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An Angle On The Logistics Revolution

Dec 18, 2018 at 12:18 PM CST
Transfix entrepreneurs Jonathan Salama and Drew McElroyHARRY FELLOWS Take a look at XPO Logistics (XPO), a $17 billion (revenues) firm that is, I surmise, destined to either crush or buy out Transfix, the doughty little enterprise featured in the December 31 Forbes Magazine. There are two reasons why, in the business of moving goods, spoils go to the big guys. One is a matter of queuing theory: The more trucks and customers that are attached to a system, the more efficient it is. The other is that writing algorithms is a large, fixed cost. If you doubt that, try solving the traveling salesman problem (shortest route connecting N cities) on your home computer. It's a tricky business, scheduling freight so that no mile and no cubic foot of cargo space is wasted. You can make a fortune in it: Shares of Expeditors International are up 47,000% over the past 34 years. You can lose one, too. Stock market old-timers will remember that Emery Air Freight was one of the Nifty Fifty, trading at 62 times earnings in 1972, and then came to an inglorious end (a fragment survives inside UPS).