By Jeff Berman / www.supplychain247.com / February 8th, 2016
XPO Logistics is extending its cost-reduction effort at former Con-way Freight operations by closing service centers in remote locations.
A recent Wall Street Journal report stated that third-party logistics and freight transportation services provider XPO Logistics shut down seven freight terminals that were part of the Con-way Inc. less-than-truckload (LTL) network, Con-way Freight. Con-way was acquired by XPO for $3 billion last year.
In a statement obtained by Logistics Management that was also in the WSJ report, XPO said these moves reflect XPO’s migration to a more efficient LTL organization with better network efficiency and greater utilization of its capacity.
“As part of our planned restructuring, we decided to close seven service centers in remote areas without exiting any markets,” the statement said.
“By consolidating these small terminals with larger neighboring locations, we’re increasing our network density and providing customers with faster transit times to hundreds of communities. All of our LTL customers have continuity of service during the transition.”
The specific locations where terminals were closed down were not disclosed by XPO, with the WSJ report adding that the shipments from customers near these sites would be processed through other, larger facilities, making those operations more efficient.
This follows an early February announcement from XPO in which the company stated it kicked off a workforce reduction for its less-than-truckload (LTL) unit.
This move is part of XPO’s previously-stated plan for synergies in its LTL business, with the company saying it has eliminated roughly 160 non-sales positions that were primarily in administrative, management and back office functions, and impacted less than 1 percent of XPO’s LTL North American headcount.
XPO said an additional 30 positions were eliminated in other parts of the company, primarily to address redundancies created by the acquisition.
XPO said these efforts will cut annual costs by more than $20 million against a targeted operating profit improvement of $170 million-to-$210 million over two years, adding that to date around $50 million of expected annualized savings have been achieved since XPO officially acquired Con-way on October 30, 2015.
In an interview with Logistics Management, XPO Chairman and CEO Brad Jacobs said that these moves were a planned reduction that is part of the company’s larger strategy for LTL, which it had intended to do since the Con -way transaction was closed.
“We want our LTL business to be a more leaner, results-oriented, with less waste and more productivity,” said Jacobs. “We had a goal of $170 million-to-$210 million over two years and in three months we have already moved more than $50 million towards that goal, which includes $20 million from these actions and over $30 million from steps we took in the fourth quarter. Our plan is very much on track, and the integration is off to a strong start.”
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