YRC Worldwide is changing more than the name of its long-haul less-than-truckload subsidiary. The company also plans to restructure its LTL network to reduce freight handling and focus YRC Freight squarely on two- to five-day shipments.
That means exiting the next-day market, a business segment YRC Freight has struggled with for years, and dismantling the Velocity network it established in 2008.
The company also plans to drop the utility employee designation it won from the Teamsters union in the 2008 National Master Freight Agreement to speed overnight freight. YRC Freight utility drivers will become local cartage employees.
“We’re going to have YRC Freight focus on long haul,” President Jeff Rogers told The Journal of Commerce. “Velocity was designed for next-day business, and that’s not what YRC Freight does. We want to be the best two- to five-day LTL carrier, period.”
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YRC Freight no longer will compete with its increasingly profitable regional sister companies. “Holland, New Penn and Reddaway are the best next-day carriers in their footprint,” Rogers said. “We’re going to let them do what they do best.”
If the Teamsters union approves the two proposed changes in operations, as is required by contract, the reorganization would be rolled out in April. The company last month requested a Teamsters hearing on or about Feb. 28.
YRC Freight is reaffirming its long-haul identity at a time when many competitors are taking their business models in different directions. FedEx Freight, the largest U.S. LTL carrier, redesigned its network last year based on a framework of “economy” and “priority” freight derived from its parent company’s package business. ABF Freight System is expanding beyond its long-haul LTL core, adding intermodal rail and ocean services to its portfolio. “We now consider ourselves a global supply chain provider,” ABF President and CEO Roy Slagle said in November.
YRC Freight has been down that road. The LTL carrier lost more than $1.6 billion as its parent company’s revenue tumbled from nearly $10 billion in 2006 to $4.3 billion in 2010. YRC Worldwide has lost more than $2.5 billion since 2006.
That makes reinvention a necessity, not a choice. But by returning to its domestic roots, YRC is signaling its confidence that the market can sustain a purely long-haul LTL trucking company that need not be all things to all shippers.
“In the recent past, this company tended to avoid terminologies like freight and customers, instead using terms like logistics, transportation, consumers,” CEO James Welch told investment analysts last November. “I’ve made it very clear to our employees that yes, indeed, we are in the freight business,” Welch said.
The proposed changes would be the most significant steps yet in the restructuring Rogers and Welch launched last July. In six months, they have stripped away layers of management and consolidated sales operations in an attempt to steer $2.9 billion YRC Freight back toward profit. “YRC has overcomplicated things for many, many years,” Rogers said last year. “We just need to simplify, focus and then execute.”
The latest restructuring takes aim at those goals. The plan would allow YRC Freight to load more freight direct to more points and reduce the number of times freight is handled or transferred. “We’re going to eliminate a lot of handling, reduce several thousand handles a day,” Rogers said. That will cut claims and speed transit times.
The company “will increase our emphasis on the corridor hubs,” he said, streamlining them and using them more efficiently. The number of hubs will drop from 28 to 23. Hub operations will be closed in Columbus, Ohio; Indianapolis; Kansas City and Springfield, Mo.; Jackson, Miss.; and Memphis.
Rogers began a review of YRC Freight’s terminal network last fall, noting he thought the company was handling too much freight too many times. “I think we may still have too much infrastructure, too much network, for the bills we’re handling, but I don’t know,” he said at the time. YRC Freight currently is handling on average 48,000 shipments a day in a network designed to handle 70,000 shipments, and that’s after closing or selling hundreds of former Yellow and Roadway terminals.
The company’s latest re-engineering won’t close any terminals, but it will change how facilities are used and relocate some drivers. The proposal calls for eliminating 60 “road domiciles” for drivers at terminals. “We’re moving a lot of the drivers back to the distribution centers” and away from smaller terminals, Rogers said. Some DCs will become “end of the line” terminals. Coldwater, Mich., for example, will no longer be a DC or a Velocity sort center and will lose 16 road driver positions. A distribution center in Akron, Ohio, would gain work from the closure of other corridor hubs and add about 22 local drivers.