Remember that occasion when the pair of trainers you ordered came in the wrong size? Or the shirt was not in the colour you expected? Maybe the delivery was late. We’re all unfortunately familiar with such experiences. Logistics typically account for less than 5% of a large company’s cost base but have a disproportionate impact on customer experience. The logic of outsourcing to an expert is compelling. To learn more on this topic, we hosted a webinar last week with the Chief Strategy Officer of GXO Logistics, one of the leading players in the field.

There has been “an acceleration of opportunity” for a business such as GXO. Companies in a broad swathe of industries have “stepped up” their outsourcing activities. The main reason is that corporates are “thinking more strategically.” Outsourcing can help reduce costs and improve returns on investment (not to mention customer experience), particularly when automated solutions are included as part of the proposition. With increasing ubiquity, businesses are “less scared” of solutions such as cobots – collaborative robots – than they were a few years ago.

AI inevitably featured as part of our conversation. For GXO, it is another tool that can be used to boost returns for customers implementing outsourcing solutions. Automation vision and control systems that use AI have helped to drive operational up-time for warehouses. One highly automated site cited by GXO has seen 120 minutes per day of increased up-time with new tools. Better routing – for robots in warehouses or trucks out on deliveries – has also been a high ROI practical use-case for AI and logistics. “It’s still early days” for the technology though, according to GXO, so expect more.

If the case for outsourcing were not compelling enough, then also consider the environmental benefits. When that pair of trainers or shirt is returned to the warehouse, reverse logistics – or re-integrating product back into a warehouse – has a clear role to play. By reusing returned products, more material is kept out of landfills. GXO handles hundreds of millions of returned items. Its resale rate of ~96% is significantly ahead of the industry average.  Many electronic items (last year GXO had a single site that dealt with over 15m consumer electronics returns) can also be recycled. Outsource more, then, and go greener at the same time.  

7 March 2024


The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Heptagon Capital is an investor in GXO Logistics. The author of this piece has no personal direct investment in the business. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.

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Alex Gunz, Fund Manager

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