YRC Freight change of operations plan is formally approved

Less-than-truckload (LTL) transportation services provider YRC Worldwide (YRCW) said this week that the network optimization—or change of operations—plan, which was submitted in March to the company’s union leadership, has been formally approved.

YRCW officials said that that the network optimization is a key component of YRC Freight’s strategy to continuously improve customer service by reducing the handling of shipments and excess time in transit.  And it added that the transportation team and network engineers at YRC Freight will implement the enhancements over the next several weeks.

“Our network team identified opportunities for us to further align customer service and operating efficiencies,” said Jeff Rogers, president of YRC Freight, in a statement. “New network densities, load factors and direct routing of shipments will make this network optimization the foundation of our continued performance improvement initiatives in 2013.”

YRCW said these changes, once implemented, will serve as another step in YRC Freight’s efforts to continuously improve customer service, optimize linehaul density and load average, reduce empty miles and reduce shipment handling.

According to a copy of the proposed change of operations released by Teamsters for a Democratic Union (TDU), the proposals include:
-consolidating 29 end of line terminals into existing terminal locations;
-reducing end of line road domiciles;
-reducing distribution center locations by 3, utilizing existing capacity to create density for more network direct loading;
-reversing specified road primaries;
-establishing a new relay operation in Staunton, Va. to reduce system miles; and
-adding additional sleeper runs to the Jackson, Miss. road domicile

In an interview with LM, YRCW CEO James Welch said that when he took the reins as CEO in late 2011 YRC Freight had a network that was way too large for the amount of business being done.

“When they put Yellow and Roadway together, in my mind, they did a very poor job of sizing the network for its business levels,” he said at this week’s National Shippers Strategic Council (NASSTRAC) Annual Conference in Orlando. “What we had was a network that was more expensive than it needed to be in which we handled our customer’s freight too much. It was as efficient as it needed to be from a linehaul standpoint. This change does not reduce any of our coverage from a service standpoint. It merely puts us in a better position to improve our density and allows us to load more direct trailers, as an example, which, in turn, gives us the opportunity not to transfer as much of our customer’s freight as we were.”

Welch explained that there is a lot of power and efficiencies to be gained by doing that, coupled with the fact that YRC Freight was able to alter its distribution center network and be configured in a sensible fashion from a density standpoint.

“We think we are going to come out of this on the other side as a better operating company, with our customers being better serviced,” he said.

TDU said that these proposed changes would result in the loss of 760 dock, cartage, shop, and office jobs, with a loss of 542 road jobs at the terminals being consolidated and conversely there would be 639 cartage and 343 road jobs added at other terminals for a net loss of 230 jobs.

In February, YRCW reported that in 2012 the company reported a positive annual operating income for the first time in six years.

YRCW’s consolidated operating revenue for 2012—at $4.851 billion—was down 0.4 percent compared to 2011, but its consolidated operating income increased $162.3 million to $24.1 million, including a $9.7 million gain on asset disposals, marking its first positive annual consolidated operating income in six years. And it reported that 2012 consolidated operating revenue at $4.869 billion and a consolidated operating loss of $138.2 million, including an $8.2 million gain on asset disposals. EBITDA for 2012 at $241.2 million represented an $82.0 million improvement over 2011.

Following the second and third quarters, which saw operating profits of $27.3 million and $15.5 million, respectively, which represented the first time in four years that YRC, the second-largest LTL carrier behind FedEx Freight, posted two straight quarters of operating profit, the fourth quarter made it three straight quarters of operating income growth at $30.0 million. Fourth quarter consolidated operating revenue at $1.169 billion was down 3.6 percent annually.