She climbed every rung of the corporate ladder at JB Hunt and now she runs the place. Today, Shelley Simpson is president and CEO of one of the largest freight companies in North America. The market is shifting and no one has a better read on it than she does.
Shelley, welcome to Freight Waves Today.
Shel, you're an inaugural guest, first show. We are still getting the kinks out of the system. As you know, doing something live in production has a lot of exceptions. Speaking of exceptions, JB Hunt is managing so much in the supply chain. What are you guys seeing right now? What's the state of the market?
Well, you know, I don't think, Craig, that a lot has changed since we had our last first quarter earnings report, which really was we heard us talk about having a fragile environment from a supply side perspective. And certainly we've seen that play out really as the first of the year just continued to progress. Overall, I would say demand is steady from our customers. Not unlike the conversations we've been having, and I think our customers are neutral to slightly optimistic. Certainly on the supply side, we're continuing to feel that same impact that we felt the first quarter, but feel good about the positioning we're at with our customers.
In terms of intermodal activity, obviously it's a significant savings for supply chains. There also seems to be shippers that are taking advantage of intermodal where they don't have to take warehouse space. They're able to move products across the supply chain. What are you seeing exactly in the market right now?
Well, Craig, one of the things we've worked really hard is restoring our customers' confidence that intermodal can be a long-term sustainable part of their supply chain. And so we've had really good success with our railroad providers and really working through several peaks with our customers. And this year has been really a good movement for our customers to think about intermodal, but in particular because if you think about budgets and how our customers really have to move forward on their budgets, anytime that they're missing their budget, they're going to be more interested in ways that we can help them save money. And certainly this year, not only with what's happening on the supply side and a lack of really follow-through on their first priority or their first position on the routing guide, that's been an issue, but also fuel has been an issue. So a combination of those two things have our customers really thinking about intermodal more and more, but it really just thinking about our entire company overall. Anytime our customers are missing their budget, they really look more towards us and start to say, 'Okay, we trust you. We believe that you've got good answers. How should we be thinking about doing our supply chain better and different?' And certainly that has continued through this year.
Now, Shelley, you have been at JB Hunt for much of your career. I understand you actually were teaching school at one point. Is that right? Did I remember that correctly?
Well, I was a preschool teacher, so I've had three jobs my whole life. My first one was I was a waitress at Pizza Hut during high school. And then in college, I taught preschool at KinderCare. And then I graduated from the University of Arkansas and started at JB Hunt two weeks later and 32 years ago last Monday, here I am.
Wow. Congratulations on your success. What is really in terms of what you've seen in the industry and you speaking specifically over JB Hunt, what has been the evolution of the business since you first joined?
Oh gosh. Well, that's a long time ago, Craig. You know, back then we actually did a lot of different businesses back then. I don't think that I knew enough about them. I started in customer service, but we had a lot of different businesses. And by the year 2000, we really spun the businesses that our then chairman didn't believe could be at least billion-dollar businesses. We really spun those outside the company and really focused and made sure that we could really build our businesses off of the strength of JB Hunt. And that was really when we started our intermodal segment separately along with truckload and dedicated contract services. And through that process we spent the next 20 years really building out supply chain solutions for our customers. So how we're organized today and five different business units, intermodal being our largest, dedicated following that, and then really our logistics services across our brokerage platform of JB 360. We utilize both 360 box and our brokerage direct with contract carriers and then final mile coming into the final portion of our customers into their home. And so there's been a lot of evolution but I would say the other thing, Craig, is that we understand the supply chain a lot better with our customers. We really try to think about it from a consultative nature. So how can we help our customers be more right? And because we have so many different answers across the supply chain, that really allows us to do that.
I want to get back into and ask more about 360 and when you guys initially got into that, but before we do that, I as a fellow woman in our industry have really really enjoyed watching the trajectory of your career and love the story of how you really worked your way up. Prior to being the CEO, what was the hardest job you had over the years sort of working your way through the organization?
Well, in 2006, our then CEO, Kirk Thompson, and Craig Harper, our COO, asked me to start up a brokerage business unit. And at the time, we were an asset-based organization. And I don't think we knew a lot about what the value proposition of a broker was. And I remember when we very first started that up, which has since been called ICS or Integrated Capacity Solutions, that was the toughest part of my 32-year career. Mostly because if you think about being in an asset-based business when you want to bring on non-asset into an asset-based business to say, 'Okay, we're going to go get freight that doesn't necessarily fit our network, but will fit other carriers' networks,' in an asset-based business that was a little bit like cussing in Sunday school. It was difficult. Our customers didn't necessarily understand the why. Our shareholders didn't understand the why and our people weren't necessarily interested in the why. And so you didn't really have anybody pulling for you, if you will. But I will say leadership from the top down, that was something that they were committed to. We were bought into. But really getting that off the ground was probably the hardest thing I've done in my career.
I've lived that life a bit where that internal sell is honestly sometimes harder than the external sell when you're trying to do brokerage inside of an asset-based company. So it's I mean asset-based carriers are notorious for having they get the freight that nobody wants but then there's also the risk or issue of as soon as the trucks are empty you immediately divert a lot of that cargo to the asset side. It's hard to balance that, Shel. How does JB Hunt think about that when you look at your brokerage? Because we saw this at US Express. Julie was at US Express. I watched it from the sidelines where the brokerage business didn't really necessarily serve the interest of the in US Express's case, the red truck. It didn't necessarily serve the customer's best interest. How do you guys balance that?
Well, that was probably what was so difficult about it, Craig, because we were not an overflow model. We didn't have a brokerage business for the assets that we had. We already had a good asset network. It really was about complementing what our customers needed overall, but also when our own trucks needed freight, we believed if we could rise up the amount of freight that was available and take more freight on, then certainly our assets could become one of our largest carriers as well. And so that overflow part of the business, we do operate all five business units independently with different margin targets. However, we do look for what complements overall, but if we look at it through the eyes of our customers, we always have to be solving for our customers with the most efficient way to do business that really lends itself to our vision statement, which is to create the most efficient transportation network in North America. And if we do that, we have to look at it the way our customers do. And so Craig, our assets might want it, but if we think cost, service, and capacity can happen differently with a contract carrier because it fits their network better, we're going to actually provide that to the customers. And in some cases, we give them two prices. We say, 'Okay, well, here's an asset price and here's a brokerage price.' And we let the customers choose what that can be.
It takes a lot of thick skin. I chuckle because I have been there when the trucks have tried to want the freight and it's not the best fit for the customer. And as you're building a brokerage business, you got to have thick skin. You got to be able to fight in the battles. You got to have grit. I mean, you know this, Julie, is
Like the grit of Julie ran brokerage at US Express, so she knows all about how that works.
Yeah. No, and I think that the way you explained it makes perfect sense and doesn't make it not hard. It's still really hard. But I think one of the other benefits that I would love to hear more about that I think of having your five business units that operate independently but also can provide kind of amazing multi-service offerings for your customers, right? Having assets and being able to have assets to lean on beyond your dedicated business, I imagine is a huge benefit and selling point for your customers as well to allow for surge and flex there. Do those businesses interact, your OTR and intermodal and other assets with your dedicated business?
