We spoke to Zeeshan Naqvi, Senior Vice President and Treasurer, GXO Logistics, Inc. about the future of his industry, his company and the key role of Treasury.
To walk through Nestle’s 640,000 square foot warehouse, located in England, is to experience an awe-inspiring vision of the future.
30ft-tall robots tower over you, communicating with each other, mechanical arms float from the ceiling, picking up crates the size of a family car, and tracks criss-cross the vast space distributing items with laser-guided precision.
Like over 900 around the world, this warehouse is designed, built and managed by GXO, the world’s largest pure-play logistics company. And while much of what GXO does remains invisible to the average consumer, the results of this futuristic interplay of technology and human expertise are fundamental to how we live our lives now.
This is the logistical operation behind the instant order, same-day delivery, free returns service which consumers now see as standard. And while physical supply chain challenges have been the source of multiple headlines in recent years, it is companies like GXO who have limited the disruption felt by the end consumer.
Who is GXO?
Formed from the separation of XPO Logistics’ transportation and warehousing businesses, GXO was stood up as an independent operation in August 2021. With a clear vision of a technology-empowered future, GXO has continued the trajectory of automation across their warehouses, begun under the XPO banner.
Speaking on Demica’s recent Insight webinar, GXO’s Senior Vice President & Treasurer, Zeeshan Naqvi, detailed the scale of investment behind this strategy: GXO invests almost half of $250m annual capex spend on technology. The result is that 30% of GXO’s warehouses are automated compared to around 5% industry average.
Indeed, Naqvi explains, “For most of our customers we’re more of a technology company than anything else”. All this is not for show, it drives differential efficiency and level of service: “automation and technology can result in around six times more boxes shipped out in an hour”.
However, Naqvi also made clear the extent of overall investment in the business, with the bulk of spend behind operational expenditure: primarily the vast 120,000-person workforce, as well as leasing on the warehouses.
Operating at this scale, globally, has made GXO the undisputed leader in pure-play logistics and means they count the world’s largest companies among their clients. Naqvi reels off a who’s who of blue-chip brands, “Apple, ASOS, Kering, Saks Fifth Avenue, Zalando… to name a few”.
And for these customers, Naqvi explains, what GXO offers is an ability to “focus on their products & the marketing of their products”, with the confidence that the best-in-class warehousing and fulfilment will be provided by GXO.
Beyond the operational considerations, GXO also offers a deeper opportunity for their clients. Navqi commented, “Our customers want a direct connection with their consumer, they want their consumers to engage with them on their e-commerce platforms.”
This connection has been at the heart of the direct-to-consumer boom of recent years.
What is treasury’s role at GXO and how is it changing?
In a business so heavily focused on automation, it’s no surprise to hear Naqvi talk about running a Treasury function through the lens of technology. He explains how Treasury has evolved over his time in the industry: “From being focused on liquidity, cash management and financial risks to being a strategic partner to the CFO”.
And to add value at this strategic level, a treasurer requires access to huge volumes of data, as well as the technology to effectively collect, manage and analyse that data.
From the days of “working with spreadsheets, downloading from ERPs, spending hours on manipulating data”, to today where his team is working on projects “to pool the data in a standard way to be able to get analytics, understand what you have as receivables, and understand what you have as other assets or liabilities”. This enables Treasurers to provide insightful analytics to inform strategic decisions.
What does this mean for working capital?
Given the scale of GXO and the particular commercial dynamics of the logistics business, Treasury’s ability to make strategic decisions is key. As Naqvi points out, “in our business the cash conversion cycle can be long”, a result of the fact that the biggest expenses are payroll and rents on warehouses and customers’ payment dates are often after these disbursements are due.
This means GXO, in the past, has utilised the full range of working capital solutions, such as factoring and securitisation, as well as taking advantage of their customers’ supply chain finance (SCF) programmes. As Naqvi points out, “Our customers are in many cases better rated than us so their SCF programmes can be quite attractive”.
The challenge though, for Navqi, is to move beyond product siloes. Too often over the course of his career he has been presented with separate products rather than holistic solutions – “I get pitched a lot about one product or the other and for me it’s not about product, what I’m really looking for is solution. What is it I’m trying to achieve, and how do I get there in the most optimal way possible?”
As a Treasury leader at the largest logistics company in the world, Naqvi’s analogies are apt: “I look at all of these products as parts of a full toolkit. Depending on the circumstances you pull different levers.”
Maurice joined Demica in October 2017 from Wells Fargo where he was CEO, Commercial Distribution Finance, responsible for a $3.0bn of receivables assets and over 400 people. Maurice joined Wells from GE Capital where he held a number of senior positions including Chief Commercial Officer of GE Capital International. Prior to GE, Maurice worked as a senior investment banker at Lehman Brothers, Bankers Trust and Paribas.