Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

Thanks for joining. I'm eager to gain a deeper understanding of Mainfreight's Air & Ocean division. Let's start with a simple question. You arrive in the US to start this division and I'm your first customer, how would you approach doing business with me?

The first challenge was explaining who we are to customers. Not many people had heard of Mainfreight, and I assume that's still the case. It was strange for me because everyone knew Mainfreight in New Zealand. Not many people knew it was a global company, but they certainly knew it as a business. So, the first challenge was explaining who we are. Then, it was about proving ourselves and getting a chance. Usually, this was done through rates. In this business, you try not to sell rates but service. You try to convince customers that we're a better company and that we'll do more for them. But at the end of the day, especially in the early days, we had to offer the right rate to attract customers, prove our value, and then try to increase the margin.

How does it work in terms of inbound versus outbound?

On the West Coast, there's a lot of inbound freight, particularly from Asia. There are several lead-generating tools. The most common one provides data from US Customs on importers, the size of their containers, where they're delivering to, where they're coming from, and all the decision-makers. The only thing it doesn't provide is the rate. You can use this information to research the customers, find out who the decision-makers are, and then try to meet with them. The biggest challenge was convincing them to meet with Mainfreight, a company they'd never heard of. Another strategy was to introduce ourselves to customers in New Zealand and Australia who were controlled from there. If they were importing from an exporter in the US, we would try to see what else they did. If you're exporting products to New Zealand, there's a high chance you're exporting products all over the world.

You gather freight data and notice there is some freight that is interesting. Let's consider a more challenging example where you haven't been introduced by an existing client. What happens next?

Our approach is about offering a point of difference, a unique selling proposition. For us, that revolves around our team. We have always been clear that we may not be the cheapest option, and we don't aim to be.

Once we started to establish ourselves, we would discuss our strategy on ocean freight, particularly our relationship with steamship lines. We appreciate being a smaller player in the market and how that works to our advantage.

Carriers enjoy dealing with Mainfreight because we're not a large German forwarder. We ensure there's a real person behind the phone and email for the customer. We tailor our reporting to the customer's needs. Essentially, we strive to do everything that our larger competitors don't. We found that customers who switched to us from larger competitors didn't appreciate being just another cog in their machine. They were forced to fit into a pre-existing box. We, on the other hand, were happy to create a bespoke solution for the customer, and we were nimble enough to do so.

What does it mean tangibly to tailor your offering to what the client wanted?

Let's say you're handling imports for a large customer. You might have 30 to 50 shipments on the water at any given time. You may want your report to show ETD first, then port of discharge, then port of arrival, or any other combination of columns. With our competitors, you often don't get the opportunity to customize this, especially in the early days. We, however, would create a special report, sometimes even manually, to meet the customer's needs. Some customers might want the consignee name first, others might want the arrival time first. This is a simple thing, but the larger competitors couldn't do it because their processes were automated and they didn't have people to manipulate the data. We did, because if it was important to the customer, it was important to us.

You get on a call with the customer, explain your offerings, and they agree to work with you on, for simplicity's sake, a container. What happens next? What are the steps involved in moving this?

If it's an import, we would need to get in touch with their supplier or their own factory offshore. They would usually connect us with them, and then we would involve our Mainfreight office overseas. We get the supplier and the overseas office talking, make the booking with the steamship line, and get it moving. If it's an export, it's much easier because we're probably dealing with the person we've just spoken to, or at least we can go and meet the person handling the shipment. It's as simple as booking a container and getting it moving.

Could you provide more details about this contract with the carrier?

Certainly, we sign multiple contracts with carriers. In the US, you need to be registered with the Federal Maritime Commission (FMC), which Mainfreight is. This allows us to contract with the carrier. Through this process, we gain access to their spot rates, which are market-driven. They may have different tiers, but we have the ability to book cargo against these spot rates. Alternatively, we may set up a contract where we commit a certain volume to the carrier. Every week, we need to meet this volume commitment. Regardless of whether we're booking against a volume commitment or on the spot market, we need to have a contract with the carrier. When making the booking, we quote our contract number and the process proceeds from there.

Could you explain the difference between spot market rates and booking commitments?

The difference depends on the market. Currently, the spot market is slightly higher than the volume commitment rates, which is what the carriers prefer. However, this isn't always the case. During the Covid pandemic and the supply chain issues of the past few years, the volume commitment rates were significantly lower than the spot market. It really depends on the market. As a business, we need to decide at the start of the year or season how much we commit to a carrier and how much we want to rely on the spot market. We discuss these options with the customer as well. For instance, if a customer has 10 containers a week, we might suggest putting six or seven of them into a volume commitment, which locks the rates for the year, and leaving the balance on the spot market to potentially benefit from rate drops.

Let's say a container is being shipped from China to the US. You have visibility on various carriers in the US for when this container is arriving. How do you track this shipment? How do you ensure it's being handled properly and know its current location?

That's a great question. You might assume the process is more efficient than it currently is, but there are technological advancements on the horizon that will improve it. The process involves obtaining a container number, which is then loaded onto the vessel, and the vessel is tracked. This information is usually automated into our operating system. There are, however, instances where the container is listed as being on the vessel, but upon arrival, it's discovered that the container is still at the port in China. This occurs because the vessel is tracked, not the individual container. But, for the most part, the system works.

How do you determine the freight price for the customer?

The pricing is largely dependent on the margins we aim to achieve and our assessment of the market. At times, the market is incredibly transparent, as it is currently, which dictates the selling rate and, unfortunately, the margin. There are other times when we can secure a larger margin due to less visibility. There are also various factors to consider. We're not just pricing the ocean freight; we're also pricing the delivery, customs clearance, and documentation. If we're creating a special report, we may charge for that as well. Therefore, the total price can become somewhat obscured due to the different opportunities we have to make small margins.

Could you provide more details about the intermediate steps?

Once the container is loaded, we receive a manifest and a commercial invoice. An ISF, or a secure filing, is required either at the origin or the destination. This serves as a pre-entry to inform US customs of the incoming goods. Generally, the customs entry is completed five days prior to arrival. This ensures that the goods are customs cleared by the time the vessel arrives and discharges. The goods then hit the dock where either the stevedores or the container yard take receipt of the container.

We are notified by the steamship line about the container's location and the specific container yard. We then dispatch a trucker to pick it up. The trucker needs to have the customs clearance documents, although these days, a lot of this process is automated and the container yards can see that the goods are already customs cleared.

Sometimes, the customer specifies when the container can be delivered, particularly if it's getting a live unload. In such cases, we often bring the container back to a Mainfreight facility and park it there until it can be delivered at the specified time. This is because the time it takes to get the container from the yard and onto your truck, a process called a drop and pull, can be unpredictable.

If it's a live unload, the truck waits and then drops the empty container back. If we're dropping the container for them to unload at their leisure, we have to organize another trucker to pick the container up and drop it back to the container yard. The steamship line only allows a certain number of days to have that container, after which they start charging.

We are responsible for informing the customer about their last free day and ensuring that they meet that deadline. This communication is crucial because if they exceed the last free day, we could be liable for the charges. Managing this process for the customer is another selling point for us. With our reporting, which is often simple spreadsheets, we can save the customer a significant amount of money by getting those containers back before the last free day.

The process seems quite complex with many potential unknowns. How do you determine the price for the customer in advance?

There's certainly some trial and error involved. We learn about the customer as we handle their needs. In the initial pricing, we always aim to meet the customer's expectations. Customers usually have a previous provider, and through conversations, we can get a good idea of what their pricing looks like. We try to price around that, but there are what we call "accessorial" charges afterwards.

When you price it out, you'll include the ocean freight, the drayage, the customs clearance, and then there will be additional line items at the bottom. We'll price that, offering 10 free days, and then charge $85 a day thereafter. So if they exceed the limit, we're covered from a contractual standpoint. Eventually, as we get to know the customer, we adjust the pricing. If they're consistently exceeding the limit, we price it accordingly, so they're aware of their fees upfront.

How do you select the transporter?

Depending on our location in the country, Mainfreight has its own drayage team in Los Angeles and Houston. We try to use Mainfreight as much as possible. However, they weren't always the most cost-effective or best option. They had their own customers outside of the Air & Ocean customer base.

There are a few national organizations that act as brokers. We have contracts and logins with them, and we can use them as intermediaries. This is particularly helpful when entering a new market. But the ultimate goal was always to find local truckers. Whether it's an export manager, the branch manager, or someone on the desk, someone would be tasked with establishing these local relationships.

We then negotiate with these local truckers, possibly guaranteeing them a certain number of loads per week to secure better pricing. At Mainfreight, we pride ourselves on paying our bills in full and on time, unlike many of our competitors. This reputation is beneficial when negotiating with truckers, as they know they can trust us to pay on time, enabling us to negotiate better rates.

How does the pricing differ in relation to what you know before the freight arrives and what you discover once it arrives and you have to manage it?

The unloading procedure is a crucial aspect. We might attract a customer by appearing cheaper than the competition. However, we learn through the process that they consistently exceed the free days given by the steamship line. For instance, they might be given four free days but end up using 10. Initially, we might have priced it at $1,000, assuming they would use the four free days. But when they don't, we adjust our quote to reflect the actual usage. This could be $1,150 or any other price based on their usage.

Another scenario is when a steamship line offers us a better deal, giving us the potential to make more margin. Some customers prefer knowing their steamship line and its schedule. They value consistency, like having their goods picked up and arriving in Long Beach on the same day every week.

There are different ways we learn about the customer and adjust our pricing accordingly. Once the service is strong and they (the customers) are satisfied, we gradually increase the prices. Even if we become $50 or $100 more expensive, they are less likely to switch to the competition. They value the service and are willing to pay for it.

How do you decide whether to work with other Mainfreight divisions like Logistics and Transport or use a third-party logistics provider once the container is at the port?

The business rule was to always use Mainfreight. However, this wasn't always feasible if Mainfreight was too busy or the pricing wasn't right. For instance, from New Zealand, it might seem like the Long Beach branch is bringing in 100 containers a week and the drayage team is only moving 60 of those. The drayage team might not be making money and questions arise about the remaining 40 containers. The reality is that the drayage team might not be able to handle those containers because of their existing setup. The customer base that the Air & Ocean team is working with might not be in the areas that the drayage team services. Therefore, it doesn't make economic sense for the drayage team to adjust their business to handle those containers. From a warehousing perspective, we always tried to use Mainfreight's warehouse. However, setting up warehousing contracts isn't a quick process. Mainfreight's warehousing business prefers long-term contracts with multiple thousands of pallets. So, it wasn't as simple as moving the next 10 containers through the Mainfreight warehouse. Once a contract is shifted to Mainfreight, the goal is for it to stay there indefinitely.

As an Air & Ocean manager, at what point would you engage with other Mainfreight divisions to keep the freight within the network?

That's a good question. It was challenging for managers to do that due to their other responsibilities. If a customer was satisfied with the current solution, we didn't go out of our way to promote using Mainfreight or to make changes. The "if it's not broken, don't fix it" mentality prevailed.

Successful interactions often occurred at the desk level, not necessarily among managers. The dispatcher and the drayage team would work closely with the import operator on the Air & Ocean team, maintaining constant conversations. For example, a dispatcher might say, "I've got three trucks idle today, do you have any work?" This approach was more successful than running reports and trying to get two branch managers together to discuss, for instance, 40 containers a week that weren't being moved by the team. At that point, the business has already moved, and it becomes a bit personal. Managers start defending their business actions. However, if the actual operators communicate, we found that to be far more successful.

Who makes the decision to move the freight with Mainfreight or with a third-party logistics provider?

The branch manager needs to be aware, but effectively it's the operator. They need to move on to the next shipment, so they need to make those decisions.

When you say the operator, you're referring to the Mainfreight employee, the Air & Ocean Mainfreight employee on the ground?

Yes, absolutely.

And this person has the authority to decide who handles the freight next?

Yes, they do.

On what basis does this person make the decision?

Typically, we look at what has been effective for him in the past and what works for his business. It's not as if he's handling this shipment for the first time. He likely has three or four truckers that he consistently uses. For instance, he might have a particular trucker set up for this customer.

When we were winning new business, there would be a Standard Operating Procedure (SOP) in place, an onboarding process, where all these details would be ironed out between the customer, the sales representative, the branch manager, and the operator. Sometimes, a key account manager might also be involved. This way, everything is set, so to speak. However, if everything is all set and the operator contacts the designated trucker to handle the freight and they can't move it for whatever reason that day, then they'll just shift it to wherever they can on the spot. We simply don't have the time to wait. This is one of the differences with Mainfreight. I believe our competitors would halt the shipment for a day or two, whereas at Mainfreight, because we empower our team to make those decisions, they just call the next trucker and get it going. If that trucker is slightly more expensive, we'd rather they did that and kept the customer happy. We would forfeit a little bit of margin because it not only keeps the customer happy, but it also keeps the whole operation moving with fewer people involved. In this industry, things often stop at that point, managers get involved, and you have to call the customer. If you were to break it down and calculate how much time was spent on that and the average salary of those people who spent that time, it would probably be a lot more expensive than just paying an extra $50 and moving it. We explain to our team that this is why we give them the power to get things done and keep it moving.

How does the communication occur between the operator who makes the decision and the Air & Ocean branch manager who prices the freight?

There wouldn't necessarily need to be any communication on that. They would just get it moving. They would have to inform the customer that it's coming on a different trucker if they were used to a specific one.

I think your question might be more about the branch manager reviewing margins and job profitability every week. If they notice that a customer was making a 13% margin and suddenly the margin drops to 11%, they would ask the operator what happened. There could be various reasons, one of which could be that the operator had to use a different trucker. If that's the case, then the branch manager might decide to talk to the customer and explain the situation.

Interesting. So let's consider this container again. It arrives at the harbor, and you have many spot rates from different carriers. How do you determine the economics of this container? How is the profitability of a container measured?

There are a couple of different ways to approach this. We run reports, at the branch level, to calculate the average margin per TEU by dividing the freight charge code by the number of containers in each specific trade lane. This is more of a deep dive.

Mainfreight is very proud of their weekly reporting, and I spent a lot of time coaching the team on this. I would request a top 10 customer list in the weekly report, asking for the revenue, margin, and straight margin percentage. If it's an import customer and the margin percentage is at 9%, I believe that's too low. If it's at 13%, it's probably about right.

At times, we would challenge if the margin was above that, questioning if we were making too much money, and if there was a risk of losing the account because we were out of market. The percentages for air freight were different.

You get quite good at understanding the branch's customers and their average percentages. I would challenge the branch manager, especially if the margin was very low. Why are we moving that business if we're only making 2% or 3% on it? That's actually costing you money when you consider your team's time.

I would challenge the branch manager to either increase the customer's rate or to move on from the customer. Sometimes we would see negative margins. This could be due to a timing issue where the team isn't entering things into the computer properly or timely. Or it could be that we've undersold the business and they're taking a shot to try and win business and then move margin up.

This opens up the conversation about the strategy to get the pricing right. These conversations were happening every single week. From my perspective, that's how I gained insight into how the branch manager was thinking, where their business was, and what business was making money for them.

Understood. So, the unit economics of the container, being the gross margin per TEU, what does it depend on?

For example, sometimes we're not handling the drayage or the customs clearance, so we're not making as much money on those shipments. It can also depend on the trade lane, whether it's an import or an export. The direction of the trade lane and how many services we're actually performing for the customer can make those numbers vary quite significantly.

How profitable is an average Air & Ocean branch?

The range varied greatly depending on the location. For instance, Long Beach heavily relies on imports, with a ratio of about 70 to 30, import versus export. On the other hand, Chicago has a more balanced ratio of 50 to 50, due to higher export volumes from the Midwest. The gross margin percentage on imports for Long Beach, which is import-dominant, was around 10% or 11%, which is quite good compared to Chicago's margin on imports. The freight rate also varied significantly. The rate from Shanghai to LA is much cheaper than from Shanghai to Chicago, which impacts the margin on imports.

We would compare branches to create a sense of competition and to encourage them to improve. However, from my perspective, every branch was quite different. For instance, Portland had a major customer that was the backbone of that office. Their margins were slim because that customer was well-known and had to be priced competitively. However, they had significant volume, so it was beneficial for us. The makeup of the branch greatly influenced these factors. Generally, anywhere from $300 to $500 per container was acceptable and considered good. This figure skyrocketed during the Covid period, with instances of making $15,000 per container. This shows how significant that period was for Mainfreight.

Is this at the gross profit level?

Yes.

What about when you include the operating expenses of the branch?

Again, it varies by branch. For example, team members in Albany, New York, are paid less than those in Los Angeles or Chicago.

We generally aimed for a Return on Revenue (ROR) between 6% and 8% (at the branch level). We achieved this consistently across the business during my tenure.

Is the ROR calculated at the branch level?

Yes, at the branch level.

How do you calculate the ROR? Is it based on net profit before tax or on a gross profit basis?

I refer to ROR as return on revenue. It's essentially gross margin minus branch expenses, including salaries, rent, national team costs, New Zealand costs, IT costs and corporate costs. Although it's measured against revenue, it's really gross margin minus overhead.

How does this vary with scale?

Regarding the difference between larger and smaller branches, we strive to maintain consistency. We typically measure a P&L against the same period from the previous year, whether it's monthly or weekly. Our target metrics include a revenue increase of at least 20% and a gross margin percentage across the entire branch above 20%. For ocean freight, the figure is usually between 10 to 15, and for air freight, it's between 25 to 30. On average, we aim for a 20% gross margin. Depending on who you consult, overheads usually fall between 15% and 18%. A healthy ROR is also a key target. We train branch managers in these metrics so they can grow their teams and overheads at the right pace as business increases.

It's crucial to avoid a situation where we're winning new business, adding overheads, but not making progress. Understanding how to read a P&L and use it to make business decisions is vital. In the early days, I often made these decisions for the branch managers, but over time, they began to make these decisions themselves.

What investments are required for an Air & Ocean branch?

The main investment is in team members. Mainfreight places a significant emphasis on its graduate program. Unlike hiring an experienced person who can add value within a few weeks, a new graduate is a long-term investment. We try to anticipate future business growth and build our team accordingly. This doesn't always work out perfectly, and we often end up throwing young graduates into challenging situations.

Other investments include decisions related to leases. For instance, when a lease is up, the branch manager needs to decide whether to move or make other changes. These are not everyday decisions, but rather significant ones that occur every few years or so.

Another investment consideration for a branch manager is whether to commit to volume and take a committed volume rate, capacity rate versus the spot market. This applies to both air and ocean freight. It's essentially a commitment contract where you pay for space whether you use it or not. This is an investment, as you often commit with the intention of growing into it. It could be a 10K a week commitment and we've only got business to cover 5K of that. Not only are you in the hole for 5K, but you would have been making money on that existing 5K, so now you are losing money on that.

From a cash flow perspective, how do you manage receiving money from customers versus paying suppliers?

We were very strict about paying suppliers in full and on time. Cash flow was managed at the corporate level in LA. Although Mainfreight doesn't like to use the term 'corporate', that's essentially where cash flow was managed. However, accounts receivable was definitely managed at the branch level.

Each week, the financial report prepared by the branch manager would focus on customers who were not paying. We had goals and KPIs in place to manage this process. The aim was for each branch to have 8% or less of their accounts receivable being over 30 days old. This was a very aggressive target, but it helped. Branches were penalized if they didn't achieve this, not financially, but through the 'Branch of the Year' award that they all strive for. It also impacted their bonus; failing to hit that KPI would negatively affect it.

How did you go about paying the suppliers or carriers?

The checks were issued from the head office, but the actual processing occurred at the branch level. In the operating system, you could process the invoice and effectively pay it. However, the actual check was written in LA.

You would pay them after the service had been rendered, even if it was a volume contract?

For volume contracts, they were reconciled monthly for air freight and annually for ocean freight. For air freight, we would receive an invoice for the shortfall if we didn't fulfill it. For ocean freight, we almost always fulfilled the contract. If we didn't, the branch would be invoiced and would have to pay.

How would you define the measure of success for an Air & Ocean branch in terms of the customer?

The measure of success would be customer satisfaction and retention rate. Mainfreight was very good at retaining customers. Once a customer was on board, they usually stayed. It was quite uncommon to lose a customer at Mainfreight.

We didn't have a specific metric for customer happiness. We conducted monthly, quarterly, or annual business reviews with the customer, depending on their size. The branch manager or a key account manager would be involved in these reviews, and we would understand the customer's satisfaction level from these. But there was no specific metric for this.

How did the growth in freight handled by Air & Ocean translate to the other two divisions?

There are two distinct answers to your question, as the situation varied significantly between our two business units.

In the warehousing sector, the majority of the items we store are produced offshore. Therefore, in our Air & Ocean business, we import a large portion of these goods. As we discussed earlier, one of Mainfreight's differentiators is our well-managed warehouses. During the sales process, we aim to secure warehousing with the freight. If it's a warehouse sale, Mainfreight is required to handle the importation of those containers. This is a rule that is now set in stone. So, there is a direct correlation here.

From an Air & Ocean perspective, a new warehouse might only receive 10 containers a week, even when Mainfreight was moving 1,000 containers weekly. Therefore, it wasn't as significant for the Air & Ocean business, but it was definitely significant for the warehousing business.

On the trucking side, the correlation wasn't as strong. Mainfreight is still trying to figure out how to attract more customers that can utilize all three divisions. However, it's not that simple. For instance, we did a lot of trucking within the Air & Ocean division that wasn't controlled by Mainfreight because it didn't fit their profile. This was similar to the drayage situation. For example, we had a large pet toy customer that supplied big box retailers like Costco, Walmart, and Target. These retailers didn't want 40-foot Ocean Freight containers at their docks. Instead, they preferred 53-foot trailers with pallets stacked in a specific way. We would transload these containers in our Ocean Freight facility and then book 53-foot truckloads into these big box retailers' warehouses. Mainfreight doesn't want to do full truckload, they prefer LTL (Less Than Truckload). So, this business didn't fit them. This is why a busy Air & Ocean business didn't necessarily correlate with a busy transport business.

So why own the Air & Ocean business in the first place? I'm trying to understand its importance to the overall offering.

From my perspective, if you look at the supply chain for any customer, there's a high chance it starts with importing, whether that's raw materials for manufacturing or finished goods for distribution. It's the beginning of the process. On the reverse side, it could be the U.S. exporting that product overseas. Nearly everything we touch and use involves some aspect of international trade. Mainfreight had the vision to be a total supply chain provider. Warehousing was the last division to be opened, acting as the glue that brings the product in, stores it, and then distributes it on the road.

Could you compare the competition in Air & Ocean between New Zealand and the United States? How does it differ?

New Zealand is home to many multinationals. Mainfreight, despite not being as prominent in the Air & Ocean sector as it is in trucking, is gaining ground. They have a significant presence with large facilities. However, many New Zealanders are unaware of Mainfreight's operations in Air & Ocean, often associating them solely with trucking. Interestingly, I've encountered New Zealanders in Los Angeles who were surprised to learn that Mainfreight operates here. Despite being a successful company, a high percentage of New Zealanders don't realize that Mainfreight handles freight in Air & Ocean.

As for competition, the landscape doesn't change much for Mainfreight. The likes of DB Schenker and C.H. Robinson are all present in New Zealand. The main difference might be that decisions made at a corporate level for these businesses are far removed from New Zealand, unlike if they were based in Europe or the USA. However, this doesn't really differ from a Mainfreight perspective. In theory, branch managers should be making most of those decisions anyway. So whether they were headquartered in New Zealand or not, you don't normally push decisions to headquarters. Decisions are made on the spot.

What do you compete on, whether it's in New Zealand or the US, when you compete against other Air & Ocean providers?

I believe it's the way your team handles the business that matters. Everyone has a tracking platform, reporting, and can access the same capacity. Rates are relatively transparent and you may have a better rate. However, if you're competing on rate, you're likely to lose the business on rate. It's the personalization and the people that you're competing on.

In the early days, if we were up against C.H. Robinson in the Air & Ocean space, we should have just walked away. Their people were really good and customers were always really happy with whoever they were dealing with. At C.H. Robinson, they were more personalized. They had really good people. Our customers would talk about the C.H. Robinson people by name, yet they would talk about an Expeditors person or a Kuehne + Nagel person, they wouldn't know their name. They would just know they received an email from someone. I believe C.H. Robinson did a better job of being personalized, which is what we were aspiring to do at Mainfreight.

Where do you think you stand today?

At Mainfreight? I believe they do a really good job. I've been gone for six months but I'm still very well connected and hear a lot of things. Things are different now compared to when I was there, but for the most part, they've got good people that really look after their customers.

What would you say the customers care the most about?

The question of whether their freight is going to move. I believe that when customers call Mainfreight to get an update or to make a booking, they should end that call or email with the confidence that their request is taken care of. They should not be left second guessing or hoping that everything will work out. They should feel that Mainfreight has got this, and I believe that for the most part, that's the case.

How different were the types of customers that you and C.H. Robinson targeted?

That's a great question. I believe we started to excel when we targeted customers that wanted our level of service and personalization.

In the early days, we used lead generation tools to target either large or consistent freight movers. These customers often didn't mind if a shipment was delayed by a few days or a week because they had so much product coming in.

We then began to focus more on higher-end products versus commodities. For example, many containers come in with outdoor furniture, but the value of the container is so low that they can't afford to spend much more on good service. We became quite adept at targeting the right commodities.

If you were to start your own Air & Ocean business today, what would you do differently than Mainfreight?

I feel like that's what I'm doing now. I've joined a business at a lesser point than when I started at Mainfreight in the US in 2011. One major difference is that I'm paying commission to sales reps.

Mainfreight has this vision that the customer falls in love with the company, and they're buying from Mainfreight, not necessarily the salesperson. While I don't necessarily disagree with that, it's not how the US market works. If sales reps are rewarded with commission, they're going to push harder and keep our name in front of the customer more. They're going to be more reactive. I believe Mainfreight is missing out by not having commission-based salespeople. These salespeople become really successful and proud of their success, which is reflected in their sales process. They're more professional. Mainfreight had a commission system when I first started, but they removed it around 2015 or 2016. I still think that was a mistake.

How does C.H. Robinson deal with their employees and sales reps compared to Mainfreight?

C.H. Robinson does pay commission to their sales reps.

I see.

As far as I know, most companies do.

So Mainfreight would be the only one not doing so?

Yes, that seems to be the case.

Thank you for this insightful discussion. We'll touch base soon for potentially the next one. Have a good day.

Thank you very much. Goodbye.