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GXO head sees light at end of supply chain tunnel

Current chaos should abate by end of 2022’s first half, Wilson says

(Photo: XPO)

The CEO of GXO Logistics Inc., the world’s largest pure-play contract logistics provider, said Tuesday that global supply chain bottlenecks should ease by the end of the second quarter of 2022, and that massive spikes in demand hitting GXO’s U.S. facilities are already starting to level off.

Malcolm Wilson (pictured) told analysts that “the issues that we’re seeing right now we believe are very much temporary. We’re anticipating to continue to see them probably into Q1, maybe even into Q2, but definitely it’s a temporary issue, [and] it will abate.”

Greenwich, Connecticut-based GXO (NYSE:GXO), which operates 869 warehouses in 27 countries, is “seeing lots of container traffic” entering its U.S. facilities, Wilson said. About 1/3 of GXO’s facilities are in the U.S.

Wilson acknowledged that global manufacturing disruptions are feeding chaotic conditions across the U.S. supply chain, a scenario that will last for several months. However, a large volume of cargo is “channeling into our warehouses,” he said.

Long-term contractual agreements allow GXO to pass on to its customers any cost increases related to the bottlenecks, company executives said.

Wilson said GXO’s operating model is not significantly affected by the supply chain issues. Some of its customers are also unaffected, while others continue to wait for products to arrive, he said. GXO is working to prioritize the goods that need to move to stores as quickly as possible.

The current conditions have forced GXO to review employee wage scales and incentive plans more frequently in the past to retain as many workers as possible in a very tight labor market. In normal times, it would be acceptable to review wages and incentives every six months, Wilson said. Now GXO is reviewing those plans every other month at some locations, he said.

“People are in huge demand, lead times for equipment are extending, and we’re having to leverage all of the buying power, all of the scale and clout we can say that GXO has,” Wilson said. “We are more vigilant than ever in terms of these key issues to ensure that we’re not caught out.”

On Monday, GXO reported its first quarterly results since being spun off as a stand-alone by XPO Logistics Inc. in August. The company beat analysts’ earnings consensus and raised its guidance for 2021. Company executives said it’s feasible the company can achieve 8% to 12% organic growth on an annualized basis. They note that GXO has enormous resources, is operating in a high-demand environment and has just a 5% share of the $430 billion logistics market in Europe and North America.

Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.