- Shipper demand for outsourcing and warehouse automation boosted XPO Logsitics' revenue, executives said on an earnings call Tuesday. The contract logistics arm, which is set to be spun off from the less-than-truckload segment, won $4 billion in new business during the first four months of the year.
- New business includes XPO's largest deal ever at $1.8 billion from a longstanding, but unnamed, customer. Executives also mentioned deals with Apple in the U.S., as well as fashion retailer Asos and grocer Waitrose in Europe.
- "Outsourcing has been a consistent trend for years, but it accelerated as a result of the pandemic," CEO of XPO Europe Malcolm Wilson, who will become CEO of GXO Logistics once the spinoff is complete, said during the call. "Large companies have become more aware of both the critical importance of supply-chain continuity ... and the potential vulnerability of handling logistics completely in-house."
XPO identified three trends responsible for driving a majority of its business in Q1: e-commerce, outsourcing and warehouse automation. Though accelerated by the pandemic, these trends pre-date the coronavirus. E-commerce was already growing, and increased volumes coming through warehouses made automation's productivity promises more appealing.
According to Prologis, using automation could help increase facility productivity by 10%-20% in commercial real estate over the next three years. Automated storage and retrieval systems provide the largest productivity gains, while mobile or semi-mobile automation can lead to more modest improvements.
Automation expected to help increase productivity
With a pro-technology strategy, XPO quickly captured that demand from companies looking to bring in a third party.
At the beginning of the year, XPO said it shipped roughly five-times more units using robotic technology in 2020 than it did in 2019. And the company used advanced automation, including robots and cobots, in more than 25% of e-commerce volume in North America last year.
"We can all relate to this: Right now, order-fulfillment times are being compressed," Wilson said Tuesday. "What used to be a five-day logistics process is now down to one day or less. Advanced automation and intelligent machines are cost-effective ways to meet these expectations."
XPO will operate a distribution center for Apple with more than 1 million square feet of space for e-commerce fulfillment, Wilson said. It will be used for direct-to-consumer distribution, complete with automation and robots to personalize products before they're shipped.
The facility, located in Indiana, will help speed delivery times, according to an announcement from Apple last week. It's part of $430 billion in U.S. investments the company is making over five years, which touches suppliers and manufacturing, as well as fulfillment and distribution.
"We have lots of very compelling opportunities to introduce advanced automation and robotics," said XPO Chief Strategy Officer Matt Fassler. "It's one of the things that our customers are looking to us for. It's one of the big drivers of outsourcing and contract logistics that ties in very well [with] e-commerce and omnichannel retail. So, all those things are really converging."
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