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Convoy CEO on adapting to COVID-19: 'The most important thing is to build flexibility into your business'

Convoy CEO Dan Lewis joins Yahoo Finance Live to discuss how his company adapted amid COVID-19.

Video Transcript

ZACK GUZMAN: One of the themes we saw play out here in the pandemic is that the surge in e-commerce and online shopping may have laid bare the stresses on America's freight and logistics sector here. A shortage of truck drivers has been at the forefront of that. But still, a lot of other issues here to perhaps be addressed under the incoming Biden administration.

And joining us now to discuss that with us is Dan Lewis. He's CEO of Convoy, a Seattle-based freight logistics company. And Dan, good to be joined by you today. I mean, when we talk about it, it does seem like a complicated issue that doesn't necessarily have the simple solutions.

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Of course, improving the logistical network, which is what you guys are working on, could help. So what should Americans know about where we're at right now at this point in the pandemic when it comes to trucking and shipping?

DAN LEWIS: Yeah, so trucking is a huge part, obviously, of our economy. It's the backbone of how things get around the country. 80% of the time, when goods are being moved, they're being moved on a truck. And in 2020 we saw a lot of volatility. Early on in the year, rates shot up with stockpiling. They came back down pretty hard in April and May.

And we estimated about 45,000 to 50,000 truck drivers retired a bit early primarily because of the depressed prices in trucking as well as the fears about COVID. Doing research, we found that 40% of truck drivers said they feared getting COVID while on the road. And so one of our biggest priorities has been how do you keep carriers productive, and how do you keep carriers safe.

And I think in terms of where we are today, things have gotten a bit more steady in the market. However, there is still continued demand for goods at a rate we haven't seen historically, with people not spending money on dinners out or on travel, spending it on fixing their homes up and buying things online.

And so we've seen a ton of freight moving in that way. We've also seen some of the imports through Los Angeles ports backlogged based on all of the stuff that people are buying right now.

EMILY MCCORMICK: Dan, this Emily. I'm wondering how Convoy has had to individually pivot its strategy, its business operations if at all, and I'm assuming you did have to, during the COVID-19 pandemic to accommodate for some of these changes in demand that you were talking about.

DAN LEWIS: Yeah, I think that when the world's unpredictable and you don't know what's going to happen next month or next quarter, the most important thing is to build flexibility into your business. And when we think about making more capacity available on the market, it's about driving more efficiency and making truck drivers more productive, so reducing empty miles, having better predictability about where the truck is, stitching different jobs together so one truck can do multiple jobs back to back, we've seen that when we do that, we create significant additional capacity in the market. And we reduce unnecessary fuel emissions and carbon into the atmosphere. So it's actually kind of a win-win experience.

And that's something we really had to focus a lot on was how do we reduce waste, how do we reduce empty miles, how do we keep carriers productive in a time when capacity is tight. And we're trying to free up as much capacity. If it's not going to come from new drivers entering the market because the commercial driver's license schools are closed, and it's harder to get into the market, then it's about making the existing trucking companies as productive as possible using technology.

ZACK GUZMAN: Yeah, that's the interesting thing that you guys always are making the big push for there. And a lot of people might not realize how much of the sector is made up by smaller trucking companies that might have fewer than six trucks, perhaps. But I think, you know, there was a recent video that went viral kind of talking about how more truck drivers are kind of potentially falling asleep out there due to these stresses.

And as you're talking about, obviously, there's a lot of packages to get delivered here. I wonder if kind of the way that the sector has moved to kind of compensate these drivers individually and kind of match their incentives to just drive more and longer trips here, if there are concerns about addressing the health and safety of drivers right now and the way that the sector and industry is built.

DAN LEWIS: Yeah. It's a really good point and question. I think honestly, always, we need to be thinking about the health and well-being and safety of truck drivers. It's a difficult job in any condition. And right now, rates are high. And rates became very high in kind of Q3, Q4 last year, which does create a pretty significant incentive to drive more because the more you drive, the more you can make.

And so I think one is ensuring that rates continue to be significant enough that more drivers come into the market, maybe relieve the pressure from the existing capacity, but also allow existing drivers to make enough money so that they can drive the right number of hours and make a living.

In the last couple of years, we've seen kind of sequential rollouts of expansion of electronic logging devices and additional regulations around ensuring that truck drivers don't drive too many hours and too much time back to back. And so that's part of it. That came in before the pandemic. And it's probably a good thing that it did because it probably helped curb some of the effects that you're describing. But it is something we need to watch out for and we're always paying attention to.

EMILY MCCORMICK: And Dan, now with this new administration, Biden floating a potentially $2 trillion infrastructure plan, I'm wondering what implications that might have for Convoy and for the broader trucking industry and whether you've started positioning the business for changes that might come from that.

DAN LEWIS: Yeah, I mean, I think, first and foremost, that would drive additional trucking. Long-term, it's great. Better infrastructure across the country is better for transportation. But there would be a lot of work to move a lot of goods for that.

It's something that we've talked about. And we aren't making any specific changes right now as we watch to see what that looks like. But ensuring we have the right kind of trucking capacity and types of trucking equipment to be able to handle that is important.

I think also there's going to be several different approaches that the administration takes, prioritizing sustainability and more environmentally friendly trucking practices. And I think that that's an area where Convoy can really shine because when you use technology to understand where these hundreds of thousands of trucking companies and trucks are, you can more efficiently match them with jobs.

So instead of driving 160 miles empty, on average our trucks can drive 80 miles empty to get to a pickup or even less. And reducing that waste not only lowers costs, it increases overall capacity. But it will also help us reduce environmental waste and support some of the sustainability initiatives of the new administration.

ZACK GUZMAN: Yeah, a very interesting a push on that front, as we have already heard from President Biden on the issue of climate change clearly being stressed here. But Dan Lewis, the CEO of Convoy, appreciate you coming on. Very interesting stuff you guys are working on. Please keep us posted. Come back soon. Be well.