Following layoffs, C.H. Robinson is now focusing its efforts on enhancing its digital load board to gain market share.
The broker is working to enhance its Navisphere platform, “extending the penetration of our digital offerings with both our carriers and our customers,” COO Arun Rajan, who was recently promoted from chief product officer, said during the company’s Q3 earnings call. C.H. Robinson saw a 77% increase in carrier load bookings through Navisphere compared to its Q3 last year.
Still, analysts say the company will need to do more than just focus on tech if it wants to stand out in a crowded field. Transport Dive reached out to Todd Fowler of KeyBank Capital Markets and Bruce Chan of Stifel, who shared their perspective on recent layoffs and increasing tech investments in separate emails.
Editor’s note: This interview has been edited for clarity and brevity.
C.H. Robsinson announced layoffs after expanding headcount. What does this say about the company's strategy?
Chan: We believe the company’s inability to sufficiently match staffing levels in its freight forwarding division with anticipated demand was indicative of ineffective organizational planning—unless they believe that they will see a substantial uptick in business activity near term (either via share gain or a market resurgence), but it seems clear to us from their comments that they do not.
As a non-asset-based service provider, one of C.H. Robinson’s hallmarks should be an ability to flex its variable cost model and control personnel expenses in a softening environment—something that its freight forwarding peer Expeditors International has historically done very well. If it is unable to respond to changes in the market quickly enough, Robinson will continue to experience margin pressure at all points in the cycle, in our view.
Fowler: It’s easy to Monday morning quarterback with the benefit of hindsight, but the context of the past few years may provide some perspective. In 2020, C.H. Robinson furloughed employees during the pandemic and was in the process of bringing employees back in the past few quarters to support the meaningful disruption experienced in 2021 and early 2022, all of which was exacerbated by a tight labor market.
The slowdown in overall demand in Q3 of 2022 was probably greater and more sudden than most were expecting, particularly in global forwarding, likely resulting in them overshooting on headcount in the short-term. So, while there were yellow flags the environment from the past few years wasn’t sustainable, responding to the volatile market over the past few years likely provides some context.
Is C.H. Robsinson’s focus on technology the right move, especially given the focus on keeping costs down?
Chan: We believe that investments in technology is an important part of a sound business strategy, but investment alone is not sufficient. Some technology enhancements are effective and some are not; some deliver a good ROI and some do not; and all technology tools must be implemented, with training and use incentivized by management. We’ve been encouraged by some of Mr. Rajan’s comments, and his promotion signals that Robinson is more serious about technology, but the company has been preaching technology as a major pillar of its strategy for the previous five years and two business cycles with little to show for it in terms of operating improvement and profitability.
Specifically concerning Global Forwarding, the division saw major uplift from an exceptional and unprecedented capacity backdrop after the pandemic, but as supply chains normalize, performance will have to stand on its own. While Navisphere has been an effective platform for North American Surface Transportation, we do not believe it is perfectly adapted for Freight Forwarding, so we may be looking at significant effort and investment there before the business unit can continue to close the long term margin gap versus best in class peers.
Fowler: In our view, this is a path the company has been on for several years. Competition within the brokerage space is always intense, and we see several positives for C.H. Robinson as well as certain challenges. Brokers benefit from size and scale, which C.H. Robinson certainly has, along with a tremendous amount of historical pricing and customer data. This provides numerous advantages to many “tech-enabled” start-ups.
That said, technology is changing the brokerage space, and C.H. Robinson has to continue to invest in their existing systems to remain competitive. Also, as a larger organization, C.H. Robinson has to navigate the cultural and structural challenges of steering a “large ship.” Clearly, Arun is well suited to help the company with this process, and while they have many advantages relative to smaller competitors, must remain nimble and responsive to the market.