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Home » XPO expands last-mile delivery presence with purchase of Optima Service Solutions
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XPO expands last-mile delivery presence with purchase of Optima Service Solutions

November 15, 2013
Mark B. Solomon
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Bradley S. Jacobs wants your washer-dryer. Your refrigerator. Your plasma TV set. And whatever other big stuff that you can't live without that has to be delivered and hooked up.

XPO Logistics Inc., the freight broker, forwarder, and expedited company that Jacobs founded and runs as chairman and CEO, said today it acquired Optima Service Solutions LLC, a nonasset-based provider of last-mile logistics services, for $22.6 million in cash. Last-mile providers typically deliver heavier weighted goods from distribution centers and stores to residences, businesses, and job sites. A last-mile move could be as short as one mile or as long as 150 miles, depending on the line-haul requirements.

Founded in 1997, Atlanta-based Optima operates through a nationwide network of 225 contract carriers and a cluster of installers that focus on deliveries of electronics and appliances that require a high level of plumbing and electrical expertise.

Optima had revenue of $35.7 million for the 12-month period ending Oct. 31. It has grown at a 16-percent compounded annual rate for the past five years, XPO said.

The announcement comes four months to the day that Greenwich, Conn.-based XPO announced it acquired 3PD, the leader in the U.S. last-mile delivery market, for $367 million, mostly in cash. Karl Meyer, 3PD's former chairman and CEO, runs XPO's last-mile operations, which was folded into the company's brokerage division, its largest.

In a statement, Jacobs said the Optima acquisition will increase XPO's presence in the growing and high-margin last-mile delivery market. Shippers, which spend about $12 billion a year on last-mile deliveries of heavy goods, are increasingly outsourcing the function because it is outside their core competency. Meyer, in fact, was corporate delivery manager at retailer Home Depot Inc. before he started 3PD in 2001 with the belief his new company could handle deliveries more cost-effectively than his old company.

Another reason Jacobs likes the last-mile delivery business is that it fits with XPO's core brokerage operations, which manage shipments moving from the factory to either the warehouse or DC. "Our destination is their origin," he said in an interview the day the 3PD purchase was announced.

In a mid-October interview with John G. Larkin, lead transportation analyst for investment firm Stifel, Nicolaus & Co., XPO executives said the company is looking to double its annual last-mile revenues to about $625 million by 2017. Most of its current revenue comes from 3PD. XPO executives believe there are about 30 last-mile providers around Optima's size that, in aggregate, comprise the bulk of the last-mile provider segment.

XPO has projected its total 2013 revenue will exceed $1 billion and expects to reach $5 billion in revenue by 2017, according to Larkin's summary of the meeting. By the end of 2014, XPO expects to be the second largest company by revenue in the very fragmented $50 billion a year brokerage industry. The long-time leader is C.H. Robinson Worldwide Inc., the Eden Prairie, Minn.-based concern with about $9 billion in annual revenue.

In an interview last month at the Council of Supply Chain Management Professionals' Annual Global Conference in Denver, Jacobs said he is looking for additional acquisitions in the brokerage sector as well as in transportation management, an area where XPO is a minor player at this point.

Transportation Last Mile Transportation 3PL
KEYWORDS 3PD C.H. Robinson XPO Logistics
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    Marksolomon
    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.

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