Accomplishing the impossible: interview with Brad Jacobs
The logistics industry existed before Brad Jacobs. It will likely never be the same after him.
In 2012, this magazine published a story titled "The big bet of Brad Jacobs." The story focused on how Jacobs, an executive with no direct experience in transportation and logistics and with whom few in the industry were familiar, planned to do what no one in this space had ever done successfully: acquire a cluster of companies over a relatively short span and unify them under one umbrella.
To call it a "big bet" seemed like an understatement. Transport and logistics companies have long had trouble integrating one or two acquisitions. Jacobs would end up fusing 17 of them in just four years. The doubters were out in force from the start, and even Jacobs acknowledged the risks to the strategy as he was pursuing it.
The bet has paid off in spades. From an initial $150 million investment, his company, Greenwich, Conn.-based XPO Logistics, has grown into a $17 billion-a-year giant. It is consistently profitable, defying many of the skeptics. It has attracted billions of dollars in institutional investment and has an $8 billion war chest for mergers and acquisitions (M&A). The price of its shares has risen more than sevenfold in six years, an astonishing share rise for a logistics firm.
Jacobs recently spoke to Mark B. Solomon, DC Velocity's executive editor - news, about XPO's strategy, where it is going (and not going), and what he sees as game-changers.
Q: This is a business that has a spotty track record, at best, in successfully executing integrations. What convinced you that XPO could build a better mousetrap?
A: You know the Farmers Insurance commercial? The one where they say "We know a thing or two because we've seen a thing or two"? Well, I guess in M&A, I've seen a thing or two. The teams I've led over the years have acquired and integrated more than 500 companies. I'm fortunate that some of the key team members from my past experience are here at XPO.
Q: At the start, your focus was on truck brokerage. At what point did you conclude that a pivot was in order to extend into other areas of logistics?
A: It wasn't exactly a pivot because we always wanted to be a multimodal provider. The first deal we did, Express-1, was in truck brokerage, expedited service, and freight forwarding. The goal was to add intermodal early on so that we'd have a comprehensive multimodal offering. Over time, we added last mile, contract logistics, and LTL (less-than-truckload) and created a real end-to-end capability. It was a way to differentiate ourselves to customers. The main change was when we added assets. That happened in 2015 when we bought Con-way.
Q: Brokerage M&A activity is as robust as it's ever been, and with the industry still fragmented, consolidation is expected to continue. Are brokerages on XPO's radar screen?
A: I love brokerage. It's an important part of our service offering. Customers certainly value it, especially in the kind of environment we're in right now. I don't know if it makes more sense to build up that business through acquisitions or to continue to grow it organically. Either way, we'll continue to apply our technology to transform it for our customers and carriers.
Q: You have steered clear of parcel. Any itches to scratch in that area, or does it remain a non-starter?
A: We're the number-one or number-two service provider in each of our major lines of business. That's an important part of our strategy. I struggle to see a path to a similar leadership position in parcel unless we bought UPS, FedEx, or DHL, and none of them are for sale.
Q: What has been the most profound change in the business—other than the growth of e-commerce—that you see lasting for years, if not decades?
A: Artificial intelligence. I believe we're seeing a tiny sliver of how AI will be applied in our industry, particularly in contract logistics. Our facilities are using predictive analytics, collaborative robots, and a raft of other smart technologies that leverage data. Down the road, AI is going to help us better understand our customers' customers. It's going to force the whole industry to shed preconceived notions about customer service.
Q: Can you speak to the growth prospects for XPO's trans-Atlantic supply chain? Will there be deeper integration between your U.S. and European operations?
A: We had a big acceleration in sharing best practices that started about 18 months ago when we finished merging our infrastructure. That sped up collaboration across the company. I'll give you some examples. We saw an opportunity to export our last-mile expertise, and now we have operations in five European countries. We're scaling up automation in our DCs on both sides of the Atlantic. Our large multinational customers like seeing consistent standards applied around the globe.
Q: XPO is looking to expand internationally, but those plans don't include Asia. What may change your mind?
A: Nothing is ever off the table, including Asia. But it would require intense management attention. And we wouldn't be the big kahuna there. Asia is a huge potential market that we can't ignore, but there's still a ton of opportunity for growth in North America and Europe, and at lower risk.
Q: What areas of XPO's business do you feel need shoring up?
A: For the past several years, our focus has been 100 percent on integration and optimization. Nothing needs shoring up. But if you're talking about continuous improvement, that's a different story. Hopefully, we'll never be satisfied with our current state, whatever that may be. We always want to get better.
Q: Is there a strategic holy grail for XPO? Do you have a vision of when you might say, "OK, this is the end game. This is what we set out to accomplish"?
A: Everyone at XPO is on board with the goal. It's very clear. Our job is to help customers move goods through their supply chains in the most efficient way possible. We operate in an addressable market of about $1 trillion worldwide, and we have less than 2 percent share. We have a long way to go.
Q: XPO has been in a running battle with the Teamsters over issues that include, but go beyond, the union's organizing efforts. Is there any common ground you can achieve with organized labor here as well as in Europe?
A: That's for our employees to decide. Our efforts are focused on creating the best possible workplaces.
About the Author
Executive Editor - News
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.
More articles by Mark B. Solomon
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