YRC Freight streamlined its nationwide network last week, implementing changes to reduce freight handling and focus the $3.2 billion less-than-truckload carrier squarely on two- to five-day long-haul shipments.
The two operational changes, approved by the Teamsters union in March, are the next plank in YRC Worldwide’s long-term plan to rescue the struggling long-haul LTL carrier and bring the company and its $4.9 billion parent back to profitability.
The changes are also the latest step in the evolution of YRC Freight, formerly called YRC and born from the merger of the iconic LTL brands Yellow Transportation and Roadway Express in 2009. The carrier was rebranded YRC Freight in February.
YRC Freight is trying to regain traction in the LTL market it lost in the collapse of YRC Worldwide’s plans to become a global company before and during the recession, when the company was driven to the brink of bankruptcy protection.
YRC Freight is now the third-largest stand-alone LTL carrier, after FedEx Freight and Con-way Freight. The Overland Park, Kan.-based company lost $88.5 million last year, despite an 11 percent increase in operating revenue from 2010.
Supported by a lending group that owns a majority stake in the company and the Teamsters union, YRC Worldwide and its subsidiaries are racing rising costs and long-term debt obligations to rebuild revenue and profit and shore up liquidity.
With its change of operations, YRC Freight’s immediate goal is to reduce shipment handling by reorganizing its network of 282 terminals, reducing the number of road domiciles for drivers and shrinking its network of corridor hub terminals. The company won’t close any terminals, YRC Freight said, but it will change the role certain facilities play within the network to speed freight, reduce handling and put drivers where they’re needed. As a result, some jobs may be lost or relocated.
For example, YRF Freight closed 60 road domiciles for drivers located at terminals. “We’re moving a lot of the drivers from end-of-the-line terminals back to the distribution centers, where we can manage them better,” YRC Freight President Jeff Rogers told The Journal of Commerce last week. “We’re taking out handles and miles. “Where we were moving a shipment on three trailers, now we might be moving it on two,” he said. “Any time we can improve our load average, it helps.”
Some distribution centers became “end-of-the-line” terminals. Coldwater, Mich., is no longer a DC or a next-day sort center, and will lose 16 road driver jobs. An Akron, Ohio, DC will gain work from other hubs and add about 22 local drivers.
The number of corridor hubs dropped from 28 to 23. Hubs closed in Columbus, Ohio; Indianapolis; Kansas City and Springfield, Mo.; Jackson, Miss.; and Memphis, Tenn. The end-result will be fewer hands touching freight, Roger said.
That’s a goal YRC Freight shares with its LTL competitors. FedEx Freight, for example, merged its separate regional and long-haul LTL networks in 2010, creating a new, slimmer network focused on what it calls priority and economy freight.
Con-way Freight also has designed its multiple regional networks to eliminate freight handling where possible, reducing costs, transit times and freight claims.
Rogers defended YRC Freight’s decision to emphasize the long-haul market at a time when many LTL competitors are pursuing multiregional and regional freight.
“There’s a real need for a good long-haul carrier,” Rogers said in a February interview at YRC Freight headquarters. “I think we can fill that need. We’ve just got to get our act together and get a whole lot better from a service and quality perspective.”
Rogers said that although YRC Freight is stressing its long-haul business, it wouldn’t abandon next-day freight. “We’re not exiting the next-day market; we’re always going to do next-day,” he said. “I actually think we’ll do more next-day business a year from now than we do today because our overall service will improve.”
YRC Freight also won’t push next-day business to its regional sister companies, Holland, New Penn and Reddaway. “There is absolutely no freight that is shifting from YRC Freight to the regionals,” Rogers said. “They’ll continue to focus on next-day and two-day; we’ll focus more of our freight on the long-haul, but there will be no shift in freight between the companies because of this change in operations.”
Freight volumes increased in the first three months of 2012, he said, after tonnage rose 6.7 percent year-over-year in the fourth quarter. “March was more of a normal March for us, but that was because January and February were so strong,” Rogers said. “Our biggest issue right now is improving the freight mix and trying to get the right kind of business.”