The Fourth Industrial Revolution on Transforming Global Logistics with Special Guest: Author Mac Sullivan

Alexander McCaig (00:08):

Hello world. And welcome back to TARTLE Cast. When we talk about the interconnected nature of things, there's always a big focus on data. Right? And transmission of things at light speed for information, that's all well and good. But what happens when you have to move massive heavy objects in bulk containers. Right? Across huge bodies of water, and then trying to keep tabs on that stuff. Our world... No matter how much we want to make things very non-physical and at light speed, we are physically bound and we brought on a world-class specialist and he's our guest today, Mac Sullivan from NNR Global Logistics to talk about the fourth industrial evolution in where we see logistics and supply chain headed, even for companies like his own. And in our global logistics studies working with... For them as the leader, to be the example for how logistics and supply chain companies should adopt, because they tend to have been lagging indicators in the past. So Mac, please tee us up with how you see logistics and supply chain moving into be those leading indicators and catching up with where other digital technologies are headed today.

Mac Sullivan (01:27):

Yeah, thanks Alex. So I guess the first thing to say is that since the inception of COVID-19 this period kind of 2020 into 2021, digital transformation has... I saw a great graphic, those are wrecking ball coming through. Right? So, I think that has acted as a really good catalyst to set the stage and kind of push logistics in the freight forwarding industry to kind of recognize some of the weaknesses that we have as an industry. Big companies, small companies alike. Right? So, it's dramatically increased the importance of digital technology. I read an interesting article this morning saying that 64% of these respondents from a McKinsey survey said they're three times more likely to engage their customers in the logistics industry as they were prior to COVID. Right? So you're seeing that push to a digital format. So, which is exciting because like you said, it's been needed for a long time and logistics and shipping is one of the oldest industries in the entire world. Right? So it's time for some new blood.

Alexander McCaig (02:42):

Yeah. It's funny. Insurance, for instance, slow movers. But if you talk about Merchant Marines, protecting cargo, that's moving back and forth, [inaudible 00:02:51] of objects when they get into port. Right? We're talking pen and paper, you get a customs form. These things end up getting scanned into a computer, do these things in fact checkout? How much in terms of human involvement is actually in the process of when a cargo carrier comes into port, I don't care if their bringing natural gas or coal or whatever it might be or cars for a roll-on roll-off. Is there a huge human element that's in this? I see the cranes move, but I'm typically not seeing people on the ground or the process of the paperwork and tracking these objects. What does that look like?

Mac Sullivan (03:28):

Yeah, so it was interesting. I was talking to a warden MBA student this morning and he's doing an internship for a large Indian consultant company and he has the topic of 5G. And I said, 5G is too far out for us. Right? We're focused on more third industrial revolution technologies. And that is the internet. Right? That is actually the digital communication of information. So when you asked that question, it's roughly 12 to 15 different parties are communicating on that documentation as the cargo goes from one origin to another. Right? So obviously that number can be smaller, but also can get much larger depending on the complexity of the supply chain. And yeah. So, when we decided to write this book we have all these different fourth industrial revolution technologies that we could look at. Right? Autonomous vehicles, AR, 3D printing, et cetera. However, one of the ones that struck out stuck out to me was RPA robotic process automation.

Alexander McCaig (04:35):

Correct.

Mac Sullivan (04:36):

And that removing that manual, repetitive rote tasks from all the different white collar workers that we have. Right? So, the automation of the physical part is pretty sophisticated. Right? You see the Amazon drones and the nice warehouses, however, the backend, the office workers that we have in our different offices, tons and they're still doing things very manually. Taking a document and just keying it in. So that's a big focus for us.

Alexander McCaig (05:09):

With keying in, do you find... If there's a margin, you got to have some sort of margin of error here and when something does slip up, what are the systemic effects of someone doing something improper? Does it hold up a larger process? What does that actually mean for goods and services that are coming in and out of these ports?

Mac Sullivan (05:27):

That's an excellent question. And I think kind of some of the things that... We bear a lot of weight in terms of the compliance that has to happen. Right? So, you were asking, the margin of error. So if you miss declare a document on behalf of your customer, that can have huge ramifications potentially legally as well, not just financially. So yeah, the typos, the human error has real-world consequences, and it's something that as a fairly low margin business, we have to constantly keep check on that. Right? And make sure that our folks are trained in doing it right.

Alexander McCaig (06:05):

So, do you think now, when you talk about the low margin aspect of it, is that probably one of the inhibitors to the adoption of certain technologies where they're like, "I don't really want to be investing in this." Because they're going to see it as another cost training, all those other aspects to get it implemented and they're like, "The old process, although it doesn't work great. It is working." Is that typically a mindset that you see within this sort of community?

Mac Sullivan (06:36):

Yeah. That also came up this morning.

Alexander McCaig (06:36):

I guess I'm just asking the same old question huh?

Mac Sullivan (06:38):

No, it's good. Transparency and visibility into where you're shipping is. Right? Right now you can order a $2 mug off Amazon, you can watch it turn by turn as it gets to your house. However, the instances where we could be shipping a couple of hundred thousand dollars worth of goods, and there are gaps in terms of the visibility and transparency along the route. Right? So I go to this conference every year called the Internet of Things. Right? It's held in San Diego. I've been to the one in Singapore, and I hold these little round tables. That's what these all very high-level guys from all these kind of blue chip manufacturers. And we sit there and talk about transparency. And they're like, "Well, why can't you guys just track the cargo better?" And I said to them, well, the tracking device is about 30 to $50. Right?

Mac Sullivan (07:29):

That you could put inside a container or a pallet of air freight, but who's going to pay for it. Right? We're constantly getting beat over the head for lower prices. So, it always goes back to that question of cost. Right? And then I guess the value proposition and talking to the right people. Right? So it's, how do you get in front of the CFO's of these companies and say, "Hey, increasing your freight costs by 2% might give you a lot better supply chain visibility and could give you value here and give you value there." Yeah. We still struggle with that. And kind of the carbonized good. The big box stores, Pharma and Automotive and Aerospace, as we were talking before. These guys are willing to put the money down for that visibility. However, not the average family trading company.

Jason Rigby (08:23):

Mac, in section two, you talk about IOT and you talk about logistics and management in an IOT world. And I know you said, they're expensive, but when you look... I know this is part of the fourth industrial revolution,. when you look at IOT devices, is this the future? Is this the adoption? I mean, are we five years out, 10 years out for this? As chips get cheaper. You mentioned the automotive industry, and I can imagine they already have these IOT devices in the vehicles, when they're getting shipped over. When you look at the IOT world, what do you see as far as on the logistics side?

Mac Sullivan (09:03):

Hesitate to make predictions in this industry. [Crosstalk 00:09:06]. So, my guess is, as the costs reduces, the information security costs are going to go up. Right? So, once again, we deal in international shipments, almost primarily. So you're crossing international boundaries, where you're you going to have different data protection laws. Even moving a truck from California to where you guys are, you have different laws that regulate the different state guidelines. So, for example, we see a lot of visibility providers trying to give us these apps to put on our truck drivers phones. Right? But once again, having that app, collecting truck drivers, personal information that changes from state to state, and you have to be really careful. Right? [crosstalk 00:09:57]

Alexander McCaig (09:58):

We'll talk about it in a second.

Mac Sullivan (10:01):

Okay.

Alexander McCaig (10:02):

Yeah. So we have a completely trustless marketplace and for instance, your company NNR could have their packets of information on shipments, whatever it might be. And you can share that cross border without any sense of liability issues you might have, because it's a consent based approach and it's an agreement every time it's transferred. So, I think that may be an option for the future in terms of that sort of trustless interaction happening with that information. But when I look at these IOT devices and we look at the adoption, I know that insurance is a big driver. So before I continue to round out this thought that I think I've had here, if I want to ship one container, whatever that thing might be, what is the typical percentage of the total cost to ship just one container accrued to insurance?

Mac Sullivan (10:55):

It all depends on the value of the cargo.

Alexander McCaig (10:58):

It depends on the value of the cargo, but say for instance, if we're looking across the board, maybe it's like 20%? maybe less?

Mac Sullivan (11:06):

Yah, I'd have to check. I haven't [crosstalk 00:11:08].

Alexander McCaig (11:10):

The reason I talk about this. Right? So, say you have a 30 to $50 tracking device you're putting on there. If the insurance companies realize what's going on with the fourth industrial revolution and they realized that data is the key driver. If they take those aspects into their Merchant Marine underwriting process for moving this stuff back and forth, then that means having that device on there for 30 to 50 bucks could actually be much more readily adopted if the information from that was baked into the underwriting process itself for the insurance company. Now you're essentially offsetting that price of putting the device on and you get a cut back on the cost of the insurance because they have more information to underwrite with. Don't you think that would be a beneficial approach going forward for something like that to help that adoption happen, to net out that cost?

Mac Sullivan (11:58):

I'm getting [inaudible 00:11:58].

Alexander McCaig (12:00):

Yeah, no problem.

Mac Sullivan (12:01):

That should be better. Yeah. So, so in some of these panels that at the event I was talking about, we've arrived at that conclusion. Right? Once again, you're talking at a pretty sophisticated level. When you got to remember some logistics managers and some logistics salespeople, they might not be able to conceptualize what you're talking about. We're supposed to still... For the more sophisticated logistics company. Sorry, logistics companies or shippers. Those are considerations that they've taken to account. Right?

Alexander McCaig (12:36):

Is education the problem?

Mac Sullivan (12:39):

Education... It's interesting that... I don't know if you guys saw the Suez Canal. Right?

Alexander McCaig (12:45):

Yeah. We did. Do you have any truth on that because I'm sick and tired of conspiracy theories on it?

Mac Sullivan (12:52):

I do not. However, between The COVID vaccine rollout and right now, the freight rates are through the roof, from China into the U.S. and the Suez Canal. Logistics has never been more attractive to perhaps young people coming out of college. Right? I still struggle to get people to even come and do internships. Right? Because we're fighting against the tech guys, the finance guys, the legal guys. Yeah. So is talent the issue? I would say 100% and that's kind of... Why did I write the book? Why do I come talk to you guys is we're always trying to attract smarter, more innovative, intrepid investigators.

Jason Rigby (13:37):

This is the future. I mean, for instance, there's memes going around about... Yesterday I saw a guy found an old 1970's Porsche in a barn that was dusty and he goes, "I found the perfect fine." And he goes, "There was two pieces of plywood." So, he's miss past the Porsche. Plywood's gone up. And then look at food scarcity, what's happened globally because of COVID. So, I mean, we can literally transform the world if we get this right. Especially on the logistics side of things.

Mac Sullivan (14:09):

Yeah. And I think that's what you'll see here in the next five to 10 years is optimizing the existing footprint. When I looked at the Suez Canal thing, as I was writing my PhD. What an image for this bloated oversized industry that nobody can get a ship out of a canal within five days. Right? So it's a very good visual representation, but I think what you're going to see is we need to kind of lean out and optimize this industry. And that takes talent. Right? Technology is not going to help fix that. It's good, old fashioned elbow grease. And some of the things we do at my team is do a lot of process mining. We look at what is our existing process today, and we kind of mapped it out. And then when we start to look at optimization opportunities, so we spend a lot of time doing that kind of white boarding exercises and find that very useful to identify issues and kind of flush out different scenarios.

Mac Sullivan (15:14):

But to your point... Yeah, food scarcity, or just... I mean, out here in Dallas, Texas, you walk around the block on Tuesday when the trash guys coming, there's perfectly good sofas and tables and all those kinds of things just sitting on the curb. Right? We're also not... I think we're going to see a growth in the secondhand market. Right? To your point of kind of sustainability. So, it's one, I think you're going to see the secondhand market really improve as things possibly tightened down. Two, we got a lot of trucks. This is how Walmart made their name, was making sure that they're filling up the trucks as much as possible. So they were sending in less, they wanted to get as much of the suppliers into one truck to optimize the use that space in the fuel. Right? So I think sustainable would just explain logistics. It really is an attractive subject. With a Democrat in office, we're starting to see, "Hey, what is the carbon footprint of the shipment?" That pops up every time a Democrat comes in the office, which is pretty interesting.

Alexander McCaig (16:20):

First of all, have you seen the inside of a Walmart trailer when it comes for delivery to drop off at the store?

Mac Sullivan (16:27):

Not recently.

Alexander McCaig (16:28):

I got to tell you it's freaking chaos. I know this, I've seen them firsthand. All the suppliers, just bombing in there. And it comes like this big mountain of cardboard with all the stuff in it. And you got to like pull it out and it's just an atrocity. But aside from that point, that little story here. You talk about the second hand market. I did a lot of research when I was in university around shipping in general and looking at the indices of shipping, because I know that everyone says, in America, "If the truckers stopped driving, America stops." Well, the truckers don't drive if the ships don't show up. We're talking about the movement of these goods back and forth across international borders, that's really dependent on shifts. And if you think about the aspects of it, these ships are huge, they're heavy, they're essentially limited by speed and weather.

Alexander McCaig (17:27):

Okay. And also processing in the ports. There's so many bottlenecks that can possibly happen within this, just for your own company. And what you've seen, what is really within your power to change that sits outside of the natural limitations of a canal, for instance, which can only let through certain of ships at any given time, what is it within your power you do at NNR Global Logistics that are solving things that increase your efficiencies that will hopefully have a nice trickle down effect or reduce any sort of liability when you do come face, the things you can't control.

Mac Sullivan (18:07):

Yeah, exactly. And I think that's where we as a company shine. Right? We have competitors that call their customers by their account number. Right? Mistakes and things like the Suez Canal are bound to happen. Right? Shit happens. I don't know if I should swear.

Alexander McCaig (18:29):

You can swear on this all you want. Be my guest.

Mac Sullivan (18:32):

Yeah. And it's the ability to kind of pull back and say, okay, we were supposed to get on this container ship from middle of China to Dallas, for example. Right? Okay. What are all our alternatives? Can we track it down to Hong Kong and then put it on another ship? Could we take it via airplane halfway, go to Singapore or go to Dubai and then put it on a ship out of there. It's kind of that problem solving. That extra effort that still... We have a job today. Right? We always say that we're kind of like travel agents for the freight. Right?

Alexander McCaig (19:10):

Right.

Mac Sullivan (19:11):

When do you need a travel agent these days? Well, during COVID, I called quite a few to try to get my father-in-law back to China because it's so difficult booking flights and coordinating all the different customs information. Right? So, those scenarios provide us as straightforward as a job and something at NNR that we pride ourselves on that ability to really get involved and come up with solutions.

Alexander McCaig (19:37):

What do you see as far as machine learning?

Jason Rigby (19:41):

Is talent an issue? And I know this would probably be years out, but this is fourth industrial revolution stuff, but would that solve the problem, especially when it comes to efficiency?

Mac Sullivan (19:54):

Well, in this space of transportational logistics, we have Alibaba and Amazon with more PhD's on staff than probably 50 countries put together. Right? So I think if there's a solution, those guys are the ones that are going to get there first, because once again, they're upstream enough, they're seeing those supplier shipments kind of being put in those FBA, Amazon warehouses where they can start to see that loading plan. Right? So once again, it's maximizing and optimizing the space on the truck is something that's 100% sophisticated algorithms can figure out. Right? Or potentially, calculating the different routing options that it could go like I just said, is it train to bus to plane, plane to ship to the truck? That's something that a machine learner could do very well. Once again, my experience in this industry is even at the highest level when we talk about tenders. Right? So rates.

Alexander McCaig (21:04):

Yeah.

Mac Sullivan (21:06):

We have a real need for sophisticated algorithms to come up with... Okay, what is the rate going to be next year from Tokyo to San Francisco? How many dollars per kilo? And you could look at all these different factors. Right? The three of us could sit here and come up 50 different variables.

Alexander McCaig (21:25):

Let's do it.

Mac Sullivan (21:27):

Let's do it. I got the time.

Alexander McCaig (21:34):

Speaking of tenders and stuff like that, and all the changes with machine learning, everything sounds great. Everybody loves buzzwords. And they talk about it all the time at the round tables. We like things that are fundamental, actionable things. And I think the way you wrote it was, "What's hype and what's a realistic solution?" What looks like hype to you right now and what looks like something realistically that can be done today?

Mac Sullivan (22:01):

Yes. Great question. So, you know what I'm seeing in terms of machine learning? For example, two years ago, I did exhaustive search looking for OCR vendors. Right? Optical character recognition, trying to find a way to take a document, scan it and extract the data. We were seeing really high prices per document. Two to three to $4 range, we're seeing that price drop and the sophistication of those algorithms really kind of get to a point where we can use the kind of off the shelf. Right? So I see OCR as a very prime case for sophisticated technology being used in the next six, 18 months. My experience with RPA, you still have to have somebody that knows what they're doing, unless you want to hire pretty expensive consultant. Right? The companies like UiPath that do a pretty good job of providing an intuitive platform. They're going to go and train the bot, where to click here and put here, click there. However, it still takes some time to wrap your head around.

Mac Sullivan (23:16):

We're seeing the growth of this digital adoption platforms. Right? So one of the things that does play this is training and up skilling our folks. So we're seeing these nice kind of... They sit on top of your software and they say, "Okay, to start a new shipment click here, next step, go here." And that can actually map out the process and copy what you click. So it's doing a little bit of that, that RPA, and just also creating training materials for the humans to come and be onboarded using that as well. Right? So adoption platforms we see on the rise. In terms of hype, I think we're still pretty far from autonomous vehicles, from what I've heard friends in that space, the regulations at state level, I think aren't quite there yet. One of the things [inaudible 00:24:08] look at us. In order for governments to be able to create policies, to sit on top of these different technologies, they got to have some smart people to look at them and come up with the rules. And I haven't seen too much of that yet either.

Mac Sullivan (24:25):

Autonomous vehicles I'd say is a little while out. Also, that's the number one job in America, truck driver. And so that would be a pretty, pretty big shift in the labor market, although there's a huge shortage. So I think there is a demand. Yeah. IOT is all around us. I mean, I think we're seeing that in one form today. Right? Like I said, the truck driver using his cell phone as a sensor that exists and is being utilized today. Are there more applications? 100%. right? Yeah. 3D printing. I just have had not seen the adoption of that really take off. So one of the things we talked about, books kind of cost the material hasn't really come around. Yeah.

Jason Rigby (25:17):

What about blockchain? I know you talked about that in chapter six of your book.

Mac Sullivan (25:23):

So yeah, we had some contributors write in about blockchain. Blockchain to me is... So when you talk about trustless platform, I've probably done... I don't know, 60 to a 100 hours of research about supply chain and logistics related blockchain projects. I have yet to see a actual mock-up, even a mock up of a smart contract. What does it look like?

Alexander McCaig (25:47):

Well, Hey, if you really want one, I don't really want to share a ton IP with everybody on the air right now, but I'd love to walk you through how we created something that has absolutely zero fee with instantaneous processing. And it can be applied to many, many different types of technologies. I'll show you how the whole smart contract works.

Mac Sullivan (26:08):

So once again. I know enough about the technology to know that the value is there. Once again, until we have these tangible teachable tools, that's where I think blockchain is kind of still turning and still waiting its turn in terms of mass adoption. Although for the first time ever in a serious customer meeting, blockchain was brought up as a potential form of payment, which... Once again, that's how it starts is people start to bring it up. The younger folks that potentially have invested in crypto are, or have been exposed to the topic, they'll start asking those questions and then...

Mac Sullivan (26:52):

I think it'll come when you talk about insurance. I think that's the perfect use case for blockchain in supply chain logistics, but you got to get way upstream to get to those factories. Or you've probably seen the Maersk trade lens. Maersk is the biggest shipping company in the world partnering with IBM and yeah, go into tag the bananas and you see the flow of the bananas, seeing that one. Getting into the factories in the middle of a third world country and expecting them to take pictures of the different products and kind of tag them. I think it was a bit of a stretch even still.

Alexander McCaig (27:33):

I agree. Yeah. I think it looks all well and good for a white paper, but the practicality of putting a chip on a damn banana in Honduras or something like that, I don't think it will continue to fly.

Jason Rigby (27:47):

Do you think as far as blockchain and you mentioned payment, do you think crypto would solve eventually once fees are down? Do you think it would solve the issue with Fiat currency and the trading back and forth? Or does the logistics have that down? As far as going from Hong Kong to San Francisco.

Mac Sullivan (28:08):

That's an interesting one because what we're seeing, we're seeing a huge cybersecurity risk out there in the transportation logistics industry. So, to me, blockchain and crypto in particular for payment have two sides of the coin. One is, it's a potentially encryptible way to send and receive funds much faster than a wire transfer and much more secure. In some ways than [crosstalk 00:28:37].

Alexander McCaig (28:38):

Targeting wires.

Mac Sullivan (28:41):

That being said, it's the same guys that are causing the concerns that are asking for ransom in crypto, which gives it a kind of bad name, which is... I'm not sure if that's going to go away anytime soon. If the bad guys are using the thing you want to use, stop the bad guys.

Alexander McCaig (28:58):

I think that doesn't get a fair highlighted because you hear all these people bashing the criminals, use it. Yeah. I'll tell you right now, the number one currency criminals use in the world, hands down as an absolute fact is U.S. dollar. I don't know what anyone's talking about. I mean, if you talk about blockchain technology, you can trace those things back. Any bright criminal should not be using blockchain technology. Right? It's too easy to see where that has come back through, in that whole process. That's the whole point of it. It's a log, it's a perfect record, decentralized across many people. Why would you want to use that? Oh yeah. We're all agreeing. Yeah. In fact that did come out of North Korea, we're all looking at it. There are great changes happening.

Alexander McCaig (29:37):

And looking at that adoption, would a unified world currency is fearless and can be moved back and forth to save a lot of headache in terms of shipment of product. Yeah, it would. And when I think of blockchain technologies for us moving data back and forth, if it doesn't work for data, then it's not going to work for a physical product. Right? But if we can make it work for this data, there's no reason we also can't track the other information that moves with those physical products and apply it at the same time, both in our eyes as an asset. Right? So, the movement of those things and actually capturing that information, finding out the Genesis of where it came from, the providence of that actual cargo container, I think this sort of thing is actually very important and would decrease a lot of those costs naturally because we talk about blockchain.

Alexander McCaig (30:28):

It's an adoption of everybody coming in to help verify the network rather than say, "Okay, it's mayor's job to verify this. It's an NNR's job to verify this." Everyone's coming better to supporting themselves and not to make a pun out of this, but a rising tide lifts all ships. Right? And I think that's a really important, fundamental factor. So if we are headed into the future and you want to leave a message to all those executives out there, because you know how hard it is to get to those individuals and have those conversations, Mac. What does that message you would want to leave with them about where you see these things headed?

Mac Sullivan (31:09):

Good question. Yeah. Going back to my point. If you want your transportation logistics problems go away, it's pay your vendors. Right? So, we can hire better, smarter, more educated people that can go out and solve your problems. Right? To look at all these solutions. I think for a long time, we've kind of been treated as commodity. So that would be the biggest request is, stop treating this as a commodity. And hey, when you get the first round of Trump tariffs, that's like the first call that we got. Our customs brokerage team is, "Okay. Hey, did I just get hit with this 25% increase?"

Mac Sullivan (31:52):

Those are the kinds of things that, that pop up right now, container rates from China to U.S. are through the roof. Right? "Hey guys, can you get me some space on that ship?" It's only in those times of crisis that we kind of feel like a valued partner. So it's, "Hey, give us a shot. Sit at the table. Supply chain is not going away anytime soon." I think even with new shoring, potential automation doing manufacturing in the U.S. We're still going to be shipping stuff for a long time. Right? It was, it was there 6,000 years ago. And I think there'll be there 6,000 years in the future. Even if we're sending nanotechnology up into space.

Alexander McCaig (32:34):

That's NNR's, next step is jumping on the SpaceX. We're going to ship more stuff.

Jason Rigby (32:38):

Yeah. We encourage everyone. We'll put it in the show notes. We encourage everyone to purchase your book. It's the Digital Transformation of Logistics Demystifying Impacts of the Fourth Industrial Revolution.

Alexander McCaig (32:48):

Yeah. And it does have the IEEE badge on it folks. So this is not for the faint of heart. This is a legitimate piece of material that was very well thought through with some very bright minds trying to solve very, very big problems. So Mac Sullivan, thank you for investigating everything that you do investigate. Doing this work personally and professionally. It's very well valued in you coming on the airwaves and sharing this with us is going to be a great benefit to many people that be able to hear this.

Mac Sullivan (33:19):

Pleasure, gentlemen.

Alexander McCaig (33:20):

And listen, we'd love to have you back on because there's so much to unpack. So you just let us know when and we'll get it shipped.

Mac Sullivan (33:29):

Sounds like a plan.

Alexander McCaig (33:30):

All right. Thank you again.

Mac Sullivan (33:31):

All right. Thanks guys.