Blythe Brumleve:
0:05
Welcome into another episode of everything is logistics a podcast for the thinkers in freight. I'm your host, Blythe Brumleve. And I'm happy to welcome in Derek Szopa,he is the CEO of CloudSort. And we're going to be breaking down the middle mile in today's conversation, which I'm pretty pumped about, because we on this show a lot, we talk about the last mile and the first mile,but we rarely talk about the middle mile. So Derek, is perfect opportunity. Welcome into the show.
Derek Szopa:
0:32
It's very nice to be here. Thank you for having me.
Blythe Brumleve:
0:36
Absolutely.Now, before we get into the logistics side of things, I was checking out your LinkedIn profile earlier today. And I noticed you have more than seven years in the Marine Corps, as far as your experience is concerned, serving most of those years as captain, how do you think that your marine background has helped shape your entry into the corporate world?But you've been in for a while,but I'm always curious about how the military helps out, you know, with the regular civilian jobs, as they might say,
Derek Szopa:
1:05
Oh, that's great.Yeah, I think for me, the military was, you know, the military gives a lot of like,young leaders the chance to lead big things. And I think that's one of the one of the great things about it. The other kind of aspect of the military, I was fortunate, and a lot of the roles that I had, I was able to be creative, try new things. I don't know if it was just luck,or just kind of like, found ways to do that. But my my leaders always kind of allowed that to happen embraced it. You know,part of the Marine Corps is about kind of small unit leadership and, you know, being resourceful with kind of limited, you know, limited, you know, things to us. And so I don't know, I thought it was it was good for a lot of reasons for me.
Blythe Brumleve:
1:57
Yeah, for sure.And I think with just based on that the folks, you know, the the military folks that I have in my family and close network of friends, it really is one of those things where a lot of them have gone on to play a role in logistics, which I think is really interesting, because I think there's it's a lot of similar roles in logistics, as you have limited resources, and you have to be able to problem solve very, very quickly. Is that is that a safe assumption of your experience as well,going from the military to logistics?
Derek Szopa:
2:28
Absolutely. was in a lot of situation where there just wasn't a lot of resources and that ability to we needed the logistic support. So it was always a part of everything that we did. It was never nothing worked without the logistic support. So I would say that's,that's completely fair.Absolutely.
Blythe Brumleve:
2:49
And and with your after you got out of the military. So you went to so you were at FedEx for eight years,you were five years at amazon before founding CloudSort, you know, close to four years ago.What did you see at your time with working with FedEx and Amazon? What what did you see as sort of like the inefficiencies that was that made you want to go and become a founder of a company?
Derek Szopa:
3:15
Yeah, I think a couple of things. And you touched on a little bit of this.So if you think back to2016 1718, there was a tremendous amount billions of dollars being put to work in on the fulfillment side, as well as on the final mile side. But there wasn't a lot of discussion about the middle mile. And when,you know, middle miles can be defined maybe a lot of different ways. When, as I'm talking about it's really about from the time that package is born, till the time that package is really like in a final mile delivery station or on a final mile route. So that those technologies processes systems in place to allow that package good to get to that point, like that's when we're talking about a mile.That's pretty much what we're talking about. And so yeah,billions of dollars being put to work on both sides of the equation, but not a lot of dollars interests. Thought Leadership in this middle mile space, and so, huh, yeah. To me,
Blythe Brumleve:
4:16
what do you think that is that that? Yeah, I was gonna say, Why do you think that is, as far as the middle mile is concerned that you know,it kind of feels like it's I don't want to say a recent thing, because you've been working on this for four years,but comparatively, so to you know, some of these other industries that have been around for decades. Why do you think the middle mile has I don't want to say like the redheaded stepchild.
Derek Szopa:
4:39
I'm probably a couple of reasons. It's a bit intimidating because the thought I might when someone says mental models or occasion I think the mind goes to hell you need really heavy infrastructure, a lot of mechanical, heavy industrial engineering big storage centers, and that may be true. Our position thing going into it was that the world's changed in the sense that in a lot of ways, but it was relevant to the middle mile, the world has changed in the sense that advancements in technology, like there's been tremendous strides and just computational power that's out there. So that unlocks potential, there's then this kind of general trend towards having smaller lightweight devices or, or things that are connected in a smart way, we thought that was interesting. And maybe there's some things we can learn there that we can bring into the middle mile. There was I mean,cloud computing a lot, a lot of it has to do with computing, and just that ability to use computational or software engineering to replace heavy industry. And so I think that unlocks, like, a way to design things that are at lower capital cost and allow a more scalable way to wait to execute the middle mile. The Yeah, so I think a lot of it is like, why don't people why haven't people looked at it a lot? Or why did it not have a lot of interest early on? I think it was intimidating because of the capital requirements? And because it's the complexities associated with it. It's like,how do I, you know, how do I?How do I even get started, it's such a, it's such a big complicated problem, if you just kind of look at it, you know,from a very high level.
Blythe Brumleve:
6:34
And so as you're you're, you know,noticing these evolutions in technology, and and the lack of focus on on the middle mile, is what was sort of the, I guess,the catalysts for you to say,like, there, I want to create a solution for this problem, I want to found a company, I want to start CloudSort, take me back to that decision. That was sort of like the lightbulb moment for you that you wanted to take on this journey of being a founder.
Derek Szopa:
7:02
Yeah, I think when I started the company, it wasn't100 thing clear, like what we needed to do, I think there was such a broad space that it was,and I had some ideas about how to apply technology and and allow a company to begin without, you know, hundreds of millions of dollars to build out a complete, you know, you didn't need to build out a complete,like Indian solution. So it wasn't there wasn't a big aha moment, it was this gradual realization that there wasn't resources being put into this space, I had some thoughts on how we could move goods in a smarter way. You know, and then,when we started CloudSort, the initial thought was, we take some off the shelf technology,we kind of pieced it together.And that would allow us to move packages across the country and start to get to work, what we discovered was, and this was a challenge getting started, it just didn't exist, we spent some time doing some research unless you wanted to buy, you know,like a multimillion dollar sortation like physical operation, there wasn't just off the shelf sortation technology that was out there that was remotely capable of doing the things that we needed to do a cloud sword. So we took a step back, kind of reset our priorities, decided to go ahead and build out that basic software tech stack. So we spent a year or so doing that. And then from there, able to deploy that get our first client started. And we've been we've been growing ever since.
Blythe Brumleve:
8:39
Now, I love that because you kind of you kind of commonly hear a lot in business, and it's kind of, you know, coming to a reckoning right now is in the tech landscape that, you know,somebody just has an idea. And Silicon Valley has sort of just thrown, you know, $50 million dollars at them, and they can get the ground ground up going for their business, but you rarely hear about those stories about the business owners that just recognize a problem. And they sort of self funded and find it, you know, with their own getting that that scrappy mentality of you know, we're just going to continue building this brick by brick without having, you know, the constraints of what the VC model is like, which I think is really interesting. So kudos to you for taking that route. And there was there on YouTube, I was looking you guys up and there was a video that great commercial that you guys had. And it said our supply chain relies on an outdated system that's been in place for decades. The original advantages of this hub and spoke model built on centralization and fewer direct routes has now become a disadvantage. Now before we get into sort of the solution side of things, can you break down some examples of where some of those legacy systems kind of are inadequate?
Derek Szopa:
9:54
I mean, there's a there's a probably a lot to talk about here. What think about what come to mind, it really, it ends up being a very static system. I think that's that's one of the problems with it. And maybe I should should qualify a bit that we, the hub and spoke design is always going to have a role. There's not it's such a massive amount of infrastructure that it's out there. I'm not,I'm not of the mind, I'm not so naive. Like, we're, something's gonna come out and just completely replace all of that.I think it can be complicated complemented, not complicated.There's a way to complement what exist with kind of a better design. So the hub and spoke model, there's a tremendous risk associated with these hubs in the sense that if there's an outage, demand patterns change.
Blythe Brumleve:
10:47
Like the airlines, you know, with all the airline controversy that just happened, like, I think that that's a great example of sorry to cut you off, no one place?Oh, no worries, it is a great and I think that that maybe is what you're talking about,right? The airline example where you know, you have a weather event going on in one city, and because that's a hub, it ruins everything else.
Derek Szopa:
11:07
Absolutely, it requires for, if you're anticipating it, you have to make changes, and you can readjust, you know, you can put transportation assets in the right locations to kind of adjust to the weather, but it ends up being very difficult to do and they're very static systems. The the, it doesn't take advantage of a lot of this computational power that's out there. So yeah, that's certainly one problem with it. The other one is the capital requirement that we talked about these hubs are massively expensive. And to build one, you need tremendous amount of volume to cover the fixed costs associated with that investment. And so that can work. Or maybe, like, it just you have to take a big leap of faith,
Blythe Brumleve:
11:59
it can work for a very
Derek Szopa:
11:59
small amount of people, or a very small amount of people. That's a very nicely said. But it doesn't work for the masses. And also, it makes,it complicates the procurement process. So you talk, you know,you think about the relationship between the shipper and the carrier. If you have a shipper that wants to ship a lot of packages, that infrastructure has to be built in. Like if the infrastructure is expensive,it's a hurdle that becomes like a complication to getting like a really good agreement in place.So how do you like we ask questions like that of ourselves? Like, how do you? How do you change that thinking? Or how can CloudSort create a better way for carriers and shippers to work together? Our thought is really, you know,attack the cost basis. And part of that is on the fixed cost side. So if we can reduce cost of hubs, I'm leaning into the solutions a little bit, we'll try to back off of that. But it it's certainly important. So the capital requirements for these buildings is massive. And I we view it as a as a as an opportunity, like, how do we address that? So I think those are probably it almost sounds
Blythe Brumleve:
13:13
like, it's almost sound like it's almost that like the hubs are, you know, put in the you know,really, I don't want to say like high areas of congestion, but that's what maybe they're creating is those levels of high levels of congestion. And then there could be maybe more efficient routes to take to avoid that congestion. Kind of like I guess, maybe how the boats on the or the ships that are on the West Coast, they were diverting to, you know, other states like Texas and Florida,when you know, they're backed up for like 72 days or something like that,
Derek Szopa:
13:47
correct? Yeah,absolutely. And there's, there's other examples of this out there and Southwest has gotten away from it a little bit, but southwest, really, instead of having a big hub network,they're really focused on the on the point to point design. I know they had some technical problems that that hurt them a bit recently, but like the concept where has worked really well for a long time and really allowed a really high level of performance. So yes, I think that's a good analogy. And there's certainly other ones that are out there, like you said, having boats thick and go to different ports and Jack closer to points points of entry. Yeah, these are I think these are examples of kind of the way that we think about things.
Blythe Brumleve:
14:36
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Derek Szopa:
15:41
So the CloudSort model is, we believe, smaller,lightweight, low cost operations, or nodes, whatever you want to call them, and have a lot of them and these nodes can be they can be a standalone standalone know that the CloudSort of establishes CloudSort can work with clients to establish sortation inside of their operations, it can really be put anywhere. So it allows,what it allows us to do is move the work to the point of greatest value creation. And oftentimes, it The analogy I like to use here is just think about interest, like how does that work, it compounds over time. So if you can make,sometimes it's a little bit painful to invest early. But if you can do that, then the benefits of that compound over the entire life of that investment in our terms, the entire life of that, you know that package delivery is it's rotting through the system. So making a really good first touch the benefits of that compound through the entire journey of that package. So, yeah, so were these smaller, lightweight operations that are connected in a smart way more direct connections, move decision making into the realm of software versus relying on like a really efficient hub operation? So I put differently.Yeah, just focus on the software and less on heavy, like industrial engineering at a local level, we want the system to think globally, that's what we're designing for. We're less interested in having a single operation or standalone operations that are really efficient, we would rather skip steps and route things direct,because it's cheaper, it's faster, there's fewer defects.Can you give us such result? Maybe
Blythe Brumleve:
17:33
like a couple,like use cases, a couple, like,example, customers that would benefit from a system like this,I mean, off the top of my head,I'm kind of thinking of like,maybe produce what would see in an advantage and using, you know, a model like this? Maybe I don't know, like flowers or perishable goods or something like that. What are some some, I guess, ideal customers that maybe are already using the platform or would be a good fit for using the platform?
Derek Szopa:
18:03
Yeah, I think the ideal customers are ones that are a bit more sophisticated or think differently about package good delivery. So instead of the dialogues that we have the cluttered house with clients isn't just how many packages do you want to ship? And here's a right to get those packages delivered? We want to enable in an ecosystem. So engaging with CloudSort audits, how do you want to participate in the ecosystem? You just do want an end to end solution? Do you want to just tender packages to an organization and and have them provide that solution? We're happy to do that. But I think where the value is really created is you have packages,you as a client have packages to ship CloudSort step in and also ask questions about about, do you have access real estate and it can be very small, like, hey,we can squeak, you know, couple1000 square feet in the corner of a building, maybe we can put that to work? Do you have transportation that's moving across the country that we can there's excess space and that we can use it. So we ask questions about not just the supply side,but also the demand side. So then we can enable on the shipper side, we can enable the shippers to kind of create their own solutions. And now they have more control over their supply chain and they can build those direct connections. The same thing holds true on the carrier side. Excuse me, they we've had carriers that because of their location, they're geographically removed from shippers like volume that they would like to tap into. We can we can just as easily work for work on the carrier's behalf to make that connection. We're not in the business of monetizing final mile carrier rates we that is not what we do. So we want to, I don't know of a better way of thinking than the CloudSort wants to enable this ecosystem.And as long as it's related to sortation, and movements of goods between that point of origin and the destination, we want to support everybody. I think we play an important role.But we don't, you know, we're kind of agnostic to, to carriers or shippers. To go back to your question a little bit like, who are the best shippers to work with? Again, generally, it's ones that are open to talking about resources they have on the supply side, because now we can eliminate costs. And we're designing a better system versus, you know, having to build out a system to support the volume, if that makes any sense.
Blythe Brumleve:
20:48
So it almost sounds like maybe it's custom solutions for each of those different profiles. So for shippers, obviously, they have different needs than carriers.And so how does I guess maybe cloud sort fit into the technology stack? Or the workday of each of those different profiles? Is it almost just like an integration directly into their TMS? Or is it a platform that they log into as a carrier to see if there's any available loads, like, tell me a little bit about how, I guess the use cases for the software for each of those different profiles,
Derek Szopa:
21:25
they're probably the best examples just out of a fulfillment center being able to create additional splits or destination. So instead of building one bulk load that's going to one carrier, we can create a group of pallets and allow that fulfillment center to build the more carriers or more locations and, and that could be done on behalf of the shipper or three PL or it could be done on behalf of the carrier that's working with that shipper.Again, it doesn't matter to us the integration with their TMS or W their warehouse management system, we can definitely do that. I think there's value to be had there. But we can also,we can do a very lightweight integration by that I mean, we can generally, oftentimes we can start off with information in the barcode, the software will allow a tremendous amount of complexity and how things are sorted. So it can be a combination of zip codes and carriers and package characteristics. So really,it's, you know, very flexible,and we can design it to whatever the carrier or the or the or the shipper needs, we you know, we think we've built some good logic into how things can be routed. But we're not so arrogant to think that we have the solutions to everybody's problems. So we enable clients to come to us and they may have their own design or thought on how they want things routed. If there's a way we can support that, like I said, we just want to be we want to play our role in the ecosystem. And for some,that's the role they want us to play. It's very prescribed, you need these flips, this is the design we want executed. And we can provide the we can match that design with infrastructure that's out there and allow that to happen. That's,
Blythe Brumleve:
23:24
that's really interesting, because it from like a coding perspective. You know, there's also a had in my notes that it is you're calling it a fundamental shift by putting the customers and the carriers in the shippers all on the same team. And so it almost sounds like there's that custom solution within the software capabilities that then allows,you know, sort of these other profiles to almost put whatever they're already doing, but just make it more efficient and almost on steroids.
Derek Szopa:
23:54
Correct or provide access to new geographies. So there may be a carrier that has a presence in the southern part of the country, but they want some sort of access to the northern we can we can establish that and allow sortation to be executed on their behalf. It's so it's yeah, it's maybe belt providing access is part of what we do.
Blythe Brumleve:
24:20
And so from I guess, like a customer perspective, so say I'm a customer, and you've sold me on the product, I'm ready to get rolling. What does that sort of onboarding process look like for the customer? Initially? What once they decide that they're going to they're going to make the jump? They're going to take the leap?
Unknown:
24:39
Yeah, so I think I mean, at this point, we've probably gone through and we've talked about some of those things that we discussed earlier. We understand volume flows, where it's going, we understand, is this an operation? It's CloudSort setting up an operation within the clients location, or is it a standalone operation? So we've worked all that out, there's gonna be a lot it could be a very,
Blythe Brumleve:
25:09
you know,marketing, like it varies. Yeah,they're gonna vary for each
Unknown:
25:14
customer, it is going to vary for each customer. And then we have all the API's, you know, we can use, you know,clients can use those API's as a, you know, kind of part of the solution. So it can be, we can be very tightly integrated. And that way, we can provide a lot more scan visibility, as things are moving through buildings and things are moving across the country. Some clients want that some are more interested in a,it's a very simple, we just need a very simple sword executed and, and we're happy to do that as well. And those, those integrations can be very, very light it can be. In fact, in some instances, we've done no integration, it's just hey, we under we were provided information on the information in the package barcode, so we can program our system to understand the barcode, we can do the splits, wherever the client needs us to do it, we can set up those operations very,very quickly. There's a story of one operation we it was we needed to execute it very quickly, we got keys to the building in the morning. And we were able to sort packages that evening. It's very lightweight,quickly, quick to deploy system.So for for your viewers and listeners, it's, as we talked about middle mile and and sortation. Were part of what we're trying to do is change the mindset, it doesn't need to be a lot of heavy, expensive automation, there's lightweight and simple things that can be done. And so for CloudSort,that's kind of how can we do it in a simple way? Like, those are some of the questions we ask we're not, we're not interested in adding complexity and making a show, we just want to simplify things. Eliminate steps, we in our view that creates value. And I think that
Blythe Brumleve:
26:58
that's probably where the AI, you know, model comes into play for you for you guys is how many steps are of this process? Can we remove is is that a safe assumption?
Unknown:
27:09
Absolutely, you're exactly right. It's a combination of eliminating steps and having these smaller,connected nodes. Historically,like that wouldn't have been possible, I don't know how it would have been possible decades ago, because of the computational power required to do that, because there's so many permutations and combinations,when the number of nodes is in the hundreds or 1000s. These are very difficult problems to solve. And it can be complex. So the computational power has to be there or, you know, again,it's an enabler for what we do.But we certainly use it to help do what you said, eliminate steps and route things in a smart way.
Blythe Brumleve:
27:54
Yeah, cuz I think that that's, that's sort of the the promise of all of this new AI technology that's coming into the space. I mean,it Chad GPT just had a major announcement yesterday that, you know, they in a big part of it,but often ignored, part of it is how much of the data processing that they've cut off from the original GPT you know, the notion so now that we're in a phase where, you know, something that was, you know, $10,000 in computing costs is now you know,roughly around five or $6, which is amazing. So, you know, I'm seeing it more and more happen on the logistics side of things as well, where it's, you have the just this massive amount of data. And these modern day tools like this, like CloudSort is going to be able to help you solve the problems that you're already experiencing so much faster. So you can focus on these other things that make more sense that make more business value sense. And then ultimately, you know, hopefully it it creates that, that that,what did you call it earlier that the compounding interest that you're going to get from you know, these types of investments? Do you wish there was a central place to pull in all of your social media posts,recruit employees, and give potential customers a glimpse into how you operate your business? Well, all of this should already be on your website. But too often, we hand that responsibility of building our online home off to a cousin,a neighbor's kid down the street, or a stranger across the world. Digital dispatch believes in building a better website at a fraction of the costs that those big time marketing agencies with charge. Because we've spent years on those digital front lines. Our experienced team focuses on the modern web technologies to bring in all of the places you're already active online, show off those customer success stories and measure the ROI of it all in one place. With manage website plans starting at $90 a month,head on over to digital dispatch.io to see how we can build your digital ecosystem on a Strong Foundation. We've got explainer videos right on the website and the ability to book a demo immediately find it all over at Digital dispatch.io. Now now, as we kind of, you know,sort of round out this interview, you know, how do you see sort of cloud sort? We're evolving, and you know, maybe the next year, the next couple of years, I know what I'm not going to ask five years out,because nobody can tell that at this rate. But how do you see CloudSort sort of evolving and the Eco eco sphere ecosystem?
Unknown:
30:31
Yeah, I think part of it is just as people become more aware of this more comfortable with working with us, we're not.Yeah, we'll onboard more clients enable more nodes that allows the software to learn more. And again, you know, we're happy to execute, or provide recommendations on how things should be routed, some clients are going to continue to want to there, they're smart, I don't discount what they need done.We're happy to execute those things. So certainly add more nodes will the software will continue to advance? We have.Yeah, I mean, I think those are,those are two, like important things that happen in the coming months and year. I think that,you know, no one's gonna know,no one knows what's coming. You know, for this next peak, as far as package delivery goes,there's, there's some talk about excess capacity that's out there, that may be true. But that doesn't, regardless of whether the capacity is excess,it may not need be needed at all. And let's find ways around it. And the excess capacity may be in specific market. So there may be a lot of capacity in one area, but not not a lot of capacity someplace else. So we're certainly looking at those opportunities, I think there's been a lot of investment in some of the major metro areas, but some of those second and third tier markets have have maybe not enjoyed the the growth and capacity that they need. So I don't know, all this remains to be seen. But for CloudSort, it's more nodes does really creating a system where clients can test and learn, we want it to be super easy procurement process with us should be simple. It doesn't need to be a huge RFP,it can be hey, here's an area that's interesting. Let's experience it, let's fall in love with it. And let's grow that we want to be easy to do business with.
Blythe Brumleve:
32:28
And it almost sounds like there's an environmental angle as well, if you're, you know, even a carrier and you're looking for, you know, space on your truck, or if you're a shipper looking for space within a warehouse, you know, that might be a little bit closer to a delivery route for you. It it sounds like there's also an environmental angle, I think that or a positive environmental angle that can be,you know, part of these use cases as well. So you're you're optimizing the routes that you're already having, or you're optimizing routes, you know,that you could be taking advantage of is I think, is it does that play a role at all?
Derek Szopa:
33:03
Absolutely. It's a little bit topical, we don't lead with that. It's not. But it's certainly a hugely beneficial side effect of what we're doing. We want to we always have the environment in our minds, of course. And as we're consolidating loads and routing things more directly and more efficiently. Absolutely.We're trying to think of ways how to quantify that benefit,never quite landed on the right way yet, but it's, it's it's certainly a part of how we think about things.
Blythe Brumleve:
33:35
For sure. And I think to the biggest selling point, I think, for me during this conversation was not just the you know, the efficiency,but also from the fact that you can get set up in as little as a day there. I've been part of too many tech integrations where it takes weeks and months,sometimes years, God forbid, if you want to get a new TMS added to your system. And that to me is just, but that was also 10years ago. So it's it's cool to see the advancements in technology in this space.
Unknown:
34:05
Absolutely. Yeah, we think we think it's important.Again, it ties into that. For CloudSort the desire to really be easy to do business with allow, create a system that it's easy to test and learn. Like it has to be easy, or it's or at least easy to get an understanding on if it's if it works for the client or not. And then we can build from there.
Blythe Brumleve:
34:29
100% and set it up in less than a day I think is is a major achievement. So So So Derek, kudos to you and your team. where can folks follow you follow more of the work of CloudSort all that good stuff?
Unknown:
34:44
Yeah, that's place to go. It's just CloudSort.com. We keep regular updates on any any new releases, capabilities,thought leadership. All of that can be found on CloudSort.com.
Blythe Brumleve:
34:57
Awesome. Well,thank you so much, Derek, and appreciate Get your time and insight today into the middle mile.
Derek Szopa:
35:04
Absolutely very much. My pleasure. Appreciate it
Blythe Brumleve:
35:12
I hope you enjoyed this episode of everything is logistics, a podcast for the thinkers in Frank, telling the stories behind how your favorite stuff and people get from point A to B. If you liked this episode, do me a favor and sign up for our newsletter. I know what you're probably thinking, oh God,another newsletter, but it's the easiest way to stay updated when new episodes are released. Plus,we drop a lot of gems in that email to help the one person marketing team and folks like yourself who are probably wearing a lot of hats at work in order to help you navigate this digital world a little bit easier. You could find that email signup link along with our socials in past episodes. Over at everything is logistics.com And until next time, I'm Blythe and go Jags
