Q&A: Malcolm Wilson, XPO Logistics, CEO, Europe, and incoming CEO, GXO Logistics

Logistics Management Group News Editor recently spoke with Malcolm Wilson, CEO of XPO Logistics, Europe, and incoming CEO of GXO Logistics, soon to be XPO's standalone global contract logistics group. Wilson provided Berman with an overview of current market conditions, how XPO has responded to the COVID-19 pandemic and what is in store for GXO Logistics. Their conversation follows below. 

Logistics Management (LM): How are things going in regards to the pending launch for GXO, in tandem with current day-to-day operations within GXO?

Malcolm Wilson: Overall, the business is moving in the right direction, and we are off to a good start in 2021. The year ahead is looking very positive and optimistic, as we are moving forward. That is showing with a number of new [customers] coming into our business. When we consider the GXO business, there is a tremendous amount happening there as well. We are building out the senior C-level team of people….when we think about that, it is a business we are really going to be building on all of the strengths that exist today to do even more to help our customers navigate the logistics world we are in right now. That is a world full of megatrends that are taking place at the moment, like outsourcing, which more and more customers have recognized as a critical niche for supply chain and logistics. The outsourcing trend is really continuing very strongly, and, of course, e-commerce. Though the pandemic, we have all kind of fallen in love, I guess, with ordering online, and I think that trend is here to stay. Lastly, those two aspects combined are driving just huge customer demand for automation. In the current environment, that is where we are at, and we are taking that to GXO with us. It really is an exciting time.

LM: When looking at the current state of the contract logistics market, how do you view the economic outlook, with the economy reopening and demand remaining pretty elevated, how are those things impacting relationships with customers and also service objectives?

Wilson: If we consider things against the background of the pandemic, around a year ago we were really in the heart of it, and a lot of countries were really in severe lockdown, including North America and most of Europe. It is such a change today, with the advent of all the vaccines and the rollout of those. Businesses are coming back to some normality. That is why I say there is such a positive outlook through 2021. What we are seeing as a business is what the pandemic did do was identify a lot of new customers and existing customers of XPO will become GXO customers. These companies are seeing just really how critical logistics is to their businesses, which has really fueled this general outsourcing trend. We are seeing many queries from companies looking at outsourcing for the first time, and many queries from existing customers. The market, and our business, is definitely benefitting from a big tailwind of e-commerce, so that is a big trend in our industry right now, and that is here to stay. We were already seeing the move towards e-commerce; it has been happening for years. The volumes we had expected to see in 2025 are being seen here and now today. That big trend of e-commerce is definitely here to stay, and that is great news for GXO. It is one of our core businesses, with e-fulfillment and returns management. That is a real core business for us and one of our big vertical offerings.  Equally, that is driving a lot of automation needs. The reason for that is we all want things sooner, so when we click on an item online and want it tomorrow, or even today, for that matter, that drives a different need in our warehousing solution, as well as a need for more and more technology and automation. That brings speed. You can do things more quickly when you are operating a big warehouse or several tens of thousands of customer consignments per day. Automation allows you to handle those big peak volumes in a much more responsive way and in a very accurate way. It is no surprise that, if we think about 2020, we handled five times more units through our automation than we did in 2019. It is really an exponential kind of increase that we are seeing. And when we think about goods-to-person robotics, that brings along four-to-six times more productivity than a human, and, equally, when we put a robot working alongside a human, like what we call a collaborative robot, even that is brining two times the productivity gain. When we put all of those things together, we very much can see why customers are demanding much more automation, and that is great news for GXO. We were an early adopter of automation, and it is very much in our wheelhouse.

LM: One thing that was apparent, due to the pandemic, was the feeling of an ongoing Peak Season, which was different from a non-pandemic year. That said, how are you approaching the 2021 peak, given everything the industry has been through?

Wilson: We are already working on peak planning for 2021. I think the advent of those bigger volumes is really driving e-fulfillment. There were times in 2020, when e-fulfillment was actually the only means of retailing. In North America and Europe, there were assuages of bricks and mortar that were just simply closed, and e-fulfillment was the number one means of people being able to purchase items. That has carried on, and there are lots of reasons as to why that might stay the case. But, I think, for us, what that means is we have to recognize that the 2021 peak activity, which normally occurs between September and January, is already being forecasted as a very big peak. We can already see that there will be bigger volumes of e-fulfillment, just in the same way that there was in the peak of 2020.

LM: How will you plan for that?

Wilson: The way we approach that is that we work with our customers to establish their own plans of what they are intending to sell, and we also utilize our own smart suite of software. And we deeply analyze their own forecast information and past activity. We do that to refine very carefully our own resources to maximize our ability to provide great service for our customers during those busy periods of time. We are already well down that route and working with our large customers during those planning sessions right now, and that is taking place probably two-to-three months earlier than typically we would have done, pre-pandemic in 2019. We are a little bit earlier in our cycle of planning and learning from what we saw in 2020. I am working with our customers to manage that. In a very tangible way, that is what is happening at the moment.     

LM: There is a lot going in in global logistics relative to current events like the Suez Canal situation a few weeks back, the semiconductor shortage, U.S. port congestion, and others. What is your approach to those types of things, from a risk management perspective?

Wilson: These types of events happen periodically. Looking at the Suez incident, for example, we were not really affected, and the reason I say that is that most of the customers we are working with are really big, blue chip organizations, and they have multiple routes for goods coming into their markets. Although there would be congestion in the Suez environment, you have to imagine that most of our customers that traffic through the Suez also have other routes they are bringing cargo in through, too. That would create a problem for a small enterprise, but most of our customers did not really see any impact. What we are always watching though, as those events happen…we are working with our customers, and they will update us, and we work together to figure out the best plan. That is always with the intent of making sure we can keep the right levels of service to the consumer, our customers’ customer. That is of paramount importance to us and safeguarding their reputation is an important part of our business relationship.

LM: With GXO soon set to become a standalone global contract logistics company and the number two provider by revenue in the market, how do you view the market, from a competitive perspective, given that shippers have so many options these days?

Wilson: For GXO, it is a pure play logistics company. Typically, the big customers we work with are making long-term business decisions. When we imagine a new automated warehouse, that is a decision that could take two years, in the process. We could start by talking to the customer, find an agreement to build a new facility and implement all the automation. It is not unusual for us to find that from the very first contact with the customer to when the first items get dispatched from the warehouse. It can take two-to-three years in some instances. With these big business decisions our customers are making, they are not really making those decisions every year. It is really quite normal nowadays for us to be entering into five- or even ten-year contractual arrangements to provide these kinds of services. It is quite normal, because it is a huge amount of business risk to make a change to these big supply chain environments like logistics warehouses. We are constantly working with our customers on stuff like that. When we think about GXO’s competition, it is kind of quite difficult, because we are a true global business. If you want to work with our company in Mexico or France or New Jersey, you are going to experience the same culture, services, the same way of working, IT, and everything is going to be the same. When I think about other companies, we tend to find companies that are very strong in a certain region but outside of that region they are not able to provide the same level of support. Another example is a company may be really good in one vertical but cannot provide the same support outside of that vertical. I think we are in a very unique environment of being of such a significant scale with a global reach, with a major advantage in terms of developed automation and enablement of it into warehouses. I think we are in really good shape. We have a long runway ahead of us, in the context of looking at our business pipeline and that looks very positive. We can see well into the future for all of the different projects we are starting with customers. Overall, we have a very promising outlook for GXO.      

LM: What are some of the current business-related concerns you see in the global logistics market?

Wilson: COVID-19 is not gone. We are fortunate to have our operations in North America and Europe. I think most countries have handled the pandemic positively, certainly when we consider the rollout of the vaccination program. I am hopeful that the worst is over, in terms of the pandemic, but, of course, we need to keep an eye on things like different variants.