"Bullishly skeptical" on Cuba: interview with Rob Kemp
There's great opportunity in supporting U.S. brands that will soon have access to 12 million stuff-starved people. But as Rob Kemp and his colleagues discovered during their Cuba trade mission in March, only the very patient need apply.
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
Robert Kemp founded DRT Transportation was part of a group that visited Cuba earlier this year.
The day before President Obama's historic March 21 visit to Cuba, a group of 18 U.S. logistics practitioners, accompanied by three executives of the Transportation Intermediaries Association (TIA), arrived on the island for a mission that, while not nearly as symbolic, may be more significant. The group spent five days observing Cuba's infrastructure and gauging the country's ability to handle the potential acceleration of logistics demand to support American businesses if the U.S. trade embargo with Cuba is fully lifted.
One member of the entourage was Robert Kemp, founder and president of DRT Transportation LLC, a third-party logistics service provider (3PL) based in Lebanon, Pa. A natural entrepreneur, Kemp seems right at home in a country where business risk-taking is a daily activity. But Kemp is also a pragmatic businessman responsible for his customers' lifeblood: their goods. Kemp sees the chance to get in on the ground floor of a market of 12 million, many of who will have access to U.S.-made goods for the first time. But he sees Cuba for what it is today: a nation with great potential and with a competitive seaport, but with little else, including the disposable income its consumers will need to buy U.S. exports.
In an interview with Mark B. Solomon, executive editor-news, Kemp talks about his experience, the opportunities, and why he is (in our words, not his) "bullishly skeptical."
Q: Cuba wants to be a cross-dock point for imports moving through the expanded Panama Canal and bound for U.S. markets, especially the New York metro area. That potentially means a lot of cargo headed for Havana. Is that doable?
A: It is, conceptually. The Port of Mariel is a modern facility that has on-dock rail capabilities. We were told it could scale up its capacity without physically expanding. Investors in the port envision it as a cross-dock location for imports coming through the canal and bound for the East Coast and Europe. Miami is the closest U.S. deepwater point, but it is too far from the Northeast's dense populations.
Q: Do you sense that DRT's customers are eager to do business in Cuba? Or is there a reluctance to step into the market?
A: "Eager" is a strong word. We have discussed this with some of our key customers, and the responses have been all over the board. The market opportunity exists. With a population of about 12 million, Cuba is as big as Greater Los Angeles. It would benefit from the modernization that can come with improved trade relations with the U.S. Solving the socioeconomic challenges seems improbable in the short term. Having cruise ships dock in Havana for a day is a long way from total trade.
Q: Virtually no U.S. transport and logistics practitioner has done business in Cuba. If a U.S. company makes the leap, what should it brace itself for?
A: Unfortunately, after Mariel, the infrastructure rapidly deteriorates. The preferred method to move goods across the island is port to port, which illustrates how poor the road infrastructure is. Most containers move on flatbed trucks because there are virtually no available chassis. Container dwell times can hit 21 days, unheard of in the U.S. Yet these challenges represent opportunities for the right companies. Port operator PSA International projected that Mariel could almost triple its current TEU (twenty-foot equivalent unit) capacity without needing to actually expand. We were told that Mariel handled close to 300,000 TEUs in 2015, and as noted earlier, the port was built with a plan to expand its TEU capacity.
Q: What else struck you, positively and negatively, about the condition of Cuba's transport system?
Cuba's famous 1950s-era cars are kept in operating condition with imported parts and metal fabricated on the island.
A: What surprised me was the state of the total infrastructure, not just as it related to freight and logistics movement. Most Cubans use public transportation. Import duties on automobiles make it virtually impossible to own a finished automobile. The classic 1950s cars that seem frozen in time and that many Americans associate with post-revolutionary Cuba are almost exclusively taxis now. They are maintained by an amazing system of imported parts and by metal "artists" that fabricate their own parts. The taxi owners are immensely proud of the condition of their cars. It is a highlight of Havana.
Q: U.S. businesses are lagging behind their counterparts from other countries that never imposed a trade embargo on Cuba. Will U.S. companies find it difficult to dislodge established non-U.S. providers?
A: I don't believe U.S. firms will have difficulty competing in Cuba if the embargo is lifted. The U.S. has a huge nearshoring advantage. It seems that most countries currently trading with Cuba do not have a large presence there. Our collective capabilities should serve us well given that Cuba's energy, civil engineering, and telecommunications ecosystems are stuck in the 1950s.
Q: What advice would you give a U.S. logistics provider that's interested in doing business there?
A: Align yourself with local asset-based partners serving the island. The reason is that there are still countless legal and regulatory questions about doing business there. For example, can U.S. logistics companies open offices in Cuba, or will they be required to use one of the three current government-owned freight forwarders like Transcargo? That's just one of many questions. You want to partner with someone who knows the local ways and means.
U.S. companies also need to understand how the currency works. Foreign companies would deal with the Cuban convertible peso (CUC), while locals would still transact in Cuban pesos. Foreign companies would pay the government in CUC currency, and the government would then pay the employees in Cuban pesos. Essentially, the currency conversion is a tax kept by the government. I know that as the landscape changes, logistics associations like TIA will play an important role in facilitating such an important endeavor.
Q: In your discussions with Cuban officials, did you get any clarity on when the country could be ready to hit the regional or global trade stage?
A: Cuba feels it's ready now. The investments in Mariel and the passing of the "Law of Foreign Investment," which opened up Cuba to foreign investors, are the catalysts. The newly established Mariel Special Development Zone (ZEDM) already has established businesses that have 100 percent foreign investment. A Belgian logistics company handles shipments at the port. We also saw a few warehouses going up that were being built exclusively with foreign capital. Previously, foreign companies looking to serve Cuba had to partner with the government to gain a foothold.
Q: Given the impoverished state of the Cuban economy, how can the Cuban people afford to pay for Western-style goods?
A: With all Cuba's potential, nothing economically sustainable can occur until the income question is addressed. We were told the average Cuban earns about 540 Cuban pesos per month, which is equivalent to about US$20. Prices of most foodstuffs are kept artificially low. But disposable income for consumables is a luxury.
Q: Fidel Castro is an aging figurehead, while his brother, President Raul Castro, is also up in years and has said he will step down in 2018. Do you foresee a liberalization of trade activity once they are gone from the scene and a younger generation of leaders takes their place?
A: Regardless of what government is in power, the key policy issue is and will continue to be how Cuba's debt obligations are served and how its credit standing is addressed. Can the current Cuban government, or its future governments, improve the country's creditworthiness? That issue as well as others that go beyond transportation and logistics are for the governments and international organizations to address. My focus is to understand Cuba's changing landscape and to be prepared to serve DRT's customers if and when the time comes.
A move by federal regulators to reinforce requirements for broker transparency in freight transactions is stirring debate among transportation groups, after the Federal Motor Carrier Safety Administration (FMCSA) published a “notice of proposed rulemaking” this week.
According to FMCSA, its draft rule would strive to make broker transparency more common, requiring greater sharing of the material information necessary for transportation industry parties to make informed business decisions and to support the efficient resolution of disputes.
The proposed rule titled “Transparency in Property Broker Transactions” would address what FMCSA calls the lack of access to information among shippers and motor carriers that can impact the fairness and efficiency of the transportation system, and would reframe broker transparency as a regulatory duty imposed on brokers, with the goal of deterring non-compliance. Specifically, the move would require brokers to keep electronic records, and require brokers to provide transaction records to motor carriers and shippers upon request and within 48 hours of that request.
Under federal regulatory processes, public comments on the move are due by January 21, 2025. However, transportation groups are not waiting on the sidelines to voice their opinions.
According to the Transportation Intermediaries Association (TIA), an industry group representing the third-party logistics (3PL) industry, the potential rule is “misguided overreach” that fails to address the more pressing issue of freight fraud. In TIA’s view, broker transparency regulation is “obsolete and un-American,” and has no place in today’s “highly transparent” marketplace. “This proposal represents a misguided focus on outdated and unnecessary regulations rather than tackling issues that genuinely threaten the safety and efficiency of our nation’s supply chains,” TIA said.
But trucker trade group the Owner-Operator Independent Drivers Association (OOIDA) welcomed the proposed rule, which it said would ensure that brokers finally play by the rules. “We appreciate that FMCSA incorporated input from our petition, including a requirement to make records available electronically and emphasizing that brokers have a duty to comply with regulations. As FMCSA noted, broker transparency is necessary for a fair, efficient transportation system, and is especially important to help carriers defend themselves against alleged claims on a shipment,” OOIDA President Todd Spencer said in a statement.
Additional pushback came from the Small Business in Transportation Coalition (SBTC), a network of transportation professionals in small business, which said the potential rule didn’t go far enough. “This is too little too late and is disappointing. It preserves the status quo, which caters to Big Broker & TIA. There is no question now that FMCSA has been captured by Big Broker. Truckers and carriers must now come out in droves and file comments in full force against this starting tomorrow,” SBTC executive director James Lamb said in a LinkedIn post.
The “series B” funding round was financed by an unnamed “strategic customer” as well as Teradyne Robotics Ventures, Toyota Ventures, Ranpak, Third Kind Venture Capital, One Madison Group, Hyperplane, Catapult Ventures, and others.
The fresh backing comes as Massachusetts-based Pickle reported a spate of third quarter orders, saying that six customers placed orders for over 30 production robots to deploy in the first half of 2025. The new orders include pilot conversions, existing customer expansions, and new customer adoption.
“Pickle is hitting its strides delivering innovation, development, commercial traction, and customer satisfaction. The company is building groundbreaking technology while executing on essential recurring parts of a successful business like field service and manufacturing management,” Omar Asali, Pickle board member and CEO of investor Ranpak, said in a release.
According to Pickle, its truck-unloading robot applies “Physical AI” technology to one of the most labor-intensive, physically demanding, and highest turnover work areas in logistics operations. The platform combines a powerful vision system with generative AI foundation models trained on millions of data points from real logistics and warehouse operations that enable Pickle’s robotic hardware platform to perform physical work at human-scale or better, the company says.
Bloomington, Indiana-based FTR said its Trucking Conditions Index declined in September to -2.47 from -1.39 in August as weakness in the principal freight dynamics – freight rates, utilization, and volume – offset lower fuel costs and slightly less unfavorable financing costs.
Those negative numbers are nothing new—the TCI has been positive only twice – in May and June of this year – since April 2022, but the group’s current forecast still envisions consistently positive readings through at least a two-year forecast horizon.
“Aside from a near-term boost mostly related to falling diesel prices, we have not changed our Trucking Conditions Index forecast significantly in the wake of the election,” Avery Vise, FTR’s vice president of trucking, said in a release. “The outlook continues to be more favorable for carriers than what they have experienced for well over two years. Our analysis indicates gradual but steadily rising capacity utilization leading to stronger freight rates in 2025.”
But FTR said its forecast remains unchanged. “Just like everyone else, we’ll be watching closely to see exactly what trade and other economic policies are implemented and over what time frame. Some freight disruptions are likely due to tariffs and other factors, but it is not yet clear that those actions will do more than shift the timing of activity,” Vise said.
The TCI tracks the changes representing five major conditions in the U.S. truck market: freight volumes, freight rates, fleet capacity, fuel prices, and financing costs. Combined into a single index indicating the industry’s overall health, a positive score represents good, optimistic conditions while a negative score shows the inverse.
Specifically, the new global average robot density has reached a record 162 units per 10,000 employees in 2023, which is more than double the mark of 74 units measured seven years ago.
Broken into geographical regions, the European Union has a robot density of 219 units per 10,000 employees, an increase of 5.2%, with Germany, Sweden, Denmark and Slovenia in the global top ten. Next, North America’s robot density is 197 units per 10,000 employees – up 4.2%. And Asia has a robot density of 182 units per 10,000 persons employed in manufacturing - an increase of 7.6%. The economies of Korea, Singapore, mainland China and Japan are among the top ten most automated countries.
Broken into individual countries, the U.S. ranked in 10th place in 2023, with a robot density of 295 units. Higher up on the list, the top five are:
The Republic of Korea, with 1,012 robot units, showing a 5% increase on average each year since 2018 thanks to its strong electronics and automotive industries.
Singapore had 770 robot units, in part because it is a small country with a very low number of employees in the manufacturing industry, so it can reach a high robot density with a relatively small operational stock.
China took third place in 2023, surpassing Germany and Japan with a mark of 470 robot units as the nation has managed to double its robot density within four years.
Germany ranks fourth with 429 robot units for a 5% CAGR since 2018.
Japan is in fifth place with 419 robot units, showing growth of 7% on average each year from 2018 to 2023.
Progress in generative AI (GenAI) is poised to impact business procurement processes through advancements in three areas—agentic reasoning, multimodality, and AI agents—according to Gartner Inc.
Those functions will redefine how procurement operates and significantly impact the agendas of chief procurement officers (CPOs). And 72% of procurement leaders are already prioritizing the integration of GenAI into their strategies, thus highlighting the recognition of its potential to drive significant improvements in efficiency and effectiveness, Gartner found in a survey conducted in July, 2024, with 258 global respondents.
Gartner defined the new functions as follows:
Agentic reasoning in GenAI allows for advanced decision-making processes that mimic human-like cognition. This capability will enable procurement functions to leverage GenAI to analyze complex scenarios and make informed decisions with greater accuracy and speed.
Multimodality refers to the ability of GenAI to process and integrate multiple forms of data, such as text, images, and audio. This will make GenAI more intuitively consumable to users and enhance procurement's ability to gather and analyze diverse information sources, leading to more comprehensive insights and better-informed strategies.
AI agents are autonomous systems that can perform tasks and make decisions on behalf of human operators. In procurement, these agents will automate procurement tasks and activities, freeing up human resources to focus on strategic initiatives, complex problem-solving and edge cases.
As CPOs look to maximize the value of GenAI in procurement, the study recommended three starting points: double down on data governance, develop and incorporate privacy standards into contracts, and increase procurement thresholds.
“These advancements will usher procurement into an era where the distance between ideas, insights, and actions will shorten rapidly,” Ryan Polk, senior director analyst in Gartner’s Supply Chain practice, said in a release. "Procurement leaders who build their foundation now through a focus on data quality, privacy and risk management have the potential to reap new levels of productivity and strategic value from the technology."