Technology now is the key differentiating factor in logistics, XPO’s Jacobs says

William B. Cassidy, Senior Editor | Nov 18, 2014 10:52AM EST

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FORT LAUDERDALE, Florida — When Bradley S. Jacobs thinks about technology and the future of transportation, he thinks big. The CEO of XPO Logistics believes autonomous driverless trucks and three-dimensional printing will change the way goods are produced and shipped within the next few decades, utterly changing global supply chains.

But Jacobs also believes technology will transform logistics in the short-term, especially as more sensors are installed on international and domestic containers, chassis, tractors and trailers and other equipment, such as forklifts, used to move freight around the globe.

“The future of transportation is the ‘Internet of Things’ or IoT,” Jacobs said in a keynote speech at the annual National Industrial Transportation League Conference and TransComp Exhibition here yesterday. “Today, there are just short of a billion devices connected to the Internet,” he said. “In 6 years, Gartner predicts that number will grow to 26 billion devices.”

Transportation increasingly is about the flow of information between manufacturers, warehouses, trucks, retail locations, businesses and homes, “all equipped with sensors communicating through the ‘Cloud,’” he said. “Call it the Internet of Transportation Things.”

XPO — one of the fastest growing public transportation and logistics companies in the U.S. — is spending a lot of money to make that Internet of Transportation Things happen.

“We’re spending about $115 million this year on technology, about $480,000 every working day,” Jacobs told the NITL. “We are firm believers that technology is the key differentiating factor between the different service providers and will increasingly be so over time.”

That’s a significant investment, and one that is often overlooked as XPO spends hundreds of millions of dollars to acquire logistics and transportation companies.

The company, which plans to achieve a $3 billion revenue run rate this year, has ambitious internal goals for technology development as well as corporate expansion. One is to become a paperless and “keyboardless” workplace. “We’re spending money on a major thrust into voice-to-text technology in our offices,” he said. For example, “I don’t type e-mails anymore, I talk to Siri and she finishes the job.” Eventually, data collected by voice will go into a company-wide data cloud that can be mined for information used to make decisions.

Some of those decisions will involve pricing — also the target of a major technology push by XPO. Jacobs said he wants to use the vast amount of data that can be collected through his company’s brokerage operations and the “IoT” to move toward “predictive pricing.”

“When I first began visiting brokers, what struck me most was that pricing was kind of random,” he told reporters. “They were pulling prices out of the air. I didn’t see any metrics, or analysis. We’ve put a lot of money into creating predictive pricing models.”

That investment created proprietary truck and rail freight optimization programs that are helping XPO’s truck brokerage and intermodal rail operations gain business, he said. “These technologies allow for more predictive pricing and better capacity utilization.”

Along with predictive pricing, efficient sourcing of capacity is a big goal. “There are 250,000 trucking companies in the U.S., but their trucks are in all the wrong places,” Jacobs said. That leads to “tight capacity” and increasingly higher rates even when trucks and trailer space could actually be available± if shippers and 3PLs knew how and where to find them.

“We have 28,000 carriers we work with, and they operate 670,000 trucks,” he said. “The Old School way of finding a truck to move a load was to make a phone call, or go onto a load board. In the New School, we put in a origin and destination, some freight characteristics, and the system takes our whole carrier base and pushes to the sales rep the 10 carriers that are probably most interested in that load.” That’s not a far-future scenario, he said. Others are working on ways to turn “big trucking data” into smart business intelligence, too.

The increasing complexity of global supply chains and the challenges facing shippers and transport operators -- everything from chassis shortages to driver shortages -- will make the development of more advanced transportation technology a necessity, not a luxury.

“We’re still in the Stone Age in transportation when it comes to tagging and tracing and communicating the location of freight,” Jacobs said. Ultimately, there’s “no need” for the type of congestion shippers are struggling with at the ports of Los Angeles and Long Beach, he said. “The inefficiencies in the supply chain are all about technology. In my view, of all the disruptions in the supply chain, the worst is a breakdown of information collection and dissemination.” XPO “is investing a lot in tagging containers,” he said.

Jacobs restated his conviction that driverless trucks are coming to U.S. highways, probably within the next decade. “Today everyone needs a truck driver and no one wants to be a truck driver. There’s going to be a shortage for quite a long time. But my prediction is 10 years from now we won’t need truck drivers, because trucks are going to drive themselves.”

3D printing will have an even more radical impact on supply chains, he said. “I see it starting as a small niche, and then becoming dominant. You’ll be telling your grandkids about these things called factories. The idea of manufacturing something in Shanghai, bringing it to long Beach, putting it on intermodal rail and truck to move inland -- that’s the old school. Manufacturing from 3D printing will be much closer to consumers and dramatically reduce the need for planes, ships, rail and trucks to carry freight within 15 to 20 years,” he said.

It’s not easy convincing an audience of logistics managers their jobs and their very industry might not exist, at least in the form they know, within 20 years. “There are always naysayers,” Jacobs said.

But he takes a long view of the history of technology and how rapidly it can change age-old ways of doing things. Before becoming involved in XPO in 2011, Jacobs co-authored an unpublished book tentatively called Everything Important Thing that Happened in the Last 13.7 Billion Years. “It was a labor of love,” he said. “There’s no money in books.” One thing he noted: “When you look at the P&L sheet of the universe, you constantly see things that looked ridiculous at first eventually become the norm.”

The key, he said, is learning to look at those “ridiculous” things, including, perhaps, driverless trucks and global 3D printing networks, in a new way. “We human beings have enormous potential in front of us, and if we learn to think differently, we can accomplish great things.”