June 27, 2017 9:30 AM, EDT

XPO Plans 'Testing Ground' for the Future of Logistics

XPO automationXPO Logistics

XPO Logistics is designing a testing center for the next generation of supply chain management, which would automate warehousing, CEO Brad Jacobs told Transport Topics in a one-on-one interview.

Calling it a “testing ground” for the future of logistics, XPO will team up with a global consumer package goods company to try out different technologies that will cut down time and costs in the supply chain. Jacobs didn’t disclose XPO’s partner, citing a confidentiality agreement.

“We’re deploying autonomous, robot-assisted picking in our warehouses, which is very efficient and improves the safety for our employees,” Jacobs said. “We’re using wearable technology, such as optical automation or smart glasses, which drives accuracy. If you pick the wrong bar code, for example, the glasses turn red. In addition, XPO is using drones for inventory management.”

Jacobs contends that embracing new technology employed after rigorous testing at the new center will increase supply chain efficiency for XPO’s customers and help them gain market share against their competitors. He also said it will cut down on waste in reverse logistics when customers return items.

As part of the look into the future, XPO is working on perfecting its software to provide predictive analytics to customers to increase throughput in the supply chain and eliminate holding onto excess inventory for months on end.

XPO ranks No. 1 on the Transport Topics Top 50 list of the largest logistics companies in North America.

“(What) customers want solved is what they should be manufacturing or stocking to be able to respond to future customer demand. We, by our massive investment in technology, test the product, determine the characteristics, associate it with order fulfillment history, put it into our algorithm and use that to predict the future return or predictive demand forecasting,” Jacobs said.

The evolution to robot-operated, automated warehousing is hardly a new phenomenon, but one that is growing rapidly. As Bloomberg News reported, Locus Robotics was launched in 2015 to compete with Kiva Systems, which Amazon purchased for $775 million in 2012.

Locus landed DHL Supply Chain, which ranks No. 4 on the TT Logistics 50. DHL will begin a pilot test this year using LocusBots within the life sciences sector at a facility in Tennessee, working alongside warehouse staff to quickly locate and transport pick items, so humans don’t have to push carts or carry bins, the logistics company said in a statement in May.

“We believe it’s critical to identify and implement these types of advanced technology solutions in the warehouse so we can seamlessly improve our customers’ supply chains,” said Adrian Kumar, vice president of Solutions Design, DHL Supply Chain North America. “DHL Supply Chain’s initial implementation of this pilot program within the life sciences sector will inform the potential for broader deployment across different parts of our business. This is a natural evolution of our robotics program.”

Amazon has about 45,000 robots and its recent purchase of Whole Foods gives the Seattle-based e-commerce giant the opportunity to automate 11 nationwide temperature-controlled distribution centers.

Brittain Ladd, a supply chain consultant who spent two years working on Amazon’s grocery push, told Bloomberg News that Amazon would likely open mega-warehouses of at least 1 million square feet and would utilize robots and automation to reduce labor costs, he said.

“The goal will be to create as advanced a distribution capability as possible to provide customers with exceptional service and the freshest of fresh produce, vegetables and meat,” Ladd told Bloomberg News.

Like Amazon, the goal of XPO Logistics is to quicken the speed to market for retail and e-commerce companies that account more than 25% of its $15 billion of annual revenue. XPO assists in drop shipping, a concept in e-commerce that refers to a third-party holding the inventory, which the retailer contacts when an order is placed to fulfill it and send it to the shopper.

“Customers are looking for same-day or one- to two-day delivery and that requires shorter turnaround times in contract logistics, and automation will help meet our clients’ needs,” said Scott Malat, XPO’s chief strategy officer.