XPO Logistics introduces four new technology initiatives with an eye on LTL optimization

Earlier today, global freight and logistics services provider XPO Logistics said it has rolled out four new technology efforts that serve as the “core” of its LTL (less-than-truckload) 2.0 optimization plan.

XPO is currently the second-largest provider of LTL services in North America. In its third quarter earnings announcement last week, it said that it reported its best third quarter LTL operating ratio in 30 years, adding that it expects to generate roughly $100 million in incremental operating profit over the next two years from its proprietary technology offerings within LTL 2.0.

“Our technology is spurring growth across all the services we offer,” said Mario Harik, chief information officer of XPO Logistics, in a statement. “We’ve pinpointed four high-impact areas where we can lead the LTL industry in transforming traditional approaches to serving customers. Two of these innovations – dynamic route optimization and linehaul bypass – are already in pilot. Given our capacity for innovation, our opportunity for creating value in LTL is nearly limitless.”

The four chief components of XPO’s LTL 2.0 offerings include:

• Linehaul bypass model: XPO is piloting new algorithms to assemble truckloads dedicated to direct movements of LTL freight. The linehaul bypass model improves the efficiency of company trucks and trailers and purchased linehaul services by reducing multiple stops to a single destination;
• Load-building through artificial intelligence: AI tools and computer vision technology for cross-dock operators help to ensure that inbound pallets are loaded in the optimal trailers, and in the right sequence inside the trailers, for the greatest possible efficiency during delivery. Intelligent load-building technology also helps limit damage;
• Dynamic route optimization for pickup and delivery: XPO is piloting proprietary AI tools that set the sequence of each LTL driver’s pickups and deliveries and adjust routes in real time based on traffic, road construction and other impacts to efficiency. This has increased the number of delivery and pickup stops per hour, improving asset utilization; and
• Pricing algorithms: XPO is developing machine learning capabilities to predict LTL price elasticity. The technology is being designed to forecast market conditions for future dates based on real-time supply and demand, as well as historical data and XPO capacity levels. This will help enhance the speed and accuracy of responses to customer RFPs.

On the company’s third quarter earnings call last week, Scott Malat, XPO’s outgoing chief strategy officer, noted that XPO still has plenty of runway to optimize its LTL network, noting that XPO recently launched phase one of its linehaul bypass model.

“This creates truckloads dedicated to direct freight shipments,” said Malat. “Instead of having the truck, stop at multiple service centers. So far, this change has shown an approximate 2.4% increase indirect loads.”

XPO Chairman and CEO Brad Jacobs said on the call that these four categories of LTL technology innovations are important drivers to the XPO business on a long-term basis.

For the third quarter, XPO’s North American less-than-truckload (LTL) net revenue was up 5.4% at $981.7 million, with the adjusted operating ratio for the segment at 85.4%, for an improvement of 220 basis points.