This excerpt taken from the EXPD 8-K filed May 23, 2006.
10 or 20 years from now can someone create a portal on which you can click the routes you want and speed you want and disintermediate the forwarders? Is there something inherently complex in your work flow that has human judgment that can prevent this?
We see this happening all the time. Futures exchanges moving from pit to electronic is a classic example. There was no value to the hand waving in the pits. Similarly Google disintermediating the yellow pages is another as there is no need to have a sales force going from door to door any more. This will happen with insurance brokers too. Problem here is that the contracts are not standardized and insurance companies are way behind the curve.
Question is will it happen to Expeditors? Please do not hide behind a statement such as we cannot project or forecast. What I am asking you to explain to me is why suppliers and buyers will not communicate directly sometime in the future? Is there is some inherent activity that in a perfect world (and I know the world is not perfect and will never be) cannot be done over communication networks?
If you are seriously asking this question, we can state with a high degree of confidence that you have a total misunderstanding of what we do around here. Even if you do understand what we do, we question the attempt to compare hand signals and the yellow pages with a company like Expeditors that uses communications as a means to facilitate and thereby provide an unavoidable physical service. After all, until freight moves like the people could on the late 1960s hit Star Trek, moving freight will remain a physical act. However, because the same arguments were likely made by the folks who ran the pony express, which was another transportation company after all, we will explore the source of our confidence about the future.
A key weakness in your question can be found in the third sentence of the second paragraph where you assert [t]here was no value to the hand waving in the pits. The fact is there was a great deal of value to all that hand waving for an extended period of time. We agree that a more efficient means of communication evolved but the basis function of executing trades continues. So whether youre paying a commission to have someone to execute an order via hand waving or whether you pay a fee to a discount broker as you point and click via an electronic exchange, you are paying something to access an organized market to execute a trade. With advances in technology, less people were needed to facilitate trades, but who can say that technology has made brokerage profits non-existent.