TATC Ep 19 – Move Large Commodities with Basin Commerce

TATC 19 | Basin Commerce

Episode Summary

On this episode of Thriving at the Crossroads, we have Tom Venable and Pete Olson from Basin Commerce. We talk all about how their business aims to give the buyer side convenience, variety and unprecedented visibility in the process of moving large commodities.

Listen to the episode here:

TATC Ep 19 – Move Large Commodities with Basin Commerce

Today, we‘ve got a special three-person conversation going on. I‘ve actually got two guests on today from Basin Commerce. I have Tom Venable and Pete Olson. Welcome to the show, gentlemen.

Thank you. It’s good to be here.

Basin Commerce, I first heard about you guys on Tech.mn locally. That’s how I found you, in the local news source. Tell us a little bit about Basin and the history and where you guys came from.

It’s ancient history. Pete and I have a lot of experience in the software world, specifically e-commerce. Pete and I worked together at Digital River here in Twin cities for a long time last decade. About a year and a half ago, we met a couple of guys who were in the commodities trading space. As e-commerce guys, we’re always looking for markets that haven’t figured out how to use the internet to conduct commerce. He explained to us a marketplace for moving large quantities of commodities. Things like sand, salt and agricultural products. He described the marketplace was very, very old fashioned and very, very inefficient. It was still people calling each other and brokers. There was no such thing as a website or Expedia-type of destination site you go and book transportation and logistics services if you want to move large quantities of said commodities.

Pete, I and our other partners looked at each other and said, “There is a market here.” We came up with the idea of Basin Commerce back in early 2016, a little over a year ago. We’ll be launching our site here in about three weeks on April 1st.

You said you are primarily for anybody who is trying to move commodities. Describe in a little bit more detail the pain points and why it’s so challenging today?

Let’s use an example. Let’s pretend I am a shipper or a broker of grain here in the city of Minnesota. I am a soy bean farmer as an example and I am selling my soy beans to a buyer in China, very real life example. I need to figure out how to get those soy beans that’s got 100,000 tons moved from my farm in Minnesota over to China.

To do that, I have to call a whole bunch of people and try to find a trucking  firm who will come pick it up at my farm. I need to find a river terminal some place on the Mississippi River that can take it off a truck and put it into a barge. I got to find a guy who’s got enough barges to handle my volume. I got to let it float it down in Mississippi to New Orleans. I’ve got to find a guy in New Orleans to take it off the barge, put it into a storage facility in New Orleans, and then the next week, put it on a huge vessel in New Orleans to ship it over to China. All those phone calls, faxes, emails, take days and days and days to try to put together.

Our vision is, just like you do when you want to book travel on Expedia, if I want to fly from Minneapolis to Los Angeles, I go to Expedia, Travelocity or Priceline. I put in my origination, my destination, dates I want to travel and voila, I’ve got a whole bunch of options to choose from. We want to bring that same level of functionality and benefit to the bulk freight market, especially using the river way system as I described.

For people that actually want to take advantage of this, where do they go? How do they find you? Basin is just in the process of launching, but we said we don’t want the phone, no fax, and no stone tablets. How do they actually find you and use your services?

TATC 19 | Basin Commerce

iBookFreight.com is going to give the buyer side convenience, a variety and unpreceded visibility into this market.

What we built for the shipper or the buyer is a different brand than Basin Commerce. We are launching on April 1st with iBookFreight.com, buyers will be able to come in and register and actually begin to go through the process of articulating what they need, what services that they are looking for. Our platform will take that information, aggregate it and then provide them with a set of quotes that as we’ve just mentioned, has been really arduous and painful for them to get at. iBookFreight.com is going to give the buyer side convenience, a variety and unpreceded visibility into this market that we are going to build.

Let’s talk about what does that visibility look like? Do you have multiple stages in the process? Can they see it at every step of the process? When you say more visibility, tell me what you mean by that.

There are two components to this. The first one is offering them a discovery session where once they’ve put their quote into our system, our network will then respond with their pricing. The first step is to be able to give to a shipper or a buyer, if you want to barge, here is option A, option B, option C, option D, here is the prices and here’s all of the information that goes along. When you book a barge, oftentimes you have what’s called free days called demurrage. It’s a tremendous problem with the industry. Oftentimes, a buyer doesn’t know what the demurrage rate is. They don’t know the free days until they get to the point of actually booking to sign a contract.

We are bringing a lot of that information upstream early into the process. The visibility is in offering a set of alternatives before they actually sign contracts and book. Further down the line, once the product is on the river and it’s moving, there’s, I don’t want to say archaic, but there are opportunities for us.

There are opportunities to provide more or near real time visibility to where the product is on the river. We are integrating some technology into I Book Freight that will give the shipper that visibility, so they won’t have to wait for a daily report to come out. They won’t have to make that 7:00 AM phone call. They will come on at 4:00 in the afternoon on their smart phone or at their desktop before they even say, “Where is the tow? Where is my product?” It even took us to the point of being able to say, “I think I have an ETA of when it’s going to arrive.” Part of the scheduling is actually it’s a pretty big deal on our industry.

Of course, it’s a big deal. You start moving things out by days and all the processes around it are completely affected by that. I shuddered a little bit when I heard you say demurrage because I thought back to the Dewey ERP implementations. I remember these things coming up. I’ve heard these terms. I’m a farm kid too. This is very familiar.

We’ve talked about the buyer’s side. We’ve got the farmer from the perspective of, “I’m buying it to ship it to the end person, but do I also have my major corporations that are going to procure through your platform as well?” You are just procuring freight for anybody that needs to procure freight and move things. Is that a fair statement?

It is a very fair statement. We see our buyer community is everybody from Cargill, largest egg company in the world, down to a one-person grain trading operation who is buying and selling various types of commodities. To the oil industry that’s buying frac sand from Wisconsin to put into rigs in West Texas. To guys that are on scrap iron yards across the country. It’s anybody that needs to find logistics of transportation services to move very large quantities of raw stuff. It’s not finished goods, not bicycles and TVs. It’s all the stuff that goes into there, like steel. A big mover in the river is the steel industry.

Coal used to be a very big user of barge freight. But the coal industry has dropped off dramatically due to the environmental issues of the last few years. Again, it’s from the Fortune 100 of the world to an independent farmer, to a co-op, to a grain trader, to a company that owns seven scrap yards in Minnesota, to ethanol plants that generate a by-product called a dried distiller grain that you could use as animal feed. Then they ship it all over the world as animal feed.

It’s a very wide range of buyers, again, big to small and across multiple different product categories will come to iBookFreight.com and find all their transportation logistics needs in one easy to use place.

Barges is not something people talk about very often. What is the most surprising thing I might not think about that gets moved on a barge? Grain is the traditional one. What are the kinds of things that you move on a barge?

A barge carries about 1500 tons of stuff. That’s a lot of stuff. We saw a barge moving very expensive, very rare bourbon from Kentucky to New Orleans. They had something like 500 barrels of bourbon on a barge going from the Ohio River in Kentucky to the Mississippi River down in New Orleans and offload in New Orleans. That’s unusual.

That’s a rarity. Usually, it’s not quite as exciting and sexy as bourbon. Usually, it’s more the things like salt and so forth. In addition to the bourbon, there are different types of barges. There are deck barges that are flat. You see a lot of special cargo going on them. There’s a lot of windmill, the propellers, the turbines themselves are starting to be moved up and down the waterways.

If you step back and you think about America’s infrastructure and the growth, not only of the people but of the things that we need to live, surface transportation is, for the most part, relatively full. Roads and the congestion is a challenge. How are you going to find more trucks and truck drivers? You’ve got a supply issue there. We’ve got rail, and rail obviously plays a very, very large part in moving product through in America. But it’s not like they are going to build more track.

Certainly, the ability to take some of the goods that previously moved on those surface modes and bring them into a situation where it makes sense, onto the rivers, is not only economical. Oftentimes, it’s going to be more ecologically friendly. It’s also going to make room for those other things and other stuff that can’t go on a river. Produce, for example, is not a good category to go on a river. Every time you put a hopper truck full of grain on the road, that’s an opportunity for something that could be there instead.

I like your point about the congestion and traffic. We are in the Minneapolis-Saint Paul area and we certainly have our share of congestion, as do most metropolitan areas. It’s an intriguing thought of, how do you move as many of those guys off the roads as possible? Even from a supply perspective as well, long haul trucking from a quality of life perspective for the truckers too. If you can take and actually shift that around so that it’s more short haul trucking and leverage the rivers, which people aren’t driving on those nearly as much. How much untapped capacity is there on the rivers?

TATC 19 | Basin Commerce

The US Department of Transportation is promoting more volume going on to the river because of the congestion issue.

The US Department of Transportation, on a video that we actually have posted on our website, states that the demand for freight transportation services will increase by 40% in the next twenty years in the United States. Again, as we said, how full we are already today with our roads and our trucks and rail is full as well, the US Department of Transportation is promoting more volume going on to the river because of the congestion issue and it’s also a lot more ecologically advantageous to move freight on the river as opposed to on rail or by truck.

To directly answer your question, we are not sure what capacity increase there are, but I think everybody would agree that it’s vast. There are roughly 25,000 barges in service today across the river system, but in any one given time you, look down the Mississippi River and you don’t see anything. If you drive from Minneapolis down to St. Louis in your car and you follow the river, you might see three or four barges during that trip. I am sure somebody inside the government can tell us exactly how much capacity there is. But common sense, being in this business now for a year tells me there is a lot of capacity that is yet to be utilized.

One of the things that we think is going to change is not just we use the river to move bulk stuff as we’ve been talking about in this conversation. But the main role of freight is done with what they call containers, which can sit on a truck that’s moved on a rail car and so forth. There is a movement, and it’s very early on, about using barges to move containers. One container on a truck, you can take hundreds of those containers and put them on a barge.

That’s what we do across the ocean. Put them on the vessels, the same idea.

You will see over the next five to ten years, we believe, a great deal of containers being moved by the rivers as well, as the infrastructure gets put in place. You need special equipments at these river terminals. You might go to river terminal on Winona, Minnesota and the guy in the yard has got a conveyor belt and a couple of cranes with some scoop buckets on that grabs sand by the tonful. But he doesn’t have a system that actually takes a container off the truck and drop it into a barge. There’s got to be some infrastructure improvements. We certainly think that’s going to be part of the long term solution to our country’s transportation challenges around congestion.

From a period geographic perspective in the United States, I know about sending barges down the Mississippi River, how many of our rivers, from a practical perspective, can we be sending barges on? I know in Mississippi, but what else do we have?

You can think of Mississippi as the main stem.

Right, because it runs north and south.

You’ve got the Ohio River which is massive. It goes all the way to Pittsburg. You got the Illinois River that goes to Chicago. You have the Missouri River, the Arkansas River and we have Tennessee-Tombigbee. Then there are few other smaller ones as well. If you think about the Pacific North West, you’ve got the Columbia as well.

If you understand the river system, it covers the majority of the Central Eastern time zones. Obviously, west doesn’t work. There are no rivers really west of the Central time zone. In reality, if you think about our population base, if you push California off to the side a little bit, you service a massive percentage of the population because you can bet Ohio River gets in to Illinois, Indiana, Pennsylvania, New York and so on and so forth. Then you have the Great Lakes. Then you got what they call the Inner Coastal Waterways which is mainly Miami, Florida over to Brownsville, Texas, over the Gulf of Mexico. Then off to Eastern seaboard. Those are all opportunities to move congestion off our roads and our rails onto waterway systems in a much more efficient manner. It’s about 25,000 total miles of US waterway that we can move freight on.

With the Department of Transportation, with even the government wanting to shift more to waterways, should we expect to see more either innovation in the types of vessels that we can navigate with? Are we going to see a lot of change? Or are we going to build more of the same and just equip our terminals to move things on that infrastructure? Are we going to see new types of boats basically or more innovative designs?

That’s a good question. From a capacity standpoint, the barge carriers themselves have had quite a bit of build down, we call deliveries. There’s an awful lot of existing and latent supply sitting there. The data that we get typically talks about these barges having a lifespan that’s between 25 to 40 some years. With that advent of all that supply coming in, I don’t think you are going to see an awful lot of innovation around the barge in and of itself. Perhaps you might see something where there are some self-propelled smaller barges perhaps. But what you are really going to see, I think coming around to it, is a little bit more from an infrastructure point of view with the current administration, and the build out of dams. There is some work there that can be done to continue to improve efficiency. I think that’s really where the focus is going to be.

TATC 19 | Basin Commerce

Moving freight on the rivers is not only economically and environmentally efficient, it is also safe.

Frankly, we also want to highlight the opportunities that it brings to the industry as well from an employment point of view. You just mentioned the long haul trucker going across the country. If you think about a barge or a tow, which is the boat that’s really pushing these collections of barges in a tow together, they are typically a month on, month off work. They have a captain, they might have second crew, but they are going to go for some period of time and then they are going to have the equivalent period of time off. There are opportunities as we continue to utilize that slack capacity from a barge point of view. Somebody’s got to sit behind and captain and make sure it’s going down the river in a safe and efficient manner.

Again, we’ve talked about this a little bit, but moving freight on the rivers is not only economically and environmentally efficient, it is also safe. The injuries or health related issues when you compare rivers versus rail versus truck, every injury is something to deal with and handle of course, but it’s miniscule. They are very few and far between. It is very safe way to conduct business as well.

Now, you are getting ready to launch in April. For anyone listening that tells you where they are at customer wise. You aren’t live yet. I won’t ask you to disclose some of the early adopters, I won’t ask you to disclose that but I am curious about this system’s perspective. You are starting with the platform. From there, for some of your corporate or your other buyers, is there a point in time in which you will integrate back into ERP systems? How do people get data out of the platform if they need to put it somewhere else?

I think there’s a vision there in integrating to some internal systems. I don’t know if these are going to the ERP level, because these are relatively simple transactions. For $30,000, I am going to have a barge company deliver 1,500 tons of stuff from Minneapolis to New Orleans. It left on March 1st and got there on April 1st and it was exactly 1,492 pounds of grain. That’s the extent of the data per se. Clearly, those are important data points. For us to integrate with a bit more, that will not be hard for us to do. But right now, the demand for the customer is not there because right now it’s all stone tablets and so forth.

From a product philosophy, we want to solve the problems that our customers have. By doing that, when we look at the industry, if we can collect all of the documents and put them in a single location, it’s a tremendous step forward for the industry. If we can build an order management engine that’s going to give us the visibility into all the products that are moving from here to there, then we can surface that in meaningful analytical ways for these Fortune 500 companies, then I think that there are opportunities for us to continue to go down that path. I think coming from the e-commerce background, we have seen this play before. There is a lot of direction that we can go. We are going to continue to test out those hypotheses with our buyers as they come on board.

You are brand new starting. It’s not like you are going to build all these integrations. You just have to see what the market is first. I was just curious where you are at from a thought process perspective. I have learned a whole lot about this industry. I never thought I’d be talking to somebody about barges on the podcast. It’s fabulous. I love it.

I have one important question for you gentlemen. I always like to ask my guests their favorite travel destination in the world and why it was their favorite.

It’s Barcelona, Spain. I have been there a couple of times on business. People ask me, “How do you describe it?” I say, “Think Paris and stick it in like San Diego.” You’ve got this wonderful old European architecture, restaurants and the art and like Old World Europe, but then it’s on this gorgeous beach with the perfect weather like San Diego or Southern California. That’s been one of my favorite travel destinations. What I don’t like about it is you can’t eat dinner until 10:00 at night. You have to go through a bit of an adjustment from a dining perspective. I am an early morning guy and it’s not an early morning city. Eat dinner at 10:00 at night and the clubs open at midnight, and eat breakfast at noon. It will take some adjusting to do.

I will say Tel Aviv, Israel. I work for a company and used to go over there several times a year. It’s very cosmopolitan. The food is tremendous. When you walk along the promenade, up and down the Mediterranean, it is nothing that you can get here in Minneapolis. We have beautiful lakes of course, but it’s just a different environment altogether. Just the life, the energy and the history behind all of it. It is a great place to go.

Thank you so much, gentlemen. This has been very informative and fun at the same time. I appreciate having you both on the show.

Thank you.

Did you know that at Consult Ace we do monthly webinars on all things SAP? If you’re curious to learn more, check out our website at ConsultAce.biz/resources/webinars.

 

By | 2018-01-31T17:41:04+00:00 March 27th, 2017|