In XPO Logistics’ Q2 earnings call in July, CEO Brad Jacobs called out its technology investments for improving the company’s operating ratio.
“Our second-quarter adjusted operating ratio ex-real estate gains was our best operating ratio yet,” he said. “In truck brokerage, we’re continuing to outperform the industry. This is due in no small part to the rapid adoption of our XPO Connect platform by customers and carriers.”
The freight marketplace XPO Connect was built to give its shipper customers an opportunity for a digital transportation experience, including transparency and analytic tools for better decision-making.
These transactional platforms help brokerage firms grow their customer base and provide more transparency to company services without having to invest deeper in human capital, leading to better operational efficiencies over time.
Accompanying XPO Connect is the carrier-facing application, Drive XPO. This tool enables carriers to see the shipments that have been entered into XPO Connect without having to call into the XPO (NYSE:XPO) carrier representatives to book loads, provide updates or obtain payment status.
Later in its July earnings call, the company’s chief strategy officer, Matt Fassler, explained that its digital strategy was not only improving operating ratio but driving revenue growth through more efficient communication.
“XPO Connect is helping us drive tremendous volume at excellent margins,” he said. “Carrier and customer adoption of [Drive XPO and] XPO Connect continues to surge. … Average weekly usage by carriers nearly doubled in the quarter, up 87%, and the number of customer accounts on [XPO Connect] is up by more than six times from Q2 last year.”
“We’re also securing brokerage volumes through API technology at a profitable clip,” Fassler continued. “Transactions driven by APIs and similar interfaces increased by more than eight times in Q2 versus the prior year, as XPO Connect talked directly to our customers’ systems. Our brokerage profitability was very strong and we leveraged our 47% net revenue growth into stronger adjusted EBITDA growth in brokerage.”
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Carrier adoption has continued to grow: The company announced last week its Drive XPO application surpassed 500,000 downloads, gaining 4.8 stars out of a 5-star rating system on Apple’s App Store.
Driving carrier adoption is not a simple task, as many digital players enter the transportation market frequently. XPO Logistics Chief Information Officer Mario Harik believes this 87% average weekly usage increase comes from the added benefits in the application that show the company’s commitment to its carriers’ experience.
“Technology has been at the heart of everything we do since the founding of XPO 10 years ago,” Harik told FreightWaves. “Carriers are excited to gain a new level of flexibility and visibility to freight options, quicker payments, performance analytics, and opportunity insights to better run their business. Owner-operators value Drive XPO for its ease of use and optimized load planning that aligns to their lifestyle and income aspirations. As a result, we’re building stronger and deeper relationships with our carrier network while delivering a higher level of service to our customers.”
Carriers on the platform can negotiate rates, find backhauls through the Get Me Home feature, find specially priced loads labeled Hot Deals and receive fuel, tire and maintenance services discounts as their overall XPO carrier score increases through continued application usage.
Harik explained the innovation will not stop there.
“Soon drivers will be able to opt in to mobile push notification capability as well, allowing immediate visibility and response to potential matching loads,” he said. “We’re also planning to expand visibility of our dedicated lanes from XPO Connect to our mobile users, to provide a fuel savings feature and to add live chat capabilities. These features optimize the entire network and bring efficiencies directly to the carriers by eliminating idle time and empty miles. Even more, small carriers will be able to operate with a consistent income and security.”
Jacobs explained on the earnings call that these innovative measures are now becoming table stakes as they lead to one objective: managing more revenue to combat shrinking margins.
“I think the difference in distinctions between the digital players and the — whatever you call the nondigital players, has become almost nonexistent,” he said. “I think margins will come down. Having said that, I think profit will go up, because I think volume will go up. I think the amount of transactions, the velocity [of] transactions is going to increase.”