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Customs Brokerage is an Information Business with Christopher Wall
105 Plays9 months ago
In this episode, Christopher Wall, Co-Founder and CEO of Zeus Logics, joins Host Brian Glick, CEO of Chain.io, to discuss:
- Why accurate, real-time data is essential for the customs process
- The importance of understanding current legislation during the customs process
- Developing customs clearance technology to help importers take control of their customs clearance
- The future of customs data and compliance
- Chris’ background in investment management and his transition to the supply chain industry
Christopher is an entrepreneur and investor in enterprise software systems serving the global trade management, logistics, and FINTECH industries. He specializes in global trade compliance systems and is the Cofounder of Zues Logics, a software company focusing on creating more efficient customs processes.
Connect with Christopher
Follow Zeus Logics
Connect with Brian
Follow Chain.io on LinkedIn
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Transcript
The Need for Supply Chain Visibility
00:00:03
Speaker
I spent an inordinate amount of time of bugging every single exec at a major logistics company I could, asking them, you know, what need was there? And they all told me some variation of the following story. They said people want visibility into where things are. Then they want agility.
00:00:20
Speaker
Once they know where things are, if something goes wrong, they want to be able to fix it. Then the other thing that they wanted was resilience. They wanted their supply chains to absorb shock. The way I see it, the resilience thing is essentially the capital expense. Spend more money, have more inventory in reserve, you'll have more resilience.
Introduction to Chris Wall and Transition to Logistics
00:00:37
Speaker
Welcome to Supply Chain Connections. I'm Brian Glick, founder and CEO at Chain.io. On this episode, we're going to talk with Chris Wall. Chris is currently the co-founder and CEO at Zeus Logix.
00:00:50
Speaker
ZeusLogix is a supply chain management technology and service provider focusing not just on the customs brokerage space, but on the general compliance area. And you'll learn a lot more about that in the show and the expansion of the supply chain up and downstream from what we've traditionally thought into things like traceability and green technology. Really interesting conversation and I hope you enjoy it.
00:01:21
Speaker
Chris, welcome to the show. Brian, thanks for having me on. So why don't we start with the basics? Tell me a little bit about your background and how you ended up in the industry. It's a bit of a convoluted story. I know that's a fun one for you. Yes, I used to be in the investment management business and the
00:01:39
Speaker
fund I worked for had made an investment into what they called the trucking company, which in fact ended up being a 3PL. And we made that investment when the times are still good in the 2000s. And when things got to be a little bit harder, 0809, they had to have somebody go in and take another look at it.
00:01:57
Speaker
really drill down, understand the business, and figure out how to help turn that company around.
Challenges During Economic Downturns
00:02:02
Speaker
And I got that job as the company had some software that was part of their offering and part of their competitive advantage, and I was the principal technology investor. And so sitting there over a period, you may remember in 2009,
00:02:16
Speaker
even really strong players in the trucking industry were parking rigs by the side of the road. Even the strong people, the really great clients, were having a lot of difficulty actually learning loads profitably. So I got to go and just learn how things work at the worst of times for the trucking industry and see how the business worked behind the scene. What kind of ratios made sense for operating metrics? How did the business work? How did information work?
00:02:41
Speaker
Coming out of that, a few years later, we ended up selling that company about five, six years after I started working with it. We went in and I was thinking about all the places that you could do really interesting things with technology. Where were there places that you could build new systems? Where was there a great need for new IT systems? My background is really in technology development. Thinking about it and discussing with people, logistics and supply chain came in as one of the
00:03:07
Speaker
key areas where there was so much work to be done, so much economic power to essentially unlock. And that's how I ended up getting into the business logistics, essentially looking at it through a technology development lens.
Working with Logistics Executives
00:03:20
Speaker
So I want to ask you a question about that first stepping into that 3PL. I was on the other side of, you know,
00:03:30
Speaker
working as sort of a more junior employee in a 3PL around that same downturn when we had the money guys from New York, as we called them, would come in and tell us we were doing everything wrong for everyone who can't see Chris, right? He's covering his eyes in shame. So what was the culture there? Was it hard to walk in and talk about things like operating margins? Because a lot of people in our industry are like, I just want to do my job and leave me alone when it comes to the money.
00:04:00
Speaker
So it was and was not hard. This particular 3PL had a bunch of essentially agents who owned a line of business and they own customers. And they have those customer relationships and then the rest of the organization executes on what they've sold into their customer base. So when it came to understanding operational metrics, the people who were selling the business already tended to be pretty sophisticated. They understood their costs.
00:04:26
Speaker
The CEO in charge of the operation, who is a lawyer by training and a Sigma, a black belt kind of guy, used to be over at several rather much larger logistics organization, had
Strategic Shift in Logistics Approaches
00:04:40
Speaker
thoroughly well drilled them in understanding what the operating metrics were. So they didn't have a lot of contracts that were upside down. Where this organization got into trouble is they raised money
00:04:50
Speaker
from bankers who were enthusiastic, shall we say. They raised money at the top of the market when people were giving money away. They wanted to move from being an asset light organization to getting more business from their super premium customers. Without saying names, a beverage company in Georgia, several large manufacturers of paper goods based in the Southeast, very, very large organization that has a lot of hotels and theme parks in Florida.
00:05:20
Speaker
Those companies will typically only deal with 3PLs or trucking operations that have their own rolling stock. This meant you had to then take on a lease. If you raise a ton of money in 2007 and you deploy that in 2008 and you start trying to sell your new leased rolling stock and then 2008, 2009 happens, everybody sort of understood what had happened.
00:05:46
Speaker
the organization, it basically became a go in, spin off the asset based operation, retain the asset light operation and focus on rebuilding that. But people will understand that they understood what had gone wrong.
Investor Communication and Economic Strategy
00:05:59
Speaker
Yeah. So it's interesting to be talking about this in 2024, because we are in the 2009
00:06:06
Speaker
to some effect of the downturn that's going on or that has gone on or is going on, depending on who you talk to. And it's hit both tech companies and logistic service providers up and down from international domestic truck. Ocean doesn't matter. What advice do you have for people who now are sitting there looking at an investor who may be invested in late 2022 with them and is now
00:06:35
Speaker
has some buyer's remorse, maybe. Nobody likes surprises. Communicate with the people you're dealing with. If this particular company is in a situation where they're facing tough times, open and honest communication with the investor will at least maintain the trust and the personal report you have with the people you're working with. I think a lot of people understand how hard it is to deal with fundraising right now.
00:06:57
Speaker
A lot of people understand how hard the market is. The other thing to always remind people is that some of the world's most successful businesses were started and or grew during tough economic times. It hones your ability to survive and be profitable and focus on what your customers want. That's what I'm telling my investors. Me too.
Customs Brokerage as Information Business
00:07:17
Speaker
You're a technologist first and a logistics person second, or at least at some point.
00:07:23
Speaker
Is that still how you see yourself and why stay in this business for you personally? The business that we operate in the logistics sphere is a customs brokerage. Customs brokerage is very, very similar. Information technology is basically the
00:07:39
Speaker
absorption, distribution, parsing, and distribution of information from one source to another. I have a web form. The web form collects the contact information in the email of the person I want. That gets sent over to a salesperson who looks at it, looks up the contact information on the internet, determines what they need to know, and then does some kind of action with it. Customs brokerage is an information business.
00:08:04
Speaker
technology is an information business. So they sort of relate back to each other a little bit more closely than people who also have to deal with the physical movement of goods. Physical movement of goods scares me. Yeah. And assets scare me. I grew up on the customs workers side, so we're in a safe space here. What about this massive, complicated data problem of customs, which I agree with you. Customs brokerage is just a data movement and organization problem at the end of the day.
00:08:34
Speaker
Though I think I've had some past guests who would probably punch me for being that reductionist, but why do we need another company? What did you guys see that isn't being solved? As you mentioned, some people in the customs business would tell you it's a lot more than just understanding information and properly cataloging it and collecting it. It's true. There is understanding the HTS codes, understanding the current trends of legislation, being able to help your client understand
00:09:02
Speaker
They may in fact do better off sourcing a more expensive product from somewhere in the Caribbean than sourcing it from China because of just the variability in duties. Things like that go beyond merely parsing and collecting information.
00:09:16
Speaker
Yet at its core, I would say that 10% of the work done is the kind of work that really requires a lot of human skill, a lot of human ingenuity. It requires that ability to synthesize. It requires the ability to look at the news and say, whoops, it looks like things are not going so well right now in XYZ country and that there may be a bit of a trade war based on the political landscape in 2025 in the US. Maybe I should really
00:09:41
Speaker
remind my client that they should be looking for alternative sourcing. Those are the kinds of things that machines just don't do very well right now. That's a consulting and advisory aspect of customs. The day-to-day work is efficiently extracting information from documents, efficiently putting that information into a format that customs wants it, submitting it, and then dealing essentially with the exception management because a certain
00:10:06
Speaker
Customs is a properly prepared customs declaration. It doesn't get any further attention from customs, 97 plus percent of the time.
Importance of Information Standardization
00:10:14
Speaker
Then customs has random inspections, their data requests. Depending on the commodity you're doing, there can be commodity or geography related additional enhancements to information. That kind of task tends to break down when people either have the wrong documents or information is input incorrectly.
00:10:33
Speaker
or information is superseded by newer information. This is a really, really typical one. You filed an ISF, your container gets rolled. You decide that you're going to air freight something over, or you decide you're going to change carrier, move it on to another ship. You now have to file another ISF because the information has been superseded. The number of times I've seen people not deal with simple filings because information was superseded is pretty surprising.
00:10:58
Speaker
If you keep track of the shipment, if you integrate knowledge about the physical movement of goods, did we see a gate in full occur over at the terminal? Did we then see the container loaded? Did the vessel in fact sail? If that vessel did sail and your container was not loaded, for example, you know you've got a problem. You don't have to wait until somebody over at the fort says, oh yeah, by the way, we just have to tell you we're going to have to move this on to another carrier and it's going to be three days late. So aggregating that information is where we really see the value and the benefit. And this is why initially,
00:11:28
Speaker
When I was really interested in what you're doing, what you're doing really is about aggregating information and data feeds, making it transparent, making it flow easily from point A to point B. And that's the opportunity, I think. And interestingly, the genesis of ChainIO really was I had another software company that did HTS code management. And one of the things
Integrating Trade Data Across Organizations
00:11:50
Speaker
that we saw with our largest customer, who was also our first customer, when we centralized their management of their HTS codes.
00:11:59
Speaker
The number of consumers of that data was so much higher than we expected, and the integration and the use of that data across the organization. And the same thing you're saying about transportation data being valuable in the customs process, like granular transportation data, not just what's the bill of lading. And we were looking at having to get that tariff number into their SAP system for costing purposes, into planning systems, into product lifecycle management.
00:12:28
Speaker
all the global customs brokers, you know, on and on and on and on. And that really was what illuminated this problem for me of moving the data around was the customs trade data, right? So yes, very much so.
00:12:41
Speaker
That makes me think that the thing that really was attractive about customs is at a certain time before 2019, I spent an inordinate amount of time of bugging every single exec at a major logistics company I could, asking them what need was there because I wanted to go.
Information Challenges in Logistics
00:13:00
Speaker
If you worked at Schenker, Kunenagel, and DHL,
00:13:04
Speaker
Chances are I bothered you and pestered you on LinkedIn, email and by phone and through your friends until somebody would speak to me. And they all told me people wanted something similar. They all gave me some variation of the following story. They said, people want visibility into where things are. Then they want agility. They want to be able to, once they know where things are, if something goes wrong, they want to be able to fix it. You know, Port of LA Long Beach is backed up. Can you offload the container in Oakland and set all these little kinds of changes?
00:13:31
Speaker
Then the other thing that they wanted was resilience. They wanted their supply chains to absorb shock. The way I see it, the resilience thing is essentially the capital expense. Spend more money, have more inventory and reserve, you'll have more resilience. The other two, the visibility and the agility are information problems. And so the name of the game, the way I saw it was, how can we get the best source of information in a standardized way so that somebody going in can take a look and understand what the true landscape of the world is?
00:14:00
Speaker
And I get the impression that that is not necessarily the norm in a lot of the freight forwarding and transportation business, in part because every single organization does things slightly differently. They collect information slightly differently. If you're dealing with the European forwarder, they're going to be using metric and maybe a 24-hour clock. If you're dealing with somebody in California, they're going to be using US standards.
00:14:22
Speaker
All these little differences add up and just draw confusion. There's one place where there's only one set of rules everybody follows, and that's customs, right? It's a tax function. They're going to enforce it, and there's 65,000 people whose job is to make sure that you do things right. And it's all they do, and they have a system, and the rules are clear.
00:14:40
Speaker
You can't randomly put things into a customs form. They will catch it. And if they don't catch you today, they'll catch you tomorrow. And they'll make sure that it is worth your while to do the diligence upfront, set standardization, and just the depth of information that was there was awesome to us. Yeah. One of the things that I've had to explain to people outside the industry about why would we do a chain is hard. I've had a number of people who want to come into the space from other verticals, right? From FinTech, from healthcare, from, you know,
00:15:09
Speaker
mortgage processing. And I always tell them this story that my first couple of months at customs broker, the kid, I'm there to make sure the PCs work and they drag me up to the suburbs here in Philly to go visit copier companies because the copiers all could be scanners now. And so let's figure out if we can automate to do the scanning on the copier instead of on the sheet fed scanners that we had because we were just starting to burn CD-ROMs for anybody who doesn't know what a CD-ROM is can look it up.
00:15:39
Speaker
But we were burning CD-ROMs with our customs documents so that we didn't have to store the paper anymore. And when we went to these copier companies, they said to us, we also have these document automation software packages that can attach to the copier and they let you ingest all the data from the forms. And we went great. That would revolutionize our business. This is 2000, maybe. It didn't even matter.
00:16:08
Speaker
We never even got to the accuracy question because the first thing they said to us when we went to get the demo was, show us your form and show us the exact location on the form where each piece of data is. And we just started laughing and we had like a 350 page example of like a parallel import from China. And like literally the bill of lading was on paper, so they knew you could see through it.
00:16:33
Speaker
It was like a consolidation with commercial invoices from 30 different vendors in 30 different formats in two different languages. They're like, no, you're supposed to have the standard mortgage form or the standard US paper check, where we can say the name is in the center, the date is in the top right, and they just gave up. I think the advantage and the thing that people who don't live in this business don't understand is
00:17:02
Speaker
there's no rules until you get to customs, right? Bringing it back to your point, until you get to customs, there are no rules, right? Like everything's chaos everywhere and everyone does things differently. And I totally, I think I've just vehemently agreed with you here, but like, you know, it's been my whole life. So I have a little bit of passion for that. So, okay.
Automating Customs for Efficiency
00:17:25
Speaker
Even though there are the sort of the data assembly collection extraction function,
00:17:31
Speaker
It's a cost of doing business the way it's done right now, and it doesn't add value to the customer. The customer isn't saying, oh, whoopee, I'm glad that you have to charge me for doing this data extraction and putting it into a form.
00:17:44
Speaker
I'm glad that you've got really awesome staff, so they make minimal errors. To them, it doesn't really add anything to their experience. And so this notion that got all these people who are dedicated to know the business, there are so many things that would add value to the customer that they could actually do. It seems like if we get rid of this cost, get rid of this friction that we'll have better outcomes and much better jobs for the people who do them. So you guys,
00:18:11
Speaker
are a technology company, but you also provide this service of customs brokers. Walk me through a little bit about the decision to be a technology-enabled service provider versus a 100% tech company who's just selling licenses and how that value proposition we're talking about changes or why go that route.
00:18:32
Speaker
First and foremost, if you're a technology company, your investors will not like if you get into the services business. It's a hard thing to do, but the thing about all these businesses, if you're going to sell something to a consumer, you're going to sell them, I don't know, a photo sharing and filtering app. If you mess something up, if the photo filter doesn't work, if it doesn't give you the blurred effect look you're looking for, okay, it doesn't work.
00:18:55
Speaker
If you start handling people's compliance and tax functions and you don't know what you're doing, you could potentially put them out of business and in the process put yourself out of business too.
00:19:06
Speaker
Not to mention, there can be criminal liabilities. In the US, if you're the president of a company, you are personally liable for all those customs declarations that are signed. And if things aren't handled right, government may come and yell at the customs broker. They may even yank your license. But if things have repeatedly gone wrong, they're going to show up and the president of the company is going to be on the hook for what was done. So I think if you're going to build technology to help people do things better, you need to understand the underlying business. You have to understand where the touch points are serious.
00:19:34
Speaker
You have to understand where you need to pay attention and what the rules are. So I suppose we could have gone and interviewed a few customs brokers and said, tell us what's important. Tell us what you think about. But you wouldn't develop the knowledge and the understanding of what is it that makes the customs authorities tick.
00:19:49
Speaker
How does the legislation work that drives all the duties to collect this information? How do the customers respond and what are the challenges that they face when dealing with things? It was really about learning the business from the bottoms up so that we could try and improve it from the top down. Do you sell to importers, to other brokers, to both? What's your model?
Empowering Importers through Technology
00:20:12
Speaker
We primarily sell to importers.
00:20:14
Speaker
It was our take that there were two places that you could sell software. You could either go and sell software and services, call it to the trade, to other logistics companies, to brokers, in which case you would understand that you have to represent their perspective. They're your customer and you really have to meet their needs. Or you can go and sell towards the importers and then you really represent their perspective.
00:20:37
Speaker
We chose to focus more on the importers perspective, which we believe ultimately is what logistics service providers want to do as well. But we started from that angle and realized that a lot of the tools and efficiencies that we brought in allowed importers to do more of the work themselves and retain control over the process. People who use our platform, they come in, they've got all their documents in one place. They can see all their filings in one place.
00:21:02
Speaker
They can see when documents were filed in their very, very own view of their feed into US customs ACE system. And so for us, it's very, very much an importer focused business. So I'm going to try an analogy here and tell me if this is either wrong or offensive. But when I go to file my personal taxes, and this is an analogy I used to use to explain what customs brokers were like at the dinner table, you know, say, okay, you can file your own taxes. You could just download the forms.
00:21:30
Speaker
You can go to an accountant who's going to charge you quite a bit of money. Or if you don't think you need the full services of a full service accounting firm, you can use TurboTax. You can use something like that. And certainly there's enterprise equivalents of those things. But the nice thing that what TurboTax learned over the years is to have that person behind it, right? Like I actually, in the TurboTax, I can hit the button and I can ask someone like a human being a question.
00:21:58
Speaker
Is that a similar model where you're encouraging your customers to self-serve but you are supporting them, or are they seeing you as, I just want to give you the data and you're my full-service customs broker? Using that analogy, we want to offer the service of the $500 an hour accountant who helps you with tax structuring and knowledge, but we want to charge a price closer to TurboTax.
00:22:26
Speaker
And the way to do that is to automate your $500 accountant or even your bookkeeper doesn't need to be entering in and taking in all the information for the different schedules that you have to provide to them anyway. Right. You can give them access to your banks and stuff like that. It gets to be really expensive, but ultimately you want to have some sense of what's being put on what schedule, you know, did all of my 1099s get recorded or whatever your tax situation might
Demand for Transparency and Data Compliance
00:22:52
Speaker
warrant.
00:22:52
Speaker
Insofar as you can automate all that information collection, A, make sure that you've got a sense of what's going on, so you're in control of it, and B, it allows you to then take the money that you spend, go towards the problems that really need human help. It's like the technical dream of concierge-level service at bargain basement prices, which you only get by humans do what they're good at, have machines do what they're good at. I did a presentation
00:23:23
Speaker
at customs for the green trade team and was just talking about the evolution of technology in the industry. As we bring in CO2 compliance, what the tech was, it had one slide and it was essentially a timeline. Customs entries started in 1789 in the United States. This is the first thing we did was to some effect the reason we became our own company. It was tariffs. That's a straight up fact. From 1789 to 2004 when AMS happened,
00:23:52
Speaker
Sure, there was the creation of electronic filing, but the job and the timeframe was just this moment at the port. And then suddenly it was, okay, we want some data about what's coming in. Then ISF happens and we want the data going further up. And then, you know, we are forced labor protection, which for those of you who don't know is essentially putting the onus on companies to know how their product is made. We've just accelerated over the last 18 years, the amount of data and the size and scope of the problem
00:24:22
Speaker
My question to you is, what are you guys doing from a tech standpoint to address the future? And what is the future of this compliance data? Because it's very, very different than 1789, where I just walked in and said, it's a barrel of sugar, and I will pay you X for a barrel of sugar.
00:24:40
Speaker
Well, it's interesting, just a sort of little parentheses. My understanding is that bills of rating and custom statements are some of the oldest human documents that still exist because they are put in cuneiform clay tablets. One day when we get back to having like a nice office, I want one of those cuneiform clay tablets in the lobby.
00:24:58
Speaker
might have to charge more than $50 if you're going to be able to afford one of those. But yes. Yeah, I think you brought up a really interesting question. The pace of mandated transparency across regions is grown everywhere. So you mentioned we were forced labor or affectionately known as UFLIPA in the US. I refuse to say that, by the way.
00:25:23
Speaker
Guys, I can sort of see that. It's going to be a little dangerous. Today is the 31st of January. Today is the first day that people have to file the European CBAM, Harbor Border Adjustment Mechanism filings. They're due today. Starting at the end of this year, people have to start filing the EU's deforestation regulations.
00:25:47
Speaker
That means that if you're importing wood, leather, any number of agricultural products, anything that can be farmed, you have to prove that it was not weird or grown on land that was deforested after January, 2020. In the US, California Air Resources Board is putting in place a whole bunch of new requirements for traceability. And we sort of get back to this idea of when we're saying earlier that the clients wanted to know they wanted visibility into their supply chains and they wanted agility.
00:26:15
Speaker
This is just an extension of that visibility process, but now the governments are demanding it, and they're saying, we want visibility. If you're looking at, I don't know, vinyl floor tiles, and you're importing vinyl floor tiles from pretty much anywhere now, the government's going to ask you to prove, where did the PVC come from that went into this layer of the floor tile? And then they're going to say, oh, we bought the PVC from this guy. And they're going to say, okay, now you need to tell us where the guy who made the PVC, you know,
00:26:40
Speaker
Where did they get the chlorine and where did they get the hydrocarbon, the ethylene, or the coal to produce that? You have to trace that all the way upstream and be able to show what's going on. These requirements are somewhat onerous right now, but they're increasing. The only way to fulfill them is with movement of data electronically. Otherwise, you're sitting down
00:27:01
Speaker
chasing documents back and forth and it's relatively ineffective. And it ends up that the customs authorities don't really like looking at pictures taken of like a bill of lading with a coffee stain on it. You know, they want something a little bit more traceable and verifiable. Part of our work in building software, we've gotten heavily into the whole world of compliance. Uyghur Force Labor, CBAM, essentially for tracking GHG emissions.
00:27:26
Speaker
we're working on EU deforestation tool, which is again, very, very similar to what you have to do for weak or forced labor. I think that that's where we're going to see the introduction. You're going to have like a flushing of all the mud that's going to reveal all the intricacies and supply chains globally. There's a lot of people working on this. Our friends over at Vision announced that they have essentially a global trade network visualization tool that they're putting out.
00:27:50
Speaker
People over at Altana are working on projects like this. There's a lot of people trying to get this to work. But previously, because there was no impetus on the path, on the part of trading partners to collect this information, data just simply wasn't there. Within five or 10 years, the notion that you won't be able to find out who made every single bit that went to this little ballpoint pen will probably be about as ridiculous as today is the notion that I can't figure out where my package from Amazon is because who can track things through the mail.
00:28:20
Speaker
The story I always use for that one is when I started in this business, a senior executive said to me, if you can tell us six days after departure, what shipped from origin, that will be the gold standard in the industry. If you took a kid coming out of school today and said, no global supply chain has any awareness from the hundred days before when they ordered the order until six days after it left, you're 100% blind, no information, and then
00:28:49
Speaker
It already sailed and six days later you find out what vessel it went on. You couldn't explain that world to someone coming out of school today. And yet that was normal less than 25 years ago. I think what you're describing is the same thing is that when this all flushes through, when traceability becomes a normal thing, businesses will forget that they were able to function without.
Benefits of Supply Chain Transparency
00:29:12
Speaker
The upside to this is so huge and we have a tendency to focus on the downside sometimes of it's hard to do right now. But when your business suddenly can see, oh my God, there's a shortage in sugar production that my tier three supplier sourcing from region X, region X has drought conditions. And I'm seeing in my everstream system that there's a drought condition in a region that's a tier three supplier to me for something that I'm not going to buy for
00:29:41
Speaker
seven months. I'm not even going to issue my purchase order for seven months. And I can deal with that now. And then I can see in my Altana system that, oh, and by the way, their tier three supplier also may not be the best actor in the world. And I can make these adjustments. This will just be normal to people coming out of school three years from now, five years from now. But it's going to be very hard for us in the interim where software comes in. I think you're totally right.
00:30:11
Speaker
People right now, like you said, are really resistant to change because it costs money. If you've got an employee who's sitting somewhere and you're like, listen, usually you'd spend 40 hours a week doing these activities that move goods through the system. Now you need to spend 30 hours a week moving goods through the system and 10 hours a week learning how to collect documents to document the origin of salt brine or something like that. They're going to be like, I just lost 30% of my employee or 10% of my employee time.
00:30:40
Speaker
Eventually, the systems will be built out. There's going to be so many benefits, like you said, in sourcing, understanding mobility, understanding how things are impacted by pricing.
00:30:50
Speaker
When I speak with people who are buying for fairly large organizations, and I get the sense that the procurement department doesn't speak with the logistics department, who don't speak with the compliance department, who they manage the customs process, and people in procurement are going to buy things with very, very little knowledge of the regulatory landscape that's shifting, and the people in the logistics department, they haven't spoken to any of them. You're like, how do you guys efficiently coordinate things? I guess they don't.
00:31:17
Speaker
I was on the phone yesterday with a pretty large import department at a multi-billion dollar company who is still getting three spreadsheets from their brokers and their forwarders and whatever and trying to manually audit things and they haven't gotten the IT resources that other departments have gotten.
00:31:35
Speaker
to even get a workflow for their audit process, right? Like it's, you know, far behind where, you know, the innovation that we're bringing to them is just like the art of the possible of, Oh, you could actually get like make a tracking sheet of all of your audit that you need to do and show your boss how much you're getting done this week and how much you have left to do. Which to many departments, you say that to an accounts receivable department, they'd like laugh you out of the room because they've had a Reba for decades.
00:32:03
Speaker
How much of what you have to do when you guys go into these companies, how much is tech and how much is the change management process and teaching these companies how to essentially become mini-customs brokers or be efficient and effective? Well, outside of the compliance department, few people realize that you have an affirmative duty to audit your customs broker. So you go in and you tell people, you do understand you have to do this.
00:32:27
Speaker
or maybe, oh, sure, but I don't deal with that. Who does? They don't know. They look around the room. Who's in charge of our self-audit? This education telling people there is a cost that you need to incur that you're not currently incurring. It never goes down super well. You're a bummer. I find that change management is the single hardest piece of things. You're not only managing for change with typically the managerial tier that you're doing the deal with.
00:32:55
Speaker
You then have to convince the people who actually have to implement things with the line-level workers that it's in their interest and that they're going to do better from it. It's the single most challenging thing out there, managing the humans and the information technology process.
Adapting to New Technology in Logistics
00:33:10
Speaker
So Rick McDonald speaking, I'll show you who is the head of supply chain for Clorox. And he said that
00:33:18
Speaker
everything's a change management project that may have some technology component to it, but they're all change management projects. That's where the action is that hit me when he said that.
00:33:29
Speaker
You know, it's like the truism, right? And even when I look at myself, when I see a new tool that's available, and I understand that it might enhance my productivity, it's pretty hard to get me to change things. I've got to not only change it myself, I got to change everybody I work. And I'm just like, Oh, I just explained to this person in this department how to run this report. And now I've got to go tell them how to do it all over again, because there's like a new tool. Oh, yeah.
00:33:54
Speaker
The amount of shitty software that we even we have where i you know people come to me every year around you know usually in the fall and you know we should look at and i don't know just i know it's shitty but i don't want to do what the change management is like the number one thing i say first it's like we have to clear that bar before any other bar right it's gotta be worth the effort. It's not just people the client level if you go into engineering team.
00:34:16
Speaker
Go to your engineering team and ask them, how many of you are using chat GPT or Microsoft's co-pilot in your day-to-day coding activities? Ask to see how they're using it. You will find a surprising number of people who are in theory devoted to building the technology themselves have gotten so used to using their tools like, well, we don't use that because we use this. We have this existing library, so we don't need to have Python written. I'm like, it says it all right there. We're running up on time here, but I did want to just
00:34:46
Speaker
Kind of more specifically ask, what's your next big release? What's the next exciting thing coming out? We're building essentially a chain of custody audit tool, which people use for UFLPA. People use for the EU deforestation. And we've been building out a tool that essentially uses a bill of materials and then has a nested bill of materials and aligns up all the documentation with that. And then traces the validity of the transport legs and so far as they're available to coordinate them all.
00:35:16
Speaker
And then you were mentioning that one of the big challenges is getting people to run the reports and use new tools and walks people through the process of becoming compliant in a relatively painless way. That's our big release for the spring. Getting the computers to manage the people, right? That's the fun part. Cool, awesome. We'll get the links to the company anger, LinkedIn and everything in the show notes for everybody. It's been awesome chatting. People who listen to all the episodes know how much I love nerding out with customs people.
00:35:46
Speaker
I promise for all of you, we'll get a non customs person on eventually. But again, thanks so much for being on the show. Brian, it was awesome seeing you again. Let's do another one of these. Absolutely. Well, huge thanks to Chris for such an awesome conversation. He and I were able to chat even for a few minutes after we turned off the mics and
00:36:08
Speaker
just a fascinating journey coming through that investor space and deciding to really stick it out in what is a hard part of the industry. We'll have all the links, as I mentioned in the show notes. And if you're headed out to TPM, I think this will be posted just before then. Make sure to come visit us. We have a conference space there at the show. And otherwise check out our blog and we'll talk to you next time on Supply Chain Connections.