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Less than Load: a thought about trucking and freight

 


The company Yellow, a freight-moving trucking concern that has been around for nearly a century, is now in bankruptcy. 

Why? As usual, there are a lot of reasons: The intransigence of the Teamsters, a series of bad judgments by the managers, and a private equity firm's desire to fish in troubled waters all enter the picture.

But what I want to talk about today is the nature of the business that Yellow is in.  (It has no connection, by the way, with Yellow Cabs. Yellow is simply a distinctive and easily distinguishable color on the move, so it was a natural choice for two distinct sets of company founders.) 

Yellow is in the LTL business. This means that it contracts to move freight that constitutes less than a full truckload -- less than enough material to fill up one of those ubiquitous trailers one sees on the road. 

Though there are other firms that work for shippers willing to fill several full truckloads at once, the segment of LTL freight is a critical part of the supply chain for US industry. After all, loads with anything less than a trailer's worth of goods threaten dead loss. The use of gasoline to move a half-filled trailer is a waste of gas. 

Fortunately, part loads can be jigsawed together into a full load in the manner you see in the image above.

Unfortunately, the jigsawing-together is not a mysterious or proprietary art, so the LTL industry is hotly competitive. Indeed, this gets us back to the "management missteps" point above. Yellow is bankrupt today in part because early in this millennium it tried to consolidate the LTL space, buying enough other LTL firms to lessen the competitive pressure. 

This left it with a heavy debt load, which became more than just an annoyance in the global financial crisis of 2008.

But I will end here. 


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