Problem Solvers: Connecting the Supply Chain - Featuring Martin Lew, Commtrex

Our President and CEO, Ben Banks, hosts our second podcast featuring Martin Lew, CEO of Commtrex (https://www.commtrex.com/).  The team talks about the core challenges of finding out who does what, and how to contact the right parties to design the best in class logistics solutions.

About Commtrex: Commtrex is a tech-enabled rail logistics provider with a team of experienced rail professionals, an extensive network of partners, and a best-in-class technology platform that simplifies the movement of freight and creates a competitive advantage. As a highly trusted, effective, and data-driven platform, Commtrex is improving how shippers manage their rail fleets and move freight across North America. Commtrex has grown to nearly 5,000 active members and has partnered with all six Class I Railroads.

Creators and Guests

Host

Ben Banks

Ben Banks, is the President and CEO of BNSF Logistics. With 2 decades of rail and logistics experience, Ben is a wealth of knowledge in the industry and our lead Problem Solver.

Guest

Martin Lew

Martin Lew is the CEO and Founder of Commtrex, the largest and most trusted electronic marketplace for rail shippers to directly connect with freight car owners/lessors, railroads, storage locations, transloaders, rail service providers, and industry data.

What is BNSF Logistics: Problem Solvers?

BNSF Logistics, a Berkshire Hathaway Company, is the premier logistics and warehouse provider solving the most complex cargo challenges the North American Shipping community faces and will face in the 21st century.

Our President and CEO, Ben Banks, hosts industry leaders to discuss the challenges that face logistics companies. Our colleagues partner with BNSF Logistics to offer the best market solutions - rolling up our sleeves and getting to work as the Problem Solvers.

Ben Banks: 00:05

Welcome to problem solvers episode two. My show highlighting real world supply chain challenges and amazing and brilliant people overcoming those challenges for the benefit of us all. I am Ben Banks, president and CEO of BNSF Logistics coming to you from the cave at Lou Mink Drive in Fort Worth, Texas. I've spent or endured, depending on the week, eighteen years in supply chain. I've seen a lot.

Ben Banks: 00:28

I've done a lot, but still feel like a rookie compared to my guest. Today's guest lives up to that assertion as he definitely makes me question what I've been doing for the last eighteen years. Martin Liu, the mad scientist behind Commtrex, the Angie's List of sorts for moving our goods from where they

Martin Lew: 00:41

are to where they need

Ben Banks: 00:42

to be, be the most environmentally friendly mode possible. Rail, but we're gonna talk a little bit two point o as well, broadening that scope a bit. Welcome, Martin. Thanks for coming. So let's just start out just you a little bit.

Ben Banks: 00:52

Tell us a little about you. Great. Well, thank you very

Martin Lew: 00:54

much for having me. Excited to be here. Problem Solvers, by the way, is a great name for this because ultimately, as logisticians, feel I like our life is all about solving problems, so couldn't have a more appropriate name. So just a background on me. My first sort of profession that I sort of went into before starting Commtrex was investment banking, commodities trading out of law school.

Martin Lew: 01:13

I knew I didn't want to be corporate securities lawyer, so I decided to go into investment banking and worked at Bear Stearns on the on their environmental markets and coal trading desk. They were starting an energy trading group in Houston. And shortly thereafter, the financial crisis happened. JPMorgan acquires Bear Stearns, end up staying with JPMorgan for another about seven years, leading origination for their coal and environmental markets group. Had no idea that I would eventually end up trying to build a platform that connects all rail service locations, you know, moving several million tons of coal per year, I was not on the logistics team.

Martin Lew: 01:46

I was on the commercial side of the business, pushing together the different deals with the coal mines and the utilities and shippers. Really the the the concept was how do you find the best arbitrage opportunity for the different types of coal that we're moving, whether it be Central Appalachian Coal, Illinois Basin coal, Colorado, UNC coal or PRB. And what I found while doing that was there were several blind spots within the rail supply chain or within rail logistics that made it very difficult for us to be able to move quickly. And in the game of trading, particularly sales and trading in the bank side, the two really competitive advantages that you have are are really two things. Information and insight and the ability to be able to move quickly.

Martin Lew: 02:23

Obviously, balance sheet, you know, that goes without saying that you need a balance sheet to be able to execute a lot of these different arbitrage opportunities. But when thinking about the real competitive advantage you have, it's, you know, where can you find fragmentation or dislocation in these different industries? And as a trader on the coal desk, it was always very difficult for us to be able to find rail cars if we needed rail cars quickly, if we needed to find a terminal, a port, a transload facility, if we needed to store cars -

Martin Lew: 02:49

a basic rate was difficult. So after hearing these complaints and, you know, obviously having a lot of friends on the different various facets or sides of the industry, whether it be, you know, folks at the railroads, whether it be classmen or short line, or folks that are at terminals, or folks that are at leasing companies, everybody, you know, all pretty much had the same complaint was there was a lack of visibility and transparency to be able to identify these different sort of service providers and assets. And so to me, the light bulb went off in 02/1415 that at some point, somebody needed to create a platform or was gonna create a platform that connected all these rail server locations. Because, you know, when you think about trucking, load boards have historically been around ocean freight, very, very liquid, very visible market, barging obviously, you know, not so much very opaque markets similar to rail. But at some point, you know, when you think about what's moving on rail, we gotta make it know, my thought was there has to be an easier way to be able to move freight, you know, on the one or two different modes of transportation by land.

Ben Banks: 03:44

Right? Couldn't be any harder. It's only up from here.

Martin Lew: 03:45

Couldn't be harder. Yeah. So that was the the the real sort of genesis behind the idea was, number one is how do you take all these fragmented and disparate locations and put them into one virtual sort of or digital ecosystem, you know, effectively creating almost kind of a virtual railroad, which, you know, when you have an industry that's been around so long, you have all these different locations, but no one's brought visibility to it, number one.

Martin Lew: 04:07

Number two, if you're thinking about the future down the road and thinking about really where the value of a digital ecosystem place is really two things. It's gonna be the ability to be able to connect the supply and the demand sides of the industry, number one, and the ability to, number two, is be able to connect all the dots through data, which will provide insights, which eventually will provide more capabilities for people to be able to move freight, in theory, in a smarter and more effective and efficient way. Back in 2015, you're looking fast forward to now, and you thought about sort of artificial intelligence and what do you need in order to really power artificial intelligence? You really need two things, right? You need compute and power, number one, and then you need data, number two.

Martin Lew: 04:45

To me, rail is sitting on a treasure trove of data because of all the different sort of everything from the CLM, ETA, Waybill data. I mean, there's just so much data that is sitting within the rail system, but it's so untapped, and no one was taking and synthesizing all those different data points to be able to create a very clear picture of how different freight can be moved. So that was the concept behind Commtrex, was how do we create this sort of digital platform that connects all the different service providers? So we started first with a railcar storage marketplace and a railcar leasing marketplace. The very simplistic view was in a bull market, leasing would always do well, in a bear market, storage would do well.

Martin Lew: 05:20

When you think about startups and building a company, in particularly sort of older industries, you always want to figure out sort of where you can add value on the peripheral, on the outside, and work yourself in versus going right after sort of what you may believe is the true problem to solve. So for me, the idea was, well, if I can start connecting the dots with the short lines across North America, there's only, know, 600 short lines, at least it's a very defined market. And class twos and class threes play a very integral role in being able to support shippers moving freight, particularly on the carload side of business. I thought that that would be a great place to start because short lines, are always very open to new ideas, and they're open to any sort of support or help they can get to grow their volume in their business. Versus starting with the class and railroads and going to the class and railroads and saying, hey.

Martin Lew: 06:04

I have a great solution for you. Let's start with the Class twos and Class threes. And then on the other side of that was trying to get as much rail equipment on as possible, and I started with the subleasing market, which was because I was in the coal market, I knew all the utilities, and, know, by volume, coal moves more than anything else. So I went to all the the friends that I had in in the coal side of the business as, hey, would you put your cars onto sublease? You know, would you store your cars on the system?

Martin Lew: 06:25

So, you know, by default, I had a kind of a pre installed user base of luckily one of the largest volume, by bike volume commodities that move on rail, which is coal. So I had a very coal sensing platform to begin with, and then eventually had to sort of move out of that. So we went from storage and leasing, then we sort of, you know, there was a lot of coal units that were being retired. So my friends at coal were coming to me saying, can you help us scrap all these cars? So we built a marketplace for, you know, effectively used rail equipment to buy and sell, and then eventually moved to transloading.

Martin Lew: 06:55

And once we sort of, you know, moved into transloading, that was really where our focus shifted for pretty much the last four or five years. And timing wise, it really sort of coincided with the beginning of the pandemic. We launched transloading at the end of 2019. The pandemic came around at the 2020, and our transload marketplace was probably three to four months old. And one of the things we optimized for is it to be number one on Google, which we're number one on Google in over 2,000 cities in North America.

Martin Lew: 07:20

So when capacity started getting tight at all the major ports, what do people do is they go to Google and they type in transloading terminals, ports and whatever city it may be, you know, and people were looking for secondary and tertiary ports to be able to move their containers and their capacity to. So we were the one place that existed that connected all the dots. So timing wise, that did accelerate our growth and that accelerated our ability to get more shippers onto the system and then also sort of made it much easier for people to get more of the supply side onto the system. And so today, you know, transloading has really become our main focus because it's the one thing that ties all the modes of transportation together. And when thinking about where do you sort of add the most value or as a platform where we add the most value, it's in really being able to help shippers think about how can they move more freight by rail.

Martin Lew: 08:07

Because if you're a shipper moving primarily freight by truck and you got caught off guard during the pandemic and you want a little bit more flexibility, resilience in your supply chain, you know, you should probably think about diversifying and maybe moving 25% of your freight over to rail at minimum just to have some optionality

Ben Banks: 08:23

Sure.

Martin Lew: 08:23

Or to hedge.

Ben Banks: 08:24

So I wanna double click a little bit on something that I don't think I, in my own mind, I really put all the dots together. So you roll this thing out just a matter of months before a worldwide shutdown. What's going through your head just right let's just chase that rabbit for a moment. A small business owner going out on your own for the first time, moving into the transportation space, and really in 2019, things aren't going well in transportation space.

Ben Banks: 08:47

You've got a freight recession as we called it in 2019, a solid four quarters of negative growth there. You're rolling this thing out and then the whole world shuts down. How surprising was it to you that this actually ended up being a tailwind for your platform?

Martin Lew: 08:59

The first reaction as a founder of an investor backed startup was, what happens if capital markets dry up and I'm not able to raise more capital to be able to continue to build? You know, every tech startup has a roadmap, one, two years out, and you're executing quarter by quarter, and obviously you got to be a little bit flexible in how you're moving, but no one anticipates a global pandemic to shut the entire world down. It's not like it happened over a long period of time. It happened over a few months. What was going through my head was first, capital wise, what do you do to be able to go find additional capital if you need to be able to effectively add more capital to the balance sheet to keep growing, number one.

Martin Lew: 09:41

And number two, strategically, how do you navigate in this new environment? And it was very clear to me that what we were building with transit, you know, it took about nine months for us to really sort of build out the marketplace, you know, three or four months of user journey, three to four months of sort of mapping out the functionality and features. And this isn't something that has been done before, so you really had to understand the nuances of transloading. And transloading, you know, is quite diverse in what it can do. Well, on the carload side, just by nature, there's over 12,000 commodities or 12,000 STCC codes.

Martin Lew: 10:11

So, think about all the different types of equipments and permits and different sort of ways you can move freight. And then you have the whole container side of the business, which is completely different. So, that was number one. And number two was, Oh my God, this is actually gonna be a value add. There's actually some tailwinds here for us.

Martin Lew: 10:25

So, how do you capitalize on this real demand for people to find new capacity and be able to do it in a way that really is supportive to shippers trying to find new capacity while also providing sort of a way for the transloaders and terminals and ports to be able to find the demand. Because at the end of the day, you know, this is no different than any other marketplace, right? So marketplace is either gonna be supply side driven or demand side driven. In our industry, shippers are the demand side, and shippers drive everything in logistics. If you have a strategy, you have to make sure it aligns with the demand side, and demand side of our system is completely free.

Martin Lew: 11:02

So since day one, we always knew we wanted to create very low friction for demand side to jump onto the system and utilize it, so we've never monetized the demand side. It's always been about the supply side, and the supply side subsidizing the demand side has been able to us to be able to, now we have over 2,500 shipping companies that use our system. We've never invested a dollar into really user acquisition. We've never advertised. Everything has really been organic and through referrals and marketing and some conferences, really thought leadership and content has been a way we've been trying to get out there and educate shippers.

Martin Lew: 11:34

But I would say that's probably the second thing that came up with the pandemic is, wow, now we're actually adding value, and it's very clear what the value prop is for us is providing visibility and connectivity. And what my next sort of idea was, how do you take that, and then now that you're moving into a world where AI is becoming more ubiquitous and pervasive, now you have to kind of reimagine what you think the future of logistics is going to be like. So that's the hardest part to me of being an entrepreneur is you have to build for the future while building for today. Now, with AI moving so fast, I don't know what six months, twelve months, what AI is going to look like. Mean, even, you know, every week by week, ChatGPT or Perplexity or Cloud, they're adding new features and functionalities that even three months ago, you would have imagined they'd been able to build.

Martin Lew: 12:16

So everything that we built before, at minimum, everything we did was all about to try to aggregate as much data and information on the supply side as possible because at the end of the day, that information is what fuels the visibility and the information that's gonna help shippers make a better decision as to how can they take, you know, convert some truckloads to rail loads across their supply chain.

Ben Banks: 12:36

So when you think about your target demographic of your platform, initially, it was started out basically you were targeting you just ten years prior. You're thinking about yourself and what would have been so much easier if you'd had access to a Commtrex at the time. And of course, you're thinking about, and even the way that you talk, and sometimes you and I talk outside of something like this, and you can tell we've been in the industry for a long time. So all the words that we're using makes a lot of sense to us. But the reality is I'm even as I'm sitting here listening to you, I'm thinking about there's a portion of your clientele that's just like you and me.

Ben Banks: 13:08

We are entrenched in supply chain. We have at least a tertiary knowledge of what rail does, how it works, and we're coming to Commtrex to say, please help me find an alternative port. It's a capacity play. It's a reducing friction play. And there's all all types of things there for those of us who've been in the supply chain.

Ben Banks: 13:26

But there's also a and probably people listening to this podcast even today, there are a lot of individuals who don't know a lot about rail. They don't know a lot about how to even get into rail and what do the railroads do and all that type of thing. But they are very aware of 2021 and what that did to them, where you had 50% tender rejections in the truck market, and if you were moving reefer freight, it was 75% tender rejections. They're fully aware of the pain of this whipsaw of capacity in the trucking market. Is there an opportunity for those folks as well?

Ben Banks: 13:58

When you are building this platform, are you also building it to help folks that know nothing about the rail?

Martin Lew: 14:04

It's a great question. To answer that question, let me back up and let me talk about the investment thesis behind the concept when we started this business. There were two primary investment thesis drivers for us when we started the business, and this is what when I was articulating the vision to our investors, this is what I was sort of explaining. Number one was the demographic shift. By 2025, which is today, 75% of the global workforce will be millennials.

Martin Lew: 14:27

Now, millennials are very different than baby boomers and different than Gen Xers. So by the time you have sort of now you're at 2025, you have baby boomers sort of moving out to the retirement. Gen X is a very, very small generation squeezed in between millennials and baby boomers. But once you get to 2025 , you really now have your first generation of digital natives, And these are people that grew up with iPads and iPhones and technology was the first thing in their mind when they're thinking about solving a problem. So if that is the demographic that's gonna be the majority of the workforce, you know, quite frankly, we need to build tools and have information at their fingertips that can help them make decisions the way they're used to making decisions, which is taking a bunch of data points, analyzing it, looking at their options, and then being able to execute based upon those decisions.

Martin Lew: 15:11

Very, very different historically where you grew up in the industry, you had your relationships, you had your networking events, and you were calling your buddy at the railroad and they were giving you some pricing. You're like, okay, great, well, the pricing works out, let's do it. The next generation just functions differently. And back in 2016, 2017, when I started this business, that's exactly what I was building for. So that was number one.

Martin Lew: 15:30

Investment thesis number one was you have this demographic shift. Whether industries want to or not, they're going to force change. And there's other behavior patterns as well that sort of move into that, which is how long millennials stay in a job is two to three years, and how they think about the first thing they do when they wanna solve a problem, you know, historically is Google. Maybe that's now gonna shift over to ChatGPT and other AI platforms. And then number two was really data.

Martin Lew: 15:54

And back then, I knew that you had to be able to create a very, you know, structured and thoughtful way of collecting data and content to be able to do two things. Number one, to be able to educate the next generation of shippers about rail through thought leadership, through courses. So we created this thing called the Resources Center, and we started out with Rail one on ones. And so we created Rail one on one for transloading, for storage, for leasing, for rail services, for warehousing. And then we created this thing called Ask the Experts, which to me was at the very beginning of five or six years ago was how do you take all of this intellectual property and knowledge that has been collected over these several decades, and then take that corpus of knowledge and put it into a digital platform so that one day you can effectively create almost a super hyper intelligent sort of AI brain that can synthesize and take the knowledge that has been accumulated over these past decades and then help synthesize it for the next generation of shippers.

Martin Lew: 16:51

And in order to do that, no one really sort of created, for lack of a better word, a time capsule of this information. And succession planning also was one of the reasons why I started this business, because I interviewed about seven to eight different shippers before I even raised my first dollar of capital. And I said, How are you thinking about succession planning? And what was very clear is on the shipper side of the business, succession planning wasn't something that was top of mind. And if that was the case and all of this sort of brainpower and knowledge was moving out, to me, it was a very obvious thing that someone had to create this repository of information so that this knowledge and information could live on past the generation of people that had sort of a fully built industry.

Martin Lew: 17:28

So those were the two things that were really sort of at the core of our idea. Now, I realize that AI would come on so strong and so fast and heavy? No, I didn't, but I knew that eventually AI was gonna be a part of the platform solution. That's exactly right. Back then, the idea was let's launch a newsletter.

Martin Lew: 17:43

So we launched our first newsletter in 2019, and let's create user generated content, and let's go out to the market, have shippers ask questions about what they wanna learn about, and let's go out to all their subject matter experts and ask them to answer the questions. So, you know, since 2019, we've created, you know, several thousand pages of content information, laying the foundation to be able to feed that into a large language model and sort of, you know, sort of an AI brain.

Ben Banks: 18:04

What do you think has been the impact on rail to the fact that we're talking about this shifting demographic, which as you talked about, you've got, you know, different habits and different approaches and how, the millennials approach work, how they approach exploring alternative solutions to their problems. And it's very like you said, it was Google at first, and it moves into more of a chat world, it's gonna move into AI as we see this progress versus how the baby boomers and the the gen xers, they approach this. But over time, there's also this just reality, and so I'm double clicking a little bit on what you said there, there's been a lot of retirements going on as this knowledge has been leaving the industry of how to rely on rail. And no doubt, as you and I were growing up in the industry, having multimodal expertise and and at your fingertips, you could call that buddy at the railroad, say, hey, truck didn't show up.

Ben Banks: 18:51

I've got six truckloads worth of freight sitting. I've got a rail served dock here. Hey, let's see if can get a boxcar in here in the next couple of days. That wasn't an unusual conversation back then. Now that that knowledge and experience and those relationships have left the industry, what's been the impact on rail from your perspective, what you've seen?

Martin Lew: 19:09

This isn't just for rail, but I think for any industry that's undergone that transformation, you go through them from a very relationship driven process to a very transaction oriented process. You go from who do I know and who do I trust and who do I think could do the best job to who do I think can provide the best price? And economics has always been an important part of the decision making process when you're piecing together that delivered cost. But I think if it was apples to apples, and my boss used to always say, your job is to win the tip ball. You know?

Martin Lew: 19:38

And a lot of times in business, particularly in transportation, it's really who's gonna win that tip ball, and typically the tip ball is gonna be go to the relationship. If that's the case, what happens in a world where relationships aren't as key? And that's the beauty to me, the beauty of AI is a lot of the time that's spent on the commercial side, on the administrative processes, on the operational processes, you know, just entering data into a CRM system, doing analytics. If you can apply AI to be able to solve those problems, what you do is you free up time for those commercial team members to focus on the higher EQ work and focus on that relationship building. Because I think in a new world where digital first and then relationship second, there's gonna be a lot more concerted effort that has to be invested into that relationship than before because the generation that we're moving to now wants to be home by 05:00.

Martin Lew: 20:28

They don't wanna be out at conferences or going to the Masters or the NBA Championship. They don't want to be doing that as much because the priorities are different. And so if that's the case, then you have to be, as a commercial person, you have to be a lot more thoughtful about how you're spending your time, and that's where I think AI can be interjected and really sort of can pick up the slack or really sort of automate a lot of those workflows for the commercial people to focus on, number one. And number two, on the shipper side of the business, I think it also behooves them to be able to still continue to build those relationships. Now, the average amount of time that a millennial stays in a job, it stays about two to three years.

Martin Lew: 21:01

And if if if you believe that that statistic is true, the obvious thing is, well, how are they ever gonna build relationships if they're moving from job to job or from role to role? Number one, how are they gonna build those long term relationships? Right? And and number two, if they aren't going to be in those roles that long and they aren't going to have that sort of long term tribal knowledge and that long term relationships, how do you still create a very effective and efficient sort of supply chain program when it's no longer relationships driving everything and it's more information and data and algorithms that are supporting the decision making. So that's why, you know, I think where we sit today, relationships are going to have to be there's going be more investments into it because you just have a generation that thinks about it or functions differently under that dynamic.

Martin Lew: 21:45

But at the same time, that's where AI steps in. And that's what I'm super excited about is how AI can really sort of jump into all these different aspects of commercial operations, back office, mid office, and really sort of free up time for humans to focus on problem solving, strategizing, a higher EQ relationship work. Really, to me, the things that today AI can't replicate and the things that don't, you know, really is is unique to humans.

Ben Banks: 22:10

Right. So describing the problem that we're seeing here and that Commtrex is definitely trying to tackle, you have all of these headwinds really to the supply chain industry overall. And maybe felt even more on the rail side and get to that here in a moment, just circling back to what you were saying earlier. But the reality is with all of that knowledge has left the building, if you will, in the industry. Knowledge of barge, knowledge of rail, really the easy button because it's become transactional, it's become truck.

Ben Banks: 22:38

And despite what's been going on here recently, the the reality is is that truck continues to grow. And that's problematic because as these shifts come back and forth, these the pendulum swings from a capacity standpoint, you have shippers that get hung out to drive because their truckers aren't showing up. There's three to one, two to one for every available trailer. And if they're used to hitting that easy button, might be working right now, but it didn't work in 2021 very well. It wasn't working in 2022.

Ben Banks: 23:06

It didn't work in 2018 very well. And as you think about the long term trajectory of the trucking industry itself, whether you argue right now that there's a driver shortage or not, everybody admits that there will be over time. So continue to hit the easy button because I don't know how to hit any other button. And that's really where it seems like Commtrex is trying to step into. You know, folks like you and me, we can use Commtrex for sure.

Ben Banks: 23:28

We know how to use it. Specifically, how does it work? So if you're a new user to Commtrex, how does it work? I've got an opportunity to move something from where it is to where it needs to be. How does Commtrex work?

Martin Lew: 23:40

The typical workflow for a shipper is most shippers, just as they are in their personal life, they'll typically start at the Google toolbar. And then they'll go to the toolbar and they'll type in any transloading. warehousing, you know, terminals ports, and then they'll type in the city. So, you know, call it Charleston, Mobile, Atlanta, Houston, you know, whatever the city is. Because Commtrex is organic position number one in over 2,000 cities, Commtrex is gonna the first exact, that's gonna be typically be the first link they see. So they'll say, for example, you know, 30 top transloaders in Houston.

Martin Lew: 24:09

So they'll click into that link and then they'll be able to see a whole list of transloaders, terminals, ports, warehouses that are in that area. And what we effectively did is we just organized a bunch of information and data that wasn't readily available for. So we take all that information, we take all of our subscribers, there's two different categories of subscribers, there's a featured and a verified. And just as you would think in a directory, we create a profile page that has all this different information on each particular facility. So everything from how many days it's served by rail, what type of transloading equipment does it have, safety features, what type of services, do you have outdoor, indoor storage, and there's a whole profile that the location can put on about themselves.

Martin Lew: 24:48

But very, very fundamental marketing advertising 101 is if your customer can't find you, you're not gonna get that business. So if you believe that that sort of very basic core tenet of marketing is the case, our job is to kind of get these particular transloaders, terminals, and ports, and warehouses in front of these shippers as quick and as easy as possible, number one. And quite frankly, when you think about sort of, you know, all the different industries that exist, this industry is the one that has invested heavily into digital marketing or digital strategy. So That's right. You chuckle because that's probably an understatement.

Martin Lew: 25:22

But I think people realize, you know, because historically, if you think about transloading as an industry or just, you know, terminals, ports, and warehouses, you know, you're really capturing business that is moving within 150 miles of that area. And, you know, you probably have 10, 15, 20 customers, and Pareto's principle, 20% of those customers are 80% near volume. So, so long as that capacity is moving, you know, you're probably sitting fairly well. But what happens in a world where you don't have that same sort of luxury of a shipper being that dedicated to that specific region. And instead of focusing on one region, now they're taking their supply chain and spreading instead of having 3 or 4 hubs across the country, now they have 20 different mini hubs.

Martin Lew: 26:02

So that capacity that they used to use your location for 40%, 50% of their business in the South is now 10% because now they're diversifying their mix and they're trying to create some flexibility and sort of resilience in their supply chain. Now, all of a sudden, your capacity opens up and you have to figure out a way to go find new business, and you have to be a little bit more innovative about how you get people's attention. So, if you believe all that's the case, then that's where our platform comes into place, because you list your location on our platform, we create a very easy way for shippers to find you. And then once the location is found and a shipper wants to either connect with you or a shipper just wants to sort of go to a city page and then find a location that matches them, letting the algorithm run, the shippers will then fill out what we call a Transload Request. And a Transload Request is gonna be about 11 different data points.

Martin Lew: 26:47

So it's gonna be origin, destination, are you moving containers, are you moving commodities, then we have a STCC code finder. And then what's the volume, what's the term, what specialty requirements do you have? Do you need trucking? Do you need warehousing? You know, all the basic high level commercial parameters that you'd wanna know as a

Ben Banks: 27:02

And once again, this is free for the shippers.

Martin Lew: 27:04

It's a 100% free for the shippers

Ben Banks: 27:05

They come in, they can fill out 11 questions that they hopefully, I assume, and you can correct me if I'm wrong, but the questions that are being asked could be answered by anybody. You don't have to be definitely don't have to be a rail expert, for instance.

Martin Lew: 27:17

No. No. No. As long as you know where your product is starting and where it's going, what the volume is, what exactly, know, it is. Usually, you have a safety data sheet that can can spell out exactly what that seven digit STCC code is.

Martin Lew: 27:27

As long as you know the basic parameters of what you wanna do, that's good enough to be able to start the conversation with the transloader. Now, and I always say, we're match.com. We're not eHarmony or Tinder. That probably dates me, the fact I'm saying those things. But the vote for match.com for for, you know, initially rail, but now sort of more sort of land-side logistics.

Martin Lew: 27:46

Our goal is to be able to connect the shipper with the supply side that can help manage their their movement, but we don't intermediate it. We're not a 3PL. We're not an exchange to where, you know, we have a standardized contract and everything flows through our marketplace. Our goal is to be able to get the shipper and the supply side to match up, you know, after the sort of basic few correspondences, then they take it offline and execute a contract together. And I think that was one of the reasons why I was able to be able to get so much adoption in the industry so quickly is because they viewed us as a matchmaker versus, you know, a broker or an intermediary.

Martin Lew: 28:19

Historically, if you're a broker or if you're a 3PL, you're typically not allowing the supply side to know who your shipper is. You're giving all the details and facts of what they wanna move without telling the supply side who the shipper is. We're the opposite. Once connect with the transloader, once the shipper connects to the transloader we want that sort of shipper to disclose who they are to the transloader or to the provider of the short line, the warehouse, the Class I railroad, and you want that sort of information flow to happen so that the transloader or the stores on the supply side quickly knows, A, is this a new customer to rail? B, is this an existing customer?

Martin Lew: 28:54

C, do they already move by rail or are they new by rail? Just those very basic details are very helpful. So, some of the questions we ask when you're a member are, you know, have you ever moved by rail before? If not, you know, do you have existing rail contracts? Do you have rail cars in your fleet?

Martin Lew: 29:07

When you fill out a membership profile, we're trying to capture all the basic details of who you are as a shipper, how big is your fleet, what type of cars do you have in your fleet? If you don't know the answer to this question, you can still register. But the more information you give the system, the better the match. That's exactly right. So, you know, in order for a marketplace to function, you need effectively clean, high integrity data on the supply side so the shipper knows what they're looking for.

Martin Lew: 29:32

And then conversely, you need that on the shipper side so that as the algorithm is getting smarter over time, and this is even pre AI, you can match up the shipper and their needs and services much better with who they're looking for on the service provider side. Very difficult business model. Marketplaces are probably one of the hardest models. Anybody who asks me, Hey, I want to start a marketplace for insert the industry, I typically dissuade them to do it because I think having one customer is hard, but think about having two customers that have two completely different motives and objectives. And then you also have to think about creating functions and features that can service both, and you're constantly updating these features and functions to create a very fluid technology.

Martin Lew: 30:09

But if you can nail the marketplace model, you've got an amazing business because then if you think about the 10 largest tech companies in the world, 7 or 8 of those 10 companies are marketplace businesses. Think about Google, Apple, Facebook, Amazon, these are all marketplaces. And why are they so critical to the industries that they serve? It's because it's extremely difficult to bring the supply and demand side into one digital ecosystem and get them to use that as their sort of first place to go to for whatever service or product they're looking for. And that's been sort of the North Star for us this whole time is how do you create easy enough functionality to where someone who doesn't know how to move by rail can jump into the system?

Martin Lew: 30:45

And if they want to learn about rail, you have rail 101s you have resources center, you have ask the experts, you have all these different sort of topics that could help inform the shipoer. Because at the end the day, nobody's gonna move freight by rail if they don't understand it, because they're gonna have to go to their boss, and their boss's boss will say, Hey, listen, that 20% of our freight that's currently moving all by truck, we wanna actually shift that over by rail. And things like accessorials and demurrage, you know, and all these different fees that sort of pop up.

Ben Banks: 31:12

Yeah. A plethora of words that are unique to this industry for sure. Let's double click on that right there. There's an assumption in basically our entire conversation to this point that when they went to Google and Commtrex came up that as they drilled down in this, now you're you're expanding well beyond rail at this point too. But if a rail solution is the underlying solution that Commtrex is building, how does a shipper know that their type of freight is potentially a good fit for rail?

Ben Banks: 31:40

So as I'm Commtrex comes up, I'm logging in there. I'm starting to fill out this form. Maybe I don't even fill out the form because I just assume rail is not a good fit for me because I don't know anything about it. So from your perspective, what makes a good rail shipper?

Martin Lew: 31:51

That's a very loaded question. I'm gonna answer the first part of the question. So the first part of the question, how do they know that they're freight or their product is appropriate for rail? I don't think you know that unless you go through the discovery process. Obviously, there's very sort of easy eliminators.

Martin Lew: 32:04

A) do you have the volume to justify moving by rail, right? Do you have enough to I'm talking carload side of that business, not intermodal.

Ben Banks: 32:11

Because rail works best with bulk.

Martin Lew: 32:13

That's exactly right

Martin Lew: 32:13

That's exactly right, right? Historically, we focused more on the carload side, and then we started moving more into the container intermodal side of business with transloading. But that that's exactly right. Do you a, do you have enough volume? And then b, let's just be quite frank, do you have the balance sheet to support the credit that's needed to get the Class I Railroad to move for you?

Martin Lew: 32:30

I can pick up the phone tomorrow and call any 3PL or any broker and move product from Chicago to LA in two seconds without a heavy credit background check. Moving rail, there's a fairly stringent and scrutinizing background check that happens or or or balance sheet sort of that they're looking at. So, you know, a volume b do you have the balance sheet and c and to me, this is kind of the more nuancing is, do you have the expertise to understand all the nuances of rail, right? How do you source the equipment? How do you bill out a car?

Martin Lew: 32:58

How do you manage accessorial and demurrage fees? How do you negotiate a freight rate? How do you negotiate a transload rate? How do you enter into a contract with a leasing company? How do you manage a three year leasing contract?

Martin Lew: 33:09

How do you manage your fleet? And I say all these things because those are all real topics that people have to think about when they're moving freight by rail. Now, if they're using system cars and they're moving, you know, a very fungible commodity like grain, and it's fairly straightforward, I don't think there's as much complexity to it. But if you're moving a hazardous liquid and there's environmental permits and there's special types of rail equipment that you need, and there's a special type of transloader you need that can handle equipment, and then you need to understand what happens if for some reason there's a spill or there's some sort of accident. There's all these contingencies that you have to think about depending upon what the product is.

Martin Lew: 33:47

And so my first answer was discovery. I think you really have to sort of go through that process of piecing together what that supply chain is like. I don't think it's as easy as, Oh, well, I have lumber, so I'm going move it, because I know lumber moves easy by rail. I think you really have to think about what your origin point is, what your destination point is, what your time requirements are, you know, who are your customers, how does it change your business model? But I don't think that all those things are hard to figure out if you know where to go to be able to get those answers.

Martin Lew: 34:18

Class I railroads, short line railroads, transloader, lessors, everybody in the rail ecosystem wants you to be successful. Everybody wants you to be more freight by rail. So everyone's gonna try their best to help you out. Now, some people will have more time than others to be able to train you. And unlike intermodal, there's not ubiquitous 3PL on the commodity side of business that can handle all types of commodities, right?

Martin Lew: 34:41

It's very specialized and very unique. There is a bit of navigating you have to do, but hence that's where sort of interject Commtrex, you know, our job is to be able to help sort of make those connections for you at minimum for you to be able to go through that discovery process and have the conversation. I think that's where the very first step is, is how do I have the conversation and how do I, at the very least, get all the inputs to be able to put into my model, whether just on economics alone, just on straight up economics, does it make sense? Is rail at least flat to truck? And even if it's a bit of a premium over truck, can you justify it as a hedge against any sort of disruption on the trucking side of the business?

Martin Lew: 35:22

And I think for most cases, people can justify, at the very least, testing it out for at least a year with some small percentage of their freight. And if it works, then they sort of incrementally will sort of move more and more freight over. But if you have the balance sheet, you have the volume, you have the desire to learn, and your management is supportive of you sort of taking some Nothing is risk free, right? It's called risk reward for a reason, right? So if you're going to take a risk on moving to another mode, you just have to build in some buffer cushion for accessorials or other issues to come up.

Martin Lew: 35:53

But whatever you may lose in that buffer, you're probably going to gain on the other side through flexibility, resilience, optionality, and to potentially sort of finding routes that you may not have access to for, through transloader or other sort of third parties that can help you create more sort of solutions to look at versus, hey, where are we gonna move this over the road?

Ben Banks: 36:14

Yeah. If I were to answer that question too, I would just add on to that. I mean, you just think about the different modes even within rail. You have intermodal. It's the most truck like service that you're gonna find.

Ben Banks: 36:24

It's a natural progression out of truck into rail to dip your toe in rail. The carrier network or the IMCs that that work in that space, the Intermodal marketing companies, they will hold your hand in a lot of ways. And your platform helps even in that space now. You're in the you're in the container space as well. You get into the carload space.

Ben Banks: 36:42

It gets into a lot of the things that Martin and I are talking about here where these accessorials and demurrage and things like that. You'll have some of that in the trucking space. You you're familiar with accessorials in the trucking space too, but it's a bit more nuanced in the rail space. But you have these conversations with the transloader. You have the conversation that may make an introduction to a rail centric 3PL .

Ben Banks: 36:59

Anyway, the the discussion happens. Have the discussion. But likely, you know, the intermodal space, think anything that's gonna be palletized is gonna move well in the intermodal space. And they have expedited intermodal. They've got standard intermodal.

Ben Banks: 37:11

And, you know, the expedited space, it can be within is is gonna be single driver competitive. Not usually team truck competitive, but it's gonna be somewhere in between there. In the boxcar space, still a lot of palletized freight, but anything that's bulk is probably something you ought to be thinking through. Right, Martin?

Martin Lew: 37:27

That's exactly right.

Ben Banks: 37:27

And anything that if you've got three or four truckloads that you're releasing on a especially on a daily basis, there's probably an opportunity to explore a transload model. And by transload, of course, what we mean by that is if you're not currently rail served, there's probably a location near you where you could dray a small distance and and have the transloader unload the truck and put it onto a railcar of some type and do the same thing on the other end. Now that's additional touches, additional cost, But to Martin's point, you have, an expectation that the railroads understand that. So they're gonna try to price that as effectively as they can, and they get the economics of bulk as well on their end. You know, the message I think for Martin and I today for sure is that there's an opportunity to have a conversation.

Ben Banks: 38:07

And if you are moving anything that's bulk related at all, you should definitely be thinking about rail and a great place to make those introductions. If you don't know anybody in the rail industry, a great place to find someone in the rail industry is to come to Commtrex. Now let's talk a little bit about outside of rail, though. You've you've got 2.0 here. I assume your clients have requested you to move maybe in this broader direction.

Ben Banks: 38:29

But talk a little bit about that, Martin.

Martin Lew: 38:30

When we started the business, really, the business objective was to be able to find an easy way to connect the supply and demand side. And, you know, eight years ago, that was through creating a very structured directory, you know, and and and the directory was exactly what I explained, right? You find a city, then you find the locations of that city, and then answer some questions, algorithm runs, and it matches you up. Now, if you ask me what is the future of logistics and what where is that headed? And I'm not going even just say logistics, I'm going say the future of most industries or every industry down the road.

Martin Lew: 39:02

I'm going to use the analogy of what you're seeing in human resources today. Historically, whenever you wanted to find a job, you would be building a resume and a cover letter for that human resources coordinator to be able to evaluate and then be able to pass you along and get you, at the very least, that first interview. Nowadays, if you're looking for a job, you're not building a resume and cover letter for a human, you're building it for an AI algorithm. Whether it be on LinkedIn, or whether it be, you know, submitting it directly to the company, AI is probably filtering out, at least at the Fortune 500 companies and most large companies, AI is probably filtering out 90% of all the resumes. So now, as a human, you're not thinking about what is the human sort of component that I need to think about.

Martin Lew: 39:44

Now you're thinking about what are those keywords that I need to do to filter to get past that very to get to that first interview. Now let's think about why are companies using an AI algorithm to be able to use as a filter? Well, they're doing it because they're taking all the different inputs that a human would, and they're saying, We can train an AI algorithm to be able to do the same thing as a human, but at a much larger scale and much faster. And we can do it to also ingest a lot more data points, not just the resume and cover letter, not just, you know, maybe some LinkedIn profile information, but you can ingest all these other data points that could help you make a much more informed decision. So I use that analogy because that is to me one of the sort of first frontiers where humans are now marketing to an AI agent or an AI algorithm at scale.

Martin Lew: 40:31

So if you believe that sort of that same sort of mental model of all these data points are being ingested and we've trained an algorithm to be able to filter out for all these different roles, why wouldn't you think that that same exact mental model will apply to other industries and other facets of that company? Let's just play this out a little bit. Let's just say that same model moves into supply chain. And let's just say Fortune 500 companies start to integrate different parts of their procurement process and using AI agents or AI workflows to be able to procure different products or different services. Now, as a service provider, you're doing the same thing as a job applicant.

Martin Lew: 41:10

Now you're saying, okay, now I don't have to sort of think about how do I market to the human that sits in those seats? Now you're talking about a procurement AI agent. That's exactly right. So if you believe that that is the natural evolution and everything is going to be driven, like I said, everything is driven by demand side and Fortune 500 companies are already doing it in their human resources department, why wouldn't you think Fortune 500 companies wouldn't start moving that exact same model to all the other departments within their company? So if you're plowing along with me and you think that that's the case, it's only a matter of time for that same model to hit procurement.

Martin Lew: 41:44

So if that same model hits procurement, then as a service provider in supply chain logistics, now you have to think about, well, how do I now market my service when it's not to a human that I meet at a conference or a human that I show up to the door, knock on the door, or

Ben Banks: 41:59

It's a like key word turn gatekeeper.

Martin Lew: 42:01

A gatekeeper. And now when the gatekeeper is an algorithm versus a human, now the whole way you think about your business has to change because the way you market and sell and your strategy commercially has to change. So I say all that to be because as we're trying to build this virtual ecosystem, we're trying to sort of match supply and demand side. As the CEO of a company thinking about where the future is, I believe that the future is going to be initially.

Martin Lew: 42:27

Agents will seep into the demand side in different parts of the procurement process. And then on the supply side, there's going be start to be a sort of a slow sort of assimilation to in everything from, I'm not just talking logistics, I'm talking everything from procuring pencils to toilet paper to services. You're going to start to think about, okay, how do I now sort of sell to this company that isn't using a human to make the decisions, but is using an AI agent to do it? So, you know, fast forward to Commtrex, we're trying to piece together exactly in a marketplace where there potentially are agents that are making procurement decisions. How do you now help service providers market to those agents?

Martin Lew: 43:09

And that is part of Commtrex Studio. How do you take all the data that we're ingesting and capturing and create a much more strategic way for the supply side to actively sort of market to the shippers? And then also, how do you help shippers in a world where they're leveraging AI to be able to find those right service providers? But all of that relies on data, and that's what we're collecting at, at scale is data.

Ben Banks: 43:28

So the value for the shippers especially, because I definitely can understand the value to the to the supplier of the services, but you want the absolute best match for the shipper. And that's an opportunity for AI. As long as you have a human being thinking as human beings do in a million different ways. But an AI can take the data and just frankly, in some ways be smarter than than I am if I'm performing the procurement process from end to end. So introducing AI as we expect they're going to do, you and I both do, on the procurement side and matching that capability on the vendor side, just make sure that they're getting the right match.

Ben Banks: 44:01

Everybody's matching with as close to a perfect match as possible. And that's gonna be incredibly valued to the supply chain. Because there's no doubt even from a supplier, I'm a vendor, that's what my company does. There's a lot of wasted conversations that we have, and I only have so many salespeople. And if they're out there having conversations with potential customer and we're not a good match, we just wasted everybody's time there.

Ben Banks: 44:22

So that's a very interesting concept, Martin, where you all are headed. And frankly, I've not heard anybody else talk like that yet. So very excited to see where Commtrex goes. Martin, we are out of time. That was that was fast.

Ben Banks: 44:32

That was a lot of fun. I'm so thankful for you, Martin. You are a true problem solver, and I'm thankful for people like you out in the industry that are seeing the problems that we have, seeing the demographic shifts, seeing the changes and from, from a relationship driven model to a transactional model, and everybody's doing more with less. We need we need solutions like what you're providing. So thank you very much for what you do.

Ben Banks: 44:53

Martin, thanks for coming on the show today. And for all of those of you who are listening in that and you're serving in the supply chain, we salute you. We know that we have a little idea of what facing every day, and it's a challenge, but we we appreciate what you do. You are all problem solvers, and we just encourage you to keep keep on going on. Keep on what's what am I trying to say, Martin?

Martin Lew: 45:13

Keep on going on. There you go. A little bit out here,

Ben Banks: 45:15

but keep going. We're counting on you. The United States needs you, the North America needs you, and the worldwide global supply chain needs you. And we appreciate you very much. So thanks for joining us today, and we'll see you next time.

Martin Lew: 45:27

Thank you, Ben.