What Logistics Leaders Can Learn from The Largest Closure in The History of The Trucking Industry

Furniture World News Desk on 8/22/2023

Yellow Corp., once the largest transporter of goods in the country, announced its bankruptcy in early August after 99 years of operation. The closure constitutes the largest trucking bankruptcy to date in the United States, and a significant loss—most of all for the company's 30,000 employees.

While this news reflects the chaotic nature of the shipping and logistics industry in recent years, it also highlights other key issues that have held the sector back since before the pandemic: financial management challenges and a pervasive failure to prioritize customer experience over growth. As the consequences of the closure continue to ripple through the supply chain, the impact on both shippers and the retailers that relied on Yellow’s services must be addressed.

Short-term considerations

Yellow was the third-largest player in the less-than-truckload (LTL) industry. LTL allows retailers and manufacturers to ship smaller loads by combining merchandise shipments from multiple companies into one single trailer, maximizing value and efficiency. The loss of Yellow’s historically more affordable LTL services greatly reduces the supply of a necessary service, and furniture retailers will face higher prices now that a lower-cost option has been eliminated without a reduction in demand.

That said, retailers are also likely to see fewer damages and returns on deliveries as they shift to working with companies that may be charging more, but are also utilizing comprehensive technology to help avoid this problem. Yellow’s reputation as a more economical option was potentially related to the fact that the company placed less emphasis than competitors on implementing modern supply chain technology such as warehouse management systems (WMS) and transportation management systems (TMS) integration. Notably, Yellow had intentions to focus on modernizing operations, but these plans were derailed by the company’s more pressing financial troubles and claims that its efforts were hindered by the Teamsters Union.

The trucking industry has also faced a slowdown over the past 12 to 18 months due to a decrease in online consumer spending as pandemic restrictions have eased. This has led to a 17% decrease in LTL shipments between 2021 and 2022. Lower volumes will make it more difficult for truckers formerly employed by Yellow to find new work, in direct contrast to the long-standing truck driver shortage. While there previously existed something of a delicate balance between industry fluctuations and driver availability, the fresh unemployment of Yellow’s 30,000 workers represents a shock that has already had ramifications throughout the sector.

Long-term lessons

Evidence suggests Yellow’s finances were consistently strained. The company came close to filing for bankruptcy four times between the financial crisis in 2008, and the pandemic-induced chaos of 2020. Yellow’s most recent disclosures revealed $1.5 billion of long-term debt, over half of which was from the federal funds the company received early in the pandemic. The funds were based on the premise that the company was integral to national security. However, reports show that despite being used by some security contractors, the company did not meet federal national security criteria, and furthermore did not use the funds for matters related to security.

Yellow’s financial troubles resulted in part from acquisitions that the company failed to fully integrate into its operations, reflecting a prioritization of growth over function. For any company, absorbing competitors offers an opportunity to modernize systems based on the best options available across its expanding assets. Yellow’s customers could have seen delivery experiences benefit from a wider range of options like narrowed delivery windows and white-glove handling, as well as increased visibility into each step of an order’s journey. Instead, Yellow failed to adopt modern technology and implement best practices from its acquisitions.

Current technology enables shippers to track and manage every detail of a delivery from dock to doorstep and provides visibility to consumers who expect nothing less. Proper supply chain management technology has the power to make or break a logistics strategy, no matter how big or small the company.

Looking forward

The shipping and logistics industry is forecast to see a CAGR of 5.6% between now and 2032, presenting a tremendous opportunity for the sector. But scaling—like the growth Yellow saw during the height of the pandemic, albeit aided by relief funds—is unsustainable for companies that are not responsive to innovations in the field and ultimately focusing on customer experience.

This event should come as an industry-wide wake-up call: It’s time for shipping companies to take a step back, evaluate their ingrained processes, and make improvements. Regardless of a company’s size or stature, adopting proven supply chain technology is table stakes for retailers and logistics providers. Without a sector-wide shift toward adapting to the needs of today’s supply chain and its customers, Yellow’s closure will not be the last.

About Doug Ladden & Deliveright
Doug Ladden is the CEO and co-founder of Deliveright, connecting retailers to a nationwide network of local delivery companies through Grasshopper, the industry’s most robust AI-powered logistics platform. Grasshopper automates manual supply chain processes and complicated logistics from the first to the final mile. With a specialty in white-glove delivery of big and bulky goods, Grasshopper enables real-time data and delivery tracking from the point of origin to the final destination for both shippers and consumers. Grasshopper combines order management (OMS), warehouse management (WMS), and transportation management services (TMS), to support the delivery-first era of commerce.