It was unchartered territory from the get-go: A newcomer to the transport and logistics space – though hardly a neophyte to corporate America – pursuing a roll-up initiative that would involve not just one or two acquisitions, but 17 in only four years. Nothing like that had ever been tried in this industry. In fact, the battlefield is littered with the dead and wounded bodies of companies that had failed to integrate even a couple of acquisitions.
Eight years since he burst on the scene with a $150 million acquisition of a then 22-year-old company called Express-1 Expedited Solutions, Brad Jacobs today sits astride a $17 billion per year multi-national behemoth, XPO Logistics, Inc. Jacobs’ initial goal was to consolidate the freight brokerage segment. However, he quickly pivoted to a more ambitious objective of dominating last mile, contract logistics and less-than-truckload (LTL) as well. It took knowledge, and a large amount of guts, to meld multiple and disparate businesses into a single brand to manage much of customers’ supply chains in North America and Europe.
It also took a big-time investment in information technology. Jacobs and his CIO, Mario Harik, front-ended XPO’s information technology capital expenditures, recognizing early on that any up-front hit would pay dividends many times over in the benefits that automation would bring to an end-to-end supply chain. XPO will spend about $550 million on all of its information technology initiatives in 2019, a 10 percent increase over 2018 levels. A large part of that budget, and of future spending, will be directed toward artificial intelligence, which Jacobs said may be the most important technological advancement in the industry’s history.
“The essence of logistics is capturing information, analyzing it and applying it to help move goods through the supply chain most efficiently,” Jacobs told FreightWaves. “AI will increasingly perform these functions better than we can.” XPO is using AI to develop capabilities from predictive analytics to pricing algorithms, to demand forecasting, Jacobs said. The company, and the industry, are just getting started, he added. “We’re in the top of the first inning in a fast-moving game,” he said.
XPO’s mantra, according to Jacobs, is to “digitize everything that’s digitizable.” Brokerage, where XPO began its journey, is a poster child for how a business that relied almost exclusively on manual processes has been transformed by digital tools, he said. More than half of XPO’s brokerage volumes are being managed electronically rather than over the telephone, according to Jacobs. Its digital freight marketplace, “XPO Connect,” is one of the fastest-growing parts of the company, he added.
In that vein, Jacobs said he is impressed by the “vision and energy” of pure digital brokers. “None of them have gotten huge traction yet, but no doubt some will succeed, and possibly succeed a lot,” he said.
Jacobs also lauded the recent launch of FreightWaves’ Trucking Freight Futures platform that has created a tradable market for truckload spot market prices, saying that it helps minimize the risk inherent in such an unpredictable market. “It’s something we’ve looked at and it’s an interesting idea. There is a world in which freight-price futures work. De-risking is something everyone’s looking to do,” he said.
Much has changed since Jacobs entered the industry in 2011. XPO is an established business, and has silenced many of the doubters of its model. The company, which has not made an acquisition since September 2015, has put M&A on the back burner in favor of using capital to repurchase its own shares. For his part, Jacobs said XPO will “certainly return to M&A. It’s in our DNA.”
Another change has been in Jacobs’ public schedule. He barnstormed the country in XPO’s early years to drum up support for the company, its model and its philosophy. Lately, however, he has kept public appearances to a minimum, focused no doubt on the running of a multi-billion-dollar enterprise.
Jacobs said he chose to participate in Transparency19, his first participation in such an event in years, because the event’s focus on technology mirrors that of his company’s. “It’s right there in the tagline for the conference – disruption and digitization. That’s our model. Be the disruptor for our customers,” he said.
FreightWaves has secured Brad Jacobs as the Visionary Keynote at their Transparency19 event in Atlanta, GA on May 6-8. The event will be held at the Georgia International Convention Center and is the 3rd event in their rapidly growing and innovative event series. Tickets may be purchased here.