XPO Logistics Chief Executive Officer Brad Jacobs continues to leverage technology to disrupt the hidebound logistics industry and gain market share in fragmented markets such as truck brokerage.
The company, along with competitors such as Transplace, Echo Global Logistics, Freightquote.com (now part of C.H. Robinson) and Coyote Logistics, is at the forefront of using proprietary algorithms that crunch massive amounts of transactional data to quickly and accurately quote rates by lane and optimally match customer loads with available motor carriers.
It’s the same way hotels and airlines use metrics like utilization rates and availability to price their products. And it beats trying to use manual processes or less sophisticated technology to marry capacity and demand from load boards and other sources.
The Freight Optimizer and a related rail optimizer for intermodal moves are XPO’s secret sauce behind its predictive pricing capabilities, network optimization and capacity sourcing for drayage, over-the-road trucking and rail. The system aggregates large amounts of information from external (DAT, Chainalytics, Internet Truck Stop, etc.) and internal sources.
Internally, whenever an associate is on a call with a client he or she types information into the system and it gets categorized and routed based on keywords so that everyone in the operations team quickly gets the benefit of the data.
But XPO is expanding automation beyond the Freight Optimizer platform to further enhance efficiency and customer service.
“We are firm believers that technology is the key differentiating factor between the various service providers, and will increasingly be so over time,” Jacobs said in a speech at the National Industrial Transportation League’s annual conference in Fort Lauderdale, Fla., last November, echoing comments from a December 2012 interview with American Shipper.
“At XPO, our plan is to use technology to drive world-class customer service. We arrange more than 33,000 shipments today. We are fanatically committed to on-time pickup, on-time delivery,” he said.
XPO expects to double IT spending in 2015 to about $225 million and one of the company’s major thrusts is in voice-to-text technology.
“Our goal is, within a few years, to be paperless and keyboard-less in all our offices,” he said.
Jacobs, who says he listens to Google’s conference calls on earnings every quarter to get a sense of where technology is going, rarely types e-mails anymore, preferring instead to dictate them to the Siri app in his iPhone because it saves time.
The latest iOS mobile operating system from Apple is much better at taking messages and finding people in the contacts list.
He noted some companies are using speech recognition software to quickly produce transcripts of earnings calls, which humans can touch up and post online.
Voice-to-text technology, the serial entrepreneur said, will allow the internal dissemination of information to happen seamlessly.
Jacobs also provided other examples of how XPO is using technology to improve customer service.
XPO, through acquisitions such as 3PD, is the largest provider of last-mile logistics services for heavy goods in the United States. The 3PL arranges about 7 million deliveries per year of home appliances, electronics and furniture for 29 of the top 30 U.S. retailers, according to Jacobs.
The company has been able to achieve customer service levels that are “head and shoulders” above the competition by investing $25 million so far in proprietary technology to measure customer satisfaction at the point of sale, he said. Home delivery drivers carry an electronic notepad, which the customer uses to sign for proof of delivery. The screen also asks for a callback number so the customer can take a short survey within 15 to 20 minutes. Customers receive a robocall with five questions, which they can respond to by using their keypad. The response rate to the customer survey is about 40 percent.
The responses generate a score that XPO uses to winnow its base of independent contractors, by giving more loads to better performing partners, and determine compensation.
“We’re rewarding our people in our last-mile organization based on the technologically derived, objectively verified customer satisfaction. So guess what? Everybody out of self-interest is zealously focused on customer experience,” Jacobs said.
IT also helps XPO manage more expedited shipments in North American than anyone else. The expedited group was formed by the acquisitions of Express-1, Turbo Logistics, Pacer’s just-in-time division and NLM from Landstar Systems in December 2013.
XPO bought NLM for $75 million and then invested another $30 million in technology “to up its game,” Jacobs said.
NLM provides managed transportation services. Rather than simply using technology to execute a shipper’s load plan the logistics provider acts as the shipper’s internal transportation department, conducting high-level planning such as load consolidation and multi-stop optimization, in addition to arranging transport with a carrier.
XPO’s NLM division now manages about $750 million in freight, up from $500 million 18 months ago, from two rooms in suburban Detroit with 123 people.
“There’s no other freight broker in the United States, that I’m aware of, that has that ratio,” Jacobs claimed. “It’s quiet. It’s all being done by computers.”
Large shippers can tender loads to XPO through EDI (electronic-data-interchange) feeds, while customers with fewer capabilities can go online to individually enter loads with origin-destination pairs, and any other selection parameters, such safety rating thresholds. XPO then holds 12-minute online auctions to source carriers that are closest to the pick-up location.
“This is the wave of the future,” Jacobs said.
NLM is flourishing under XPO. Landstar’s independent agents/brokers were reluctant to sell the NLM product because they saw it as competition for human service they provided.
Jacobs told reporters after his presentation that XPO is pilot-testing the online auction model for regular truck brokerage too, although only in heavy traffic corridors.
“You need a certain lane density to get carriers to be glued to that screen,” Jacobs said. “It’s like gambling. They’re looking at the screen and bidding all day long. But if they don’t win anything they’re not going to do it more.”
XPO is also investing millions of dollars in GPS tracking for intermodal containers.
“We just have to, otherwise shippers won’t keep converting over to intermodal, they’ll just stick with truck,” he said.
Kevin Sterling, who covers XPO for BB&T Capital Markets, said in an interview that companies like XPO are hiring millennials who are tech savvy.
XPO’s technology “is very user-friendly. It’s very Google-like,” he said. As XPO’s database of carriers gets bigger the search engine can better pinpoint available trucks and the market price, compared to “smaller truck brokers who put their finger in the wind,” the analyst said.
There are 28,000 trucking companies in XPO’s network.
“I don’t think he’s reinventing the wheel here. He’s just arming his people with the ability to succeed by mining a lot of data,” Sterling said.
This article was published in the June 2015 issue of American Shipper.
