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.
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.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.