nCa Analysis
The American trucking giant Yellow Corp. (previously known as YRC Worldwide) is declaring bankruptcy and it has sent shockwaves across the transportation industry and the e-commerce world.
With its workforce of more than 30000, Yellow was the third largest small-freight company in the transportation sector in the USA, specializing in low-cost transportation of smaller (less than a truckload) volumes of cargo.
This specifically relates to the still-budding e-commerce sector where the first-mile-collection and last-mile-delivery of small volumes of cargo, mainly from small companies and individuals, are the most challenging task in bringing the products to the end users.
This is very directly relevant for Central Asia where the trucking companies are springing up fast to keep pace with the rising transportation demands from the e-commerce sector.
According to the Reuters and USA Today, Yellow held roughly 8% to 10% of market share. Its customers included large retailers such as Walmart and Home Depot, manufacturers and Uber Freight.
It is too early to comment with confidence on the reasons why Yellow failed but here are some possible contributors to its downfall:
- It was charging unrealistically low rates for the transportation of cargo. The layer of profit was rather thin to protect against any unforeseen factors.
- It borrowed heavily, in excess of the ability and capacity of its business model.
- It was unionized and had to face the Teamsters union at every step of its decision-making process. Some 22000 of its 30000 employees were represented by Teamsters. As such, it could not compete with the non-unionized trucking companies.
Whether it was mismanagement or miscalculation (or a mix of both) there is no doubt that the Yellow management tried to keep the company afloat till the very end. With a 100 years of history, Yellow was the source of handsome livelihood for several generations in succession.
“It is with profound disappointment that Yellow announces that it is closing after nearly 100 years in business,” the company’s CEO Darren Hawkins said in a statement. “Today, it is not common for someone to work at one company for 20, 30, or even 40 years, yet many at Yellow did. For generations, Yellow provided hundreds of thousands of Americans with solid, good-paying jobs and fulfilling careers,” USA Today quotes Hawkins.
It is a tragedy. — Yellow was a $5.2 billion business as recently as last year when it moved around 50,000 shipments a day in a trucking network that made it a fundamental part of the supply chains of hundreds of U.S. companies.
The public and private sector organizations in Central Asia related to transportation, trucking, and logistics need to study this case thoroughly to avoid what is avoidable. /// nCa, 11 August 2023
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