XPO Logistics Inc. (NYSE:XPO) will announce tomorrow the launch of four technology initiatives for its less-than-truckload business, projects its chairman and CEO said tonight will result in $100 million in profit improvements after two years and then $100 million a year in increased profits thereafter.
The tools include the use of artificial intelligence for load-building and cross-docking improvements, advanced algorithms to strengthen the company’s line-haul network, algorithms to maximize pricing efficiency, and dynamic route optimization that functions in much the same way as digital apps like Waze which guide motorists around traffic chokepoints and accidents.
In aggregate, the features should dramatically elevate productivity for XPOs multi-billion dollar LTL business, according to Brad Jacobs, XPO’s founder, chairman and CEO.
Earlier this month, XPO rolled out a tool to strengthen bid communications between its brokerage business and its network of motor carriers. More than half of XPO’s brokered loads are offered to carriers electronically, a figure that Jacobs said demonstrates a profound change in how brokers and carriers transact business.
In addition, the Greenwich, Conn.-based company has completed the installation of automated labor management tools to improve worker productivity at 225 of its largest contract logistics facilities in the U.S. and Europe. Jacobs said he expects the systems to yield 2 to 5 percent productivity gains of between 2 and 5 percent, which over the unit’s $6 billion revenue base is a “huge” savings.
News of the I.T. initiatives comes as XPO released its third-quarter results today after the market closed. Revenue increased 11.5 percent year-over-year to $4.3 billion, with organic revenue growth of 10.5 percent outpacing the industry, according to Jacobs. Net income rose to $100 million, a $43 million gain over the year-earlier period
Revenue for the company’s North American logistics segment rose 18 percent year-over-year, the segment’s fastest year-on-year revenue growth rate in its history. The company said it closed $918 million in new business in the quarter, up 43 percent from a year ago.
The company continues to talk with prospective sellers about acquisitions, Jacobs said. Activity has perked up as valuations have eased, he said, adding that potential sellers appear more “reasonable and motivated.”
XPO, which acquired and integrated 17 companies in four years in a strategy that was unprecedented for this industry, last made an acquisition in September 2015 when it bought trucking and logistics giant Con-way Inc. for $3 billion. XPO had planned to make 1 to 2 acquisitions during 2018, and has built- a multi-billion dollar war chest to do so.