Two big brokers and third-party logistics (3PL) providers are just getting bigger.
Second-quarter results released in the past two days from giants C.H. Robinson Worldwide, Inc., and XPO Logistics Inc. reinforced the notions that business is quite good, and that the big boys are effectively balancing their capacity needs and shipper demand.
Eden Prairie, Minn.-based Robinson, which reported results Tuesday, said second quarter net revenues-revenues after transportation costs—increased 17 percent year-over-year to $671.5 million, with solid growth across the major shipping modes as well as customs services. Total revenues grew by 15.3 percent to $4.3 billion, with growth across all service lines, Robinson said.
The company's core "North American Surface Transportation" unit posted gross revenue gains of 20.9 percent and net revenue gains of 21.4 percent, a reflection of strong demand, tight capacity and the higher freight rates they produced. Operating income surged 31.4 percent, Robinson said.
Robinson Chairman and CEO John Wiehoff said the company saw a slight moderation in the pace of buying and selling price gains. However, the trend toward higher end-to-end pricing grew for the fifth straight quarter, Wiehoff said. "We believe that the current freight market fundamentals will remain in place for the remainder of the year," he said.
Wiehoff's comments were echoed by Benjamin J. Hartford, analyst for investment firm Baird. Channel checks with customers show "expectations for robust demand and continued tightness in freight fundamentals" for the rest of the year, Hartford said. While daily net revenue in July is exceeding expectations with a 20 percent year-over-year gain, more difficult comparisons starting with the latter part of the current quarter will result in decelerating net revenue growth in relative terms, he added.
The news was also very positive at Greenwich, Conn.-based XPO, which reported results yesterday. Revenue rose to $4.36 billion, up 16 percent from the 2017 second quarter. Transportation revenues increased 14.5 percent, while logistics revenue rose 19.1 percent, helped by a 4.7 percent gain from favorable currency fluctuations. Brokerage net revenue surged 46 percent year-over-year, XPO said.
The company's less-than-truckload (LTL) unit reported an operating ratio of 84.3 percent, its best operating ratio since the forerunner company, Con-way Freight, began tracking it in the late 1980s. Operating ratio is the ratio of operating expenses to revenues, and is an important metric of a carrier's efficiency and ultimately, profitability. The company realized, on average, a record 6.4 percent pricing increase on LTL contract renewals, according to XPO Chairman and CEO Brad Jacobs. "This is the best LTL market that's ever existed," Jacobs said in a phone interview yesterday.
Jacobs said the company generated $1.1 billion in new business during the quarter, the first time in XPO's 7-year history it has done that. Its logistics division launched 37 start-up contract projects in the quarter, also a record. From June 2017 through the end of this June, XPO added 21 million square feet of distribution center space, he added.
According to Jacobs, July has the been XPO's best month so far this year, an indication that its momentum shows no signs of abating.
Bascome Majors, transport analyst for investment firm Susquehanna Capital Group, lauded the results, but advised investors that a decision to put new money in XPO shares should be based on Jacobs' ability as an efficient capital allocator and not on a belief that logistics is in a secular bull phase. With management and employees appropriately incentivized to perform, the faith in Jacobs' business instincts "is a bet we're willing to make," Majors said in a note today.
Jacobs has said that XPO plans to make one, and perhaps two, large acquisitions in the foreseeable future. Jacobs took the unprecedented step of acquiring and integrating 17 companies over a four-year span. Though many doubted his chances of pulling it off, he has managed to structure a $16-$17 billion a year trans-Atlantic powerhouse that, above all, is profitable. XPO has been off the acquisition trail for nearly three years.
Jacobs declined comment on XPO's acquisition plans other than to say that any transaction will be done thoughtfully and with the goal of dramatically increasing shareholder value. "Right now, we like the business we have, and the prospects we have," he said.
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.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.
Krish Nathan is the Americas CEO for SDI Element Logic, a provider of turnkey automation solutions and sortation systems. Nathan joined SDI Industries in 2000 and honed his project management and engineering expertise in developing and delivering complex material handling solutions. In 2014, he was appointed CEO, and in 2022, he led the search for a strategic partner that could expand SDI’s capabilities. This culminated in the acquisition of SDI by Element Logic, with SDI becoming the Americas branch of the company.
A native of the U.K., Nathan received his bachelor’s degree in manufacturing engineering from Coventry University and has studied executive leadership at Cranfield University.
Q: How would you describe the current state of the supply chain industry?
A: We see the supply chain industry as very dynamic and exciting, both from a growth perspective and from an innovation perspective. The pandemic hangover is still impacting decisions to nearshore, and that has resulted in a spike in business for us in both the USA and Mexico. Adding new technology to our portfolio has been a significant contributor to our continued expansion.
Q: Distributors were making huge tech investments during the pandemic simply to keep up with soaring consumer demand. How have things changed since then?
A: The consumer demand for e-commerce certainly appears to have cooled since the pandemic high, but our clients continue to see steady growth. Growth, combined with low unemployment and high labor costs, continues to make automation a good investment for many companies.
Q: Robotics are still in high demand for material handling applications. What are some of the benefits of these systems?
A: As an organization, we are investing heavily in software that will allow Element Logic to offer solutions for robotic picking that are hardware-agnostic. We have had success deploying unit picking for order fulfillment solutions and unit placing of items onto tray-based sorters.
From a benefit point of view, we’ve seen the consistency of a given operation improve. For example, the placement accuracy of a product onto a tray is far higher from a robotic arm than from a person. In order fulfillment applications, two of the biggest benefits are reliability and hours of operation. The robots don't call in sick, and they are happy to work 22 hours a day!
Q: SDI Element Logic offers a wide range of automated solutions, including automated storage and sortation equipment. What criteria should distributors use to determine what type of system is right for them?
A: There are a significant number of factors to consider when thinking about automation. In my experience, automation pays for itself in three key ways: It saves space, it increases the efficiency of labor, and it improves accuracy. So evaluating which of these will be [most] beneficial and quantifying the associated savings will lead to a “right sized” investment in technology.
Another important factor to consider is product mix. With a small SKU (stock-keeping unit) base, often automation doesn’t make sense. And with a huge SKU base, there will be products that don’t lend themselves to automation.
With any significant investment, you need to partner with an organization that has deep experience with the technologies that are being considered and … in-depth knowledge of the process that is being automated.
Q: How can a goods-to-person system reduce the amount of labor needed to fill orders?
A: In most order picking operations, there is a considerable amount of walking between pick faces to find the SKUs associated with a given order or set of orders. Goods-to-person eliminates the walking and allows the operator to just pick. I have seen studies that [show] that 75% of the time [required] to assemble an order in a manual picking environment is walking or “non-picking” time. So eliminating walking will reduce the amount of labor needed.
The goods-to-person approach also fits perfectly with robotic picking, so even the actual picking aspect of order assembly can be automated in some instances. For these reasons, [automation offers] a significant opportunity to reduce the labor needed to fulfill a customer order.
Q: If you could pick one thing a company should do to improve its distribution center operations, what would it be?
A: Evaluate. Evaluate the opportunities for improving by considering automation. In my experience, the challenge most companies have is recognizing that automation is an alternative. The barrier to entry is far lower than most people think!