This past weekend Yellow notified its customers that they were officially closing their doors.
For many, this was no surprise. Virtually every shipper in the United States knew that Yellow was on the ropes. And after the Teamsters threatened a strike over Yellow’s missed $50 million payment to the Central States Welfare and Pension funds, it was a foregone conclusion that Yellow would have to file a bankruptcy petition and either attempt to reorganize or liquidate.
Last week I was quoted in a Wall Street Journal article, highlighting the uncertainty that underscored their trouble: “The Teamsters introduced variability and uncertainty into a market that can’t stand variability and uncertainty.”
If you’re interested in learning more about what went wrong for Yellow, I encourage you to listen to this recording of my talk last week to the Traffic Club of Chicago. Instead of focusing on “what went wrong,” the purpose of this update is to respond to calls from several shippers and industry publications asking for our thoughts about how Yellow’s closure will affect their LTL freight costs.
If you’re wondering about how this event will impact your company, the answer to that question is: “It depends!” There is a right way and a wrong way to replace Yellow. Suffice it to say, if you replace Yellow the wrong way, it will be very costly for your company.
The right way to replace Yellow is to have an effective, written LTL strategic plan that addresses Yellow closing their doors. We can help you in the long term by working with you to create that strategic LTL plan. This is important not only for your outbound transportation, but also by making you a better receiver and helping you facilitate an inbound transportation program.
We can help you in the short term by benchmarking your rates and matching you up with the best carriers--whether you are looking to replace Yellow or simply find a better carrier mix for your freight.
Beyond having a strategic plan, here are some important points for you to consider in analyzing the Yellow situation.
Shippers who say that “everything will be fine” since the industry survived the closure of Consolidated Freightways (in 2002) and other large carriers (e.g. PIE – Nationwide), are overlooking the fact that despite being in a freight recession, there is actually less available LTL capacity than the capacity in place at the time of Consolidated’s closure.
Additionally, the LTL freight marketplace today is significantly different than the freight marketplace has been historically. Today, the LTL carriers have a tremendous amount of data about how shippers use their equipment. They are using that data to determine their cost to serve numbers and to determine where the rates will be. Most importantly the carriers have replaced using rates to gain market share and instead are quoting rates based on a financial model that takes a look at how a shipper's business will affect their operating ratio.
After mentioning the need for a written strategic LTL plan, I heard from some shippers asking: “What does this plan look like and what issues should be included?” Let me cut right to the chase. There are several issues in play here. And answering those questions requires more time.
That is why, given the importance of this event, I have cleared my calendar so that those of you who want to have a one-on-one conversation can make an appointment with me directly here via Calendly. We’ve created fifteen minute blocks so that you and your team can share your thoughts and questions and also gain some insights based on expertise and experience about things your company may want to consider doing in managing the fallout from Yellow’s closure.
Or if you prefer, feel free to send me an email or give me a call directly.
Mike Regan
Co-Founder
