Talking TransportsSchneider National appears well positioned once the current trough in the freight cycle gives way to growth. There’s a lot of uncertainty over timing for when rates will inflect positively, but there are some encouraging signs. In this Talking Transports podcast, Mark Rourke, Schneider National’s president and CEO, joins Lee Klaskow, Bloomberg Intelligence senior transportation and logistics analyst, to share his insights into the truckload, intermodal and brokerage markets. Rourke also talks about the company’s sustainability initiatives, the driver market, cross-border opportunities, regulations, rail service and life as a “cheesehead.”
Hi everyone, Welcome to Bloomberg Intelligence Talking Transport Podcast. I'm your host, Lee Klaskow, Senior Freight Transportation religious X analyst of Bloomberg Intelligence, Bloomberg's in house research arm of almost five hundred analysts and strategists. Before diving in a little public service announcement, your support is instrumental to keep bringing great guests onto the podcast like the one we have today. If you haven't already, please do take a moment to follow, rate and share the Talking Transport Podcast. We appreciate your support. I'm very excited to have Mark Rourke, CEO and President of Schneider National, a leading provider of trucking, intermodal and other logistics services. Schneider trades under the symbol SNDR and as a market cap of three point eight billion dollars. Mark joined Schneider in nineteen eighty seven as a service team leader at the company's Sayville, Ohio location. Prior to assuming his current role, he was the COO. He's held a variety of leadership roles with increasing responsibility, including President of Truckload Services, General Manager of Schneider Transportation Management as well. Heals a bachelor's degree in Marketing from the University of Akron and has attended programs on corporate governance and strategic leadership at Harvard University. Mark serves on the board of directors for the Green Bay Packers, the Shift Group, and the Trucking Alliance. Welcome to the Talking Transport podcast, Mark.
Well, thank you.
So I'm assuming you're a Packers fan.
Well, if you live in Green Bay, Wisconsin, it comes with the territory. It's actually required. But it's a great joy to be on the Packer board and obviously is a small community to have an NFL team, it's kind of unheard of. So and we're happy with the trade out here to New York. Hopefully you are as well we are.
And I'm assuming do you guys when you have your board meetings you wear cheese heads?
No? No, but the Packers now own the chief's head and so we're encouraged to do so. But so far I've avoided that.
Okay, Well, let's shift from football. Let's talk transports. So can you give a little background about Schneider National.
Yeah, we are a large, diversified multimodal as you kind of laid out in your opening there in the full load space, So we have segments serving our customer needs in full truckload as well as intermodal, which is where we leverage the Class one railroads to take double stack containers on the middle mile portion. And then one of our fastest growing is third party logistics, where we bring together third parties with customer freight and use our technology to optimize and help customers solve problems beyond what we have our own assets. And again a very growing portion of what we do a lot less asset intensive. Obviously we're leveraging other people's drivers and power and trailers to serve our customer.
Right, And actually Bloomberg and Schneider have a lot in common. Both of our colors are orange.
That's right.
You know, orange is a big part of our color scheme. So if you're on the road and you see an orange, it's likely Schneider, right.
That's right. And you know why that is. It's why do they have blaze orange hunting jackets and construction barrels. It's very visible. And that was really the behind that that the safest color was orange, and Don Schneider felt that was the best corporate color.
I think it's great, and safety is job one for transportation, that's for sure. Can you talk about you know, you know your transportation company, so you know, some people might think it's a dirty industry what you're doing on the sustainability side.
Well, you know what I like about the sustainability story and message is it's one of those things where it's good business as well as it's the right thing to do and good for the environment. And so whether it's taking empty mile waste out, whether it's improving your diesel MPG year after year with new technologies and training of your drivers to now alternate fuels like battery electric, all of those things are good for the environment, but it's also good for our customers and good for our bottom line.
Right. And you guys recently, I think you had like a large fleet of battery electric trucks that you added. Can you talk about how that's been working out and maybe a little background behind the investment.
Yeah, your reference, we have about ninety four battery electric trucks serving out in southern California the intermodal dre for our Inland Empire out there at our ELMNTE South California location, and very interesting. It was a three year planning project because we actually do the on site charging, so we have our own charging station in addition to deploying the ninety four tractors. And I guess what we've learned is the tractors are the easy part getting the trucks. The more challenging part is how do you bring all that together with the infrastructure working with a power company to get the power distributed to your site, and then you have to think about how you operate your business entirely different. The range is much different than diesel. You know, when we're used to fueling a diesel truck, whether it's three in the afternoon or three in the morning, we generally know what the pricing is going to be. With battery electric and you're charging, it makes a difference whether you're charging during peak hour times or whether you're charging in the middle of the evening. And so a lot more goes into our optimization algorithms to make sure that we have a low cost effissient operation.
And because they're electric and they do have to charge, I don't know if you know the numbers, and how long does it take roughly to charge one of these electric trucks.
Yeah, we can get to an eighty percent charge in about four hours. These are very heavy duty liquid cool This is a four point eight megawatt location and so we can with sixteen charges up to thirty two trucks at a time, and so it's a real commercial site. And that's how we really think this industry is going to have to adopt is put it where the truck is operating at or where it rests, as opposed to kind of over the road while you're out charging, it's not nearly as efficient. So so that can get to eighty percent charge and we get about two hundred to two hundred and twenty miles in between charges, and that's why it works best in those local operations shorthaul movements.
And are you doing anything with your fleet? Because you know there's a new I'm sure you know this, there's a new EPA admission standard for heavy duty trucks. I believe it's twenty twenty seven. So are you guys doing anything in terms of from a strategic standpoint of your buying of trucks? Are you pre buying or you're not there yet?
Yes, it's a little too early for that. And first of all, I think there's two questions. How much do you want to pre buy, and the second question is how much supply will there be, how far ahead could they manufacture even get with labor and supply chain challenges. So I think that's a little bit unknown at this point. But generally speaking, we don't like to take the first generation engine right off the line. We'd like to see that broken in in some burning period before we go ahead and buy. So we'll have to see how that plays out.
And so you know, from a growth strategy, is Schneider more focused on organic growth or do you go into the market and try to buy growth, whether it's a trying to get into a new business or a new region.
Well, historically we've been an organic growth organization and more recently though, we've looked at ways that can advance our strategic content, particularly around specialty dedicated services, and so we've made three acquisitions in the last two years and very very happy with that outcome. So I think what you'll see from us in the future is a bit more balanced between organic growth, which is our primary opportunity, but how we can augment that with successful customers that are excuse me, carriers or other services that advance our strategic content. So I think we're going to be an a shop in the future versus just organic.
Out of your three businesses, is there one business that probably has the most potential for organic growth versus the others.
Yeah, we think so. You know, obviously we're an intermodal and from a domestic intermodal standpoint, the top four providers there have about seventy percent market share, so there's just not as many opportunities and assets that make sense there. Brokeraage, we think is a place that we can grow organically the best and the fastest, and so that really leads us to specialty truck applications of some sort. It could be tanker, it could be specialty dedicated things that generally that have some type of moat built around them because of the special type services that you might be briting for your customer. We think that's the most likely, and that's what we've done with the last three acquisitions.
Okay, great, and so let's talk about the trucking market. There's you know, a lot to talk about. Where do you see the trucking market today and kind of what are your expectations going forward, because you know, rates have been depressed for quite a long time. Some might argue it's a demand issue. Some might argue it's a supply issue. Where do you sit on that argument?
Well, Lee, this is my thirty six almost thirty seventh year in the industry, and I don't think I've quite lived through cycle like this one. We obviously go through cycles, and it's really borne by the rapid run up of the pandemic and post pandemic era to now the correcting factor here on the other side of that, And so I think it's a little bit of both. I think it doesn't take much in our industry to get out a whack. A couple percentage points on capacity, a couple percentage points on demand can have the effect. But we are definitely in an historical long cycle here. From a down cycle standpoint, I think on average, twenty months is what we generally find in our internal metrics as a cycle either up or down right, and we are now in the twenty four and twenty five fifth month of this down cycle, so long by any historical standard.
And you know, GDP expectations for the next two years is not great. It's around two percent, give or take for twenty twenty four twenty twenty five, So barring some craziness that increases the demand. So from our standpoint, you know, we think that when rates are going to you know, inflect positively and start moving forward, it's got to come from the supply side. More so, that coupled with our expectations of a more normalized peak season this year, which we'll give you some good year of year growth numbers relative to past peak seasons, what do you think has to happen on the supply side.
Well, maybe just back to that demand piece. You know, a year ago, we were dealing with the inventory overhang from that and so that was very difficult to work through, not only for our customers, but what the impact was to the freight freight market. So that I guess the good news as we sit here todayly that that is largely most every customer we talked to believes they're through that inventory correction, maybe not yet thinking they need to be in the building of inventory based upon being a bit more cautious, but at least that part of the equation is behind us. And so I think, to what your point, the supply side has been a little stubborn to correct the overbuild that came through the pandemic led build up, but we're starting to see modest and continual correction opacity levels. We're starting to see some firming of pricing contractually with customers. All those are signs that I think we're starting to see some light at the end of the tunnel. A little early to call it inflection, but I think there are some things developing that we might start to get back to your point of some normal seasonality. We saw a little bit of that at the end of the first quarter in March. We're getting close to the holiday season here in the summer, and we're seeing some pickup in the traditional food and beverage markets, which is typical of seasonality. So a bit more encouraging than we certainly were a year ago in this position.
And so you know, not only is Schneider a you know, a diversified company in terms of the services, your customer base is pretty diversified as well. So you're seeing all sorts of the economy, whether it's you know, consumer products or manufacturing. Can you talk about the mix of customers that schn.
Yeah, that's one of my favorite parts about this industry is the exposure you get to the various parts of our economy. And we're predominantly serving in the consumer industrial sectors for our customer base, but it's highly diverse, everything from extreme value retail to home improvement retail to specialty or big box all the way through automotive, chemicals, manufacturing, and so highly highly diversified, and not one We don't have any customer above five percent of our revenue, so even within that a lot of distribution. And so the question is where's the catalyst, And obviously the automotive market is hung in there well manufacturing and the near shoring coming back on the trend, I think from the supply chain, we think Mexico is going to be a big winner and perhaps even more near shoring in some of our other US based locations. So I think maybe the manufacturing is a little bit of a renaissance, maybe a little bit ahead of us yet to come. But overall demand across all that segment has been fairly steady. It just hasn't been spectacular.
Did Schneider do a lot of across border traffic with Mexico.
Yeah, it's one of our rural strategic growth drivers. So we've been in Mexico for thirty years, have an on site presence both sales and operations in Mexico City. And what we found is over time, while the decision makers may be in Mexico City or somewhere in the US, the collaboration between the two countries is important for things to operate smoothly. And we've recently been the anchor of the new Kansas the CPKC service intermotially coming out of Mexico, and we think that is just going to be a tremendous growth driver. Already seeing great success there because that market's been underserved from a reliable rail service to convert some of the over the road traffic. So a very important growth driver for US.
Can you broadly talk about, you know, what kind of products are moving southbound into Mexico and what kind of products are moving northbound out of Mexico.
Yeah, Mexico's the largest trade partner with the US, and about fifty percent of that at least northbound has to deal with the automotive market. A lot of automotive parts, and there's some automotive parts ago the other way to be finished and then maybe come back domestically, and so that is the biggest opportunity. But we're seeing you know, electronics and food products. It continues to be very much a manufacturing hub and diversifying across our service offerings.
In addition to CPKC, some of your other partners are like Union Pacific in CSX. Broadly speaking, how has rail service been, because you know, over the last couple of years, it's been a challenge. It seems to be getting better. But I'd love to hear your perspective on that.
Yeah, it is, you know, And our philosophy, Lee, is that we really collapse our spending alignment around those three primary providers. We don't try to split between because it takes a lot of collaboration and a lot of efficiency around the rail hubs. And so we align with the Union Pacific and that's relatively new for us. We're in our second year with them. Out of the West. We're with the CSX in the East, and then CPKC not only in an out of Mexico, but if we get STB approval on the Meridian Speedway, we'll connect the Southwest with the southeast as well. In service is really geographically specific. The CSX in the East has been rock solid for a number of years, very truck like the new CPKC coming out of Mexico is a bullet train. It's been on time, terrific execution where we've seen great improvements in the West, and that's place we probably needed it certainly the most sure and so the team at the UP really focused in on that and we've seen dramatic improvement. Got some more improvement to do, but it's taking the service card off the table.
And it's broadly speaking from an intermodal standpoint. Do you see more growth on the domestic side or on the international side or the I don't know. I guess cross border is considered what domestic or international?
Well, how we define it. If it goes in a fifty three foot domestic box container, that's a domestic. International is when it comes on the smaller you know, twenty and forty footers that come into the come through the ports, and maybe a little surprising, imports are really up quite a bit yere over year, but we haven't seen it fully translate into domestic volumes because they've been moving intact more into the interior of the country. And I think you'll start to see that change when they want to get it back to Asia quicker, they'll start translating more at the borders, and that is good for our inn mold because they put that in a domestic box and then we move it inland. So we're up in the west, but not as much as some of the data would suggest based upon imports.
So you guys do very little international. It's mostly domestic. Yeah, we're one hundred percent from the ports. That's right, gotcha? Okay? And is there I guess is there a region that you think that's going to grow more? Is it the west? Is it the east or is it the north South?
Yeah? Well, customers have done over time to d risk is not bring as much as they used to through the southern California ports and diversified a little bit more east, right, and so which puts that more into the truck lines versus the intermodial lines when you depending upon the length of the hall when it does come through the east, but most economically is coming through the west. It's the cheapest way for it to get here, and it's a great distribution arm. So it's still going to be incredibly important, but people have diversified a little bit away. The fastest growth opportunity though, we think is Mexico because there just hasn't been a reliable product that customers will convert from over the road to intermodal until the CPKAC service came into play, and it's created a competition with some of the other railroads as well. And you know, the whole near shoring and the direct ford investment going into Mexico is dramatic. That doesn't turn on overnight. It takes a little bit of time, but over the next two or three years, we would expect Mexico to be at the top of our growth.
Right, let's just switch gears a little bit. You know, one of the most important things about it of a trucking company or really the driver, because they're the ones that do the real hard work. Right, Can you talk about the labor market, How has it been to higher drivers? What is the you know, the turnover rate relative to historical numbers. If you can just talk to that, that'd be really interesting to hear.
Yeah, I think that's a very nuanced question, and I woun't want to break it down in a couple of different ways. First, really, if there has been a silver lining about all this attention on supply chain, it's it's brought attention, it's brought prominence and maybe a little bit of pride to how important truck drivers are to the whole economy of North America and so part going through this supply chain crisis, it's it's attracted more new entrances into the industry, which is which ultimately is a very very good thing. Secondly, our conversion into intermodal, our conversion into more dedicated is something that drivers prefer. I get whole more often, schedules are more stamp, they might get the same lanes serving the same customer, They get to know the people, so all of that just like you and I like to have relationships at work, same thing with our driver community. And so our shift there has helped the driver life balance, and it's helped our retention, and that's all a good thing. And so our whole configuration has helped us There. Doesn't mean that the over the road driver is still incredibly important, but it's a little bit more challenging for folks to say, I want to be away from home longer. But again, all the good publicity to the industry has allowed us to attract and bring in different were up to thirteen percent female drivers. It wasn't too long ago we would have been saying we would have been mid single digits.
So that's probably well above the industry.
Yeah, and so much more to go. There's still way underrepresented, but we have a good brand. Being a safety conscious company is important to everybody, but I think especially to our female candidates, and so we continue to press into that and I think even the aging of America, but it could be good for it. I don't know what you think about doing after retirement. Maybe a part time job moving some some freight around the country. And so I just think we have to get more creative over time to figure out how we serve our customers.
I drove a Class A truck once in a parking lot and I murdered a lot of cones. So I don't know if they want me on the road.
Yeah, I learned to drive before the CDL. Yeah, that was important.
And so when when the market? When the spot let's talk about the spot market. So when the spot market titans And I know Schneider's really doesn't play in the spot market. It's very little part of your business.
Yeah, a little more today than it historically is. But yeah, it's usually a five to seven percent play for us to fill some empty lanes in our network business, so it's not a not a big part of our approach.
Right And so for the listeners out there, the spot market is you know, usually the leading driver to where contractual rates go, and that's where most publicly traded companies operate with, you know, eighty five to ninety nine percent of their business in the contractual market on the carrier. So you know, we have a lot of slack capacity out there. Once capacity kind of tightens, and again that could be from you know, people slowly coming out of the market because they're not making any money. Right now, do you expect the problems of the driver shortage. I'm doing air quotes right now. The driver shortage is going to come back, and things will get tough again to recruit and retain well.
Demographics certainly aren't in our favor there, so you know, it's never easy. Maybe a little bit easier now than typical just because of the attraction factor and the publicity factor. But the schools are doing well the people that we deal with, and we can be a bit more selective geographically, which is all good for our network. But I don't think it's going to stay here as this is the new normal. I think it will. I think it will tighten. I think it will get more difficult, and I think that will be a tightening of capacity. And really, for the first time in a number of years, we're actual getting a little bit younger in our driver fleet. That was a place that we continue to skial older and we actually have more millennials now than than boomers, and so we've kind of been through that curve a little bit. And it's a terrific nobles of profession. Right, you're making a difference for the country, You're making a difference for your family. So there's a lot of positives, but it's still it's a highly skilled position and I think our challenges will be out there for sure.
And so when you're recruiting new drivers, does Schneider have its own driving schools or do you have strategic relationships with driving schools across the country.
Yeah, we hire about half our folks experienced that may come from a company that didn't quite work out from them and we can be a better option. And the other half come from what's considered CDL holders but not having a lot of driving miles under their belt. So our primary focus is working with third party schools, and then we bring them in for a finishing a couple of weeks of just schneiderrizing them, if you will, and finishing up their skills so that we're confident they can go out and be successful. We did, for the first time since two thousand and nine, at the height of the pandemic, kind of hit our nuclear button and started our own schools back up. When I joined the company in nineteen eighty seven through two thousand and nine, that was our primary method as our own schools. Yeah, and we we kind of go out away from that to leverage other people's assets, and so we were in there for a little while, but we're now just back to the finishing school part.
Of that, okay. You know, and you can't talk about labor without talking about inflationary pressures. Can you talk about, you know, labor costs today, how have they been trending over the last couple of years, and maybe other inflationary pressures that you're trying to mitigate.
Yeah, I think that's at the heart of the issue right now, when you have a depressed rate environment, yet you're still dealing with the inflationary costs and they're port and we've had significant raises to our drivers over the last several years, and very important to do, very deserving to do. Unfortunately, the rates aren't supporting the continuation of that, and so we have to get some more help from our customers. But we also had increases in insurance and this hardening insurance market, we've had increases in equipment costs, and so the good news is that's kind of plateaued and we're now kind of whittling away at getting more cost out of the business as opposed to it continuing to rise. But we still have a lot to overcome based upon the last couple of years. We're not going to take our driver wages backwards. That's not a reasonable approach. We have to get more productive of what we have and we have to get some rate recovery to get to a compensable rate for what we're doing.
And people that don't follow the trucking market that closely, can you talk like, what's going on with insurance? Why is insurance increasing so much for trucking companies?
Yeah, I think it's really across all categories of risk management, from natural disasters to fires. But certainly the trucking industry themselves has had some bad trends, not so much in performance. I think we keep getting safer. We have never been safer as a company. Yet, nuclear verdicts and high settlement costs, inflationary cost relative to medical, inflationary costs relator to fixing cars or trucks that might be involved in the accident all put additional pressure on the bottom line, but also for the risk management element of those who are ensuring you. And unfortunately, not all of this is based upon facts. There's just some venues that it's really hard to get kind of the fair assessment of the facts and getting to a reasonable and accommodating an appropriate settlement, and those things just continue to rise, and as that continue to rise, so does the insurance risk that come with that.
Yeah, it seems that lawyers are really going after the trucking industry. You can't be driving on America's highways without seeing a billboard about, you know, a lawyer touting the fact that they go after trucking companies or hear it on the radio. So it's definitely been an interesting development. And those higher inflation or higher insurance costs are going to probably you know, be the straw that breaks the Camel's back for a lot of independent truckers, and that could be the thing to bring the market to a better equilibrium for rates.
Yeah, and that's an annual process, as you know, and so depending upon where you are in that cycle, and you see that that that certainly can be the difference between staying and going.
Can you give us some broad trends about the bid cycle that you know most trucking companies are usually talking with their customers now and renegotiating rates. I know you're not going to tell me exact numbers, but could you just talk broad strokes, you know, how this time is feeling versus previous cycles.
Yeah, let me put some context around your question. First. What we're referencing as our network type businesses that route going from one location to the next versus a dedicated contract which is generally three to five years and you have all those things ironed out on the front end versus this annual process. So we generally at this stage of the year, we're through forty to fifty percent of our annual contract renewals. Is where we stand by the time we come out of the second quarter, and the good news is here. I think there's some hardening of that that and not across the board, but I think customers are looking to Okay, where are we in this cycle? Maybe a year ago I was trying to use a broker to get the last nickel I could, and now I'm being a little bit more biased towards asset based providers, which I think is good for a company like Schneider. And so for as we came out of the first quarter, for the first time in six quarters, we actually had on average improvement in contractual price renewals and so, you know, not enough to call it inflection and not at disjunction, probably enough for our liking, but at least we're starting to see some improvement. We would expect that as we get here in the second quarter as well.
Is that any different than your intermodial business?
A little different. Yeah, truck is a little bit ahead of intermobial. We on our most recent earnings call, we had intermodal renewals in the first quarter, again around that forty percent level of flat. Again, most of our costs are with the third party being the railroad, so it's a little different dynamic, and certainly last first quarter was the most constructive renewals of a year ago. So we're actually fairly pleased with that outcome.
And you know you mentioned the largest expenses the railroad piece. Are they flexible because they like to talk about their pricing power a lot on earnings calls, So are they giving up any sort of price because of the reality of the market.
Well, we want to make sure when we work with our rail partners on intermodal and we serve as a sales arm for them, there is that we're our interests are highly aligned. And to do that, we have to be highly aligned to the market. And so, without getting into specifics, you know, we do have mechanisms that adjust to the market over time, regardless the market's up where the market's down, and that helps us make sure that we stay aligned and don't get out a step and therefore ends up hurting volumes or converting freight from the train back to over the road at a big a clip. And so that mechanism allows us, I think, certainly better when the market doesn't change dramatically. It's more difficult when the market goes up really fast or down really fast. But most of the time that those mechanisms allow us to stay highly aligned and keep a steady stream of opportunity coming to the train.
So your trucking business, your intermodal business, asset intensive businesses, you guys have to spend money to refresh the fleet. Make sure you know you have a great, reliable and save fleet. Can you talk about your your cap X program, how much you's spending you know what is that is? How much of that is our trucks and equipment versus you know, technology and things of that nature.
Yeah. Yeah, And a little tale of two cities here we can talk about twenty three and twenty four. First, our factories wear out, so we have to replace them, and we replaced, depending upon unit on a three to five year cycle as it relates to the tractor, and a little bit longer, much longer, ten to fifteen years on a trailing piece of equipment. A year ago, our CAPEX was five hundred and seventy five million. Because we were catching up from the pandemic. We couldn't get all the trucks that we wanted to get, so our fleet got a little bit older than we desire or optimize around, and that raises maintenance costs, increases downtime. So we knew we had to get some younger to get caught up once the OEMs were in a position to do that. Fast forward to this year, well, where we needed to be on age a fleet. We don't have to buy chassis for our intermodal. We've got our ratios right there, and so our capex this year will be three hundred and fifty to four hundred million, still a big number, but not that outsize five hundred and seventy five million that we experienced a year ago. So still lots of money to reinvest in the business, and the vast fast majority of that is on rolling stock is you know, we do a lot of tech, but it pales in comparison to buying a tractor, container or trailer.
So when companies talk about you know, technology and AI, they usually get an additional multiple out of their stock. So this might be a good conversation for you what do you what are you guys doing as it relates to leveraging AI, and you know, AI is a very broad category. So whether it's machine learning or you know, the real cool stuff that we're hearing about today with artificial intelligence.
Yeah, yeah, there's always a hype cycle out there somewhere, but it's you know, technology is very important size of our company. For example, on our truckload business, we're dealing with seven thousand origin destination pairs. You know, you throw the complexity of third party capacity on that, intermodal ramps and schedules, and so we need to have technology that really allows us to deal with that in real time so that we can price to a customer in sub seconds on a spot market or for our brokerage business, and all of that has some element of AI associated with it, and learning models that adapt and adjust to what they're seeing on win rates and what they're seeing in this geography versus that geography, and so our care and feeding into those models is where our investments are. Because we've been through the digital transformation. We're digitally connected to shippers, we're digitally connected to third party carriers, and so it's the decision science, your decision making science. We used to think about, let's put the best information we can in front of our people and let them make the decision. To hey, we've been doing this long enough that the models are good enough. Let's not have them make the decision. Let's let the machine make the decision and lets us deal with the exceptions. Allows us to put our people a little higher in the value chain, and it allows us to be more efficient and let the machine and the AI or the robot do what it does best.
And then out of your businesses, is the most opportunity for productivity gains the brokerage business or is it one of the other businesses.
Well, what I like about brokerage it's a great test ground for us on new technologies. And so if you think about brokerage today, we can price almost instantaneously. We know who the best carrier is. That can be done almost instantaneously. Or think of the eBay experience. Go out there, we put a price, they hit by. Now nobody touches it and it goes. If they're a qualified carrier, we know who they are. Got to be a little more careful today. Organized crime and cargo theft is a bigger issue than it's ever been, not only in our industry but the country. And so you get all those checks in, you can get a lot of frictionalist transactions done which allow us them just to raise our productivity. Then we generally can take that into other aspects of our business and learn there and then and take it in. So we're excited about AI. We want to make sure we're smart about it and and and we think that's something that will continue to invest in.
Yeah, when I talked to freight brokers, you know, whether it's c suite folks or people in the front line, the two things that are always talking about is technology and fraud. You know, it's it's pretty pretty incredible about the amount of fraud that that's going on in the in the brokerage space, and then probably takes a lot to try to fight that.
Yeah, So it's one of the things that the beauty of digital is you can make it frictionalists, but it can also create vulnerabilities if you don't have proper checks, and particularly in today's stolen credential world. Right, So it's it's forced us to do some things differently. It's forced us to actually to back off some things, to put some more manual steps in the process in certain geography, certain commodities, and so we have to stay one step ahead of the bad guys.
You mentioned a hype cycle before with technology that same vein. What are your thoughts on autonomous trucking?
Well, if you've ever been in one, it is absolutely amazing how far it's come right, you know we're involved. You know, our philosophy here is we believe the best solution is one that's engineered from the ground up with the OEM because of all the redundancies versus applications that try to do it aftermarket, and so that's our bias. But and so we're involved with two and we're involved in the freight hauling space still with the safety driver in the truck, and one of those folks are going to be testing later in the year without without the safety driver, but in very very specific lane configurations. And so to us, it's it's early and we have to make sure that you know who's liable something goes wrong. And back to our lawyer question earlier. But the technology is advancing and it's it's amazing how good it is.
Oh, okay, great, And so you know, you see the application being very I guess regional specific because from what I understand, it doesn't really work that well in the snow, so it really it needs to be called the desert.
Yeah. Well, they're working on it, but certainly, you know, I think ultimately the lead that the best application. It might look initially like our intermodial business a little bit maybe we're going to have a driver do the first mile, let that do the middle mile, and then the driver do the final mile delivery. And that's great for our drivers. That gets more local positions, really cuts into the economic case of what's the total cost to serve on that lane when you break it up and do it. So we kind of got to get through all of those economic cases to see but I think that's how you at least get started and allow the technology to do what it does best. And maybe it's that highway exit to exit is how you get some density going.
We'll definitely be interesting to watch see where it progresses from here. You know, with technology and with the equipment side. Can you talk about how technology has made the trucks and the driver is safer?
Yeah, it's you know, one of the things that I think is so beneficial on this journey to autonomous is what you can adopt along the way. And you know, the first thing that we got to put on all of our equipment was collision mitigation technology. And you know, at first you had to work through the bugs of that, but it's astonishing we've reduced rear and collisions by nearly seventy percent and the severity by over eighty. As you can imagine, anything that's kinetic energy is bad when it transfers from a truck to a car, and so terrific. Now lane mitigation, we're getting to mirrorlests where you can eliminate blind spots. We're all automatic transmissions, so people of smaller stature now don't feel as intimidated by all the physical movements or took to drive a truck. So it's it's a much different environment and and amenities like AP used to cool and he the truck without having to idle it. The tablet based communications. Uh, the industry has come a very long way.
So you lead a you know, a large storied you know company, can you maybe talk about is there anything keeps you up at night?
Well? Just about everything, but uh we can sleep. Yeah, yeah, you know there's Uh, the industry is appears to be coming under more and more regulation. Right, we went through a big deregulation period and now you know a lot more direction coming about whether it's green trucks, and faster than the mandate, the mandates coming faster than the technology, certainly faster than the cost offsets. And so you know, as I think about how we make all that work for the consumer, for our shippers, and for us. I think we're getting ahead of ourselves a bit, and I think it would be good to step back and look at the total system costs. We love to be greener. It's good for our business, but it has to be economically feasible, and so that's a concern concern of ours. We talked a little about the demographics, the aging of the of the country. We got to make sure we continue to attract people and keep them engaged in the business. And and so those are probably the two things that right now are top of a list.
And just you know, curious, So you know, I mentioned earlier your first job at at Schneider, how did you get into transportation? Did you? How did you get there?
Well, from from Macron, Ohio area, and the seventy six and high seventies and seventy all that came together there. And when Schneider first moved away from and got to a field location outside of Wisconsin, that was the first place because it was halfway between New Jersey and Chicago, which was a major trade lane, and so a lot of transportation growing up in that area always was fascinated by how things moved, and a little bit of a unicorn to be at the same company thirty six years later. But starting learning from drivers, Working with drivers was a very rewarding start. Learned a lot and I didn't have to leave the company to get new and different experiences because of the depth and the breadth of our company. And so a little bit of a American story of coming in at the very front line and having the opportunity to lead such a great American brand.
And how long have you been at the corporate the corporate headquarters?
All roads for us eventually lead to Green Bay, Wisconsin. So I came to Green Bay at nineteen ninety five, and so I've been there a good long time and I've been CEO since twenty nineteen.
And we'll green Bay Packers. Will they have a winning record this year?
You know, we got a little tougher schedule this year, but how they came on at the end of the year with all the young offensive talent in particular, I think there's a lot of optimism.
Yeah, I'm a Giants fan, I'm not that optimisty this year, so I hope for the best, but my expectations are kind of low you know, in your journey, is there like a book that you read about transportation or leadership that really stuck with you that you know, maybe people that are you know, people that are interested in transportation or leadership might might want to read.
You know, I don't have a lot of those that just kind of to me are transformational. I was, and this might be a little bit odd, but Phil Knight's Shoe Dog about how to just persevere in business and bet on yourself and bet on your company versus taking the easy road. You know, I think about our company being around ninety years next year, and we've had to overcome a lot of depressions and recessions, and so that just seemed to resonate with me about you know, stick to your principles, stick to what you believe in, bet on your people, and bet on yourself. I think is kind of the Schneider story as well.
All Right, well, Mark, I really want to thank you for the time. It was a great conversation. Thank you, and thanks for tuning in. If you liked the episode, please subscribe and leave a review. We've lined up a number of great guests for the podcast. Check back to hear conversations with C suite executives, shippers, regulators, and decision makers within the freight markets. Also, if you have an idea for a future episode, please hit me up on the Bloomberg terminal or on Twitter at logistics Lee. Thanks everyone and take care.
