GXO Head Sees Light at End of Supply Chain Tunnel

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 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 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.