YRC Freight kicks off network optimization plan

Less-than-truckload (LTL) transportation services provider YRC Worldwide (YRCW) said today that its network optimization plan for YRC Freight, its largest subsidiary, has officially commenced.

The plan, which was submitted to YRCW’s union leadership in March, was formally approved in late April. Company officials said that this plan will deliver greater service reliability and consistency across their network, coupled with enhancing operational efficiencies by increasing network density, reducing shipment touches, and reducing the number of empty miles.

“Our primary goal is to provide our customers with consistent, reliable, damage-free service,” said Jeff Rogers, president of YRC Freight, in a statement. “The change in operations we are implementing today will give our customers an improved experience when they ship with us.”

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 last month’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.
Following February’s announcement that it had achieved a positive annual operating income in 2012 for the first time in six years, the Overland Park, Kan.-based carrier said in early May it had a positive first quarter operating income—also for the first time in six years. 

YRC’s consolidated operating revenue for the first quarter—at $1.162 billion—was down 2.7 percent compared to the first quarter of 2012. Meanwhile, its consolidated operating income increased from a $48.8 million loss a year ago to a $9.9 million gain in the first quarter, representing a $58.7 million increase. YRC officials said that first quarter operating income included a $4.5 million gain on asset disposals, which included an $8.3 million loss in 2012. And adjusted EBITDA—at $60.7 million—was $45.4 million more than the adjusted $15.3 million recorded a year ago.

First quarter operating revenue at YRC Freight—at $753.8 billion—was down 4.5 percent annually, with total tonnage per day and total shipments per day down 5.4 percent and 5.3 percent, respectively. Revenue per hundredweight and revenue per shipment were up 3.4 percent and 3.2 percent, respectively. First quarter operating income for YRC Freight—at $2.4 million—represented a $58.5 million annual increase and the third straight quarter of positive operating income for the company’s largest segment.

Rogers said on the first quarter earnings call that the company estimates gross annual savings will be between $25-to-$30 million through the plan that he said will eliminate a tremendous amount of fixed costs, with some of the chief benefits being increased network density, fewer shipment touches, and a reduction in empty mileage.

“Our operating improvements are due to a continued focus on getting back to the basics of the Freight business and focusing on business that fits our network and core competencies,” said Rogers. “This focus resulted in an EBITDA margin of 4.5 percent for the first quarter and was mostly due to the 3.4 percent year-over-year increase in our revenue-per-hundredweight and incremental operating improvements. The revenue-per-hundredweight increase is due to concentration in growing higher margin and higher value-added services.”