The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.
Yellow Corp. announced recently that it was ceasing operations, terminating employees and was in talks to close and receive debtor-in-possession financing.
Strikes and other socioeconomic events have impacted supply chains in a big way the past few years.
The risk of a strike in the ports of LA and Long Beach during 2022 and 2023 forced companies to divert container ships from the U.S. West Coast to the East Coast.
Similarly, the threat of a strike had a huge impact on Yellow in the past few weeks. Volumes tumbled from 49,000 shipments per day in 2022 to 10,000-15,000 shipments last week, according to SJ Consulting.
Yellow was the third-largest LTL carrier in the U.S. and controlled around 7% of the total less-than-truckload market. So the question on everyone’s mind is what the impact will be on supply chains now that Yellow has closed. Will it materially impact capacity and will it increase LTL rates significantly?
While in a weak economic market there might be enough available capacity, that does not necessarily mean you have access to that capacity.
Thousands of Yellow customers will all be looking to get to that capacity. Large customers like Walmart and Home Depot have already taken steps to transfer their freight to other carriers.
Part of Yellow’s financial issue was that its prices have historically been the cheapest compared to other carriers. So when its customers divert their freight to Estes, ABF or FedEx Freight, that capacity will come at a higher price. According to another major LTL carrier, “all LTL carriers will be trying to maximize the capacity they have with freight that fits the network at the right price.”
Companies should look at network modeling to look for opportunities for modal changes and carrier changes and fully understand the impact on their networks and the financial impact. Furthermore, digital freight platforms and automated freight procurement tools can help gain quick access to LTL capacity.
I recommend companies to go to bid as soon as they can and lock in some of the availability to close the capacity gap and to ensure the lowest possible impact from a cost perspective. Use technology to speed up that process and ensure you make the right decision.
Look for more articles from me every Friday on FreightWaves.com.
About the author
Bart De Muynck is an industry thought leader with over 30 years of supply chain and logistics experience. He has worked for major international companies, including EY, GE Capital, Penske Logistics and PepsiCo, as well as several tech companies. He also spent eight years as a vice president of research at Gartner and, most recently, served as chief industry officer at project44. He is a member of the Forbes Technology Council and CSCMP’s Executive Inner Circle.