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Sept.4, 2017

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SURFACE & DOMESTIC TRANSPORTATION TRUCKING | RAIL | INTERMODAL | AIR & EXPEDITED | DISTRIBUTION 40 THE JOURNAL OF COMMERCE SEPTEMBER 4.2017 By William B. Cassidy SHIPPERS WANT FASTER door-to-door ser- vice from less-than-truckload carriers, and YRC Freight is obliging with the most extensive change to its terminal network in years. YRC will add eight distribution centers, without breaking ground on a single new building. The LTL ca rrier pla ns to unlock underutilized capacity by converting eight existing terminals to distribution centers, effectively adding 837 doors of "transfer capacity" to its network, allowing the Over- land Park, Kansas-based company to handle an additional 7,000 shipments a day. Changes to Y RC Freight 's US net- work of 260 terminals will be matched by changes in its driver workforce. The company told the Teamsters union, which represents YRC Freight's 7,000-plus driv- ers, it plans to create 84 "utility employee" positions for truck drivers. Utility drivers will be able to drive and work on the dock, and they will work in shorter-haul lanes than traditional linehaul drivers. That means they'll be home most nights. These drivers will operate within a 175-mile radius of the carrier's 31 distribu- tion centers. The carrier will go further than that. YRC plans to introduce 118 "meet-and-turn" relay operations involving 236 drivers from 20 terminals. The company will eliminate 195 layover trips and 267 overnight hotel stays each night, helping drivers get home faster and more often. These steps will translate to a 15 per- cent overall increase in capacity by the time the network enhancement is completed in October, as YRC Freight repurposes existing facilities, changes how it manages drivers, and adjusts freight flows, President Darren Hawkins said. "We believe we're going to need that (capacity) to handle the demand that's com- ing over the next several quarters," Hawkins said. He expects a steady increase in indus- trial freight and surg ing e-commerce demand to continue to boost LTL volumes and pricing this year. Those higher volumes, along with other steps toward efficiency gains and improved pricing, helped push YRC Freight back into the black in the second quarter after two quarters of losses. The carrier reported a $28 million second-quarter profit, after a $10.5 million first-quarter loss. "And then we've got the ELD (elec- tronic logging device) mandate coming" on Dec. 18, Hawkins said. "The LTL carri- ers won't have any issue with that, but any truckload carriers running into delays get- ting ELDs in place could create additional demand for LTL capacity." YRC Freight's network enhancement comes as greater demand for LTL service overall tightens capacity and encourages several LTL carriers to expand terminal networks. Eleven straight months of manu- facturing growth is piling shipments onto LTL docks. At YRC Freight, higher volumes strain the network at certain key times. "The constraints that exist within the current structure cause the company to regularly incur severe freight backups at seven of the present distribution centers," YRC Freight wrote the Teamsters union in July. E-commerce, however, may play an even more important role by fundamen- tally changing distribution needs in ways advantageous to LTL carriers. "With the way many large retailers are positioning their own distribution centers, we're see - ing higher demand for LTL," Hawkins said. Those retailers are building smaller distribution or fulfillment centers closer to consumers, emulating Amazon. "In the past, inbound traffic to the DC would be truck- load," he said. "Now, with a shorter length of haul, many retailers are more inclined to use LTL." Where LTL carriers such as YRC Freight really stand to benefit from e-commerce isn't the final mile but the "middle mile," Hawkins said. "The middle mile often gets overlooked," he said, but LTL terminal net- works are designed to handle that leg of the freight movement. As the length of haul from vendors to a retail distribution center gets shorter, rapid replenishment and the cost of inventory mean orders get smaller and more frequent, favoring an increase in the number of LTL shipments. That's helping to tighten LTL capacity. When it comes to truck capacity, 2017 has been an unusual year, Hawkins said. "In times past, we've typically seen truckload YRC FREIGHT'S NEED FOR SPEED Carrier will convert eight terminals to DCs and improve driver management to improve flow and free up capacity "We're a reflection of the economy. I like what I'm seeing. Demand seems firm. Pricing seems firm. I'm encouraged."

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