Will Yellow Freight(NASDAQ
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During a hot summer, unrest abounds in the transportation provider market. The record profits made during the 2020-2022 period puts the transportation provider at a disadvantage in union negotiations in what is now a soft logistics market. Supply chain leaders need to prepare for disruption.
Can The U.S. Government Intervene?
Probably not. While President Joe Biden and the US Congress intervened to stop a railroad strike in December, the railroads are governed by the Railway Labor Act, which specifically calls for action if mediation fails. Transportation is not subject to this restrictive labor law. While Biden could invoke emergency provisions under the Taft-Hartley Act, as former President Jimmy Carter did to break up a lingering miners’ strike in 1978, this move would be controversial for the pro-union Biden agenda.
What Happens If Yellow Freight Goes Bankrupt?
Negotiations between Yellow Freight trucking and the teamsters is contentious. When the Company management told the Teamsters that Yellow would run out of cash by August, the Teamsters’ General President, Sean O’Brien, responded, “Go ahead and shut down.” Days later, O’Brien tweeted a gravestone picture depicting death stating: “Yellow, from 1924 to 2023.”
The company nearly avoided bankruptcy three times in its history, but this time is more of a challenge. Freight is being diverted to competitors, and supply chain leaders are planning for a disruptions in the Midwest and Northeast US sectors with a focus on interconnects with Reddaway a Western LTL carrier, Holland a Midwest LTL carrier, and New Penn Motor Express a Northeast LTL carrier.
The Less-Than-Truckload Sector serves the industrial and e-commerce sectors including fabricated metal manufacturers, transportation equipment manufacturers, food manufacturers, plastic & rubber products manufacturing, chemical manufacturing, and electronic shopping/mail order houses. According to experts, today, there is enough LTL capacity for another carrier to move Yellow freight. However, we are in a downturn of demand in the logistics market; and as a result, there may not be enough capacity for the long term.
What Happens If UPS Strikes?
The pending UPS strike is a larger issue. If this strike happens, experts forecast that only 20-25% of the UPS capacity can be absorbed by alternative providers. UPS is preparing for contingencies asking management teams to run operations.
If UPS strikes, expect major disruptions in eCommerce, medical device deliveries, and commercial wholesale. The nervousness around transportation labor outages creates the need for increased planning and inventory. Companies need to plan for contingencies. For example, sales employees at major medical device companies may need to deliver medical supplies. Distributors may need to temporarily hire private fleets. Retailers may need to slow eCommerce sales. Money will be thrown at many creative solutions affecting alternatives like Taxi service, DoorDash, TaskRabbit and Uber
UBER
Labor Issues at the West Coast Ports? Will They Go Away?
The June port worker slowdowns increased lead times and supply chain variability. However, the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) reached a tentative agreement in the United States West Coast labor dispute on June 14, 2023. This agreement lasts for six years and covers the 29 ports responsible for most U.S. imports; however, the Canadian port issues remain fluid.
Port labor issues will continue as the port operators tackle badly needed automation in a tough workplace.
Steps to Take
The modern design of the supply chain assumes:
- Capacity is Available. The focus is on price. Logistics continues to be a a constraint. Freight capacity is not always available. This is no longer a valid assumption. What to do? Use network design technologies to build models to reflect the options and use these assumptions in Sales and Operations Planning (S&OP). Flex modes and think creatively as shifts occur.
- Lead Time is Predictable. Supply chain design also assumes that logistics lead time variability is minimal. This is also no longer a valid assumption. Next steps? Build a data base of lead time by lane and track actual lead time by carrier by lane to understand the variability. Use this data in continency planning to improve manufacturing reliability of inbound material shipments. Work on building logistics visibility systems to track and plan inbound shipments.
- Transportation Providers are Expendable. The current practice of extending payables force many carriers to factor receivables in an asset intensive industry. This creates business viability issues for carriers that are especially problematic in this soft market. With over 70% of the truck drivers more than 40 years of age, carriers also face looming in healthcare and retirement costs. Action item? Now is a time to rethink terms and more favorable payment terms for carriers by manufacturers and retailers.
- Rethink Rush Orders. At many manufacturers, logistics departments often operate in isolation with other departments like manufacturing and customer service. Within the organization, there is an assumption that rush shipments are always a possibility. With the pending shifts in the LTL and small parcel markets, rush orders may not be possible, forcing companies to consider expensive air freight options. Steps to take? Facilitate cross-functional communication as the value network works through the issues.
Supply chain leaders need to put their teams on alert. The traditional supply chain focus on full truck movement assuming that rush orders and smaller shipments can easily happen is no longer a viable assumption.
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