xpo logistics

Fortune Staff

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XPO Logistics

McKenna Moore

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CEO Brad Jacobs says AI is "the biggest thing going on in the business world"

XPO Logistics CEO on AI: "Jump in"

Leadership

brad. When you started XP Oh logistics 11 years ago you decided to invest in artificial intelligence right from day one. And those were the early days of Ai. How did you know back then that this technology would be so critical to your company's success. So the first part of the transportation industry that we sought out to consolidate was truck brokerage. And the third person that I hired was our Ci oh Mario heart. And in our first meeting in our first interview in my living room, we totally connected with the vision of automating brokerage. So instead of it, all being, people on phones will be machine to machine by computers. So in our most recent quarter, we reported that 80% of our shipments were automated, either on getting it or covering inside. If you had gone back to 2011, that would be 0%. So looking back at those early days, what impact did artificial intelligence have on XP Oh, oh, huge! Because we're able to grow faster because we were able to say yes to shippers more because technology allowed us to find the right trucks were able to say yes to carriers more because we could find shipments for them. So it was good, it was good for everybody was good for customers, good for carriers and therefore was good for profits. And AI has changed so much in the last decade. Give us an example about how AI is helping your customers and your own XP Oh, operation by in brokerage, which will now be called R Xo when we spin it off, that is a largely automated business and will be increasingly automated over time. And the big benefit we've got from that is we've been able to expand our margins to best in class margins in the industry and we've been able to expand our load growth, our volume growth in this most recent quarter we had 16% year over year volume growth. We would have never been able to do that if we were doing that all mechanically just from people. So look ahead 567 years from now, what do you think we're going to get out of artificial intelligence? That will be even more transformative than it is now in the brokerage business where we now have 80% penetration of a I I don't think it'll go all the way to 100% because there'll always be certain problem shipments that need human intervention although eventually computers will get better than humans at that do. But in the foreseeable future I see it going up to like 97% 98% and the benefit for that will be will be able to serve our customers serve our carrier based better and our employees can make more money. They'll be able to do much more volume and be more profitable. You are such a big believer in ai and I just hear your passion about it but there are many ceos and business leaders who are sort of standing on the sidelines and looking and saying I'm not going to invest in this now. Let me just see where AI goes. If they were to ask you what are your thoughts on this, what advice would you give them jump in because you're gonna get left in the dust? Because this is the biggest thing going in the business world is A. I. And correlate to that machine learning, everything that's being done by humans is being copied now by AI and it's doing it more efficiently more effectively and it's better for customers and ultimately better for shareholders. Yeah. I'm a big believer in AI obviously.

Brad Jacobs’ leadership advice for his successor: “Take care of people”

XPO Logistics CEO & Founder steps down: “Company’s in great shape”

XPO Logistics CEO & Founder steps down

brad. It is so great to see you again and there's so much to talk about XP Oh logistics, big changes in the company structure and your big decision to step down as Ceo and we're gonna talk about that in just a minute. But first let's start with why you've been spinning off or selling off so many of your business units. I mean what's the thinking behind all this thinking behind that is very simple to create shareholder value. We've always had a focus on what's the best way to create immense shareholder value and because we've had that mindset, that focus, we were the seventh best performing stock of the Fortune 500 of the last decade. But it seems so out of character for you brad because you're best known for building X. P. O. Through a series of very aggressive acquisitions. And now it looks like you're unwinding those acquisitions. I mean what's your goal here? What do you want to accomplish? So we never set out to build an empire and to become bigger and bigger for the sake of being bigger. We set out to create shareholder value and to do service to the people in the institutions and the endowments and pension funds who trust us with their money and to give them very, very good returns. And that's the whole thought process behind everything we've done. Let's talk about what you've spun if you spun off the warehousing business and you're about to do the same for your freight brokerage unit, you're selling your european business, how would you describe the new XP oh what does it look like the new X. P. O. Once we complete the spin and once we complete the sale in europe will be a pure play less than truckload carrier. So most of the trucks you see on the highway are full truckloads, they have one customer, the same freight in the whole truck. Sometimes you see two smaller, we call them pups next to each other and those are less than truckload which means we have many different customers. We consolidate the freight for those many customers. So is this L. T. L. Part of the business, the most attractive and fastest growing part of the business for right now the truck brokerage business is actually faster growing because we've been growing at 27% kegger three times the rate of growth of the competition. So the industry has been growing at about 9% kegger in brokerage, we've been growing about 27% but L. T. L. Has strong pricing power and I expect that pricing power will say will stay strong even in difficult parts of the cycle. Tell us about the timing that you're doing all these transactions? I mean it looks like the economy is headed for a serious slowdown. Maybe a recession. Why does it make sense to make do these transformative changes at a time when the economy is slowing down, there's never a bad time to pay down debt now with the sale of europe, that will pay down debt to almost nothing. So it will be almost debt free, nice unlettered balance sheet. And in terms of the spin, whether the market is up, whether the market is down where the economy is good, whether whether the economy is bad, there still is strong logic to creating two separate pure play companies, one in brokerage and one in L. C. L. But still how the economy does is very important for your business for anybody's business right now. And you told investors not long ago that you're not concerned about what you call an economic hurricane hitting the U. S. Now you have more data that you can examine and look at. Do you still feel that way? We just reported our second quarter. A few weeks ago we had record revenue, we had record Ibadan, we had record GPS, we had record margins, we had record returns on invested capital. We have a lot of records. So I can't be complaining about the economic environment. Well it is true you reported those really solid numbers. Can you keep up that momentum looking ahead for the rest of this year, into 2023 do you think you're gonna be able to match that kind of performance? I can't predict 2023 because I don't know what the macro condition is going to be. So it could be a very big range for the whole industry for most industries frankly, but for the rest of the year we have a good line of sight and visibility to the numbers and we've raised guidance for the rest of the year but we have been seeing interest rates going up. I mean what do higher interest rates? I mean for a company like XP oh it can't be a good thing. No interest rates going up is bad for the transportation industry because it tends to slow down growth. So the less freight that's out there, the less business there is. So raising interest rates is not a positive thing. Having said that we have many idiosyncratic things that we're working on inside the company and the L. T. L. Business were exerting various healthy pricing power, double digit pricing. We have a lot of technology initiatives to improve what we call our pickup and delivery network or line haul network, our workforce planning network that's irrespective of the macro. So what are you hearing from your customers? Especially when it comes to you raising prices, what are they telling you about their businesses? Are they slowing down well so far this year it's in an inflationary environment and a significant inflation. And so everyone's been raising prices on everyone along the chain. And unfortunately that ends up with the consumer paying high prices that won't last forever because interest rates are going up. We don't have quantitative easing anymore. We have quantitative tightening so that'll slow down the economy inflation will slow down and pricing in our retail business will likely stay strong but not not double digits like it is right now. And in our truck brokerage business, we're still going to take market share in general, customers are a little more cautious and slowing down just a little bit, but I wouldn't call it a disaster. So what is the biggest issue facing your industry right now? Is it a shortage of truck drivers? Is it these high gas prices we've been seeing or something else? Fuel prices going up is good and bad for us. We we purchased a lot of fuel so it's bad when those expenses go up. But we have pricing power, it's good for us and our less than truckload business because we charge a fuel surcharge to make a profit on that labor? If you'd asked me that question a few months ago, I would have said, yeah, it's almost impossible and sometimes impossible to find labor certain categories in certain parts of the country Today. That's changed remarkably in the last few months and labor availability has gone up 44%. We monitor how many people apply for each job that we post. It's up 44% in the last several months. And why do you think that is? Interest rates have gone up. Economy has slowed down. Government subsidies have subsided so people coming back to work. So is there anything on your worry list? I mean what concerns you most right now? I wouldn't say worry, but I always pay a lot of attention to the people in the organization because the real secret of success to build a high growth companies to have an organization where the people are empowered, the people are engaged. People have high morale. People like the company, they like each other. They like the vision, they see how they fit into the whole vision and how they're actually contributing to that. And so I always pay attention that as any good Ceo should do well speaking of good ceo you surprised everybody announcing that you're going to step down as ceo. Why now especially with so much going on at your company companies in great shape. I've got great successors in place for both parts of the business and I want to do my next big thing. We've known each other for a long time. You know, every every decade or so I get into a new industry and figure out a way to create a large value for shareholders. So what's the next industry, have you decided on that yet? I haven't decided on that yet. And I just barely started the hunt and most of the times in the past, all the times in the past where I ended up was not where I started the search and that's that's the fun part of the process. You know, people look at how you build X. P. O. From a relatively small company into this mulch, billion dollar powerhouse and a huge fortune 500 company in just 11 years and they wonder how did he do it? What is the secret to your success? I built up great teams. We had a good strategy and we always kept focused on creating shareholder value. There's so many distractions and management team can have and sometimes they take their eye off the ball. We've kept our eye on the ball, but it's also leadership. And what would you say are the most important things you did a good leader if they're going to create tons and tons of sharing has to a bunch of things. It's not just one simple thing. You have to have a good strategy. You have a good plan, you gotta have good tactical execution of that plan. You have to have a team that's really fired up and really charge and all in and you've got to make them all coherent and cohesive so that they're killing proverbially the competition instead of killing each other. And that's what we've done. We've created a very good machine of people that are focused, focused focused on serving the customer, creating a great employee environment and creating value for shareholders. You've chosen Mario Harrick to be your successor as Ceo. Why did you choose him? What does he bring to XP? Oh he's fantastic. He was the third guy heart Back in 2011. He's been chief information officer that whole time and when you're running technology, you learn the business inside and out. He was chief customer officer, so he knows customers. He's been running the less than truckload business for the better part of last year and has created a great improvements in the business. So I had a successor in place that was just perfect for the job. This is Mario's first job as ceo of a really big company. What's the best leadership advice that you can give him as he takes charge. Take care of people, make sure that people are happy, make sure that people understand what we're trying to do, make sure they understand what they contribute to the vision and make sure they get along well.

XPO Logistics CEO explains why splitting up the trucking company makes sense

XPO Logistics CEO: splitting up trucking company makes sense

There are thousands of open jobs.

Brad. Everyone is wondering, What's your next move? People were very surprised when they heard that you were thinking about splitting up your company, Expo logistics. And in fact, a couple of years ago, when we were talking, you were very upbeat about the future of a company that you have built into one of the largest freight and logistics transportation companies in the world. What changed? I'm still very upbeat. I'm very positive about the company that we've built with strong leadership positions in Europe and North America and some of the fastest growing parts of transportation and logistics. It's all powered by technology, most of which is proprietary. So I'm very optimistic about the future of the company, and customers are very appreciative of what the service is that we're providing for them now. You mentioned that we're considering strategic alternatives in terms of what's changed. We are considering that the reason we're considering that is because the valuation that we're getting in the public markets is not so great, okay? And we won't be great. And so we're thinking for some of our business units may be in a sale transaction, we could get higher multiple well you said to your employees that you have mixed feelings about this. In fact, to quote you, you said We have to do what's right for the shareholders. Is the board asking you to do this? Is there Ah, shareholder group that's pressuring you? No, I'm very collaborative relationship with our board. It's It's a great dynamic, and we agreed as a board that let's pursue whatever makes the most amount of sense toe fulfill our prime mission, which is to create shareholder value. And so I do have mixed feelings because I'm in love with our employees and I'm in love with our customers and I. We've created a great one Expo family atmosphere around the globe, and if we end up selling, some of our business units will shrink instead of expand. Its better to expand. But the most important thing is to expand our share price for our shareholders. We have to do the right thing for them. We're not on a on an irreversible path of we must sell these for business. You know, if if it makes sense in terms of creating shareholder value to sell, then we will sell. So let's talk a little bit about the business units. You've made it very clear that there is one that you really want to hold on to its your small freight trucking unit, which you call North American LPL, which stands for less than truckload. What's so special about that particular business? Right? The trucking market is hundreds of billions of dollars in size. The bigger one is the full truckload market, where if you look inside one of those big trucks on the highway, you'll find usually one customers freight filling up the whole truck in less than truckload. Er lt l it's palates from dozens of different customers that we consolidate and put into a truck and that business is a smaller business. It's tens of billions of dollars still substantial, with 1/3 largest lt L player, and we have enormous opportunities to improve the efficiency and productivity and profitability of that business, all powered by technology in the pickup and delivery in the cross dock facility in the line hall and in the pricing Thes Opportunities toe have quantum improvements in the efficiency of the organization. So let's say you do sell the other how units of Expo, what do you do with the money, you're gonna put it into this. L feel division, not all because it's, you know, the substantial billions of dollars. But we have options options. We can return cash to shareholders. We can do dividend to share buyback. We can pay down debt we can do everyday. If market is that logical thing to do, we can invest more in Catholics, and technology will allocate capital in the way that's most efficient. That's most productive for she hopes, as management and as a board. That's probably our highest obligation is to allocate capital intelligently. So whatever allocation of capital makes the most amount of sense, given the circumstances at that time that we'll do, are you still looking at logistics, A CZ a really good business to be in or you're looking to expand outside. We're in the transportation and logistics field, and since 2011 when we started the company or goals always has always been, how do we create most amount of shareholder value within transportation and logistics? Now we've taken the tack that we should invest in technology in order to differentiate our way of doing business from our competition. We spend over half a $1,000,000,000 a year on technology. And we have so many projects to take advantage of advances in artificial intelligence and machine learning and pricing algorithms and optimizing the way our trucks move and automating things in the warehouse. Very exciting. We could spend much more, much, much higher amounts of money in technology, but way live within our means and on Lee spent about half a $1,000,000,000 a year in technology but bread here in the short term, we see that the financial markets are selling off. Many economists are saying that this Corona virus could push the United States into a recession. Are you slowing down your plans for that? Are you just gonna wait and see until this all passes? And it's business as usual right now? Um, no, not at all. We're going full speed ahead with that sales process, and we have four different business units that are in the market, and we've got great buyer demand from them. We're continuing that process regardless of what's going on in the Corona virus in support of those businesses. Still great businesses in this, A lot of interest in them now how it results in end will depend a little bit on the debt markets, then M in a market in the Corona virus and oil in the stock market. So it may put the kibosh on them or it may result in really nice prices for them, depending on where the world is a couple months from now. I don't know yet. Every CEO always has a Plan B and Plan C, then a plan D if they're good. So what are your backup plan for ex Pio? Given all the uncertainty that we're facing right now, So Plan A is we'll continue on the path of pursuing strategic alternatives for those four business units two in Europe to North America. And those were great Those results in great outcomes in terms of great prices, the board will very seriously consider those. They'll be fine if because of the Corona virus or because of the debt markets of them in a more Kadir capital, markets are seizing up. We don't have a productive outcome. That's okay. We don't have to sell those. We don't need to sell those. We launch those process thinking it's a great idea. Maybe we could get some great value to take advantage of the arbitrage between what we trade at and what those things with sell at a sales context. But if it doesn't result in a successful can, we just won't tell. Okay, we have The company will continue in the same form we've been doing great at for 10 years.

 Brad, you came to be CEO in a very unusual way. You really were a deal maker first. You did hundreds of acquisitions in your career. And then, you started several companies in very diverse fields-- trash collection, construction equipment, oil trading, and now you're in logistics and trucking. What has been the secret to your success? The success I had was finding something that I really wholeheartedly believed in and could get a bunch of other people to also believe in it and work together to succeed those big visions. It's really about creating a community that's very energized and focused on accomplishing something big. Many people doubted that you could take a small trucking company and build it into a multi-billion Fortune 500 company, but you did do that. So as a leader, what did it take to get people to believe in your vision? Susie, people still doubt us. They've doubted me in my whole career. And that's good. That keeps you on your toes and keeps you not being-- so I work on XPO from when I wake up to when I go to sleep, pretty much seven days a week, with a few exceptions. I love it. It's not a job. And that's what I look forward to. I look for people who are true leaders, meaning they want to do this job. And it becomes a magnet to get other people who also want to do the job. It's really about people in the end. And another challenge for you, really, has been merging all these acquisitions and all of these different cultures into one single corporate culture. How did you pull that off? Through a lot of communication and a lot of listening, not just talking. So we do business in 34 countries, and each country has something that's a little bit different than the other countries, not just language-- business practices, all kinds of stuff. We were one of the beta projects for Facebook in their-- it's called Workplace. It was called Facebook at Work at first, which is our social network, only for XPO employees. And it's the first thing I read every morning. The very first thing is I look at what people have posted from all around the world. And it keeps me in touch, as it does all of our other users of that tool to what's going on inside the company. That's one of many, many different ways of communicating to be knowledgeable, to keep feedback loops going within the company, to keep everyone focused on results. I'm guessing, though, that there was some resistance to all this change and these mergers and all of that. And how did you deal with that resistance? Less than you think, because we have a sparkling-type of company. There's just a lot of excitement and enthusiasm, and morale is very high. That's really important. Because you can have the greatest strategy in the world, the greatest plan in the world, but if the employees aren't buying into it and really don't like the company, you just can't make it happen. Brad, as you look on your very long and successful career, what's the best leadership advice that you've ever received? And why was it so critical in shaping you as a leader? So my main business mentor was a gentleman called Ludwig Jesselson, passed away in the early '90s, and was a great influence on me, because he was very smart and wise in business. He was the chairman of Philip Brothers. And I remember one day, I went to go have lunch with them. And he said, you look kind of glum. He said, you don't look like your normal chipper self. I said, oh, yeah, I got this problem. I got this problem. I got that problem. And he said, hey, look, you picked a profession-- the business world. That's about solving problems. So every time you have a problem, that's a good thing. That's an opportunity to create value. So that clicked on me. So your take-away on leadership was what from him? Positive reframe. Don't get into a loser mentality of, oh, my god, I'm a victim. I have this problem. I have this problem and this problem. Rejoice. Embrace the problems and solve the problems. And move on to new problems. Keep solving problems. Problems are good. 

What It Took For People to Believe in This CEO's Vision

XPO Logistics’ Brad Jacobs says it’s all about helping others succeed.

bread. You came to the CEO in a very unusual way. You really were a dealmaker. First, you did hundreds of acquisitions in your career, and then he started several companies in very diverse fields trash collection, construction equipment, oil trading and now you're in logistics and trucking. What has been the secret to your success? The success I had was finding something that I really wholeheartedly believed in and could get a bunch of other people to also believe in it and work together to succeed. Those big vision is really about creating a community that's very energized and focused on accomplished something big. Many people doubted that you could take a small trucking company and build it into a multi $1,000,000,000 Fortune 500 company, But you did do that. So as a leader, what did it take to get people to believe in your vision? People still doubted they doubted me in my whole career, and that's good that keeps you on your toes. Keeps not being so. I worked on Expo from when I wake up, when I go to sleep pretty much seven days a week, with a few exceptions, I love it. It's not a job, and that's what I look forward to. I look for people who are true leaders, meaning they want to do this job, and it becomes a magnet to get other people. Also wanted to the job really about people in the end. And another challenge for you really have been merging all these acquisitions and all of these different cultures into one single corporate culture. How did you pull that off through a lot of communication and a lot of listening, not just talking. So we do business in 34 countries, and the country has something that's a little bit different than the other countries, not just language, business practice, all kinds of stuff. We were one of the beta project for Facebook. In there, it's called Workplace was called Facebook at work at first, which is our social network on Lee for Expo employees. And it's the first thing I read every morning. The very first thing is I I look at what people have posted from all around the world, and it keeps me in touch, as it does all of our other uses of that tool to what's going on inside the company That's one of many, many different ways of communicating to be knowledgeable feedback loops going within the company to keep everyone focused on results. I'm guessing know that there was some resistance toe all this change in these mergers and all of that. And how did you deal with that resistance Less than you think, Because we have a sparkling type of company, There's just a lot of excitement and enthusiasm, and morale is very high. That's really important because you can have the greatest strategy in the world, the greatest plan in the world. But the employees aren't buying into it, really don't like the company. You just can't make it happen. If you look on your very long and successful career, what's the best leadership advice that you've ever received? And why was it so critical in shaping you as a leader? So my main business mentor was gentleman called Ludwig Jefferson, passed away in the early nineties and with a great influence on me because it was very, very smart and wise in business. He was chairman of Philip Brothers, and I remember one day I went to go have lunch with him, and, uh you look kind of glum. Don't look like your normal chipper self. Hell, yeah. I got this problem. I got this problem and that problem. Hey, look, you picked a profession. The business world. That's about solving problems Every time you have a problem, that's a good thing. That's an opportunity to great value. It really clicked on me. Your takeaway on leadership was what from him. Positive refrain. Don't get into a loser mentality of Oh my God, I'm a victim. I have this problem like this Problem this problem. Rejoice. Embrace the problems and solve the problems and move on to new problems. Keep solving problems. Problems are good.

XPO Logistics

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XPO Logistics

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World's Most Admired CompaniesAs of 2/1/21

World's Most Admired Companies
As of 2/1/21