Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
In late March, James L. Welch, CEO of YRC Worldwide Inc., met with Judy R. McReynolds, president
and CEO of Arkansas Best Corp., parent of YRC's less-than-truckload (LTL) rival ABF Freight System, Inc.,
to discuss a YRC buyout of all or part of Arkansas Best.
McReynolds listened to Welch's proffer, met with her board, and within a day or two, told Welch
that Arkansas Best wasn't interested. But the fact that Welch even made an offer spoke volumes. After
a four-year slide that put it on death's door at the end of 2009, YRC was under new management, enjoying
labor peace, and seemingly on its way to righting its money pit of a long-haul unit, YRC Freight, under the
leadership of Jeffrey A. Rogers, who had turned YRC's Holland regional unit into a star performer.
ABF, meanwhile, was locked in a make-or-break battle with the Teamsters union over a new labor contract, was
burdened with an uncompetitive cost-structure in a largely nonunion industry, and could only watch as its losses
mounted and the value of its equity shriveled into the single digits.
That was then.
Today, it is YRC, not ABF, locked in a make-or-break contract battle with the Teamsters. It is YRC, not ABF,
that is losing money and facing bill collectors demanding their pound of flesh in return for restructuring $1.4
billion in debt, with the first principal payment coming due in February. It is Arkansas Best, not YRC, that is
watching its stock price climb. It is Arkansas Best that has suddenly become a competitive force in the
less-than-truckload industry, bolstered by as much as $65 million in annual savings at ABF from a new five-year
collective bargaining agreement with the Teamsters and the increasingly stellar performance of its expedited
transportation unit, Panther Expedited Services. This is the kind of firepower that YRC, stripped of everything
but LTL services, does not have.
Arkansas Best and YRC posted third-quarter results within a day of each other this week. The differences couldn't
have been starker. Arkansas Best reported a solid, though not spectacular, quarter. Its net income more than doubled
year-over-year. ABF's operating revenues rose $21 million from the 2012 quarter. Its four non-asset-based units, led by
Panther, accounted for 26 percent of total revenue in the quarter, a percentage that has risen sequentially throughout
2013, the company said. Panther's operating income jumped four-fold year-over-year.
ABF's third-quarter operating ratio—the ratio of expenses to revenues and a key metric of a carrier's efficiency—
was a decent 96 percent, meaning ABF took in $1 in revenue for every 96 cents it spent. The third-quarter results were
tallied before the new collective-bargaining agreement took effect Nov. 3. If the cost-savings from the agreement were
overlaid on third-quarter results, ABF's ratio would have dipped to 93 percent, according to estimates from Stifel,
Nicolaus & Co., an investment firm.
Arkansas Best stock hit a 52-week high yesterday of $31.97 before closing at $31.70. That is a five-fold jump
from its 52-week low.
DIFFERENT STORY AT YRC
At YRC, meanwhile, operating revenue rose 1.3 percent year-over-year but operating income dropped
to $5.8 million, a $21.5 million decline from the 2012 quarter. The company reported earnings before
interest, taxes, depreciation, and amortization (EBITDA) of $62.4 million, down $16.4 million from the
year-earlier period.
The quarter was trucking's version of Murphy's Law, and it came from a familiar source: YRC Freight. A major
network realignment that began in the spring was not well implemented, leading to service problems, a loss of
high-yielding volumes, and escalating costs. It also resulted in Rogers' ouster in late September and in Welch
taking control of the unit.
Welch said the problems continued into the third quarter, with service levels affected by driver shortages at certain
terminals. Welch blamed the shortages on the timing of summer vacations and a reallocation of labor following the network
realignment. The driver shortage had a cascading effect, resulting in higher-than-expected overtime pay, increased use of
costly purchased transportation in certain lanes, and lower productivity, Welch said.
As if all of that wasn't enough, Welch said YRC recorded an additional $4.4 million in expenses over the 2012 quarter
due to higher bodily injury and property damage claims.
Welch said the unit's service levels are "within a couple of percentage points" of where they were prior to the
realignment. In addition, daily shipment counts in October were slightly higher than in the 2012 period, which reversed
a negative trend, Welch said.
YRC's four regional units—Holland, Reddaway, New Penn, and Reamer in Canada—continue to do well, the company said.
However, it is clear by the overall results that as long as YRC Freight, which still accounts for the majority of YRC's total
business, performs poorly, the company as a whole is unlikely to gain traction.
The urgency of the situation was underscored late last month when management asked leaders of union locals to meet in Dallas
Nov. 5 to discuss the need to extend their current labor agreement through 2019. The current pact expires in March 2015.
In an Oct. 30 letter to employees, Welch said that servicing YRC's $1.4 billion debt load leaves the company with no money to
reinvest in the business once wages, benefits, and regular operating expenses are paid.
YRC is financing its debt at interest rates between 11 percent and 12 percent. That means it is paying $150 million in annual
interest, more than all its publicly traded rivals combined. The interest burden is "strangling the company," YRC said in a
handout at the meeting.
Time is of the essence, according to YRC. Because the refinancing process typically takes 90 days to complete, it must begin
by Nov. 15 to meet the first principal payment of $69 million, which is due Feb. 15, the company said. YRC has a $326 million
payment scheduled in September and another $678 million by March 2015. YRC's lenders have told the company they will not agree
to refinance its debt without a new labor agreement in place.
There is no way of knowing if YRC's 25,000 unionized workers, which agreed to several rounds of concessions in 2009 and
2010 to allow the company to survive up to this point, will agree to any of this. YRC said Tuesday that local union leaders
agreed to allow negotiators to start discussions with the company over its "financial future."
YRC stock fell more than 20 percent yesterday to close at $7.72. It hit a 52-week high of $36.99 in mid-July.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.