GXO Logistics focus on automation has been a boon for nabbing new customers
Dolce & Gabbana, JD Sports Among Latest GXO Wins
GXO Logistics Inc.’s focus on automation and returns has been a boon for nabbing new customers.
The Greenwich, Conn.-based company said it now counts Dolce & Gabbana, Lacoste, JD Sports, Spanx, Restoration Hardware and L’Oreal among the more recent fashion and beauty customers that have hired the contract logistics firm to help manage their supply chains and warehousing.
The momentum behind GXO, which had a recent market cap of $6.1 billion, led the company to up its guidance for the year when it reported its second-quarter results this week. GXO said it now expects organic revenue growth in the range of 12 percent to 16 percent, up from 11 percent to 15 percent. The company is also forecasting adjusted earnings before interest, taxes, depreciation and amortization in the range of $715 million to $750 million, compared with previous guidance of $707 million to $742 million.
“Across global markets and industries, continuing supply chain complexities, elevated inventory levels and high inflation are making seamless logistics management mission-critical for more and more companies,” CEO Malcolm Wilson told analysts this week. “This all plays to the strengths of GXO [and] is no doubt helping to drive our significant organic growth and market share gains. On the one hand, we have seen some return to brick-and-mortar by the consumer. On the other hand, large companies are still continuing to expand their online product offering.”
On the acquisition of Leeds-based Clipper Logistics, Wilson said “we need to digest that,” when asked about future deals being struck. However, the CEO noted the trend in industry consolidation in saying GXO would look at opportunities that would allow it to expand into new verticals.
“No doubt we will look again in the M&A market. North America, I have to say, is probably our favorite market. Lots of opportunities,” Wilson said.
Clipper is expected to help bolster the company’s e-commerce efforts once it has fully transitioned into the GXO system.
“E-commerce is growing rapidly for GXO as more big, global brands continue to put more of their products online to catch up with consumer behavior. E-commerce generates higher product returns and managing these returns is a problem for most customers,” GXO chief commercial officer Bill Fraine said this week during the company’s second-quarter earnings call.
Fraine said 96 percent of GXO customers are able to resell returned product. That compares to, industry-wide, about 25 percent of returns remaining unsold.
Fraine went on to say 40 percent of GXO’s new customer contracts include reverse logistics and said there is “significant growth opportunity here for GXO.”
The CCO used the example of a large sports customer GXO began working with about four years ago to paint the picture of how the logistics firm has made the returns process more productive for getting in-season merchandise back into availability for purchase.
Software helps the company identify which of the trucks returning to a warehouse contains product that needs to get back into the system queue for sale. Merchandise is then processed by level of priority based on that information.
Clipper Logistics adds more software that’s expected to bolster GXO’s reverse logistics offering to customers, with Wilson saying that will eventually be rolled out across all of GXO’s European business and not just the U.K.
Technology and automation provides the backbone to GXO’s services and the company continues to open automated warehouse and distribution centers.
About 60 percent of the new business in the second quarter was for what the company said are highly automated sites as more apparel, retailers and other businesses focus on software to help with inventory management and trimming costs.
About that same percent of contracts GXO is bidding for have a tech component, according to the company.
“In my career, I have never seen such demand from first-time outsourcers and existing customers for reverse logistics and automation”
Companies have become particularly keen on warehouse automation to help solve labor concerns of the past couple years, Fraine pointed out, adding it also helps make the existing workers in a facility “more sticky” as technology helps make work easier.
With availability of everything from real estate to parts and other components, Wilson said GXO’s ability to obtain the necessary robots or other technology for its facilities is not a concern for the company given its size in the market.
Said Wilson: “That scale gives us huge buying power when it comes to equipment, like automation, not to mention real estate.”
