Dive Brief:
- XPO Logistics is pushing ahead with the buildout of its terminal footprint, increasing its network capacity in the face of declining LTL tonnage, President of LTL Mario Harik said during a Q2 earnings call.
- The LTL carrier, which grew its network by a net 345 doors between October and June, is evaluating more terminal sites in Atlanta, Salt Lake City, Houston, Kansas City and Philadelphia, Harik told analysts.
- XPO is focusing its real estate investments in markets with growing LTL demand, he said. “We expect these markets to continue to grow over the long term,” Harik said.
Dive Insight:
Expanding XPO’s terminal footprint is part of the LTL carrier’s plan to lower its operating ratio, and the company is one-third of its way to a goal of adding a net 900 doors by the end of next year, a 6% increase.
XPO’s new terminals in California and Georgia added nearly 200 doors when they opened in April and May, respectively. The company, however, has shifted some of its capacity around: The 314 doors added between October and January were somewhat offset by the closure of 165 others, according to a Q4 investor presentation.
Like competitor Old Dominion Freight Line, which is also pressing on with its network expansion despite slowing LTL tonnage, XPO’s strategy involves investing for the long term.
“We’re seeing that mixed feedback from customers and softer demand than what we saw last year,” Harik said during the Q2 earnings call. “But generally, over the years to come, that demand is going to pick up, and we’re going to have the investments in capacity to be able to capture that demand.”
Customers are taking notice of XPO’s network investments. A large shipper, which recently signed up and became XPO’s most recent top-10 customer, met with Harik at the carrier’s new Atlanta terminal in the week before the Aug. 5 earnings call, Harik said.
“They’re very happy with their onboarding experience, and they’ve already committed to incremental volume with us,” Harik said.
