Dive Brief:
- XPO reduced its purchased transportation costs for its North American less-than-truckload segment in Q2 to $32 million, down about 53% compared to a year ago, per an earnings release.
- Investments in rolling stock in recent years have allowed XPO to cut outsourcing costs in the short term and position the carrier for success once the market improves, Chief Strategy Officer Ali Faghri told Trucking Dive.
- “When demand recovers in the LTL industry, you're going to see truckload rates go up significantly, 20-, 30-, 40-percent,” he said. “And that's really where we're going to see a bigger benefit, because we've essentially insulated our cost structure from this cost category.”
Dive Insight:
XPO can operate linehaul miles more efficiently than third-party contractors, the company notes, and so it’s finding wins among a market slowdown.
Outsourced linehaul miles were 6.8% of total miles in Q2 for the carrier, a significant shift from a rate of 15.9% a year ago, per company earnings reports.
“That's more than 900 basis points lower than last year and the best level in our history, with more opportunity ahead,” CEO Mario Harik said on a July 31 earnings call.
New AI-powered linehaul models are “driving additional savings, reducing normalized linehaul miles by 3%, empty miles by over 10% and freight diversions by more than 80%,” he added.
The company aims to hire a director of AI, and Harik said the company plans to launch more AI integrations this year. XPO is also currently piloting how AI can improve pickup and delivery operations that lower costs, the CEO said.
AI initiatives with other transportation players have led to efficiencies, such as ArcBest optimizing city routes to reduce miles and fuel costs and C.H. Robinson Worldwide offering price quotes, eliminating significant manual processing and speeding up output for customers.
