Disruption in Logistics Industry Could Be Partial Truckload Shipping Opportunity
The bankruptcy of Yellow has left shippers nationwide scrambling for options, particularly as peak holiday season nears. However, the bankruptcy, another disruption in a logistics industry riven with uncertainty the last few years, provides an opportunity for you to strategically realign your carrier base.
An in-depth transportation diagnostic evaluation could help your enterprise discover better service and cost savings even though Yellow, which reportedly had 40,000 fills a day, had the reputation as the lowest-cost carrier.
Yellow Bankruptcy: Too Much Debt, Too Little Integration
Yellow was plagued by debt and the inability to integrate operations and networks from the many carriers it acquired over the years. As FreightWaves reported, the company spent billions of dollars to become a global logistics transportation leader. The heavy balance sheet left the company struggling after the 2007-2009 Great Recession. Annual revenue was around $5 billion a year, profits never topped $25 million and the company lost money most years, according to The Wall Street Journal.
Debt-for-equity swaps, billions of dollars in union wage concessions, restructuring and even a $700 million loan from the U.S. government were not enough to save Yellow.
Yellow Bankruptcy Solution: Stopgap vs. Strategic
Most shippers have looked to redistribute their less-than-truckload fills to other LTL carriers, according to investment company Stifel. Those carriers have an estimated space capacity of 20%. Instead of ending your due diligence with that stopgap solution, your enterprise should strategically align its carrier base with your client in mind.
To accomplish that task, you need to know four facts:
- What shipments should be in a national LTL program.
- What shipments should go to regional LTL providers.
- When can you mode shift from LTL to full truckload.
- When you can shift from LTL to multistop truckload.
Most shippers are well-versed in multistop truckload. Warehouses consolidate shipments into one truck that drops part of the load at Stop 1, part at Stop 2 and part at Stop 3.
However, over the years I’ve seen many shippers send one-third of a truckload LTL even though, at times, full truckload rates could be cheaper. Knowing when to mode shift from LTL to truckload could serve your clients better and cut costs. LTL rates depend upon class, weight, dimensions and many other factors.
How to Determine LTL vs. Truckload vs. Multistop …
A transportation diagnostic evaluation is the right strategic response to the Yellow bankruptcy. In fact, such an evaluation is beneficial even if your enterprise did not rely on the bankrupt carrier.
That evaluation will tell you where you can mode shift from LTL to truckload, where you need to contract with regional LTLs and where you need to contract with national LTL carriers. The data will let you know where your costs are high, where you’re not using the right mode and where you can improve service levels.
You can craft the right transportation solution for your unique situation. Beyond the current situation with Yellow, your enterprise gets the right fit for truckload/LTL, multimode, final mile, even freight forwarding. Better yet, a TDE can be done within a few weeks. From there, Tompkins Ventures has the Partners who can provide Transportation Management System (TMS) technology and/or managed transportation providers to support the new routings.
Logistics professionals have faced disruption after disruption over the last few years. Instead of stopgap solutions and waiting for disruption to end, turn those challenges into opportunities.
Want to learn more? Contact me to find out how a TDE and a TMS can revamp your shipping just in time for the holiday peak season.
Chief Operating Officer Mike Royster has over 30 years’ experience managing Logistics and Distribution on a global basis for companies like Ingersoll Rand/Trane, Eaton Corporation, and XPO Logistics. Mike now leads Tompkins Ventures’ global logistics and consulting practices. Reach him at mroyster@tompkinsventures.com.
