Circle Logistics: Adapting in a Dynamic Freight World

Inside Circle Logistics: Growth, Challenges, and Industry Insights

In this episode, experienced transportation professionals Carl Fillhouer and Robert Fortmeyer discuss their roles and experiences at Circle Logistics, a leading freight brokerage. 

Founded in 2011, Circle Logistics has grown rapidly, specializing in truckload brokerage and other transportation services. Carl shares insights into the company’s operations and growth, which includes managing hundreds of millions in annual revenue and leveraging a large network of vetted carriers. 

Robert, the in-house legal counsel, sheds light on the importance of legal oversight in contracts and risk management, especially with issues like tariffs and industry-specific challenges. The episode delves into the rigorous vetting process for carriers, the impact of tariffs on the industry, and Circle’s service offerings across various transportation modes.

Contact Circle Logistics:

Robert Fortmeyer, General Counsel, rfortmeyer@circledelivers.com, 260-222-5175

Karl Fillhouer, Vice President of Sales and Operations, kfillhouer@circledelivers.com, 260-271-7055

Your Hosts:

John Farquhar

National Risk Services Specialist, Transportation, Gallager GGB

https://www.ajg.com/ca/

M: 437-341-0932

John_Farquhar@ajg.com

Chris Harris

CEO, Safety Dawg Inc.

905 973 7056

Chris@SafetyDawg.com

https://safetydawg.com/

00:00 Introduction and Guest Introductions

00:17 Carl's Background in Transportation

01:03 Robert's Role and Legal Insights

03:43 Circle Logistics Overview

05:24 Challenges and Growth at Circle Logistics

07:44 Service Offerings and Carrier Partnerships

13:31 Impact of Tariffs on the Industry

23:33 Carrier Vetting Process

26:13 Conclusion and Final Thoughts

Transcript

0:00

And this week on the show, we've got Circle Logistics, talking about how they service our transportation industry. Let's get on with the show. Welcome to the Trekking Risk and Insurance podcast. Gentlemen, welcome to this episode of the podcast. Carl, can you introduce yourself to our viewers? I certainly can. Uh, Karl Fillhouer. I've been in our industry now since 1983. I've had the fortune of touching every segment of transportation, domestic international service type, LTL, truckload, air freight, whatever. Uh, I've been with Circle Now for about eight years, joined the Circle Team in 2018. Uh, and I, I'm kind of a jack of all trades in some respects. I've got some definite functionality that I have to do on a daily basis with Circle, but. I get involved with a number of our branches as well, uh, any corporate needs. And you get involved in podcast episodes, correct. Alright, Robert, welcome to the show. Say hi to our viewers and listener. Hi. Thanks for having me. You are welcome. What's your background, Robert? Uh, so I've been at Circle for a little over seven years now. Done a variety of different things while I've been here. Currently I'm our in-house legal counsel helping with compliance contract review, and then also working with our Mexico operations to kind of help make sure that that's all done in, uh, good fashion. So, so we're talking about circle logistics, which is largely a, uh, freight broker. Why does a freight broker need a lawyer? All the risk there is, uh, cargo claims, highway accidents, you name it. Yes. Well, I could name a few more things. Carl. Uh, why would, uh, a broker need a lawyer, an in-house counsel? Most of us are large enough to where we're. Exposed by the amount of business we do to all sorts of different potential claims. Cargo claims is the big one. Contract review is huge. Most of our largest con companies that we work with, we are under contract. So we're, we're reviewing, I'm, I'm gonna guess that a couple of contracts daily, uh, just to make sure that they are not, uh, over favoring of the customer and to make sure that we're covered and we can do what we're agreeing to. In the contract. So Robert is our in-house counsel and we also have, uh, a couple of different outhouse lawyers that we work with or out-of-house lawyers that we lead on to anything we need from a capacity standpoint. So Rob and Robert, as our in-house is managing those relationships as well. Isn't it wonderful, Robert, to be in the freight industry as a. A legal counsel, definitely enjoyable. There's something new every day. There's always a, always a new problem to track down so well, and that keeps things interesting. Exactly. What I'm thinking is there's always, always something going on, and especially as a freight broker, I mean, one of the things that comes to mind immediately is fraud. Um, among. The stuff, but we are here talking about circle logistics. Carl, can you tell me a little bit about Circle and the brokerage behind it? Absolutely. Yeah. I'll, uh, I'll give you the 50,000 foot overview. So we, the company's been around since 2011, I believe it was September when we incorporated. We're privately held by two individuals, uh, both with origins in Fort Wayne, Indiana. The history basically is rapid expansion. By the time I joined the company in 2018, we were already at about$185 million in annual revenue. The bulk of that in the mid 90 to 95% range is driven by truckload broker. Activity. So as we grew, we've kind of evolved into what we've become Today we are light asset based. We've got a transportation entity we're associated with, but we approach everything from a broker's vantage. Since 2018, we, we have grown from that 180 ish million dollar annual revenue up to, we peaked over 700 million. We've kind of settled in over the last couple of years at the low 500 million mark, which gives us a lot of buying power, and it gives us a lot of relationships that we try to manage with our carriers. All of our growth has been organic. We, we have not done any m and a work and we've done nothing more than hire really smart, really well, uh, networked leaders that be, have become part of our organization. I'll see you. And how does that, since Robert's here, how does that get you involved? What are some of the problems with the growth that Circle has done over the last several years? Well, one of the main things is contract review, like Carl mentioned, is just keeping up with all of the contracts. You know, not all of them are the short sweep, four pagers. You know, some of these are, uh, 60 pages and it's covering every single little thing you could consider. So. Uh, you know, keeping up with the contracts has been a big part. And then, you know, as volume increases, there's more cargo claims, so keeping up with that and making sure our insurance matches up with the commodities we're hauling and all of that. So it's every time we're growing, there's a new, uh, a new risk to mitigate Without giving out names or anything. What is the most unusual thing you've found in a contract that, uh. Perhaps you never signed the contract until it was changed, but what's an unusual item that you found that you didn't, uh, particularly like, can you give us an example? Yeah. I think the most extraordinary term I, I've seen in the contract came up in the last year, and it was an overseas client wanted as part of the, as part of the master agreement, there was a confidentiality clause. Uh, specifically related to data, and they had a $750,000 penalty for the export of data, which was defined broadly enough that if you access the database from your personal computer at home, even as still an employee, that was worth a $750,000 fine. I just, it was defined so broadly, it was almost anything could be. A breach so Well, and I hope all the trucking owners and managers of trucking companies just heard that is, I will bet many of us would've signed the contract without complete understanding of the contract. You know, but, Hey, Carl, what some, what are some of the service offerings if I'm a carrier? Why would I want to come to Circle Logistics? Well, we've got, uh, what I would define as key carrier partners. They're generally carriers that are, uh, five trucks up to maybe 50 to 80 trucks, depending on where they are and where they function. We can provide them with a sales effort that they generally can't do on their own because they're just not big enough to support. Well run sales effort in a marketing effort. So what we offer the carriers is really visibility and access to freight that they would not be able to access on their own. From a customer's standpoint, we're doing the same thing in, in the states, a large, uh, majority. Now it's, it's north of 50%. Of the truckload business that is not a regular route, point A to point B, that's still managed or moved by small mom and pop operations, one truck to 10 trucks. And what we can do from an organization standpoint with our customers is we provide them access to well vetted carriers contracted properly that they would never have access to on their own. Uh, most of the large carriers, what we're seeing today. They've got specific lanes they wanna stay in, and if they veer from that lane, they're generally charging the customers a premium for that because they're getting their truck out of the normal lane assignment. We can solve that problem by offering them small operations that need us from a sales standpoint and on the customers thus can benefit from our network of carriers. I think a lot of the times the, the smaller carriers will give a lot better service. Because they are much more reliant on you as a customer, and so they really want to do the delivery and excel at it because they don't have another, you know, six or seven customers backing them up that could easily replace you. Mm-hmm. Yep. Correct. What are some of the problems that you, you do run into in your world?'cause I, I've never been a logistics or a broker. I've always been on the trucking side. Uh, what kind of problems would I run into as a broker? So the. One of the biggest challenges brokers today have is having the right SOP in place for vetting carriers they're gonna work with. It's gotta be something that is not just gonna provide the carrier with data, information, and business, but it's gonna provide safety for the carrier and the customer. So when you look at costs in the evolution of cost for a specific customer. They can't control those costs by having their own relationships with small carriers that they own and operate from. So we're a clear read house. Um, we make sure things are, are properly contracted. We make sure the risk is really set out and understood in the right place. And, and again, I'm gonna go back to we give access to a carrier group. That will work better and more efficiently in, in lanes that are not consistent lanes. I don't know if that answered your question. I think it does. Yeah. And what areas do you service? So from a, from an industry standpoint, we, we manage transactions in every mode. We obviously have the variety or the, the, the bulk of the variety of type of freight we manage is gonna be 53 foot van freight. But we also have, uh, multiple teams in multiple locations that concentrate on oversized over dimensional flatbed free. As well as just typical flatbed freight. We do a lot of work with partials, uh, in the, in the flatbed world and it, and in truckload, so we can, we can build a or fill the gap between LTL and truckload needs. I'm trying to remember where I was going with that. But at any rate, we, we offer every industry vertical. So van, we, we do bulk, whether it's bulk tanker and or bulk hopper, that type of thing. We do any specialty trailer. Um, we actually have some of our own trailers that are catering to the automotive industry that to haul like frames of cars. We give a end-to-end offering when it comes to automotive. Everything from tier one, uh, plants shipping directly to an auto assembly plant to shipping cars after they come off the line as one-offs. We, we move a lot of vehicles in that regard, and we have a lot of tier one products going into manufacturing in respect to automotive, and we do sue in every industry vertical. So each verti vertical, depending on what shipper you're talking about, may need. Van Freight as well as flatbed support, and we can provide both very easily. Uh, we also do a lot of reefer work and we, we handle a lot of reefer work, whether it's full freezing, 10 below, uh, temperatures on the reefer units, all the way up to just ambient temperatures for freight that can't get too hot right now. And you mentioned automotive, which in my mind at the moment brings up the subject of tariffs. How are tariffs, uh, one hitting the general freight industry, and then specifically, how are tariffs affecting circle logistics? Uh, Robert or Carl, who wants that one? You want me to pull that one down, Robert? Yeah, if you wanna get us started. Yeah. Okay. So. The tariff privately. As an individual, I'm hoping that we as a government are just using tariffs for negotiation purposes today. Uh, we're seeing, uh, a slowdown in business from many of our shipping partners. We consider our customers partners, and we're seeing somewhat of a slowdown because there's so much unknown that could hit. At any given day. Now, as, as you already know, some of the tariffs have been pushed out 90 days with the exception of China there, and, but there's just an upheaval in our industry of freight volume, where it's going, when it's coming in, and what are we gonna do with it. That's been, that is being initiated by these tariffs, so it's causing that. At the same time, we're seeing an uptick in shipping customers or partners in sending out new RFPs, rf, QS, RFIs, because they truly don't know what's gonna happen. So they're trying to, sure they're ready for whatever hits us next on the tariffs. Um. I don't think the tariffs, this is again, a personal opinion. I don't think they're doing what they were intended to do, uh, by, by Trump. Uh, but again, I'm hoping it's just a negotiation thing. The, the problem with tariffs are if, if we keep going down that road, the United States is not equipped. To compete with other countries.'cause our labor rates are so much higher that if we truly wanna bring manufacturing back a hundred percent to the states, we can't compete with what that would, uh, mean from a rate standpoint.'cause our, our average income, our average. Uh, labor rate is probably three to five times higher, maybe more in China, Mexico, the same. So it, it's gonna cause problems that we can't overcome if those tariffs go into place. Uh, from an economic standpoint, again, I'm hoping that's just being used as kind of bait for negotiation. And it is. That's genius. You know that 'cause we're gonna get some things that we need to have back. From a revenue standpoint in our economy. Well, and I'd be remiss if I didn't say, Hey, you're talking to a Canadian. So the tariffs haven't been pushed out for 90 days against Canada, which here in Southern Ontario where I live, we have a large economic. Uh, tie in to automotive and probably no auto freight or automobiles that are built in North America are literally go across the border several times, typically before the end of the manufacturing process. So it is definitely an upheaval at the moment, and since Trump signed the last. Trade contract with, uh, Canada and Mexico. Uh, I have opinions that I won't express at the moment. Robert, how are tariffs affecting your world? Because as a lawyer, I gotta believe contracts are being torn up at the moment. How does that work? And we're seeing a, a fair number of, you know, promised volumes. Uh, being just put on hold. We have customers that have shut down their plants across the border, or, you know, suppliers that have shut down and, uh, for a period of time just kind of waiting to play things out so there's promised volume, promised shipments that aren't happening. So that's kind of putting some things on hold. Uh. Then there's also the, uh, kind of the issues of, you know, new rates and contracting with, with new business. Kind of how Carl alluded to sourcing lanes and sourcing a, a capacity from suppliers that maybe they're not working with currently trying to beat the tariffs. So it's kind of been an interesting thing with different addendums and different waivers, just trying to keep up with the changing business. Yeah, I never thought of, 'cause I don't read the contracts, I'd never thought of volume commitments. As being part of the contract. But yeah, that's in a lot of contracts. And now in the current world with tariffs, who knows what the volumes are gonna be? Certainly there's a slowdown right now, I believe in trucking, uh, certainly in cross border trucking that I'm experiencing. There's a. Absolute slow down. Have you seen, and totally off base, and not in your wheelhouse, but have you seen more trucking companies going bankrupt in the state? Have you seen any of that happening? We've seen some consolidation in the LTL side of the business. We've seen a lot of the larger truckers that are running their own in-house three pl. To take care of their overflow. I'm actually hearing of several of them that are shutting down or really pairing your brokerage. Operations back, they, they need to keep their revenue and their expenses more tied to their assets. I don't know statistically if there's an uptick from a percentage standpoint of bankruptcies right now, but there's a lot of guys that have already just kind of shut down the small mom and pops. If they can't make money, they're in many cases better off just shutting down their operations. Yeah. Now, are you, is Circle Logistics taking on new co new. Trucking co companies as clients, shippers or actual carriers? Carriers. Uh, if I was a carrier that's struggling and I need freight, is Circle Logistics, looking for trucks? We're always looking for trucks. You know, we've got what we call a a three tiered program. First is use our assets. The second tier is very similar to using our assets we work with. Several hundred small mom and pops where they, they rely on us for the bulk of their business. They're our core carriers. We're willing to work with any carrier, even the larger carriers based on lanes. So we're always adding carriers. It's getting tougher and tougher for new carriers to get properly through the vetting program. We won't work with a carrier that's only been in business for a month or two or three months. So as, as, as new young startups get their authority, they're not necessarily gonna get freight from a broker of our size or larger. Um, just because part of the vetting is to work with carriers we already know and trust. So, so we are seeing that kind of movement. There's still a lot of small mom and pops entering the marketplace. There's a lot of DOT licenses hanging out there, and there's a lot of active mc licenses. I mean, we all have to live. So if my entity was to go bankrupt, I'm going to find some way to make a living. That's the way it is. And so there's, there's always an ebb and flow, I think in every business, but certainly in trucking. My dad owned a trucking company and it's not around anymore. Mm-hmm. Not that I went bankrupt. It got purchased, which is also happening a lot right at the moment. Mergers and acquisitions. So, uh, what else do we need to know about Circle Logistics, Carl? Um, well, we're pretty, pretty agile and, and we can make adjustments on the fly better than most. Uh, we've got, uh, enough of a sizable staff to give whatever support is needed. And believe it or not, we haven't shrunk in size since we peaked at that 700 million revenue mark. We've settled in at the, the low to med fives. But we're seeing our transaction counts coming back to where they were in 2018 and 19. So those are coming back. Revenue is down based on lower fuel surcharges and, and more capacity available out there. But we offer, the one thing that I can tell any customers we offer access to properly vetted capacity that they need, um, from a carrier standpoint. We offer access to freight from larger shippers that they can't access on their own. Um, so, so we're truly sized, right? We're not too big. We're not too small. To give, uh, asset value to either side, whether it's a carrier or whether it's a shipping customer. So I think that that is likely a really good spot to wrap it up, unless, Robert, do you have something that you wanna throw in there? A new carrier? Obviously there's contracts involved. Robert probably wrote, huh? Yeah. Well, I mean, if, if I'm gonna come on to circle logistics, I'm gonna have to sign some paperwork. What is the vetting process? Is that a Robert question or a Carl question? Um, I'll let Robert determine that. I can certainly handle it, but I think Robert might, may be able to as well. You, you want me to handle it? Do you wanna take it Robert? I'll just kinda give the short and sweet summary is we'll send you the. The onboarding link and everything to sign up and kind of go through the, the vetting process. And that includes, you know, looking at your authority, looking at your safety history, looking at your history with our company, if you've worked with us before. And then, uh, you know, includes a certain number of fraud verification efforts through the different things to ensure that you are who you say you are. And then, uh, you know, signing the contract and showing us, you know, giving us proof of insurance, your COI and. And then, um, you know, in addition to a couple other things, maybe account specific requirements or you know, where depending on where the pickup is, maybe you know, shipper specific requirements. But beyond that, then, uh, you know, once you completed the onboarding through the link, then you're, uh, active with circle. Right? So just to kinda recap, you do a fraud check to make sure they are who in the heck they say they are.'cause fraud is, is just rampant today. Um, you're looking at their safety scores and you're making sure they, they have adequate insurance. Is that kind of the main three, uh, components? Yeah, I, I would say those are the three big ones. Yeah. Agreed. Alright. Carl, anything to add to that one? The vetting process? No, I, I, I personally feel, so, I've been vetting carriers for years and years and years. I believe our vetting process is probably top 1%. If, if you look at every broker out there that's gonna vet a carrier, I. Um, we vet them based on safety. We vet them based on lane and size, age of the company we're gonna be dealing with. We vet 'em based, uh, slightly differently. You know, they, everyone's gotta pass the same safety regs of the safety part of the vetting process. But we have different rules set up. For, uh, carriers that are running hot shots versus expedite, freight only, versus air freight. We, we manage that a little bit differently while at the same time our systems are built. So if you're a large shipper, you tell us what you're willing to use and not use from a carrier standpoint, and we can vet that by the transaction and, and make sure you're getting only the carriers that fall in the, the, the arena that you want them to as a shipper. Perfect. Robert Carl. Thanks so much for coming on the show and letting me learn about Circle Logistics. All right, thank you. Appreciate the time. Thanks for having us. Thanks Carlo. Robert, really enjoyed the interview. And for you, our listeners and our viewers, please share this episode, uh, with somebody that you think would benefit. And don't forget to, uh, click the like button and comment and subscribe. Alright, that's it for this week. A pleasure to serve you. We'll see you next week.