Act Swiftly: Assess Your LTL Options After Historic Yellow Bankruptcy
Published on Aug 2, 2023
Over the last few days, Yellow Corporation announced they are ceasing operations,terminated employees, and are reportedly in talks to close a deal to receive debtor-in-possession financing from one of its current lenders, Apollo Global Management.
The low-rate profile carrier has been fighting financial challenges for years, including taking a $700 million federal pandemic loan just three years ago. Last week a strike was averted with the Teamsters union, but volumes fell 80% within a week due in part to the threat strike, the final blow to an already-struggling company. Yellow had also quietly stopped rail pickups 2 weeks ago, signaling concern to those watching closely.
Yellow had attempted to restructure in the spring, blocked by the union, which represents 22,000 Yellow workers. Both sides point to the other in terms of the cause, and plenty of post-mortem analysis will flood the news in the days and weeks ahead, but wherever the blame best belongs, the biggest question now shifts to…
What Should LTL Shippers Do Now Following Yellow’s Closure?
Many assume that with a $5 billion company closing, rates will increase very quickly, but even though it’s a sizable hit to the LTL market, Yellow as the third-largest LTL carrier only controlled about 7% of the total market. There is enough available capacity in the market to absorb Yellow’s freight, but is it better to go to bid now or wait until the dust settles a bit?
Our recommendation is that you should go to bid sooner rather than later. As former Yellow customers go to bid elsewhere, the first to the table will win. Delaying will mean all of that available Yellow freight will have started to find it’s way into other carrier networks, shrinking that available capacity gap and taxing carrier pricing departments. Both of which mean price increases and reluctancy to take on new freight. Partnering with a 3PL with strong carrier relationships and a diversified networks will become even more important.
Evaluate Your Network Now, Across Modes
It will take time to get organized following the shutdown, and while rates will go up a little, getting in early with bidding and re-evaluating your network can lead to avoiding even higher costs.
There will be a ripple effect across modes as well, as the Full Truckload sector stands to benefit from some shippers stacking more pallets to take advantage of low truckload rates. Parcel carriers, with UPS likely avoiding its own Teamsters strike catastrophe, may also benefit with a small influx of shipments on the lighter weight of LTL shifting into the parcel space.
Peak season is also around the corner, and while it’s certainly a softer economy than recent peak seasons, that capacity constraint will still impact rates, and it’s one more reason shippers shouldn’t wait to bid.
Maximize Your LTL (And Other Modes) With a Redwood Solution
Redwood offers multiple levels of LTL engagement to help you adjust your LTL network, along with network analysis expertise for both Full Truckload and Parcel as well. With tools to analyze LTL shipments at a lane level, buying power and extensive carrier relationships, we can help you avoid the fallout from Yellow’s challenges.