XPO Logistics: Transportation segment
XPO Logistics’ (XPO) Transportation segment generates ~63.0% of its revenues. The company’s Transportation division provides services in five areas:
- freight brokerage
- last-mile logistics
- less-than-truckload (or LTL)
- full truckload
- global forwarding
In fiscal 2017, XPO’s Transportation vertical had revenues of $9.8 billion, up 3.8% year-over-year. Now let’s take a detailed look at the freight brokerage services of XPO’s Transportation business.
XPO’s freight brokerage services
XPO’s freight brokerage services include truck brokerage on a global basis and intermodal, expedited, and drayage services in the United States. The company’s truck brokerage business is a non-asset-based business. The truck brokerage business includes XPO placing its customers’ freight with trucking companies. This service is priced either on a contractual basis or on a spot market basis.
XPO’s Freight Optimizer is a cloud-based brokerage platform that allows the company to look into the supply and demand trends of its truckloads in real time.
XPO Logistics views the truck brokerage segment as a business that requires minimal capex (capital expenditure) with high free cash flows. The company also expects this market to expand further, as this is a highly fragmented market. As customers continue to outsource freight transportation, XPO expects to benefit from this trend.