By Paul Scott Abbott, AJOT
In an industry that will see continuing consolidation and with federal highway reauthorization legislation apparently finally nearing passage, top executives of merged competitors Yellow Transportation and Roadway Express Inc. remain confident that they can succeed by adapting to the changing marketplace.
James L. Welch, president and chief executive officer of Yellow, and Robert L. Stull, president of Roadway, expressed those views and others in a June 3 conference call hosted by Michael A. Regan, advocacy committee chairman of NASSTRAC. The conference call also included a plea to the call’s more than 200 industry listeners to contact members of Congress concerning the highway legislation.
Welch said Overland Park, KS-based Yellow Transportation was “struggling mightily” in the early 1990s because it was maintaining its old operational model with a hub-and-spoke system using more than 700 terminals. Yellow, he said, was a “slow, stodgy” less-than-truckload (LTL) long-haul carrier at a time when that kind of service no longer was driving a marketplace that was seeing an “alarming” amount of manufacturing leaving the United States for Mexico and elsewhere.
Even as recently as four years ago, shipments stayed in Yellow’s system an average of about four days, Welch said. But Yellow now has pared its number of terminals down to 360 ’ which he described as “no easy task” - and has accomplished a “huge feat” by reducing average transit time for shipments in its system to 2.8 days, with 47% of its business currently delivered in two days or less.
“I think Yellow in particular was a little slow to change,” Welch commented, adding, in reference to the approach of new management, “We have sped our company up while trying to keep costs as low as we can.”
Today’s challenge, he said, is to aim to provide seamless transport for products from the point of manufacturing ’ in “Shanghai or wherever it is” ’ taking full advantage of technology and information systems.
“The future really is bright for companies seeing what is going on and who work with customers to understand their supply chain needs,” Welch said.
He described Yellow and Akron, Ohio-based Roadway, which Yellow acquired at the corporate level in 2003, as “healthy competitors” that “take advantage of backroom synergies.”
The two brands combine to control about 70% of the nation’s LTL revenue, according to the conference call’s moderator, Ed Wolfe, senior managing director and air freight and surface transportation equity analyst with the New York investment firm of Bear Stearns & Co. Inc.
Roadway Express’s Stull joined Welch, as well as Regan, in opining that industry consolidations, such as the May 16 purchase of Overnite Corp., by UPS Inc. will continue.
“Scale matters in this changing marketplace,” Stull said. Also important, he said, are sales organizations attuned to shipper demands, “daily obsession with service” and empowered employees to “allow decisions to happen closer to the customer.”
Regan, who in addition to his NASSTRAC role is chief executive officer and chairman of the board of TranzAct Technologies, an Elmhurst, IL-based logistics management firm, said he believes consolidations have actually resulted in better overall LTL service and greater options for shippers - and even rate reductions for “shippers willing to think outside the box” and work closely with chosen carriers.
Welch said he believes one of his favorite business-world sayings - “The marketplace will always win” - holds true in the LTL industry:
Later in the conference call, John M. Cutler Jr., NASSTRAC’s general counsel, said he concurred with Welch that the marketplace always wins, “But, when the government gets involved, it sometimes gets distorted.” (Formerly known as the National Small Shipments Traffic Conference, NASSTRAC is now simply referred to by the acronym.)