Tuesday, July 15, 2008

YRC counts on “Velocity Network” on return to profitability

YRC Worldwide, parent of three of the nation’s largest LTL carriers accounting to more than one-fourth of the $33.6 billion LTL sector, is counting on speed to return to profitability after two quarters of losses.

With the launch of its new “Velocity Network” designed to enable YRC to compete with the best non-union regional carriers, it is cutting transit times on more than 30,000lanes at Yellow Transportation, Roadway and USF Holland. Most of the service improvements are east of the Mississippi River, but YRC officials say expanding on the West Coast is coming as well.

Mike Smid, president and CEO of YRC North American Transportation, says the changes position the YRC-affiliated companies to compete better in a changing LTL environment.

He said only 30 percent of its business comes from “traditional” LTL freight that was suited to the old hub-and-spoke network system. Smid says customers increasingly are asking for additional services, tighter delivery windows or consolidation or other services.

“Our entire network moves on a time-based system,” Smid explained. “That does two things. It makes us more consistent and it gives us tremendous support for our premium services. It also makes us considerably more nimble and considerably more reliable.”

Service is cut by at least one day for more than 15 percent of YRC’s 150,000 shipments a day handled by all its operating companies. YRC officials say the new configuration reduces shipment handling and eliminates approximately 20 million line-haul miles annually for a savings of $40 million.

That’s because YRC companies are moving away from the traditional, outdated hub-and-spoke system where, as Smid said, “In a lot of situations, we had to go east to go west.”

YRC’s changes evolved from its most recent labor negotiations with the Teamsters union, which represents some 66,000 YRC workers. YRC Chairman, President and CEO William Zollars calls the new labor pact “a game-changer” that has effected many internal changes. One is the creation of a new “utility worker” category. For $1 an hour more in wages, these workers can drive a truck one day and work the dock the next—flexibility long sought by unionized carriers to compete with the likes of Con-way, Estes Express, Southeastern and other top non-union regional specialists.

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