Yellow Begins Bankruptcy and Liquidation Proceedings and Ocean Rates On the Rise
Aug 9, 2023
Last week Yellow closed its doors and announced they would file for bankruptcy. This week they formally filed their Chapter 11 petition for bankruptcy. While Chapter 11 is typically associated with a reorganization, Yellow has made it clear that they will liquidate their assets to pay their creditors.
Add it all up and the question on the table is: How will this decision impact shippers?
Since Yellow’s closure eliminated approximately 10% of the capacity in the LTL market, we had predicted what would happen in our Two Minute Warnings and also in our quotes in the Wall Street Journal and the Journal of Commerce. Specifically, we predicted that Yellow’s closure would result in a sudden tightening of capacity, and the LTL carriers would use that tightening to issue a bunch of rate increases.
Well, one week after Yellow’s announcement to close their doors, shippers and 3PL firms are seeing our predictions come true. There are reports that the LTL carriers have issued lots and lots of rate increases in the wake of Yellow’s closure.
It is important to note that Yellow had approximately 300 terminals and the LTL carriers need terminals to handle capacity. Fewer terminals and doors to handle LTL freight means that capacity will continue to be an issue for the remainder of 2023 and on into 2024 – especially if the economy picks up and brings an end to the current freight recession.
In addition to the potential for a bevy of rate increases, there are reports of service issues as the LTL carriers struggle to onboard former Yellow customers. And that is why we have consistently recommended that LTL shippers have an LTL strategy that identifies the most effective sourcing capabilities based on current market conditions.
As part of this LTL strategy, consider the following steps:
First, benchmark your LTL rates – Identify how your rates stack up in the current market and see if there are opportunities to reduce your current LTL rates or change your processes to lower your freight costs.
Second, consider whether it makes sense to join our Freedom Logistics LTL sourcing network – If you're a mid-sized company, we can help you understand your options in the market, provide a more effective LTL contract and improve your rates with our LTL buying network.
Third, learn about LTL management tools and decide which ones make sense for your company. We’d welcome the opportunity to have a discussion with you about the tools we have to help you manage and track your LTL activity. Whether it is our Constellation TMS, our Telescope Data Analytics Platform, or other resources, TranzAct can share our expertise and experience in helping you create and execute an LTL strategy that improves your company’s profitability.
Get in touch and let’s discuss the next steps in putting that LTL strategy in place for your company.
Ocean markets on the rise
After a long period of stable ocean rates, we’re seeing increases in far Asia to West Coast lanes of 45-55% over a two month period. Until ocean rates reach a range of $4-6k, ocean carriers will do everything they can to raise rates. We're watching this area for any developments that occur.
BY MIKE REGAN, CO-FOUNDER OF TRANZACT
