C.H. Robinson leader sees ripples, not big changes, in global trade

C.H. Robinson Worldwide might not be well understood even in its hometown.

When Chief Executive Bob Biesterfeld meets people around the Twin Cities, he told me last week, and says where he works, he is often told: "Oh, I've seen your trucks."

No one has seen C.H. Robinson's trucks. They don't exist.

But their boxes do, big container boxes that fit on the ships, trains and trucks of other companies.

C.H. Robinson books freight for its thousands of customers, in its boxes or those of other firms. That includes boatloads from China, where efforts to contain an outbreak of a new form of virus has thoroughly disrupted everyday life and the economy.

It hadn't been a great couple of years for people who manufacture globally even before the coronavirus. Yet Biesterfeld called all this "ripples," not the kind of tsunami that would cause executives to rethink where they get their products and materials. The basic premise of trade — the whole system gets more efficient and produces more if products get made in the right place — makes as much sense as ever.

C.H. Robinson stands astride global trade like no other company in the Twin Cities. It grew out of its roots as a fruit-and-vegetable broker more than 100 years ago to become the leader in what's now called third-party logistics.

It blossomed just as the most recent wave of increased globalization swelled. All that term globalization means, by the way, is businesses choosing to work with other businesses on the other side of a national border.

The London-based economic forecasting firm Capital Economics is among those wondering if the latest surge of globalization that began after World War II might be ending. Last year the firm suggested it might not be just a stall in growth, which had shown up in data back to 2010 or so, but the start of a retreat from goods, people and capital easily moving across borders.

That might not be a bad thing, they stressed, if it was happening because better production technology took the pressure off companies to find sites with lower-cost labor or materials. If machines can do the valuable work now, those cost about the same anywhere.

A reversal of globalization would hamper economic growth, though, if it's driven by new trade barriers to protect politically important industries or just to reflect growing hostility toward other parts of the world.

It's hard to know right now what's happening. For the past couple of years, of course, the news has been mostly about escalating trade conflicts.

As U.S. tariffs on Chinese goods increased beginning in the summer of 2018, a lot of activity clearly moved from China to countries like Vietnam in Southeast Asia. U.S. companies were looking for a workaround to the tariff problem, Biesterfeld said.

The disruption brought about by the tariffs was clearly one of the factors in an overall slowdown in manufacturing last year. Biesterfeld mentioned that, in the third quarter of last year, several key indicators to C.H. Robinson all seemed to be slipping at the same time, including ocean port volumes, container traffic on the railroads and the closely watched PMI manufacturing index.

"But as you know, Malaysia and Vietnam, they simply don't have the infrastructure of China," Biesterfeld said. "You can't just literally move China to Vietnam; that's not going to work."

"Over the course of the last 12 months, and whether it was with tariffs initially and now culminating with this coronavirus, there's a lot of conversation with our customers about what they think the appropriate supply chain strategy is," he continued. "Where production should exist, whether they should have a more balanced portfolio, how do they avoid supply chain disruptions."

Biesterfeld declined to talk about the impact of the virus outbreak at length. Executives at rival Expeditors International of Washington, last week spoke of "a significant impact" on shipping volume for the first quarter.

Biesterfeld said no customer has said they were even thinking of leaving China due to the disease.

"As we think about our strategy sitting in the middle of this global supply chain, we see customers becoming much more focused on being more global, not less," he said. "The expectation is 'I want global supply, I want visibility to it on a global basis, and I want it now.' "

That is, there is a place somewhere in the world where people can build what C.H. Robinson's customers want more efficiently than anywhere else, maybe even including the customer's own backyard. The pressing task of management is to find those producers and get those products to the doorstep of their own customers as efficiently as possible. And that's not easy.

Much of what C.H. Robinson does can be thought of as making this whole process more efficient. An example is how the company helps owners of mom-and-pop U.S. trucking firms carry full loads on more of the miles they drive.

"When we talk to our customers — and we talk to them a lot, formal surveys and just conversations — the theme that comes out is that … shippers and manufacturers understand that they need to take advantage of the economic benefits of global production," he said. "But they're not sure exactly how to do that," puzzling over everything from managing customs and trade rules, where to keep inventory or how to keep eyes on every part moving through a long supply chain.

That puzzle just got harder to solve with a disease outbreak in Asia, of course, yet there's no reason to think the desire to solve it has started to evaporate.