How QXO is Using AI to Streamline Distribution

QXO Inc. has identified about $200 million in pricing leakage at newly acquired Beacon Roofing Supply, CEO Brad Jacobs told investors at recent Q&A sessions in New York and Laguna Beach, revealing the staggering cost of outdated systems and highlighting longstanding technology gaps in the building materials industry.

Rather than viewing the discovery as a setback, Jacobs presented it as validation of QXO's artificial intelligence-driven transformation strategy, which he says is already delivering "double-digit productivity gains" and reshaping how roofing materials move from manufacturer to job site.

"The building products distribution industry is way behind on tech," Jacobs told investors during the Q&A session. "We've seen companies running dozens of ERPs with outdated systems, manual processes, and limited inventory visibility."

The $200 million in leakage stemmed from what Jacobs described as "undisciplined discounting" through manual pricing systems. Stockouts of critical materials and fragmented procurement across thousands of vendor agreements were additional challenges. QXO discovered that Beacon frequently ran out of its most important products.

"Four percent of our SKUs account for about 80% of sales. Yet many of those fast-moving SKUs were out of stock," Jacobs said. "That's a huge no-no, which we immediately addressed."

The revelation highlights a problem familiar to roofing contractors nationwide: project delays caused by unavailable materials, even basic items like shingles, underlayment, and fasteners.

• $200M pricing leakage uncovered: QXO CEO Brad Jacobs said they identified about $200 million lost to undisciplined discounting and inefficiencies at Beacon.
• AI-driven turnaround underway: Jacobs added that QXO’s AI systems are already delivering double-digit productivity gains and tighter pricing discipline.
• Inventory reliability improved: Fast-moving SKUs, which make up 80% of sales, were frequently out of stock—QXO has addressed this with automated replenishment and forecasting.
• Procurement consolidation saves costs: QXO centralized authority, consolidated the top 20 vendors and is using bots to negotiate terms, eliminating thousands of fragmented agreements.
• Simpler supplier experience: Centralized purchasing and standardized terms should mean fewer headaches and more consistency for contractors.

AI Transformation Delivers Quick Results

QXO responded with what Jacobs calls a comprehensive technology overhaul, implementing AI-powered systems for inventory management, pricing, and logistics across operations.

The technology deployment is already showing results, according to Jacobs. QXO's AI-embedded quoting systems now generate faster and more consistent estimates, delivering double-digit productivity gains, factoring in current inventory levels, freight costs, and customer-specific pricing history.

"We're embedding elasticity models, freight-adjusted pricing, and customer-level profitability analytics to capture margin while staying market competitive," Jacobs said.

Inventory availability has "dramatically improved in the few months that we've owned the company," he added. The AI systems predict demand for fast-moving items and support automated replenishment of critical products before shortages occur.

In warehouses, QXO is introducing scanning, slotting, and placement systems that separate fast and slow movers.

"The focus is to always be in stock, in every branch, on A-items," Jacobs said.

QXO is also revolutionizing supplier relationships, using "bots and other automation for some of our procurement negotiations" while centralizing purchasing power. The company consolidated terms across its top 20 vendors, which represent about 70% of spending, eliminating thousands of fragmented agreements.

This represents a departure from the relationship-based, manual procurement processes that have traditionally dominated the industry.

Market Strategy Shift

QXO's approach rejects competing primarily on price, rewarding suppliers who can deliver operational excellence through technology.

"We plan to win market share not by discounting price but by being in stock, quoting quickly, delivering on time and in full, and invoicing accurately," Jacobs said.

The company has upgraded its entire tech stack from beginning to end: CRM, pricing engine, ERP, warehouse management system, transportation management software, sales and operations management planning [demand forecasting, inventory management, and automated replenishment], business intelligence tools, and its Human Resources Information System, all with real-time data transparency.

The company projects its technology investments will drive significant financial performance. QXO expects to grow EBITDA at a 34% compound annual growth rate between 2025 and 2030, compared to the 14% CAGR of the S&P 500 Industrials Index between 2020 and 2025. As of Sept. 15, 2025, QXO's stock price is up about 5.71% for the month. 

Industry-Wide Implications

The scale of QXO's transformation signals broader changes coming to the building materials supply chain.

"I think building products distributors are watching QXO closely," said Lilli Tillman Smith, analyst at Principia Consulting. "If their technological investments continue to prove a competitive advantage, as early indications suggest, they could set a model others will follow."

She points to Lowe’s recent acquisition of Foundation Building Materials as an example. As CEO Marvin Ellison highlighted, FBM not only expanded Lowe’s geographic reach but also brought in technology capabilities that made FBM a more lucrative business.

Roofing contractors should expect faster quote responses, more reliable material availability, and better delivery scheduling as suppliers adopt similar technologies.

Traditionally, building products has lagged behind other sectors in technology adoption, but as market conditions tighten, distributors will need to leverage technology to differentiate themselves in an increasingly competitive environment.

Tillman Smith points to Dodge, which forecasts a moderation in residential new construction through 2028.

"If affordability conditions do not soon improve, the lock-in effect will continue to keep homeowners in their homes and not moving, which drives a lot of R&R age replacement activity in roofing," she said.

For suppliers, the QXO model suggests that significant technology investment may become necessary to remain competitive, with companies needing to choose between modernization or losing market share to digitally enabled competitors.

"For smaller retailers, the edge has long been superior customer service and deep regional expertise," Tillman Smith said. "That won’t change, but AI is creating opportunities to do more with fewer resources. If independents embrace AI thoughtfully, they could carve out unique advantages even against larger, tech-enabled competitors. One thing is certain: AI is no longer optional. Distributors who fail to adopt it risk falling behind."