Narrator [00:00:04]:

Welcome to Supply Chain Now. The voice of global supply chain. Supply Chain Now focuses on the best in the business for our worldwide audience, the people, the technologies, the best practices, and today's critical issues, the challenges and opportunities. Stay tuned to hear from those making global business happen right here on Supply Chain Now.

Scott W. Luton [00:00:32]:

Hey, good morning, good afternoon, good evening, wherever you may be. Scott Lewton and Kim Reuter here with you on Supply Chain Now. Kim, how you doing today?

Kim Reuter [00:00:42]:

I'm doing wonderful. Excited for the long weekend.

Scott W. Luton [00:00:46]:

We are too. We are too. And you know, we got to get all of our work done so we can enjoy the long weekend. How's that sound?

Kim Reuter [00:00:52]:

Yes, absolutely. So let's get this podcast done.

Scott W. Luton [00:00:55]:

We got a long list of good stuff here, starting with this really unique show here today. I think it's gonna be really informative and intriguing as we dialed in on a topic that we don't talk enough about. And that's the airfreight industry, at least here at supply chain. Now, my hunch is that plenty of folks out there in our global audience stand to learn more about this intriguing component of global supply chain, too. Things such as, hey, what's the current state of air freight? What's changed since the pandemic? What does Peak look like this year and how should we prepare? And in general, what are some been there, done that? Expert tips on how to best optimize your organization's approach to using air freight. Stay tuned for a great show with a wonderful guest, including Kim. Your background and expertise is going to be really relevant and helpful here as well. Should be a great show, huh?

Kim Reuter [00:01:45]:

Excellent. Super. Looking forward to it.

Scott W. Luton [00:01:47]:

All right, so let's get to work, Kim, let's welcome in our featured guests here today Sean Francisco, chief operating officer for the Americas with Apex Logistics International. Hey. Hey, Sean. How you doing today?

Sean Francisco [00:02:00]:

I'm doing well, thank you, Scott.

Scott W. Luton [00:02:02]:

Great to see you. Have really enjoyed our conversations. Kim. I tell you, Sean is bringing it here today in an expedited manner. Folks need to stop what they're doing and check it out, right?

Kim Reuter [00:02:14]:

Yeah. If you are not shipping air freight and working in the e commerce industry, you're probably losing out on some opportunities. So this is going to be a great conversation.

Scott W. Luton [00:02:22]:

I agree. Well said there, Kim. But here's where we're going to start. Before we get to all the good stuff, we're going to start with a fun warm up question. Sean and Kim, all three of us and many other millions of others out there have been really captivated with the Summer Olympics in Paris. That wrapped up a few weeks ago, right. I think a lot of folks, as I was sharing pre show, have come, told me, hey, the Olympics are reinvigorated and we're all just can't wait until LA in 2028. So with all of that said, Shawn, I know you're a big fan of the Olympics.

Scott W. Luton [00:02:54]:

What was one of your favorite moments from Paris?

Sean Francisco [00:02:57]:

You know, that's really not an easy question to answer, Scott, because for two weeks, the world brings together the best athletes. And, you know, whether it's gymnastics or swimming or track and field, there are stories within a story. But probably if I had to choose one event, I was really engaged and proud of how the US did in the men's and women's basketball. To be able to continue its long history of winning the gold wasn't easy, but they put on a fantastic show.

Scott W. Luton [00:03:33]:

They sure did. And there are ceremonies for all the medal winners at the end of both of those tournaments, men's and women's, and that was just heartwarming. And so you. Thank you for taking one of mine. Kim, what was one of your favorite experiences from the Olympics?

Kim Reuter [00:03:48]:

Gymnastics. I grew up as a little gymnast, not very good at gymnastics, but I was shuttled off the gymnastics classes on a weekly basis for years. I've always loved watching that as a little girl, I loved watching gymnastics. So it was wonderful to see the us team just slam it, man.

Scott W. Luton [00:04:07]:

So no wonder you're such a supply chain pro. You are trained in the art of gymnastics and flexibility. All that good stuff. Love it. I would just add the us women's four by 400 relay. That was like, just inspirational. And one other thing that wasn't as widely, I don't think as widely known is there was a french Paralympian that wore a exoskeleton, and it was the first time that a Paralympian had run with the torch in the lead up to the first day. And that was inspiring.

Scott W. Luton [00:04:39]:

So lots of good stuff from the Olympics, for sure. All right, so, Sean and Kim, we got to get to work. There's so much else we could talk about. The Olympics, which, by the way, is a huge supply chain feat. But I'll save that for another show. I want to start here. Sean, you have got, uh, you're very humble persons, what I've gathered from our previous conversations, but you've got an incredible journey, done a lot of things across industry. So let's start there.

Scott W. Luton [00:05:02]:

If you would tell us briefly about your background, Sean.

Sean Francisco [00:05:05]:

Sure. So, first, I've been very fortunate to be in the logistics industry for over 30 years. And if I'm being honest, when I left college I didn't know much about supply chain or logistics, but I was able to get into this industry and then I realized what a long history has had. And over that period of time I worked in almost every aspect of logistics from messenger to operations, processing documents, lived in different cities. I was able to secure my customs brokerage license, worked through the IATA FiATA training programs where later on in my career I was able to kind of settle in and focus on transportation and air cargo. And, you know, that's also been an incredible journey as well.

Scott W. Luton [00:06:00]:

Yeah, man, what's those books that you used to publish back in the day that just gave you the highlights of all the English reads we had to make? What was that?

Kim Reuter [00:06:08]:

Tim Clifford notes?

Scott W. Luton [00:06:10]:

That was a cliff notes version. Sean Journey and Kim pulling just one thing out of that, what Sean shared, I could relate because my introduction probably was loading containers into air force planes, but way back in the day. But Ken, here, there, that really resonated with you.

Kim Reuter [00:06:28]:

It's interesting because I didn't go to college for supply chain either. I kind of fell into it. I graduated with a degree in international relations at a bachelor of arts degree. And a friend of the family knew a friend of the family. And Kim needed a job because she graduated from college. And I started out as a telex girl. This is because this is before we had cell phones and we had to send telexes to the ships. And I started as a telex operator.

Kim Reuter [00:07:00]:

I was a terrible typist then, I'm a terrible typist now. It never got better. But yeah, that was my job. And printing off all the telexes and making copies and giving them to all the people.

Sean Francisco [00:07:11]:

It never done that for sure.

Scott W. Luton [00:07:15]:

All right, we're gonna, we're gonna have a reminiscing show. Let's set up a sequel here. All right, so Kim and Sean, thank you both for sharing a little bit about your background beginning and then some. Sean, tell us a lot of folks are familiar with apex, but just in a nutshell, for context, especially, tell us what the company does.

Sean Francisco [00:07:31]:

Sure. So Apex is a leading global provider of essential supply chain solutions. And we're founded in 2001 and over the next 20 years have accelerated to becoming a top five global air freight forwarder, ranked number one in China and over the trans Pacific. Our focus has always been on each individual customer. Our model is we deliver passion. And I'd like to describe Apex as an open source provider. And what I mean by that is when we look at the logistics chain in support of supply chains, there are many steps in a process. We look at each step and identify how can we improve upon that step to ensure that our customers have the best possible service.

Sean Francisco [00:08:25]:

There are many times when we will work with another company to improve on that step. And then there are many situations where we simply will invest and take over that step. Open source means collaborating and working to find the best solution for our customers and not in a isolated manner where our customers won't always get the best service.

Scott W. Luton [00:08:52]:

Sean, I love that. First off, the rankings are just in time for college football season, so I love that. And congratulations. Congrats on your movement up the rankings and at the top in some cases. And Kim, that last comment he made about no matter what it is, the customer is always North Star. And that's where the perspective as they assemble solutions, that resonates with me. Your thoughts there, Kim?

Kim Reuter [00:09:16]:

Of course it resonates with me because that's the Amazon model. But I would say any successful service provider, if you start with the customer work backwards, you're going to have a much better solution. I think the other thing that Sean pointed to that is really key is understanding every single step in the process and how to optimize that individual step because that will lead to a better supply chain overall. And I think that was a really great point that Sean brought up.

Scott W. Luton [00:09:43]:

Excellent. Breaking it down, breaking it down and excelling in each little ingredient. Well said there, Sean and Kim. All right, so we got a great topic here today. I really love how we've couched this thing. Sean and Kim, air freight roulette, how to win. So, folks, not to tell too much on myself, but I love playing roulette. I might be a sucker.

Scott W. Luton [00:10:04]:

I don't know, it's just easy and it's fun. And sometimes when luck breaks in your favor, I tell you, it can be a lot of fun. So with that as a ongoing analogy, the gift that keeps on giving, let's set the table a bit, right? So, Sean, if you would elaborate a bit on the current status of the air cargo industry.

Sean Francisco [00:10:22]:

I smiled when you said airfreight roulette because it seems that our industry has moved into a phase where there are situations where it may be a gamble in regards to what you're trying to achieve. So that's why I kind of smiled. Right. And, you know, I'm not a gambling person, but I think everyone's kind of familiar with roulette. And if you think of roulette, your odds is based off of your decision. It can be very precise. I think you can select a specific number. Some have many favorite numbers, but your odds are less in that white ball popping on that number.

Sean Francisco [00:11:07]:

The simplest and safest bet is selecting a color. Usually it's red or black. And so when I think about the state of airfreight today, it is really a guessing game. There are a lot of dynamics. I won't simplify the decisions that go into selecting an air freight service or even booking an air freight shipment. But what I do know is that processes and decisions have not really evolved with the new dynamics. And so what I'm referring to is, you know, in the global pandemic, what everyone saw was that we all got more comfortable with online shipping or shopping. I should say we got all more comfortable on having meetings similar to this live stream or through video conferencing.

Sean Francisco [00:12:00]:

The e commerce industry rose and took advantage of individuals getting comfortable with online shopping and simply have ran with it and have influenced how air freight services are being purchased and provided in today's environment. So your title. I smiled because, yeah, you can associate with a lot of decisions as a 50 50 proposition of will it work or will it not work? Will you win or will you not win?

Scott W. Luton [00:12:37]:

A calculated risk, an educated guess in some cases, not all days are like others. Kim, respond to kind of the opening salvo there from Sean. What do you hear there that really stands out?

Kim Reuter [00:12:54]:

So picking your partner is key. Right. And I think Sean has a lot of expertise he's going to share with us about that. But, you know, not all cargo is the same, and it's not always just about the price and whether or not you bought one day versus, you know, cargo, three, four day. And the other thing that's very interesting, I think, in the air cargo space, and Sean's going to share some stuff with us about this as well. Is that just how it's evolved, especially as we think about it, air cargo, when I started in the supply chain industry, was pretty much for very expensive products are very timely, time sensitive products. Right. It was very expensive.

Kim Reuter [00:13:32]:

Not a lot of people were doing air cargo on a regular basis. But as we've moved into direct to consumer and shipping directly from origin to the customer, we're seeing all kinds of different kinds of art air cargo solutions, right. With consolidation and direct injection into the postal networks and things like that. So air cargo really has changed.

Scott W. Luton [00:13:53]:

Kim, what a wonderful, perfect segue for this next question to Sean, because a lot of things have changed. Not just an air freight and air cargo, but what other part of the world hasn't changed since the pandemic came along? Right? So to that end, Sean, what dynamics within the air freight industry have changed? Maybe the most post pandemic.

Sean Francisco [00:14:16]:

Yeah. So most businesses have looked forward to and therefore have estimated that coming out of the global pandemic, that things would return to norm. However, I think no one really saw the emergence of e commerce because of the boom of online shopping. So if you think about pre pandemic, that was up to the ending of 2019, because of global pandemic was declared in March of 2020. At that time, e commerce was operating, but not to the levels we've seen. The global pandemic did a couple things, and one was elevate the importance of e commerce, but also it elevated the importance of supply chain. You know, everyone knew who Amazon was, but people kind of really realized the ability to get their product from a factory in, say, Asia to a doorstep in, say, Atlanta within three days. That has created the new phenomenon, which really is the influence of e commerce post pandemic and how they have changed the air freight industry, because for a company, in this case, the e commerce vertical, to be able to service their customers and their ambition is every doorstep in the world, three days, from factory to door.

Sean Francisco [00:15:57]:

They need to position themselves with dedicated consistency in access to air freight capacity and services. And so when we looked at the ending of 2023, when they emerged after the global pandemic, China alone, they purchased nearly 50% of air freight, all air freight capacity operating in China. That's 6 billion kilos, Scott, 50%. So what we also learned was that wasn't enough, but that's all they had access to. So as we stepped into 2024, they moved early, they bought early, and they bought big, and they secured not only more than 50% of the market or freight capacity, but then they expanded beyond North Asia, expanded more than just servicing China. And our rough estimates bring that they have secured over 65% of the market capacity at the start of 2024. So coming out of the pandemic, it's made it even more difficult for the industry, for many businesses to have an air freight strategy or plan, because the amount of available capacity has minimized a lot.

Scott W. Luton [00:17:27]:

All right, you've established a lot of those here. I'm gonna keep beating up this analogy. Good bit. But folks, stay tuned, because based on all those market conditions Sean just walked us through, we're gonna touch on and ensure you know how to take a smarter approach so you can win more and not just take my strategy of betting on red 19 each and every time. So, Kim, those are some really big shifts. I didn't have a chance to do the conversion of 6 billion kilos to pounds, but let's just say that's a big number. Your thoughts here, Kim, before we move on.

Kim Reuter [00:18:01]:

You know, it's hard to have a strategy when the deck is kind of stacked against you almost every year. And in order to do that, because of what's happening with the market, with capacity being restricted almost artificially, you have to be aware of what's going on. You have to engage with the right partners. You have to have your relationships in place. It's not just about booking cargo anymore, especially with what's happening in the market. It's really about working with the right people.

Scott W. Luton [00:18:28]:

Well said, Kim. I love that. And Sean, I know that resonates with you because you've got a passion for people and relationships. That's one of the things I've learned in our due diligence prior to today. All right, so, Sean, for our fearless audience members out there, because we got the smartest audience in all of global supply chain right here at Supply Chain Now. So folks out there that are either using air cargo a lot, their seasoned pros, they've wrangled it, they've conquered the rodeo that presents itself each year, or they're newer and they've used a little bit here and there, and they've got a lot to learn. All points in between. I think we're going to walk through three things they should focus on.

Scott W. Luton [00:19:08]:

What's the first one, Sean?

Sean Francisco [00:19:10]:

Yeah, so before I answer that, Scott, I just want to say, would you call out of the audience? It is, you know, I'm based here in the US, but they're all over the world. So I do apologize upfront if I don't cover a particular area. But I recognize your audience is, it's global. So, you know, the first thing is, as you're going through your procurement process, I think the one thing you would like to do, especially what I just described of the state of the air cargo market, is try to work with a service provider or a few service providers that have a strong commitment in the industry. And I can't really speak for everyone, but I'll use apex logistics as an example. Recognizing the emergence of e commerce in 2022 and their growth in 2023, as well as their ambition moving forward, Apex continues to invest for its clients within the logistics industry. An example to that is today, as we are about to step into September, Apex operates over 60 freighter flights per week across to the Trans Pacific. The trans Pacific represents over 35% of all airfreight moved around the world.

Sean Francisco [00:20:31]:

So it is a big market. The US, North America, the Americas, they're a large, consuming imported market. And Asia is the world's largest factories right now. And so 60 flights a week, you just kind of think about that. That's over 3000 dedicated freighter flights. It is to continue to add capacity because the market has got constrained. You know, if you kind of look at the amount of capacity and the commercial airlines that services the Trans Pacific market, the Apex dedicated charter fleet would represent probably a top five airline that's operating over transpacific. And our ambition is to continue to grow that because it looks like many of our customers are not slowing down, they will continue to grow.

Sean Francisco [00:21:22]:

And so that customer base ranges from e commerce to high tech to retail. It seems that that growth started during the pandemic when we were helping the government with ppes, and that kind of expanded forward to where we are today.

Scott W. Luton [00:21:37]:

And Sean, with that growth comes change. Right. Plenty of change. And as we were talking pre show, I think in this first thing that folks got to keep front in mind the criticality of change management. Right. Anything you want to add there before I get Kim's comments?

Sean Francisco [00:21:53]:

Yeah. So the challenge with change is it's never, never comfortable. There's always risk involved. But I think when you look at sort of how airfreight has evolved, I think companies really have to consider how they're managing within their supply chain, the airfreight services that they have today. You know, change may be evitable to be able to keep up with what's happening around them.

Scott W. Luton [00:22:18]:

That is. Right. Kim. Change management, what growth brings, what complexity brings, what a global business brings, you name it. There's no shortage of sources that are driving change and challenges in our businesses. Your thoughts there.

Kim Reuter [00:22:36]:

So, you know, Sean's kind of touching on the fact that if you're in the air cargo space and you're still managing your air cargo the way you did it pre pandemic, you're not optimizing your air cargo supply chain, you're not taking advantage of other providers out there. You may not be even working with the best providers because there's been so much shift in the market. So in order to have a really good cargo strategy, you have to embrace the fact that you may not be doing it perfectly today.

Scott W. Luton [00:23:04]:

Well said. And there's so much power in that multi modal diversity and flexibility. All those gymnastics that Kim is so good at, there's so much power there.

Kim Reuter [00:23:15]:

Can I just say one thing about the gymnastics? I think everything I learned there is, I learned to fall down and get back up.

Scott W. Luton [00:23:25]:

I knew where you're going. Kim, I'm glad you mentioned that. That is a universal lesson learned. No matter if you're in supply chain, if you're growing up, it's a leadership lesson. We all fall down at various times, but it's being able to pull yourself back up, your team back up and keep moving forward. Okay, so that willingness to change because the market already has. But how was your organization handling it? Right. That's a really important thing that to keep your finger on the pulse of what's number two? Because I think number two, Sean, we're kind of.

Scott W. Luton [00:23:54]:

You're going to give us some thoughts on what we should be looking for in a successful partnership with an air freight provider, right?

Sean Francisco [00:24:01]:

Yes. So once you select your service provider or providers within your organization, how you can help your strategy be successful is really evolving to where you're able to manage your commitments as well as your booking. So I have an example for this, Scott. Okay. We all have had the opportunity to travel as passengers. And so if I'm using me as an example, if I know I'm going to fly out in 30 days, I try to purchase my airline ticket. I try to do it early for a couple reasons. One is to have the most flexibility in the flights that I want to fly on.

Sean Francisco [00:24:46]:

I want to try to have the best price, and I always want to try to get the best seat. But if I'm not sure that I'm going to fly out in 30 days, I will wait. And so my decisions will reduce as I get closer to my actual departure time. And so air cargo is the same, right. Once a flight departs, the airlines or the Ford have no opportunity to resell unused space. So as the time gets closer towards you needing your shipments to fly, those decisions get less and less. And I recognize that one or a business may not be able to determine when their shipment needs to fly, say, 30 days from now. But that's where working with your service provider, ensuring that you have upfront capacity commitments, and again, that commitments is more secure when it's on a provider's own asset versus being shared with others on a commercial asset.

Sean Francisco [00:25:47]:

And then try to keep to that commitment and you don't have to do 100% of your needs. A lot of our customers will commit 30% to ensure that they have a baseline, they have a consistent flow into that capacity. There is not only consistency, but rhythm to how shipments are being picked up and then loaded and then flown across the world and then cleared and then delivered. So try to get into a cadence so that way the predictability is something that your service provider can manage versus the unknown.

Scott W. Luton [00:26:21]:

I like that. All right, so, Kim, I love what he finished with. Sean finished on in terms of the predictability. Right. What can we commit to? So there's enough predictability for our air freight provider to work with. Right. And handle and perfect and improve. Your thoughts there, Kim, what Sean should.

Kim Reuter [00:26:39]:

Yeah. So most importers out there are not going to commit 100% of their air cargo because error cargo is very volatile. Right. So you're going to try to purchase as much as you can, but it's always a good idea to do 30% to 50% in a committed contract. That way you at least have half of your supply chain covered and then you can kind of ride out the rest of it. But I do agree with Sean that you do need to make some commitments to airlines in order to start getting those best services.

Scott W. Luton [00:27:05]:

Yes, well said, Kim, before I move to the third one, Sean, when you think of that selection process to finding the best fit for your organization, you know, you think about the relationships and the processes involved and other dynamics. Anything else come to mind that you would offer up as advice to folks that are trying to figure out, okay, what's the best match here?

Sean Francisco [00:27:27]:

There has been an evolution within our industry, especially when it comes to international transportation. And as I shared earlier, being in this industry for over 30 years, we've seen the evolution. I've seen the evolution. And, you know, companies have become more and more advanced in how they manage their logistics, supply chain, and they've divided their process between, say, procurement and operations. The best customers we work with, and when I say best, the best control over their supply chain, they've been able to bring both sides together. In the end, you may purchase probably the best deal available, but if your goods are not delivered to your customers, that's going to be a failure. So working together will probably put you in a best position to yield the best results, shine.

Scott W. Luton [00:28:25]:

Well said. I just about moved to that third point. I'm glad we didn't because, Kim, we talk about silo busting all the time here for years. Right. But I think, as I'm doing a quick recollection to all the shows, I don't think we've ever applied silo busting, at least in the conversation I've been a part of to the selection process, which is kind of what Sean was talking about there.

Kim Reuter [00:28:45]:

Yes.

Scott W. Luton [00:28:46]:

Your thoughts, Kim?

Kim Reuter [00:28:47]:

Yeah, you, the merchant buyers, the planners, supply chain, everybody needs to be working together. I still see out there in the market companies who have that siloed supply chain that just kind of operate over here, and they report on, like, here's our booking report for the week. But they're not involved in the sourcing conversations and the merchant picking conversation. And it's really important to bring those two things together, especially with air freight, because, one, it costs a lot of money, so you can't really afford to screw it up. And two, it moves really fast. So if you do kind of make a mistake, it's going to compound pretty quickly. So the best supply chains I see out there today are really the merchants and the supply chain teams are working hand in hand. They're helping each other.

Kim Reuter [00:29:36]:

They're not beating each other over the head every day with their, you know, my reports. Is this your reports? So that's a key piece I would take away from us.

Scott W. Luton [00:29:45]:

Well said, Kim. I love that. And, uh, it's like Sean wrapped his response on just because you get the best deal, if they can't make it happen, what is it even worth? They don't even matter. All right, Sean, let's see. There's one more. There's a third thing that we want to make sure folks keep front and center, and that deals with consequences, which my parents told me all about growing up. Consequences. Your thoughts here, Sean?

Sean Francisco [00:30:07]:

I. Yeah. So there was an interesting thing as well. During the global pandemic, when airlines or passenger aircrafts sort of suspended all of their services and moving airfreight became more difficult because apex operated a lot of its own aircrafts. We recognized that a lot of companies who came to us, who we never worked with before, didn't have any restrictions or restraints of just getting onto our flights and using the capacity we had. And then fast forward. As businesses try to return back to normalcy, their decision making process also has returned where they've put up restraints. And that restraints could be lack of resources for a transition or maybe lack of resources for integration or connectivity within systems.

Sean Francisco [00:31:08]:

Because of that, maybe they're more reluctant to change. And, yes, the current market is not a global pandemic, but as I explained earlier on, how the buying of airfreight capacity has changed, if companies don't remove certain restrictions and they don't change, they may find themselves back at the roulette table of choosing red or black and trying to make a decision, will it work or will it not? So I think they have to look at being more flexible. And the last thing is the manufacturing industry is also evolving, whether it's through political decisions, whether it's through conflicts around the world. A lot of manufacturing is migrating to different countries, and that migration is emerging in India, Mexico, Southeast Asia. And so not every provider is equal in every location. And so they have to really think of not only how to prepare themselves for the last part of this year, but really what does 2025 and 26 will look like? And the one question we get is, how long do we think the impact of the e commerce industry will be? And no one really knows. Right. But we know that their ambition is to continue to grow, and we see that expansion beyond mature markets such as the US and the EU.

Sean Francisco [00:32:35]:

They're going to every market that they can, and they're trying to establish themselves as the number one reliable source of receiving your product.

Scott W. Luton [00:32:45]:

Kim, I want to go way back to near the beginning of his response because he made an interesting comment here. I really appreciate kind of how he approached very diplomatically some of the consequences out there. Your thoughts, Eric?

Kim Reuter [00:32:59]:

So, you know, we touched on this a little bit earlier on the conversation, and it is this, if you don't have the inventory, you can't sell it. So choose wisely is always my big, big piece of advice to people. But I preach that, especially with supply chain, because people don't talk about supply chain, especially in customer experience and retail and e commerce. Like, we just don't talk about supply chain. But the fact is, is if I can't get it on a plane or a ship or however a truck and get it to you, it doesn't really matter. And I'm talking about the inventory to the warehouse. I'm talking about the shipment to the customer. And especially as we move more and more to do direct shipping from origin, we're going to see more of that.

Kim Reuter [00:33:38]:

I think the other really interesting thing that Shawn touched on is that we are seeing major shifts and manufacturing origins that's driven by the tariffs that we have in place right now. We're expecting there to be some additional shifts in the US for political reasons here in the future. And so we're seeing more shift to Southeast Asia, more shift to Latin America. Well, not everyone carries cargo out of those places and can do it well. You will see a lot of air cargo carriers chasing that market now. But again, back to what Sean's been talking to us about the whole time. It's about picking the right partner who will honor their commitments.

Scott W. Luton [00:34:18]:

Well said. Well said. And going to your response, there's been some early winners in these big shifts. Right? India is growing their manufacturing base. Vietnam, Mexico is rocking and rolling. That's an excellent call out there because the shifts aren't done.

Kim Reuter [00:34:31]:

Mexico imports up 30% into the United States.

Scott W. Luton [00:34:35]:

All right. So clients want more visibility in their air freight as it travels through its logistical process.

Kim Reuter [00:34:42]:

They do.

Scott W. Luton [00:34:42]:

We want visibility everywhere, don't we, Sean?

Sean Francisco [00:34:45]:

Yeah, that's correct. And, you know, as I said earlier about how we approach our industry and our customers, we've continued to invest to bring visibility internationally from factory to door. I know we won't get too much into it, but I would agree with that. That is very important today. And it's not just the major leagues. It's, let's just say on your final mile, just being able to see your product once it arrives, you know where it's at. And with technology today, with geo mapping and online services and gps tracking, that's all available today. But it's just getting with the right provider, your provider, to ensure that they have that as part of your transportation service because it shouldn't be a bolt on, it should be part of your overall service.

Scott W. Luton [00:35:29]:

Well said. Got an approach with Excel. Spreadsheets, faxes, phones and emails will only take you so far, only provide a certain amount of visibility. There are so many better options these days, thankfully, as both of you are kind of speaking to way back in the beginning where your careers had started. Okay, I hate to ask a dumb question, but I'm asking anyway. Sean, is it going to be a peak season this year? What does that look like?

Sean Francisco [00:35:53]:

You know, Scott, it's not a dumb question because it's probably the number one question I receive every year. For the past 30 years, there has been a peak season every year except for one. And the reason for that is I think I should share really what the definition of peak season is. In the past, peak season was, and again, I'm going to use the trend specific as an example, is when businesses imported more in preparation of the holiday shopping season. And so that's usually Christmas, but that has expanded because now you have such events as Prime Day, Black Monday, Cyber Friday. Black Friday, cyber Monday. Sorry about that. You can tell who does the shopping in the family.

Sean Francisco [00:36:43]:

So the definition of peak season is the connection between supply and demand. And when demand is higher, then the price for the capacity or the supply gets higher. But here is what has happened every year and we're talking about airfare. So I'm going to talk about the commercial airlines. They will raise pricing going into the fourth quarter. It's part of their strategy. It's part of the budgeting. They know that air freight ships heavy in Q one and Q four Q one because many companies want to report a first quarter with strong earnings.

Sean Francisco [00:37:23]:

And to do that, you need inventory, you need product selling. Q four is to have enough inventory or product for their commercial or showing well in ending the year. So the airlines will purposely raise pricing in the fourth quarter. Here's the question, though. Will the demand be strong enough to sustain that pricing? If the demand is not strong enough, then the pricing will soften. If demand is strong, then pricing will continue to elevate. So I've seen years where peak season was four weeks or six weeks because when the pricing rose, the demand wasn't there to sustain it. And so the airlines remove their peak season, but they do so in offering spot market pricing at a lower rate than their market pricing.

Sean Francisco [00:38:16]:

But here's what people should realize, or at least the audience, I should say, is air freight pricing today is already at an elevated level. So because the year started off with the e commerce purchasing a lot of capacity, the available capacity came at a higher rate. So starting off at a higher watermark would tell you that the peak season pricing this year will be much stronger than it was last year.

Scott W. Luton [00:38:46]:

All right, so, Kim, you shared a lot there. I think that's good insights for folks out there. He started with talking about the smearing that goes on out there. I think you and I have talked about that on the buzz before. And then, of course, he talked about that. Q one, Q four, some of the yearly norms and then some. What'd you hear there, Kim, that you think folks got to take to the bank?

Kim Reuter [00:39:06]:

Yeah, there's always going to be a peak season. It's not always in October or November. It's not always associated with Christmas. We're also seeing more and more spring peaks, people getting ready for outdoor sporting equipment pools. And that peak comes in January, February. The market has been, has been muddied. We've blurred the lines. Right.

Kim Reuter [00:39:26]:

It used to be that we shop for Christmas gifts at Christmas. Now we're shopping for Christmas at Labor Day. And we have all these new sales events, all the different prime days. It used to just be in October. Now there's one in, what, June or July to get ready for college. Walmart's jumping on this marketplace sale day. So the lines have been blurred on where there is actually even a peak season anymore.

Scott W. Luton [00:39:49]:

Speaking of that, smearing or shopping year round, Summerween became something this year. I mean, we're retailers we're sticking with because demand was there where folks were buying Halloween stuff as early as April, which blows my mind. Kim and Sean. But hey, as Sean pointed out, and Ken, as you and I talked about just on a million times, demand, it is the alpha and omega of global supply chain.

Sean Francisco [00:40:18]:

Don't forget, this year is also political year that creates uncertainty. We've already seen businesses start to import product early because they are anticipating the possibility, as Kim said earlier, that tariffs may rise. So bringing in inventory early is driving a lot more demand as well.

Scott W. Luton [00:40:38]:

Good point. Good point. I think we're all ready to get past the election already, here in the states at least. All right, so let's see. I've got one more thing, and this has kind of been a theme throughout today's conversation, but I want to spike the football on this one more time because I think it helps bring this perspective and make it more actionable. Right. Raise your hand. Have you heard this? But we've always done it this way.

Scott W. Luton [00:41:03]:

Of course, that sounds familiar to all of us, right? We've all heard it at various times, maybe numerous times in our career. And while there's been a ton of change in global business environment that Kim and Sean both, all of us are talking about, some companies, though, have chosen to stick with the long held procurement, supply chain strategies or approaches, I'll call them, to be nice, old fashioned, maybe a bit more static than maybe they should be. Sean, though, and I don't want to over generalize either. But Sean, if you would speak to what you're seeing out there, including Touchstone, the risk, that certainly is inherent to one of my favorite words, clinging to how we've always done things, the success.

Sean Francisco [00:41:43]:

Of businesses is usually tied to their ability to service their customers. When I think of the air freight market, not much change has to take place. I think as you're describing it, it's not like you have to restructure your whole organization based off of what's happening in air cargo. But what I also think is philosophies or fundamental processes can be tweaked, can be tweaked to try to calibrate with the dynamic that we're seeing here today. And so getting back towards the e commerce influence, and as I mentioned earlier, when they procured in 2023 over 50% of the air freight capacity in China and they wanted to expand, that expansion went through the largest commercial cargo airlines in North Asia to South Asia. So again, think of the United States for capacitor, South Asia for air freight. There's very little coming direct from South Asia, if any. And the reason for that is many of these countries take Vietnam because you mentioned Vietnam, Scott.

Sean Francisco [00:43:00]:

They don't have direct flights into the US. They service Europe very well, they service Indra Asia very well, but they don't really have direct flights into the US, so they don't have cargo flights. So most of the air freight cargo out of Southeast Asia, with the exception of Singapore, that has cargo airlines or aircrafts, is being serviced by the north and the Middle east carriers. So just think of emirates, Etihad, Qatar. And so the e commerce companies, after they secured over 65% of capacity from the north, they then started negotiating with Southeast Asia. So when we talk about doing things the same, there are things that is embedded in organizations. So they're successful, but strategies have to evolve, have to change. And we've seen more and more new customers sort of break away from sort of legacy setups to try to be more open source.

Sean Francisco [00:44:00]:

If I can use how I describe apex, so they can take advantage of newer solutions, newer models that comes at not only a greater value, but at a yemenite better price than what maybe legacy processes and services is offered.

Scott W. Luton [00:44:18]:

Well said. Sean Kim, also always being right. What was one of your favorite elements of what Sean shared there in terms of the. The danger of keeping doing things like we've always done them?

Kim Reuter [00:44:29]:

Yeah. So if you are evolving, you're dying. I mean, that is the end. That. I mean, that's just basic science and physics and that's how we all, you know, that's how life works. And it's especially relevant in corporations and in supply chain. How we move cargo today is drastically different than how we moved cargo in the 1950s, in the 1960s, even into the nineties, our supply chains are massively different than how we moved cargo before, especially with the introduction of e commerce and more importantly, the direct to consumer piece of this that has really changed supply chains and especially has impacted air cargo, because now people actually know that there's air cargo. It's not just FedEx, DhL and ups.

Kim Reuter [00:45:20]:

They know that there's actual, you know, consolidation points. People are ordering prescriptions from overseas that are being shipped by air cargo now. I personally get my prescription glasses now from China, and they are air cargo to me. They have a lovely little tracker. I can see when it's on the plane and everything. So you have to change if you are a supply chain professional today. And I don't care if you've been in the industry for 50 years, probably if you're in it for 50 years, you're a little bit, you know, you definitely have to make some moves or with five months supply chain successful supply chains are constantly evolving. Constantly.

Scott W. Luton [00:45:56]:

Well said, Kim. And it just makes me think some of your commentary there. I wonder when we're seeing the next Malcolm McLean, that really changes the entire game. It's around the corner games already changing to Sean and Kim and Bob's and many others comments here. All right, as much as I hate to, we got to start to wrap. Let's do this. A couple that, we got a couple resources from Sean, the team we want to share with folks, including one that if you're a fellow aviation buff, you're going to love. But Sean, how can folks track you down, you and your team on the move for any conversations, a talk shop, a compare thoughts, maybe even do business with you, how can folks connect with you?

Sean Francisco [00:46:32]:

Yeah, so first they can reach out through our website, www. Dot apexglow, oneword.com. and personally they can reach me on LinkedIn. I'm invested in this industry. I'm enthused about this industry and whether it's just a simple chat, they can reach me there.

Scott W. Luton [00:46:51]:

Love that, Sean. And we're going to drop the link. Uh, so you're one click away, folks, from connecting with Sean's team. Sean, in that white paper, what's one thing quickly that you can pull out as in a with them? What's in it for me? Watch it, folks. Check it out.

Sean Francisco [00:47:06]:

Change is good, options are better.

Scott W. Luton [00:47:09]:

Ah, okay, I'm gonna write that's a t shirt. As if change is good, options are better. All right, um, well, Sean, a pleasure to have you. Kim, before we wrap, though, I loved your last comment. That might have been your key takeaway. You're challenging folks to do business different earlier, but with Sean's t shirt ism there. Change is good, options are better, or anything else we've kind of run the gamut on over the last hour. Any last point you want to leave.

Kim Reuter [00:47:37]:

With our audience, pick the right partner. And that goes above and beyond pricing. Okay, so when, when I talk to people about picking the right partner, price is actually the last thing we talk about. What kind of tech do they have? How do they support you? Do they have access to the capacity? Do they care about you? Are you going to be a tiny little customer or a great big customer? Where do you fit in their ranking? Their culture. How does their culture complement your corporate culture? That is way more important than people give importance to. So I think the thing that I heard from Sean today is the most important thing in air cargo is making sure that you have the right partner.

Scott W. Luton [00:48:18]:

Yes. Well said. And I would just add piggyback. One little thing. Are they open to change? Because we know change is going to always be there and that it's a tough, you know, when you, when you try to collaborate with folks that are very resistant to change, especially in this industry, bad things can happen. Well said there, Kim. Well said, Sean. I want to thank everybody.

Scott W. Luton [00:48:41]:

Thanks. First off, I know we couldn't get everybody's comment and question out here today. Again, you'll be able to connect with Sean and the team and we encourage those post show conversations for sure. They always bring lots of new Eureka moments. I want a big thanks. Big, big thanks to one of the coolest, coolest guys around. Tell you, cool as a cucumber. Sean Francisco, chief operating officer for the Americas with Apex Logistics International.

Scott W. Luton [00:49:06]:

Sean, thank you so much for being here.

Sean Francisco [00:49:08]:

Scott, Kim, thank you very much as well. I really enjoyed myself.

Scott W. Luton [00:49:12]:

I did, too. We're going to have to do it again. And Kim Reuter, as I knew your expertise and background was a great fit for this conversation here today. Thanks for being here, Kim, love being here.

Kim Reuter [00:49:22]:

Thank you for the opportunity.

Scott W. Luton [00:49:24]:

With all of that said, what a great conversation here. Hopefully you've enjoyed as much as I have. Make sure you reach out to Sean and the team, check out those resources. Make sure you follow or connect with Kim also across social, especially on LinkedIn. But one thing that we gotta challenge you to do that is take action. Take one thing that Sean or Kim touched on here today, put it in action. Your teams are ready to change how business is done, but it takes deeds, not words. So with all that in mind, on behalf the entire Supply Chain Now, team Scott Luton, challenging you do good, give forward, be the change that's needed.

Scott W. Luton [00:49:55]:

And we'll see you next time right back here at Supply Chain Now. Thanks everybody.

Narrator [00:50:01]:

Thanks for being a part of our Supply Chain Now community. Check out all of our programming at supplychainnow.com and make sure you subscribe to Supply Chain Now anywhere you listen to podcasts and follow us on Facebook, LinkedIn, Twitter and Instagram. See you next time on Supply Chain Now.