DC Velocity - March 2013

In a sign YRC Freight has made progress in shedding unprofitable freight, the unit’s revenue per hundredweight—a key measure of profitability—rose 3. 2 percent both in the fourth quarter and for the entire year, even though tonnage and shipment counts were down in the same periods. The unit’s revenue per shipment rose 3. 1 percent in the quarter and 2. 9 percent for the year, the company said.

For the full year, its operating revenue rose 0.1 percent to slightly more than $3.2 billion. In the fourth quarter, revenue was off by 3. 4 percent. Fourth-quarter revenue, shipment, and tonnage figures were affected by Superstorm Sandy, which disrupted supply chains and reduced freight movements throughout the Northeast.

Per usual, YRC Regional—which consists of four operating units in the United States and Canada—was the star of the show in 2012. It posted full-year gains across all metrics and showed fourth-quarter increases in every area save for daily tonnage and shipments, again a partial byproduct of Sandy’s impact.

LOOKING BACK ON 2012

In an interview with DC VELOCITY, Welch and Rogers said the improvements at YRC Freight in 2012 were due to a better mix of business, a drop in freight claims ratios, and significant companywide declines in workers’ compensation claims. Workers’ comp claims in 2012 fell to their lowest levels since YRC began tracking the data in 2000, the company said.

Freight claims ratios, which were a big problem at YRC Freight when Welch and Rogers came onboard, have declined for seven straight months on a year-over-year basis through the end of January, Rogers said. Without disclosing specifics, Rogers said the unit’s freight claims ratio is at its lowest level in years.

Welch said better profitability and lower freight claims go hand in hand because freight that is difficult to handle and is subject to damage often results in a money-losing shipment.

Both said freight demand in general was choppy in 2012
and will continue that way through the rest of 2013. “The
marketplace is very fickle,” Rogers said. “Some days it feels
good. Some days it doesn’t feel good.”
Like other LTL executives, Welch and Rogers have tried to
restore rational pricing to the sector after several years of
destructive rate wars. The strategy has included reducing
truck capacity and culling unprofitable freight from the
carrier’s system as well as an ongoing process of balancing
YRC Freight’s customer mix. The general rate increases
imposed on YRC Freight’s noncontract customers have

go figure …

53%

The percentage of 600 executives responding to a 2013 survey who said supply chain disruptions have become more costly over the past three years. About 48 percent said such events had become more frequent over that period.

SOURCE: DELOITTE CONSULTING

been sticking, according to both.

Rogers wants to attract more local and smaller accounts that generate higher margins and to de-emphasize larger corporate accounts that use their sizable volumes to drive down prices and compress YRC Freight’s margins. The big accounts represent about three-quarters of YRC Freight’s business.

Welch and Rogers said each day at YRC Freight is a balancing act as some accounts sign on while others, perhaps looking for better rates, go elsewhere. With larger accounts, both said, the unit has to analyze each traffic lane to determine which are profitable and which aren’t.

“It’s like hand-to-hand combat,” Welch said.

STILL MORE TO ACCOMPLISH

After 20 months, Rogers seems heartened but not satis-
fied. In a Jan. 11 letter to YRC Freight employees, he noted
the 2012 accomplishments but said they will mean noth-
ing “unless we deliver results in 2013.” “We simply must
win in the marketplace,” he wrote, adding for effect, “and
I mean NOW.”
In the letter, Rogers said employees could either unite as
a team or “continue operating in virtual silos, going
through the motions, and letting competitors beat the crap
out of us.” He said the ultimate goal is that 10 years from
now, “people are still talking about YRC Freight as the most
remarkable comeback in the history of our industry.”
Neither man said he plans to go anywhere in the near- to
medium-term. Welch is 18 months into a four-year
employment agreement and said he plans to honor the
agreement, unless, he said half-jokingly, YRC falls flat on its
face and he gets fired.

Welch added that he’s now having fun at the helm after
spending most of the last 18 months “cleaning up the
garbage that had built up at this company.”
Both men said that there is so much ground to be made
up at YRC that corporate succession plans are not on the
radar.