heard today, is a very important part of our business. A And couple of years ago, I thought it was a great challenge for me and there was a good opportunity for the company for me to leverage my knowledge of the business and help the IT department build what needs to be built. So right after launch, I thought it would be a great thing to do is to go through about 45 of slides on our architecture, both software architecture and the infrastructure.
Andy don't like that idea. It's supposed to be to bring in some very talented people to help me demonstrate the technology. So I am just going give
you a recap mainly of
what you've already heard today about Navisphere and our platform. So Navisphere, it is a global, all mode platform to execute transportation. It has all of the required things to do that. Things like real time visibility, real time analytics, order management optimization, carrier selection, inventory management and things like that. Technology has been around forever.
Robinson has been not this technology has been around forever, sorry. Robinson has been a platform company since its inception. We've always been matching supply and demand in clearing transactions. Were one of the first in the industry and early adopters of technology. We connected all of our local offices in the early 80s through a mainframe technology.
In the early '90s, we began communicating through EDI with our customers and accepting orders and invoicing customers. So again, we were early adopters of electronic communications. In the late 90s, we went to the web like everybody else and started exchanging information that way as well. In 2011, we were the first mobile app for carriers in the industry. That mobile app just got retired last year when it was the most used app in the industry brokerage transaction.
When we retired that, it was when we released our new app, which is also the most used mobile app for carriers. Bob talked about that earlier. So our platform has become more and more automated over time. Today, have 35,000,000 different messages that are digital per month. Over 70% of our customer orders are tendered to us electronically and over 45% of our transactions today are no touch from the perspective of the order is entered to us, the carrier is selected, shipment is rated, and it is tender to the carrier today.
We do have a very powerful and robust platform,
as I
mentioned, but really what makes it work and what makes it so important is the 220,000 different community partners that are connected. Those relationships are made possible by our strong people. So some of the current areas of focus within our technology, There's global connectivity. We've all been talking about that all day. We've talked about the API and EDI, machine to machine integration and how important that is in the industry for small and medium sized customers, it's web and mobile.
Still for a significant portion of our customers and our carrier base, it is traditional manual phone data framework. Again, we want to get rid of as much of that type of interaction as we can and move those customers from manual to mobile to web, fully electronic integration. But we feel it's very important to be good at all of them to be able to interact with the full supply chain. We consume a lot of data while we're doing this. Bob talked about the importance of not just the shipments we move, but the shipments that we didn't move and the trucks we didn't use.
We also integrate a lot of information from outside of our network. These things like rate indexes that are available, weather information, traffic information. So that information that is available to everybody in the marketplace, we consume that as well. But a differentiator in our asymmetry and the data availability is the great amount of transactions we have ourselves. So what do we do with all this data and why is it important?
We're using this data to do data science,
machine
learning, artificial intelligence to make better matches, make better pricing decisions, provide better visibility to our customers and actually get to the predictive. We're making our humans that interact with system and our supply chain more efficient by using this data. They've always used the data. We're now giving them better information to make better decisions by not just looking at the executed transactions, but all of the data that we have available. Also leveraging that data and those skills is creating more automation opportunities.
We've talked a lot today about automation and taking friction out of the supply chain, how many no touch loads we have. Bob mentioned that our Freightquote allowed us to go to small LTL customers and make no touch transactions. When you look back to the no touch transaction part of Robinson system, it really started in 1999 in two different areas, Jordan's business, the TMC, as well as LTL with larger customers where we are integrated with the customers on the load tendering and invoicing and also leveraging the automated interfaces we have with the carriers. So in summary, we're doing what we can to reduce the friction in the Robinson brokerage model. We're leveraging our data asset.
We are using machine learning to make better, more informed decisions, whether those are fully automatic or executed by our people. We are using the data that we ingest to give better supply chain visibility
for our customers
and our carriers. And we're also working on predictive analytics to help manage and predict disruptions in our customers' supply chains. So that's it.
I just
I thought I should really just recap what everybody else has said about our technology, give you a recap of what we are currently focused on and now we'll move into a couple of demos. Brent Nagy, who is our Vice President of Customer Strategy and Brett Cooksey are going to demo a supply chain visibility product, and Megan from FreightView will demo her application that Jordan mentioned earlier. So Brett and I have been interfacing with some of our largest customers with this new product. We have one Alpha customer up and running and you will see a demonstration of their supply chain today. And we also have many other prospects in line to on to this product as a beta customer.
Admittedly, a rookie to this room. The safe harbor statement is internally the team that Chad has called out. It is referenced internally as team luminosity or project luminosity. If you see some of the branding within the actual application or you hear us reference it, you should know that we have every intent this particular application associated to master technology brand. That's my personal safe harbor statement from that side of the room.
Really quickly what we thought we would do before we actually got into the tool is to find for you how we see visibility. If you break this down into two segments, it's really traditional and maybe nontraditional, if you will. Traditional points of measure in a supply chain are pretty obvious. What we're essentially doing in this space is building an application to aggregate all this information and at the same time, migrating away from legacy based technologies, whether it be manual, some sort of web interface or API interface that's largely built on latent based milestones and move it into an API real time environment. So essentially, when we get into this tool, I want to make sure you understand that this entire universe of traditional supply chain measurements is being aggregated within the application.
And really quickly, I want to call out, Chad talked about us Optimus aggressively pursuing customers in Filipino to continue to round out the application. We've had a large CPP shipper last week and they are in the midst of going through an RFP for some of the competitors in the truckload space specifically visibility, if you will. You probably all have heard of them. Having said that, the question I had for him is the second you turn this on, what are you then going to do with that sort of information? And I'm going to go to this other provider and they're going to build me a tool to make sense of that information.
So I want to make sure that I'm making it clear out of the gate. We are building this as a holistic application, all modes in the traditional measurement forms inclusive of inventory as well as nontraditional flows in the
form of
weather, traffic, news and economic with the intent of not only having one spot for all this information, but also then putting us in an environment from machine learning standpoint, artificial intelligence and predictive. So it's very, very critical for us that you understand that our approach holistic. Additionally, we are not closing this particular application in one particular service. This is an enterprise product for deployment within the enterprise to be used across the enterprise customers in an attempt to really give them a single point of information relative to all their supply chain shipments again. We'll get into the demo here in a moment.
One layer deeper than that are all these real time visibility integrations. Over here, I mean, the simplistic way to work through this is on the left hand side you have emerging, potentially potentially on the bottom right hand side, you have some setting. So I talked about EDI, talked about cell phone triangulation, dump phones being able to physically take a phone number associated to a load and then actually have that tracking through cell phone. And then obviously, direct ERP integrations, those will continue. That's the underlying master data from a shipper perspective.
And then like I said, the emerging over here to the left. Currently, the tool, we have all air shipments globally adjusted. We have all vessel shipments globally adjusted ultra APIs. We have ELD aggregators and are aggressively pursuing ELD integrations as well as global GPS providers. The global GPS provider is pretty critical when you think about some of the comments that Yaron was talking about relative to Europe.
A lot of the technology from a track and trace perspective in Europe is centered around the actual GPS aggregation of the trailer. So it's critical to understand the individual nuance on a continent by continent basis, which is a global visibility. Below that are traditional, and we've heard a lot relative to what we're doing in the mobile application space. So think about that as your phone and geolocation services and associating your phone to an order. And then beyond that, ingesting potentially specific high concentrations of an individual carrier.
You're a large trucking firm or if you're a large shipping firm, you have your own app, the ability to ingest that information associated to one of our customers' loads is also With that, as he's bringing in, want to highlight the customer that you're about to see. We were our evolution from a visibility standpoint has been perpetual. Obviously, technology is a large driver of what that looks like in the current form. But when we headed down this path and got to a point of scale, it was important for us to really target a client that thought of this type of environment not only as aspirational but impactful. So essentially, what you are seeing here today is Microsoft's entire global supply chain.
Approximately 98% of their hardware moving throughout the world is represented here. Through the TMC, we manage and deploy across every single control tower resources associated to that network and derivative of that from Navisphere is what you're seeing here in Luminosity.
The other
thing you should be aware of and again going back to all those contested points is that we are no longer reliant on Navisphere as a single point of information to drive some. Brett and his enterprise architect team have built a whole host of, call it, plumbing around the tool and allows us to ingest information outside of NAVSURK and going back to news, weather traffic. So to set up the tool from a landing page perspective, essentially what you have here is a search bar. And that's where I'll start. I'll start at the top and I'll work our way down.
So essentially what this allows you to do, this allows you to in a macro form, again, want to start by saying this is completely consumer data driven. It allows us to in a macro form work through various different filters, if you will, or segments, if you will, and put yourself as a user. So in the Microsoft world, they have a whole host of different user types. They have macro level users, of which you can do here at the end. And then they have micro level users relative to carrier relationships, geographic relationships, channel based relationships.
Then when they're inventing things or releasing things to market, they have SKU based and launch based relationships that are critically important. So that type of interface with the tool is critical from a U. S. Perspective because essentially what you have to allow someone to do is to sit down into the things that they want as opposed to have to look through everything to find the thing to do. So I should say this is probably where the question action part starts.
Right? Because I'm following through this because I've got talked back down. I don't if anybody's seen this, there's a lot of information. So I'm just going to assume you stop me if there's a question. So in here you have risk levels tracking summaries, have you, you have various different regions, flows, carrier customizations and obviously customer customization.
So for example, if they wanted to see how Walmart was performing for them from a delivery mechanism standpoint, anywhere in the world, they could sort on Walmart. They want it rolled up at the master unit number. And then from that unit number, they want to be able to siphon down in relative to the line of business, the product or the scale. So if you're an executive of Microsoft and you're responsible for Xbox, you can essentially interface with this tool for your entire global in transit inventory, understand the performance of that inventory based off of your customer type, your product type, your type and then translate that back into risk in transit inventory values and then eventually work into an environment where you are slowly reducing the solid inventory because you have greater control over intrinsitive and all the different things that happen as a result of disruption. We'll get into some of those disruptors here in a bit.
But this is key relative to where we're going from a machine learning standpoint and from an AI perspective. These interfaces, these electronic interfaces are going to be changing and rerouting and optimizing orders in a different way than planned. The underlying master data is to be completely sound. I think that goes without saying, but the point is that the derivative of this technology and the fact that we've loaded this data into it, it completely shines a
light almost instantaneously where their master data
is not accurate, where we're not getting what we want. So they are aggressively pursuing their providers, their contract manufacturers, their warehouses to really ensure that the appropriate amount of information, the integrity of the information that is being asked at appropriate levels. So that gives you a sense from a filtering perspective and how they would interact with Okay, moving on. So this obviously is the world. Essentially what you're looking at right here very quickly are trade lanes, motion based shipments, again color coded based off of the actual ETA associated associated to that shipment correlated to the requested arrival date.
You've probably heard, especially in e commerce and in CPG, the punitive measures that some of these big box retailers have. The punitive measure is not just when it's late, also when it's early. So it's very critical in this entire environment that they understand relative to these various different retailers they're selling their products through, how their freight is performing. And it's not just when it's late. So again, vessels, you'll see various different call outs for facilities.
These facilities are color coded based off of their particular desires. So the purple are all their global reverse logistics environments or return centers. All the blue here, the dark blue are all their port deployed warehousing
or DC centers, the traditional environment.
And then the light blue pieces here and here and then again over here in Asia for their contract manufacturing centers. Lastly, you'll see airplanes. Full disclosure, it would be really cool if it were about two hours from now. Unfortunately, freight, at this point, it's been central time during the day from an import standpoint from Asia, has either landed or yet to take off. It's really cool when you can do a correlation and take the tail number from an in transit point, go to FIDOARE, look the tail number up and overlay that to the map to see it is exactly where that plane is at in our application.
If there's anybody that wanted to follow-up and see that, it's being out. I know some people are leaving early around five or five this time. The Continental aggregation. So we played with this early on and visibility at a high, high granular or excuse me, at a high, high macro level looks really sloppy if you're allowing a bunch of things to happen across the map. You have to aggregate it continentally then allow for zoom in technology that eventually breaks out in a grid like fashion where all that's created at.
And all the color coding within those circles is associated back to that. The number of shipments. You can then do is get down into the shipment. And, again, when I talk shipments, I'm talking I'm talking small parcels all the way up through container traffic going off of boats or load. Yes.
Delivered. Yep. Okay. So what Brett's doing here is to give you a sense on zooming in relative to a mode. So here we have trucks.
You can see exactly where that truck is at. You can see that the line of business within that truck is Xbox One. This is one that has delivered. It's delivered on time. So again, back to Chad's point, it's keeping and refreshing based off current activity, not just near term looking forward, what happened here recently relative to performance.
And then beyond that, drilling down into the actual commodity view. So again, this is an example being able to see truckload of Xbox One's 500 gigabytes that were destined to their PC facility that just recently came online in Louisville, Kentucky. So again, the point here is to show you how we are pulling information from their ERP, information from their various warehousing providers, correlating to in transit information and then deriving not only what is going to be associated with all that particular thing is moving through the life of the order, but then all the other underlying components that more or less build out that particular. What Brett's showing you is an actual facility drill down. You can see that within that facility, are approximately 2,611 shipments.
You can page through them. You can categorize them based off of late, on time, early or at risk. Just gonna come back out to the map view here. Drill down into a boat in the Suez Canal, I believe. Again, activity, this particular one
has two onboard. You
can see the various different items. Two containers, you can see the various different commodities that are within it. These are Xboxes destined for the country of Ireland. There's an Irish code based on obviously probably outlets or games or what have you. What's really interesting is that our relationship with Microsoft started with the ability for us to leverage Navisphere when Xboxes and gaming consoles were deregulated into the country of China.
So from that, we have a pretty long history of enabling commerce for them relative to the Xbox platform and obviously the gaming consoles. So
just to be clear, this is this is
not dummy dump data for presentation. This is actually not a 30 That's why I
was trying to fix that
we didn't have an airplane in the air because I wanted to show you the actual live correlation. This is Microsoft's live environment. It's 98% of their hardware. Do get permission where we do have permission. Like I said, I'm a rookie.
So from that, you then
have various different intestines of impacts. Again, going back to the nontraditional forms of measurements and the nontraditional impacts within the supply chain. We all know that weather can drastically impact supply chain, but being able to see it housed
within a single application. And then
from that, begin understanding through data science how these various different activities correlate to the impact within an individual shipment. And beyond that, replanning relative to say hurricanes, we now know and
can see based off of
our API into this weather provider, a forecast based hurricane that could potentially be hitting the East Coast. We can essentially from that, spin up all potential orders in Microsoft's world, both today as well as however far into the future we want to go, that could potentially be impacted and make preplanning decisions associated to that. You put it in the environment first, you pull back the weight, you put it off to
the side and manage it differently because
it's going have service impacts relative to the whole. And all those very different downstream impacts that come from an event like that before we would react to whereas now we're planning for. Yeah. Was just wondering if you could give more perspective on the relationship with Microsoft. Are they have they outsourced everything to you and kind of broadly how they pay?
Is it the fee base that we talked about before or the per transaction? You do a full rate? Well, just to get a sense of what does that do for you and how does that link into Jordan talked about his different types of fee arrangements. Microsoft does have a fixed fee plus a transaction charge. This is an incremental product.
That's ARP and additional license fee. So they are not holistic and either of those moments relative to us moving every single thing. So it's critical when you think about the services that were reviewed this morning. Jordan and the managed services team have deployed people with Navisphere to manage Microsoft's supply chain. There are other services that Robinson executes within that supply chain in the form of forwarding and North American service transportation.
So it's not necessarily one of the same. I would say there are Our relationship with Piper's and some of the things we've done for them during some of their disruptions definitely give us an opportunity
Do you have the
same real time visibility at the truck level to what's moving through North America or Microsoft goods? And what needs to happen? What are the next few steps, the next maybe few years that need to happen for most clients to have the visibility to truck level where in real time the goods are? Great question. So what do most clients need to do?
Well, they need to make a decision that the actual visibility is important first of all. But I think what you have is you've got a lot of people and again, spend approximately 90 plus percent of my time in front of customers. You have a lot of people thinking they need fifteen minute updates because that's what they hear some of the biggest e commerce retailers on the planet doing. And the reason they're doing that is because one truckload of personal shipments in a middle mile environment to say Dallas is 30,000 potentially missed prime orders. So that's why they want that level of visibility.
So it's kind of going back to say the early 2000s when RFIDs was everything everybody had to have and the expense was absolutely high. And then all of a sudden, nobody had a way to really understand how that expense then translated into either service or reduced cost. So it's of a similar environment right now, which is really interesting. The difference now is visibility in the form of some of these providers, either through geolocation services and phone, and ELD has really come down in similar things to some of the things you've heard today to the point where it's attainable. The real difference now is what are you doing with that fireballs of information?
Going back to the CPT conversation I had last week. You can literally ask them, hey,
this is going to give
you a ton of visibility. What are you going to do with this? Because they're like, that's a great question. I want 80% visibility of 1,000 truckload shipments a day. How are you then going to actionize that within not only your workforce, but potentially your retail workforces and then either show reduced cost improved service.
So again, would say it's more obtainable based off of just cell phone technology, ALD mandates, those sorts of things. For me, it's less about whether or not the company wants to get visibility because it's more about why do they want it and that's how they're gonna use it. I'm just dropping We'll take one more here and then keep moving because we've got to get to the next demonstration as well. Can you
give us a sense so I guess a few questions. Can you give us a sense
on how deeply penetrated it is to close your customer base? And then what the cost is associated with the subforklift? And then lastly, do you need to handle the entire supply we feed into this at the tool is data driven? I think part of the answer to the question is, have visibility in project Luminosity. Your freight does not need to run through.
If we can then adjust shipment information from any obviously, it takes integration. If a customer has half their business running through Robinson as a North American service trans customer and they want all of their information, then TMC is not their managed services provider. We can adjust information from other 3PLs, other carriers. So it takes an integration, obviously. They have to provide us the information.
But this tool is capable to show that's basically EMS agnostic. And what's penetration across your business? So back to kind of how Chad opened up, you're looking at a production environment now. We have aggressively pursued what we would deem as integrated relationships at this point to begin filling the funnel. We will communicate a go to market strategy here relatively quickly.
You can assume sometime early to mid summer. And the approach there is that we are pulling in that funnel now, having user experience design sessions with those customers now, knowing that we are rounding out the application early to the adoption early on from a case study perspective, given the fact that it would then turn to each independent service line and say your salespeople now have the ability to go. This is not generally released. It is getting You're ready for that? Basically, every customer who is seeing that is very intriguing.
We need to get some more. Microsoft just doesn't have a lot of service support truckload freight in North America. We obviously need to get some more truckload customers. We have a couple of those set up, and we are starting work on their integration. So we need a little more truckload experience.
And like Jim said, as we expect to go to market later
this morning.
What I zoomed through was weather, traffic and more importantly, on Friday, I ordered Andy Clark a new Bluetooth mouse, and I wanted to show you that it actually didn't drop at the D. C. Location and is now at risk based off of our machine or excuse me, our data science. So we are basically correlating EPA as it sits versus requested delivery date. Please take my word on it.
You're welcome to the new house. What you're seeing here is essentially the aggregate view of everything that we just walked through very quickly. This is called lobby visualization. Essentially, we want to do with lobby visualization is we want to allow these customers the opportunity to customize the way aggregate reporting comes out of the tool. So again, going back to the fact you don't necessarily need a service line, a service line agnostic, CMS agnostic.
If we're deploying this and they're using it in their own environment, they can essentially set up a scrolling view of their preferred metrics and all the different things associated to the metrics they want to see at an aggregate level. That aggregate level is completely customizable. It's a rolling seven days. So they get a sense of not just impact and all sorts of other stuff relative to weather and lines of business, but they can also get a view of densities globally. So if this were to be left alone, you could essentially it would essentially just move, but this gives them densities globally relative to kind of where they're seeing transit shipments, delivery shipments, kind of that performance.
And what's really interesting in a Microsoft world is watching this flow now and then coming back in the fourth quarter in that retail e commerce season. So again, these are views set up based off of using their data correlating their data via SLAs and then adjusting all that information I've talked you through.
And then on top of that,
all the performance measurements associated to their various different geographies. So Slide one to open the CARES, you can see this is AOC, the defined AOC by this region here that's lit up. And here are the lines of business, the channels, the units by destination. This then gets into reason codes associated to why something's late, poor I know there's a bunch of questions on this, so I'm trying to leave a couple of minutes at the end. But right now, I'm going to introduce Megan North, who leads our free tube team.
And Jordan introduced it earlier in terms of really the best innovation to all small and mid sized shippers and Mega is going to take you through a demonstration. I think we challenged her with the height of this, but we wanted it to be up higher so everybody could see. So Hi,
everyone. I'm Megan Horst. Nice to meet all of guys. I'm really excited to be here today to tell you about. So we three years ago, we just had our third birthday a couple weeks ago.
We saw a need in the market for, as Jordan alluded to earlier, really big customers, complex supply chain. We are on the opposite scale. Right? All the midsize businesses, they there should be daily. They can't invest.
They don't have enough money to invest in these technologies and integration. They know they just need a simple and quick technology to help them skip. There, it must be done. So I'm gonna bring you to our customer here. This is called Global Skyware.
They're out of North Carolina. Small company, 120 employees. And Jennifer here, what she was doing before FreightView is she has she has relationships with 11 carriers. She would go every time the order would come in, she would say, okay. I'm gonna go to this website, this website, this website, right on the rates.
One that's the best.
So she's doubled upon Freeview. And what we've been able to do is not only help her stay with with her free post, but also give her a visibility. So she she came on to Freeview. She added her 11 characters. One of the magics of Freeview is you can come here.
We integrate with our 80 LTL carriers through API. You can come here. They work with triple a. I have a direct relationship with them. Click authorize.
That's in the request of triple a. They say, yep. That's that's set up for a global. Here's the rates. That's all API based.
We upload rates. Everything's gonna be easier. You can also add in any shipping location, and she can add as many users as she wants. So her company, Jennifer, has her customer service people because I cannot They get the phone calls, right, by my shop is like, where's my shop that Come on here. She's got her cable cable.
She's gonna carry her voice. She can understand why they were floated and her warehouse. So when they're and they're wanting to order, they they get in here as well.
So just to quote now.
It comes in. She puts in her she can upload her own address book, everything is self-service. She comes in here, clicks her address.
She comes
in, puts in all of her shipment information, like, showed my rate. So this is the exciting part about free. We just have all those different carrier sites, 11 of them came back, pulled in rates right here. So now she now Jennifer's life is so much easier. She has one place where she goes.
To all of her direct care and relationships. The other thing you have to think about too with your customers is race is important, but tree is
also important. Service is also important.
So we also highlight what your fastest rate is. You can come here, check out all the difference if you need it by 03:00, 12:00, 09:00, whatever. Everything on one screen for you to visualize. Click here whichever rate you want, and then we auto automate that dispatch for that carrier, and you're good Compared to your shipment screen.
So now she's got all of her shipments here in one place. You can click on it, see her tracking. She can she can share the shipment, so maybe she wants to send it to her customer, visit her email address. She can constantly, her customer service can get in here and understand
what's going on.
Is there all her paperwork? She can place her label. It's an exciting feature for our customer, that's label. They can create their own BOI, do whatever they need to all in one place. The most exciting thing too about the customer's solution is Jennifer before, I had a good idea.
Right? For carrier. For ABF carrier that comes in and says, Jennifer, went into my limit. She can just come right here, show them the screen. Hello.
I'm here for the last week. This is where I've gone. Here's the lanes I'm going. The relationship with the carrier too because the carrier doesn't always understand what the customer is doing. So that's gonna complete visibility to each party in the transaction.
The nice thing too, you
have the
export button. Click here. It's all data from the BOL and Excel spreadsheet. You do what you want with it. So customers love this feature, being able to slice the place where they want to see it.
So, again, this is an out of the box software. We don't do customizations. We we and it's this is a feature we get.
Thank you.
I did. I was right off.
On that list. You said the carriers can come in and negotiate with them. We're asking why am I getting I'm not getting can go back and look at rates and say you were always 20% too much. Yep. Yep.
So we have
in our quote references, we have all kinds Right? So you can come here to read the quotes. You can pull it up. You can basically rerun the screen over the carrier line.
The the carrier has limited, and I he understands.
How do I make money? Let me repeat the question just for those who have questions. So the question was, when did we roll this out? How much traction do you have? And how do you make money?
We rolled it out in April '14. We had. We didn't have dispatch rates. We came out very bare bones just to see what the market wanted, and it's highly customers are loving it. We're getting them in daily.
And we make money. We're a monthly
subscription fee. So we
truly are software as a service. I'm just like Basecamp and Kahab and all those different
ones out there. We could
look on their website to get our pricing. That's exactly what we do. Our platform is based on and three. Our customers love it. And you also the other thing with free, know, that's differentiator.
So we have a thirty day free trial. If don't really know if it's a yeah.
This is awful. Look.
This is, the same. We're like, you can try it. Try it out for free. See if you like it or not. Yes, we have a people really like when you're out to the street to get them that.
Because of Aetna free trial is really good.
So I'm gonna open up to questions. The next
one is to to
Brent, CEO. Oh, I'm sorry. I don't know what the right order is. I think we have to take both of you.
Ask a measure from Cisco.
And you offer sales services in all different platforms. If there's a
plan to to explain explain to to that? That.
Yeah. So, actually You guys got a sneak peek. We have about 20 customers in our field. So what we learned, we are only as good as carrier technology. So with middle scale industry, there is driving straight.
Carriers are knocking out our doors. They're like, okay. It's time. We're like, alright. We can get on here.
So truckload, not there yet. Right? So we have been talking to our customers. Hey. What are your pain points?
Like, they're we're actually talking to our customers about their pain points. The pain point is, I'm sending out email blasts all day long. It's living in my email. I'm trying to track it. You know, my inbox is living all day long.
So what we've created is actually a cloud loading tool. This is this is our dashboard. So now Jennifer is sending out daily emails to all of her her providers, both carriers, and brokers. Take an outcome here. Click on her dashboard and say, alright.
At once. Now she had two days, how many carriers responded, what was it? You can click here. And, again, we do all the paperwork. Yeah.
So our pricing is on our website. You can go to freemere.com. And it has $100 up to 100 shipments a month. Then $100 for up to 300 shipments a month. And then over that, then we have more.
In terms of number of customers, we're going to let her off without going add, I know. I look at them. Yes. So as mentioned and as still in the early innings, we are approaching 1,000 customers with the service. And it's certainly very fast growing.
We don't disclose the specifics on growth rates. It's a revenue stream that's part of managed services
a question?
APIs and data stores that we have for our core transportation footprint. So we were able to leverage a lot of technology we already have. The difference is it has and A at the end. Reach out to Ed, Fred, and my closer. We're going to also just move to mouth while Chris O'Brien, our Chief Commercial Officer moves in.
So Chris, I'll turn the floor over to you, and you're really good at navigating distractions around you. So we'll we'll get out of your way. How's that? All right. All right.
So my objective is to talk about from the lens of the customer how this all comes together and I've got sort of two themes that I'll go back and forth on and one is the current advantage and two is this huge opportunity that we have going forward. That opportunity is really based in three things. One being the people that we have around the world and the expertise and we probably don't talk about it enough, but they form deep long lasting relationships
with our
customers. We're very hard to displace because we can leverage net people plus great services plus great technology and bring them to market with a huge pipeline of existing customers. Two, I'm going talk about our small share. That's another reason that gives us great hope for opportunity. Both the fact that we don't do business with most of the customers in the world and those that we do, we have a relatively small share when you think about all the different services and divisions that we have to offer today.
Lastly, would be our global network. We've built a global network. We've invested in that over the years and we do believe that global network benefits from a trend of increasing lead and increasing shipper desire to do more services with less providers, more solutions and more geographies around the world. So I'll talk about that. So I'm going to start a little bit with our current customer network and what types of advantages that provides to us.
On the left, you see some things we've shared before, 113,000 customers, large customer base is not concentrated at all. The largest customer is under 2% of our net revenue. And then we have very large customers on the other end, another advantage of course, so eight customers with over $100,000,000 in business. That's rare in our industry. The relationships like that, that's been a high growth area for us.
I think the last time we were together for an Investor Day twenty thirteen, there were only three of those relationships that's up to date. Those relationships we learn a lot from. Again, they're rare, not many of our competitors have one or two of those. Any, they are like enterprises in themselves. We're deeply integrated with them.
We may have our account team on-site. They are demanding and we learn a lot that we apply to all areas of the business. The last section on the left talks about the health and scope of those customer relationships. If they go anywhere from small transactional customers to global, so again, we talked really about the value of that office network, that transactional business is still extremely important to us because we have the combination of the local office network and control towers and managed services. It makes really any shipper in the world addressable for us.
Between also besides small to large, there's different types of relationships. So on one end, somebody that just needs a transaction every once in a while to our fully integrated collaborative solutions suite of customers where we are really paying attention at their supply chain and team and we'll talk about that. On the right, you have a little bit of new information and this is really how we look at our customer base and how we go to market. An easy way to think about this is the small ones are $60,000,000 and smaller and the global of the $5,000,000,000 company, the biggest in the world. We have a small share of those as active customers.
So our customer base, the small shippers, you see the percentage of active customers, so 82% are in the small. That approximates the marketplace, but most of the shippers out there are small. And we have a nice spread of revenue across all of those customer bases, across all those customer sizes that we leverage. So again, concentrated in any one area. Small is probably the part that's grown the most for us through the acquisition of Freightquote and understanding it's always been the strength of Robinson, but we've even gotten into smaller and smaller customers and all the way down to even sometimes the individual homeowner at the Freightquote side.
Our top 500 that's been fairly consistent with our diversification and growth into smaller customers has brought that number down a little bit from the 50s that has averaged over the last five to ten years. So that's our current customer base. We're also we've got a strong diverse customer base from an industry standpoint. This is how we roll up our customers and to make the 12 highest levels. There's a couple of areas that we're probably a little bit over the market in, in food and beverage and retail.
Mean, of the Robinson Fresh drives a lot of that, but also those are high demand areas. Customer expectations are really high. If you take the combination of those two, retail and CPG, it is a fast moving area. It's an area where there is a lot of freight available as well as large global networks and we can leverage our skills there extremely well. Each of these verticals has a lot of different sub segments and we have deep experts in all these.
So again, how people become tremendous advantage for us is our people know a lot, not just about these customers, but about what's important from a supply chain management standpoint within these industries. And on the opportunity side, although we've had a lot of verticals that we've been very deep in for years, we are really just starting to invest more and using that as a better sales advantage and going to market more as a vertical specialist versus a generalist. We think that there's a lot of upside leveraging what we already have, which is deep expertise, very specific solutions that get really finely turned into these segments as well as sub segment. Each of the divisions has talked a little bit about e commerce. Obviously, a huge area of demand for us and a high growth area for us.
Demand is through the roof. It touches a lot of areas. I've got some stats on our growth within e commerce companies, those that we roll up as e commerce shippers, receivers or models. But the majority of that growth actually in our e commerce business falls in e commerce solutions that are provided to CPG companies their traditional retail companies, that growth is also really high. An important thing for us is that it's another area that we can leverage expertise.
Those supply chains that Jordan talked about that have gotten so complex and that have changed so much challenge our traditional customers, especially those that have built distribution systems, that have modeled their business on the predictable nature of what just really has been thrown upside down and the expansion of multiple channels is a challenge for our customers. It's an area where they struggle a little bit more. That creates questions and that creates opportunities for us whenever there's questions in the marketplace, it's an opportunity for us to go in and use our expertise to provide solutions for them. It's a global service. It cuts across most every division and solution that we offer, actually consolidation to fulfillment, order management, procurement, aid for buyers, and it touches a lot of our emerging services.
So big part of our growth in reverse logistics and special handling and our final mile solutions. Again, area where expertise and demand is creating a distinct advantage for Robinson. Okay, I talked about that range of customers from transactional all the way to collaborative solutions. Collaborative solutions is the suite of customer relationships that spans all of our divisions where we have 100 of some part of their supply chain. And including managed services and TMC, that is up to 16% of our revenue.
And I think that's important for a couple of reasons. One, it emphasizes the expertise and the need for people in supply chain management. It's a part of the business we haven't talked about that much. These relationships are very, very sticky. And it's just a place where we can really demonstrate skills across multiple continents, multiple regions.
And those customers, we distinct relationship that they get a little bit different. So in these relationships, what we recognized is that their expectations are higher. We are more seen as their partner or an extension of their team. Again, a lot of this revenue is in all of our divisions. The majority of it is both outside of DMZ from a revenue standpoint.
So each of the divisions will have some type of relationship that gets all the way up into the point where they've outsourced some part of their supply chain to cost. This illustrates just some of the things that we do. We provide benchmarking for them because when we're in an outsourced relationship, we want to make sure that they feel connected to the marketplace. We'll lead with that. We'll lead with how we're doing versus the market for them in order to make sure that they know that we're adjusting or that they don't need to go to procurement events, but we leave with them because usually these relationships have started with some type of commitment to service or price relative to the benchmark.
We have enhanced reporting suites. So for the last ten years, we've been focusing on enhanced reporting suite. Again, we're an extension of their supply chain, they did a distinct reporting suite. We've been upgrading it every year and we just redid the whole reporting suite that we call Navigator Insights for them. Most of these relationships start with a strategy roadmap to ROI.
So whether it was savings or increased customer service at the very beginning of these deals, we're talking about we're looking at all their data and we're committing to some value that we can create by consolidating their orders, optimizing their network and simply saving them money in transportation, managing all their LTL better. Some level of value is the beginning of the customer relationship and we track that and monitor it with all those customers. Account management, so we have a specific group of team. We've created a peer group within our account management group of those that are in the outsourced reporting customer relationship side. And then lastly, those customers, we provide a lot of peer learning.
So we put together regional or industry based formats where we talk to them about how we're using the technology with other customers, what their peers are doing in their industry and again, a distinct value that we can provide. So when it comes to competitive environment to take this back to our advantage, we're just providing a lot more of those relationships, again, last a long time and it's up to us to continue to commit to that ROI. It's a very complex, people rich technology supported part of the business. It's a great advantage for us and a huge opportunity. Okay, I'm going speak very specifically about customer opportunity.
I shared the fact that we go to market and align based on customer size. We do that for a customer focused reason. There's a lot of different ways you can align your sales force and align your account management group. We've chosen customer size as the marker for the way that they might want to buy from us. So the global, again, those are companies $5,000,000,000 and larger.
They tend to be global. They tend to have relationships in business in multiple continents and they tend to want to buy those services with somebody who knows all those continents, they're used to dealing with people from multiple continents all the way down to the small where they are going to want to go to relationship. On our side, we've aligned our sales force and go to market in this way because it's how our customers want to buy. The big thing so we've looked at I'm using the North American example to be conservative here because that is our largest and most penetrated market area, but we start with the E and B data, they'll tell you there's 20,000,000 companies in North America. We address that down to using data science to about 9,000,000 shippers from our estimate.
And then we take the industry that they're in and various estimates of freight spend by industry to get our freight spend. Active customers, we saw that in the first slide. Our shares are within the global, within North America, those about 1,000 companies that we have in that addressable market that are $5,000,000,000 and larger, we have business with all half of those. But those are very big companies. They're doing business in every single mode of transportation and a lot of it.
So even though we're working with half of them in some regard, we have 0.3% of their freight spend today across all modes. Large, again, 1.5% up to 11%, the majority of the companies that fall into this small segment. Two opportunities here. One, the fact that even within our current market share, our current customers, we don't do most of their business and we also don't do business with most of the companies in the world in our largest marketplace. I've talked earlier about one of the things that we feel comfortable and confident about going forward is this trend of buying more with less.
So it's a global multi service opportunity. It's not new. It has been accelerating and it's another reason that we have these divisions. We have great services around the world, but we're also benefiting from the fact that when we pull them together and orchestrate more that to customer, we win more. We're uniquely positioned to win because of our investments that we've made in having great services and great people and having done it around the world.
So when we get into these deals, we have less competition. There's a couple of drivers I'll talk about why we're experiencing this. One is we are now dealing with procurement officers more so than traditional buyers. So the people that we sell to procurement need to drive out cost is injured and replaced a lot of traditional truckload or ocean buyers, professional procurement is a big part of that trend. Two, efficiency, just they want to do more with less and that there's a benefit for them from an integration standpoint or risk management standpoint of doing more with fewer providers.
Convenience is simply easier for them as they can get together and look at more parts of their business together and visibility, which saw with the Microsoft being able to see everything in one place. So there are a lot of drivers. Efficiency is probably the biggest one and the third is just less people that we sell to. Throughout the recession, a lot of people were taken out of Corporate America, especially a lot of people that we would sell to. Hasn't really come back in.
It's not coming in. There's more people simply that are trying to do more with less. So again, we're positioned to win here. We're already benefiting from it. There's fewer competitors when we get into these deals where there's multiple services in multiple regions, and we win more.
I'll talk a little bit about our own experience when that happens. So just a couple of comparisons. Our multi seven year comparison, our multi division customer count is up 58%. Companies that we do business with on multiple continents has gone from two seventy one in 2010 to almost 10,000. Now about half of that was the acquisition of Phoenix International, but still a tremendous amount of customer growth that's been driven by both that trend, the fact that we're addressing the trend, the fact that we're aggressively cross selling, go to a customer and that we have truckload with and sell them motion, we sell them visibility tools.
A lot of that is our own organic growth and the efforts of our cross selling. But we also believe it's the benefit of the trend that more companies, especially at that large size want to do business. Our own internal information, we track in our CRM, the calls that each person makes, Bob talked about that increase of sales activity. We also look at their effectiveness. One thing that we do measure is the amount of intro calls and how often those are tied to an opportunity that we've closed on one.
From the global side segment, those biggest customers in the world tend to want to buy multiple services. Our win rate there, our close rate is approximately double that of the average of all the rest of the size group. So again, evidence that we've got an advantage there in being able to pull multiple services together. So again, something we're working hard on, we feel well positioned to win on and that there's some tailwinds that are supporting us. Doing services around the world is important.
Having great people is Doing it well is for us the thing that we probably don't talk about enough that we do this extremely well. And I'm just going talk a little bit about some the recognition that we get from the industry on being the best at these customers. Our great people work extremely hard. These are just some of the awards that we've had just in the last 20 awards with some of our largest customers, some of the biggest companies in the world just in the last year.
They're all on our web page. If you go to About Us, Newsroom, Awards and Adelaide, you'll see all of them that have allowed us to get their press release. We didn't talk about it that much. We're starting to do that a lot more. But these represent so much hard work by great people at Stevens Robinson all over the world.
These are the biggest companies in the world, and they recognize us for being the best. And our core competitors are in most all of those really large awards. That was just 20, some of the sample titles that we won just in the past year from the biggest and there's been countless small and medium sized ones. So winning and doing it well is how we maintain these relationships and how this becomes real together. Industry recognition, we've been recognized at Pingdom Logistics, 3PL for the last six years in a row.
We are going through seventh. This is quote from our peer group. And then just yesterday, Gartner released another top three TL Magic Quadrant and we participated in that and we're ranked in the upper right leader category and the highest ranked in terms of ability to execute. So we don't say this because we don't tend to brag about this a lot, but we think sometimes it's hard to connect how all these things do come together, great people, great services, great divisions around the world. It's not easy to pull that off and our people work extremely hard.
And fact, some of those awards, those are not easy to win. It keeps us very connected and makes us really hard to beat those customers. So I'm going to conclude with trying to orchestrate everything that you've heard from the group today and with me and why this really matters. It matters that we do more services and have key services in all of the ones, the major ones that our customers are buying. Great people make that happen.
So putting the right people in place with those customers, we constantly hear from them. When we win those awards, they'll usually it might be top 3PL or best vendor overall. It's almost always, this is the person that got it done at Robinson, this is the person that they recognize. With VPL, it's always about representing some person who's made a difference in that, they are shipper and we do a lot to get great people to train them and to put them in the right place with those customers. Again, all geographies around the world, having great technology to lead and support our people, but also knowing how to deploy that in ways that shippers and carriers actually do business today.
So that combination of all the things is off from an innovation standpoint, that's all based on knowing what shippers and carriers are asking for. At award winning level, having long lasting customer relationships, service is being rewarded with long lasting relationships, deep vertical expertise, again, the expertise of people is what makes a lot of this happen. And we feel like we're still just at the beginning of being able to leverage that a lot more growth and then leveraging all experience to make this happen. And so we don't say it a lot, but our customers recognize it. When you do this well, when you do it all over the world, it makes us really hard to displace customers, and it makes what we do very hard to replicate.
So that concludes my comments. Is Chris Wetherbee from Citi. I guess I wanted to go back to the slide that you had in terms of size of your customers and just think a little bit about the growth rates with the different sized customers. I think we had the last investor update, I think you talked about some of the growth coming from the bigger guys. Just want to get a sense how that's kind of played out.
And then the second question just about your technology and your competitive advantages. When you talk to customers, do you hear that any of your competitors are closed from a tech perspective? I mean, kind of offering are they getting out there in the business? Chris, our growth has been pretty consistent across all of these areas. We have had recently by focusing on global, that's grown a little bit faster in the last year, but it really varies through different cycles.
But overall, we feel like we're putting the right strategies in place to grow across all these areas. What we've learned from freight quotas helped us grow small and even in the smaller than we did before. We thought we were great at some of the small, but we learned more there, some accelerated a little bit. But in general, the growth rates have been pretty similar across customer goods. When we talk to big customers, I spend most of my time talking to our largest customers.
It really depends on the relationship and how integrated we are with them. A large truckload carrier that we share business with multiple customers multiple competitors and some of the biggest trucking companies, they might be some of the least the lowest users of some of the technology, if you get into the outsourced area, probably the highest. When it comes to our reporting and analytics, we frequently hear that we are beating everyone. And that's really what they see in ACR interfaces. So they see at the web page, they see in their reporting and analytics.
And they generally give us really high marks. And we're having some of the best reporting and analytics, which is the representation of our technology for them. Some of those that were very integrated was always pushing us for more and we're building around them. That's good news. TightSuite was really built with for VersaMind and they value our ability to sit down with them and create better technology.
Hi, Judson Perks. Can
we go to Slide 72?
It says global customers represent 29% of net revenue. How do I square that with the fact that North American service, it looks like 80% of your operating profit by segment. So it's sort of like 20% that seems that only struck me as high, 29% of net
revenue coming from those.
So is it Coke that or Microsoft that you're helping do global stuff, but then most of the profits you're making in North America? Yes. Well, that's a great question. Global is a size segment for us. So those are the biggest companies in the world.
Most of them are global and that they do business everywhere. That doesn't indicate that we necessarily have a global relationship with them. It could be a very large global company that we do business with in just North America or just in Europe. Most of them we do have a relationship with. Areas are probably the most
shared across
services But 29% of the business with global really represents large companies more so than we do something with them globally. Okay. I'm going to have to transition there just because we're already a few minutes late. We are scheduled for a breakdown, which we're going to execute before AMG takes over here.
So if we could be disciplined on time, that would be great. And back here in ten minutes, and then we'll turn it over to Angie, and we'll try to corral you back in as well. Alright. We're gonna start back up. Final section here.
Before I turn it over to Andy, just a quick mention. I'm predicting five times surge pricing on an hour. It's amazing. Very campus.
Lyft, Uber do come out here,
so I know a lot of people have flights, but I am at so at the front desk, we have a list of local cab companies. Might take fifteen, twenty minutes for them to get here. So there's a variety of options, and the cab companies out here as but not sure they're expecting this event to close at 03:00 this afternoon. So just a heads up there. Yeah.
Well, if we stagger it, it'll probably help them out. Alright. So without further ado, I'll turn it over to Angie Freeman, our chief resource officer, and she'll take it from here. We will take a couple of questions at the end of the interview section, and then we'll go right into the q and a.
So the good news is that a few people left, there's a
little more room
to spread out. The bad news is that we have less body heat in this room. So next time we promise we're gonna pass out C. H. Robinson blankets to keep everybody warm.
We thought it would
get a
lot more toasty
in here, and
we figured this was better than sweating. So as to mention, for those of you whom I haven't met before, my name is Angie Freeman. I'm the chief Human Resources Officer here at C. H. Robinson.
I've been with Robinson for nineteen years, the last five of which leading HR. Prior to leading HR, I led a variety of functions including marketing, PR, public affairs and investor relations. So I had the pleasure of working with some of you back in my IR days and it's fun to see some familiar faces. I told some people today that it was kind of fun to be back in the investor relations arena and they thought I was lying. I'm not lying.
It was really fun to be back. So we've a couple of objectives for this last section of the day and then we're going to bring her home. We're going to talk about why C. H. Robinson continues to strongly believe that people and culture are a powerful competitive advantage.
That shouldn't be a surprise. I think that's going to come at the end through the whole day, but we're going to talk about that. And then second, we're going to talk about how we are evolving some of our talent strategies to support the business transformation you've heard about today and also adapt to some changes in the talent marketplace that are impacting all of us who are trying to acquire great talent. Since our IPO twenty years ago, John mentioned this morning, people and culture have been a really important part of our story and how we describe our strengths and what makes us unique. And it's no coincidence that the first two words of our mission statement are our people.
Combined with our leading technology, the supply chain processes that you've heard all about today, the people who are highly motivated, driven to succeed, engaged and customer centric, they make all the difference and enable us to continue to win. As Chris mentioned, Robinson is consistently recognized for being one of the best in our industry and for being a great place to work. And as a service company, that's no coincidence. Those two things go tightly together. The recognition of the awards for being a great place to work is especially meaningful because words are based on employee feedback that's gathered anonymously by a third party from our employees about what they appreciate about working at C.
H. Robinson. And with that, we also conduct our own employee engagement surveys and our engagement scores are consistently very high. Just like our employees tell us that Robinson is a great place to work, our customers consistently recognize what our people do for them. It's very common for our customers, as Chris said, to tell us that the acumen and the expertise and the dedication of their Robinson team is a big part of why they chose to work with us.
Our employees are engaged, they're empowered and they're enabled. And as a result, they perform at a higher level. Let's talk about our global employee base. You heard pieces of this today, but we thought it was important to bring it all together for you. We have about 14,400 employees around the world today in 39 countries across five continents.
With those employees, we speak over 80 languages and today about 25% of our employees are outside of North America. So we're increasingly globalized in our account base. Another interesting fact about us that I just put up on the screen is that we're, as a company, we're about 66% millennials. A leading global HR consulting firm told us that those demographics make us look more like a Silicon Valley company than your typical traditional Fortune 500 company. We think this is a huge advantage.
Millennials are digital natives, grown up immersed in technology. They're entrepreneurial, they're collaborative, they're creative, innovative and they're highly adaptive to change. All traits are really valuable to a service company that's powered by technology in a highly dynamic industry. So again, we think we're in a really strong position with the talent we have at Robinson. So what are the key defining elements of
So culture can be a hard thing to describe, but we all know it when we see it. And we all know that it's really important to how well a company serves its customers and how well the company performs over the long term. Here are some of the elements of our culture that we think have been really important to our success and will continue to drive our growth into the future. First and foremost, you've heard it a bunch of times today, but a defining element of Robinson's culture is our focus on performance. Our people want to win and they bring their A game every day.
Strive to performance due to a couple of things. First, it's about the people we hire. I mentioned this before, but we're looking for people who are self starters, who are motivated, who are driven to make an impact, who want to be part of a team, who are dynamic and engaging and curious. It's also about the culture and the expectations that we put those people in. It's about how we pay them, how we motivate and incent and reward them through our pay for performance compensation and I'll talk about that a little later.
And then it's also our promote from within culture, which recognizes and rewards those employees who are making the greatest impact and driving value. Our culture values relationships and is highly customer centric and part of the way that we reinforce that is we empower our employees and our frontline managers to make the decisions they need to make to support the customers and their carriers when in the marketplace. Being experts and using our business and supply chain acumen to drive results for our customers is a core expectation. We value hard work and hustle and those who don't settle for good enough. We also deeply understand change and innovation where today can have been fundamental reality in our industry.
C. Robinson's ability to constantly evolve all kinds of marketplace conditions and all different chapters of our history has been a core part of our success. And finally, we take a lot of pride in operating with integrity and professionalism and being a good corporate citizen. This is a culture of success and of growth. This is something that matters to everyone.
And being part of a team, people who are smart and talented and also want to win is a really big part of what people tell us they love about working with C. H. Robinson. I mentioned before that about a quarter of our employees today around the world are outside of North America, which is newer for us as we continue to globalize. And as we have expanded globally and made acquisitions, we have worked really hard to preserve and grow this culture globally.
A group of us visited Australia last fall to attend an APC employee meeting and meet all of our new colleagues. And I'll tell you that the cultural similarities between these two companies was startling. For those of us coming from Robinson, was like walking into a C. H. Robinson meeting and that has made for a very smooth cultural integration.
And Andy mentioned today that cultural similarities is a really important part of how we decide where we want to invest and how we make
acquisitions. Also a group
of us recently visited Asia, Malaysia for our Asia managers meeting and while we were there we visited the Kuala Lumpur office. And again, the cultural similarities were striking the same high caliber of talent, dedication to success, commitment to customer value, all the same traits you would see in any other C. H. Robinson office around the world were felt very deeply across those Asia managers and that Kuala Lumpur office. All around the world, we've been able to keep what we believe is a very special culture, grow and preserve that and that's been an instrumental part of our ability to serve customers globally, which again is a very important part about how we compete and are different as Chris O'Brien talked about.
So this is not your usual Investor Day fair, but we thought it was a really compelling way to illustrate and reinforce Robinson's culture of performance and engagement. This is one of our employees. His name is John Stendera. John is business development manager in our Robinson Fresh Monterey, California office. This picture was taken about one week ago as he was making his way to base camp on Mount Everest.
Sometime in the next two weeks, he's going to summit Mount Everest. And when he gets there, he's going to plant that Sage Robinson's flag you see in his hand. Many, many of our employees are following John on his climb through his blog and through our internal social media platforms. And I just think this is a beautiful illustration of this is Robinson. It's people who think big, who challenge themselves, who are cheered on and supported by their teammates and who are so proud of the company they work for that they want to tell the world what team is.
Okay, so that was culture. Let's talk a little bit about talent strategies and how they're evolving. We've heard a ton today about a lot of change in our industry and our marketplace and at Robinson. We're also experiencing a lot of change in the talent landscape. We have more competition today for top talent than ever before, not just within our industry, but across multiple industries, companies who are looking to attract the same types of people that Robinson has always wanted to bring on our team.
Jordan talked about this, there is a supply chain challenge for it. And so because of that, we have to be really good at attracting, retaining and developing our people. The other big change that's been happening in the talent landscape is that as new generations come into the workforce, the millennials who we've been out brought on, also Generation Z that's coming up right behind them, they have different opinions and preferences with the employers they choose to work for. So to stay ahead of those changes, stay competitive for top talent and also ensure that we can continue to support our business changes and transformation, we have been adapting some of our talent strategies that you may have heard us talk about in the past. The first is that, while we're absolutely still committed to the same traits that we have always looked for, again, mentioned them self starters, motivated, curious, dynamic, collaborative, team oriented people.
We are starting to augment when we hire with more people with technology, supply chain and analytical skills. So we're continuing to hire sales people, account managers and carrier sales. We're also hiring many more developers, data scientists, analysts, engineers and supply chain professionals. So that we can ensure we have the right skill sets to curate great teams for our customers and these sophisticated relationships. We're also looking for more people who can do complex selling and support Chris's team and also people with really sophisticated, superb account management skills to manage these large global multi geography multi service accounts.
We still are very committed to performance based compensation and in fact in many roles and parts of our business we're actually increasing the amount of performance based compensation as a factor of their comp to make sure that we're recognizing, motivating individual and team contributions to performance. We also are doing that because we want to make sure that we're creating meaningful differentiation for our top performers, committed to and actually increasing in many roles the amount of our compensation that is performance based. Tom talked about role specialization. We have been working on starting to more differentiate and specialize in our roles for a couple of reasons, drive productivity and efficiency, increase expertise in certain areas of the business and also enhance customer experience. In tandem with that, what we've been able to do then is create job families and very clear career paths, which is an important recruiting message for top talent.
So we can explain to our people within these job families, here's the progression you will make in this career, here's your opportunity, here are your performance expectations, here's what you need to learn and grow to achieve those objectives longer term. That's been a very compelling recruiting message. And our people really appreciate it because they understand how they're being measured and what they need to do to perform. In addition to that, we've been increasing our investment and learning roadmaps, really robust curriculum to support those people as they progress in those career paths, so they can more rapidly accelerate how much they understand and know about logistics and expertise. In addition to those learning roadmaps and that investment, we've also been investing more in development just overall.
So leadership development programs, high potential development programs, account management development programs and also a very robust onboarding program that we think is the best in the industry. This commitment to development and learning, this increased investment is not just very important to ensure that our people are really productive and are successful and perform at the highest level possible. As I mentioned, that's also a really important aspect of how we're recruiting people. We have our recruiting team who is normally spread out across The U. S.
And the world. A bunch of them are in tones this week to get ready for fall on campus recruiting season. And I met with a couple of them yesterday to ask them, so what are you hearing about from our new recruits, from recent hires about why do they choose Robinson? Lots of these people, very talented, have lots of options in the marketplace. And number one by far the answer that they get from folks about why Robinson is that Robinson has a
reputation for investing in its people.
That we develop them, they'll learn a lot about the industry, they're going to gain deep expertise and that they have a lot of opportunity in their career with the company and that career path message and development is really reinforcing. The other thing we hear from them is that they really like that we're global. They understand especially those who have educated in supply chain that our global footprint is a big advantage for us as a company and therefore they'll have more opportunity. And then interestingly another piece that I just think is really relevant is they like that our culture and our environment is fun and professional. The last thing that we're doing in the realm of adapting our talent strategies is deploying data.
So just like we use data to drive lots of decisions in other parts of our business, we're also using data to inform our talent strategies. So we set up a workforce analytics team and they work in close collaboration with our business analytics teams to help ensure that we're using information to create talent strategies, measure impact and then refine. All right, so I'd wrap up by saying that again, our employees are engaged, determined to perform at a higher level. They're empowered. We ensure that they have the capability to make the decisions they need to make to support their customers and carriers when in the marketplace.
And then they're enabled. They're supported by the world's leading platform, supply chain information and technology processes. A very powerful combination that means that they can perform at a higher level and continue to drive our growth and success. Thanks.
Thank you, Angie.
I just finished on the short talk with no
further know, questions. Because we're going into Q and A, Ken, why don't we have your first question for Angie, but let us first make the transition to get the and executive team then we'll hold and do that. We'll just take one minute to do that and then we'll start Alright. Turn it over to Ken to ask the first question.
A little bit of a ground rule that I've thought about in advance. I'm sure we'll get a surprise or two. But when you ask your questions, if you want to direct it to one of the leaders, please do that.
If you just have a general question
and you want to leave it to my judgment, where to steer it, that's fine too. I'm I'm happy to try to do that. So if you don't So I was actually just going to ask you a quick one, but I'll also one for John as well. How much given how advanced your staff is and how So part of what I would say
I won't say that we don't ever lose people to competitors or other startups. Of course, it happens sometimes. But I think we feel pretty good about our ability
to hang on to our
people and gather that they think that they believe Robinson is the best place for them. One one example, a very large e commerce retailer opened up a technology center here in Minneapolis. And and as of today, we have not lost one of our IT people to that large e commerce retailer.
I would add to it that we have had a longstanding practice of hiring people right out of school and training them in the way we do things at Robinson, and that's how you get to a lot of the demographics that you talked about. Part of that, as you progress and become more into leadership, we have been very consistent about extending long term incentives, equity awards in exchange for non solicit and active capital agreements that we all have. And that's we've been very upfront with all of our teams that we're looking for a two way commitment from our leaders. So that's part of what helps our position in the marketplace as well, too, as we personal stuff and there's a lot more LTL freight and different types of shipments leading up to that. So as inventory patterns change throughout e commerce, you've seen the density of freight that will compete with that.
The increasing the autonomy of the vehicle and save the labor costs that are associated with that.
Can It's
also very logical driver If you think about how that capacity would likely commission and phase itself into the market, I think there's a great opportunity for the services that we provide to acclimate to it and to try to figure out the right freight that we'll be able to take advantage of and go into it. So again, there's a lot to come on that and that's a topic that we're staying close to it. But I think it could really be an opportunity for a third party like us more than any kind of a threat. We get that question, obviously, not really coming out of the call, but throughout our history in terms of people and where we're adding and how we're adding them. So one of the benefits of going through the segment reporting was to actually break out where we did it and run right here.
Think about up double digits and account the tremendous work that they did in sourcing. So it's been a great topic of discussion
in terms of how we
break out the segments and their ability to be productive and it's been great. Now you look at where we're making investments as an organization. And we've talked and hopefully came across today in multiple ways, the amount of investments that we're making in technology and managed services that's driving the headcount additions. Disruption? Are we reacting to technology?
Are we reacting to all these things that are out there to competitors, emerging competitors, existing competitors? We're making the investments in the right place and as a result, it's driving more headcount in that particular The and U. Margin of a lot of that e commerce rate in Asia as well as the integration opportunity where e commerce is growing faster. Here, it impacts Robinson Fresh.
Opportunities for us. So it's
really across the board. There's no new marketing world that isn't impacting growing footprint. And then again, lot of services you asked about, Historically, a lot of the successful good observation. Part of the network transformation has been the introduction of service line leadership and network leadership. So kind of past,
the executive team has been
asked, everybody had accountability somewhat for everything. They may have leadership over truckload, leadership over LTOP, leadership over the portal, leadership leadership over over the network. And they worked very closely together to make sure that the network understands the service life strategy closely, and they know how to take that to market commercially, players. Can you elaborate on that a little bit more? Are you seeing that already?
Do you expect to see that going forward? If you are kind of revenue guidance, your margin guidance is kind of some of that potential pressure being done as some of these guys came in at like a single digit margin? So the comment was really hopefully after you listened to us today and have seen our demonstrations and talking about things. When I think about the non traditional competitors and the changes in the landscape, the competitive landscape that we're seeing, I'm not very concerned about the mobile app going to destroy us or the algorithm that's going to make this obsolete or all the rest of that. I'm sure there will be an agent in technology that will go with that.
The stuff that I think has disrupted more other industries is people aggressively going after market share or people breaking rules or people trying to reinvent something with very aggressive process changes or really trying to disrupt the business model by actual increasing the discount, subsidizing whatever you want to call it, key markets here, doing different things. In my mind, in the short term, that's probably the biggest threat
in terms of risk in the
competitive landscape. So I'm sure we're going to have to continue to evolve our people and technology. But to me, when I think about at a very high level around how this
team needs
to react in the next three, four, five years, it does come back to that. How do we make sure that all our business processes and innovations and our technology are aligned and competitive with what's in the market? When people have come, we've had traditional competitors in the past who have very aggressively gone after share customers, most of them need to try to take advantage of that. They are very competitive businesses themselves. And if somebody comes in and offers them a lower discount, even if it's not sustainable, they may take advantage of it for a while.
In the freight world, one of the things that's true is most everything replaces at least annually. And so it becomes a little bit more difficult to try to hang on to that freight and if you are just kind of buying market share, if you don't regulations over the last several years around safety and CSA and hours of service and how we held these two of them have knocked some capacity out of the marketplace and cleaned it up. I'm sure there will be some disruption in December around that and we'll react just like Bob laid out. Of a bit capacity of was not equal to the quality of more dedicated large group capacity in the marketplace. And one of the positive byproducts of some of these changes around safety hours of service and ELD now, there's going to be a much more leveling of the playing field in terms of the quality of the capacity.
Probably the age of the equipment might be one of the big things that's left where you could try to differentiate. Responding to those. By leveraging data more effectively, by leveraging the process more effectively, we find that we're getting better at it. Results of going from 6% win rates on large truckload beds and 10% win rates on large truckload to make that process more automated and what vessels are gonna be on those on those freight has created some lowdown in bookings and which has backed up the bookings. So once they figure out Okay.
I am going to turn it over to Andy to close us. I'm watching the clock here, and we're already a little bit. Are we good? Yeah. Follow on.
Okay. I would like to start off with thank you all first very much for making the effort to come in. We know that it is an investment of your time and of your day. So we certainly hope you feel like today. You've got a very large return on your investment.
I'd I'd like to thank my colleagues in the room, Megan, Brent and Brent, I'm sure he's back programming right now. But I thank you all very much. I think you did a wonderful job demonstrating the power of our technology and the impact that it has on our customers. I would also like to thank Adrian and Tim, and I would like you to give them a round of applause. He did a wonderful job.
Have my job as an officer. And I spent a lot of time with investors to help them tell the great story. And these people actually are doing much better than I do. So I'm very pleased that you all came in All everybody else is out there talking about an app or talking about a program that likes to track the truck. What Nobody's better qualified to tell you the impact of that than when he's talking to our customers and saying, great, you can track a truck.
What are you going do with it? The investments that we're making real time, the investments that we are expensing real time that are impacting our profit a lot being made for the long term. So that when technology is ultimately adaptive, when our customers are ready to transact in a way that we all believe that they should, we are there for them. We'd be able to meet them where they'd like to buy. And the thing that I think came out really was the number of customers that we're currently transacting with.
It's a large number. The better news is affects our team. And despite the fact that we've got plenty of people on the street, we need more people. So we would like to not only for us, but for our investors to know, but we're gonna continue to make those investments in people. They can go out and come on more customers.
We can service those customers