Capacity rationalization still needed in trucking industry

Implications

This article, while sounding draconian, accurately reflects the trucking industry's excess capacity still chasing too little demand. So, what is the impact, now and in the future, between transportation suppliers and consumers?

Consider the following points: 1. With excess capacity still in the market, a majority of agreements between shippers and carriers are probably based solely on price (rates and discounts). 2. When the economy eventually rebounds, it will be leaner and more efficient across a breadth of industries. Accordingly, the surviving carriers will be those with streamlined linehaul operations, updated "back-office" and in-cab technology coordinating deliveries in a rationalized network minimizing the number of empty miles. 3. Lesson to be learned: Carriers -- improve/optimize now. Shippers --- develop your relationships now as price points will adjust upward once supply and demand are rebalanced.

Analysis

A contemporary example of the impact of the industry's capacity rationalization is the recent annnouncement by ABF to consolidate and realign its operations.

In a nutshell, they are seeking efficiencies and it's analogous to an airline improving yield management by allocating the right size aircraft on the right length flight to carry the maximum number of passengers per mile. In trucking, it's very similar; the more direct the route, with fully loaded trailers, the better. This simply means less handling (less labor cost & potential for damage) and greater density per mile traveled. All of this adds up to better efficiency, which will drive costs lower.

Only the fittest will survive in this industry over the next 2-3 years. Those carriers that emerge on the other side of this recession will then be positioned to provide shippers with efficient distribution networks. However, I suspect they will have long memories of which companies negotiated with them now only on price instead of developing strategic supplier relationships as part of building a robust supply chain for the future.

USF Holland consolidating Holland terminal operations into Grand Rapids service center

USF Holland Inc. is closing its Holland terminal and consolidating that into its Grand Rapids service center in Wyoming, the Holland-based trucking firm announced Wednesday.

The company's headquarters, 750 E. 40th St., will remain.

The consolidation of the firm's West Michigan operations to 4600 Clyde Park Ave. SW is part of a continued effort to reduce costs, according to a company statement.

Service to West Michigan will not be affected, according to the company.

Celebrating its 80th anniversary this year, USF Holland employs about 500 people in West Michigan.

"Many employees will have the opportunity to move to the Grand Rapids facility," a company spokeswoman said.

Last month, the company closed 11 terminals in Kansas, Maryland, New York, Pennsylvania and Virginia, affecting about 350 employees.

Roadway to close most of local facility

Tannersville terminal to lose estimated 143 jobsRoadway Express will close most of its Tannersville terminal by March 1, transferring or eliminating an estimated 143 jobs as part of a nationwide consolidation of the trucking company's operations.

The move will affect 55 drivers, 42 transfer dock workers, 25 mechanics plus other employees. Most of those jobs will be moved to other facilities.

Just a few jobs related to pickup and delivery will remain in Tannersville; the exact number is unclear.

"Tannersville will be a much smaller operation than it is today," said Mike Smid, president of YRC North America. YRC owns Roadway Express and Yellow Freight and is combining the companies. According to Smid, integration of the Yellow and Roadway will create the largest trucking operation in North America.

At the Yellow location in Allentown, 19 jobs will be gained, while Roadway in Allentown will lose 37 jobs.

Roadway's Tannersville location has experienced several staff reductions in the last few years. In recent weeks some Tannersville workers have been furloughed because of the season and economics.

Of the Tannersville workers affected "most will have opportunities to follow work to locations that are gaining work," Smid said. Those locations have not yet been determined. First, a change-of-operations hearing must be held with the Teamsters union, which represents the workers. That will happen in January, but the exact date and location has not been determined.

The "change of operations" is a document for the union which states the intentions of a company.

"It's a massive change. Probably one of the biggest I've ever seen," said a business agent who declines to give his name at Local 229 Teamsters in Scranton, the home union for Tannersville Roadway employees. Yellow and Roadway job transfers and work-force reductions are planned across North America.

"YRC is being forced to make changes in an attempt to cut costs. Unfortunately that will have some impact on our members. We will work tirelessly to ensure their contract rights are enforced and their seniority is protected," said Leigh Strope, a spokeswoman for the Teamsters.

Tannersville is one of 450 truck terminals in the United States owned by YRC North America.

Major Trucking Company Downshifting