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November 26 2018

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November 26 2018 | The Journal of Commerce 39 www.joc.com Surface Transportation Matthew Harding, vice president of the Freight Market Intelligence Consortium at Chainalytics. The use of AI to create a dynamic demand-based pricing system for con- tract as well as general tariff pricing is exactly what XPO is aiming for. "We will use real-time supply and demand data, looking at the availability and utilization of our capacity and the requirements coming in from our customers to give prompt responses to RFPs [requests for pricing]," Jacobs told The Journal of Commerce. "If you look at the airlines or hotels, they're not using 2-week-old informa - tion to give you quotes, they're not generalizing," he said. "They're using real data based on what's in their sys- tems now, looking at seasonal patterns, whether it's the end of the quarter, how things are tracking previous years. And based on that, they're raising and lowering pricing by the minute." XPO plans to use AI-driven software to fuel improvements in LTL revenue, profit, and efficiencies. The first is load planning. "The pallets come into the cross-dock and the computer tells us what's the optimal trailer to put them in and the optimal sequence to load the trailer," he said. "That maximizes efficiency." Next comes AI-based LTL linehaul planning to more logically schedule and move freight between termi- nals in intercity runs. "We'll use an advanced linehaul algorithm to create more direct loads," he said. Today, "you wind up with a lot of wasted [linehaul] miles. We'll use these AI-driven tools to create more direct loads and get freight where it needs to go more efficiently." JOC email: bill.cassidy@ihsmarkit.com twitter: @willbcassidy technology providers race to build machine learning and AI into their platforms. The end goal is to create more efficient, self-running supply chain processes, speakers said at the recent JOC Logistics Technology Conference in Las Vegas. "AI is really about the ability to pro- cess tons of information that a human otherwise could not do," Jack Oney, CEO of Oney Consulting and a former Procter & Gamble logistics executive, said at the conference Oct. 29. "AI is going to do a lot more than blockchain will ever think of doing. It's about driving decisions based on hundreds of otherwise disparate data sources." The merits of blockchain aside, AI and machine learning are technologies many think can be deployed to help au - tomate processes from pricing to carrier selection to load planning. "There's a lot of structured data in logistics where you can supercharge analysis with machine learning," Alex Hoffmann, managing director and co-founder of TNX Logistics, said at the conference. "We think of AI as a way to have human decision-making be enhanced by the computer," said Hoffmann, whose European-based company offers trucking optimization soft- ware. "The idea of more dynamic floating contracts [using AI] … that's something I see on the horizon," said IN THE NEAR future, shippers asking XPO Logistics for less-than-truckload (LTL) rates will receive price quotes more like what they'd get from an airline booking system or hotel than a traditional LTL quote. XPO is preparing to inject artificial intelli- gence (AI), including an AI-driven demand-based pricing system, into its LTL operations, and to make that switch in a two-year timeframe. If XPO follows through, that will be a ground-shaking game-changer for LTL pricing. The LTL industry has possibly the most complex pricing model offered by any transportation mode. LTL pricing today is based on several classification characteristics, including dimensions, stowability, and density; complex company tariffs and rules that often date back decades; and discounts. In terms of revenue, XPO is one of the top three US LTL carriers, ranking second after FedEx Freight in 2017 on The Journal of Commerce list of the Top 25 LTL Trucking Companies and competing neck-to-neck with Old Dominion Freight Line (ODFL) for the No. 2 spot this year, according to SJ Consulting Group data. A major change in pricing at XPO would rever- berate across the sector. "This is a new world," CEO Bradley S. Jacobs said. "We're going to pursue innovation in four categories that will generate more than $100 million in LTL income, using AI-based load-building tools, linehaul planning algorithms, pricing algo- rithms, and dynamic route planning for pickup and delivery," Jacobs told The Journal of Commerce while dis- cussing XPO's third-quarter earnings. XPO's announcement is a big step for the use of AI in transporta- tion, and it comes as more logistics LTL pricing evolution? XPO Logistics prepares to infuse artificial intelligence into price quotes By William B. Cassidy "We're going to pursue innovation in four categories that will generate more than $100 million in LTL income." The LTL industry has possibly the most complex pricing model offered by any transportation mode. XPO Logistics Trucking | Rail | Intermodal | Air & Expedited | Distribution

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