In a broad-based discussion about the state of the trucking market with a panel of shippers, the talk got very specific when the panel’s moderator asked about one particular carrier – YRCW.
At the Wolfe Research Global Transportation & Industrials conference, analyst and moderator Scott Group asked the virtual gathering about whether the large shippers he had brought together might be impacted by the ongoing financial troubles at the less-than-truckload (LTL) carrier.
Specifically, he turned first to Ron Guzzi, the senior manager of transportation carrier relations & sourcing at The Home Depot. Guzzi said YRCW was the second-biggest carrier among the companies that move goods for Home Depot.
“All four of their divisions are big within our network,” Guzzi said of YRCW, an apparent reference to not just YRC Freight but also to USF Holland, New Penn Motor Express and USF Reddaway. “We are staying close and monitoring their status. They’ve been a big partner for us as long as I’ve been in the business,” a period Guzzi said was about 10 years.
Guzzi had said earlier on the panel that Home Depot was going through a bid process now for future freight needs and that YRCW was a part of the exercise.
But Guzzi added that Home Depot has “no immediate plans” to reduce its activities with YRCW, “but we are making sure we have a contingency plan or two in place for the worst case scenario.”
“We’ve been there with YRC from the get-go and our plan is to stick with them in challenging times,” Guzzi said.
But less optimistic was Eric Stone, senior manager of domestic sourcing and supplier performance for Johnson & Johnson. J&J is near a bid round for LTL services, and YRCW “has been talking with us over the past year and we’ll see what comes from that.”
But Stone was blunt. “Given the risk involved, it is unlikely we would bring them in as a carrier,” he said. “But we will see.”
The irony of the discussion of YRCW is that in another part of the panel, the shipper representatives talked about the discipline that LTL carriers were exhibiting in their pricing as compared to their truckload carriers. Guzzi said Home Depot puts out a bid to LTL carriers every two years and it will be launching its next round in a month. “I think the carriers are more disciplined,” Guzzi said of the LTL companies that will bid for Home Depot’s business. “There aren’t as many. “
He expected the process for securing new rates to produce numbers that would be “relatively flattish.” Guzzi also said Home Depot “might” put a mid-year review in place, because of the extreme nature of recent changes.
“We have to keep in mind that those rates have to be sustained for two years,” he said.
J&J’s Stone said its biennial LTL bid round was delayed to June from April this year. He said the company is expecting low single digit increases.
Group noted at the start of the roundtable that the shippers on the panel sold products that would have soared in demand at the start of the pandemic. Besides Home Depot and J&J, the panel also featured Randy Cooper, the director of transportation at Del Monte Foods, and Dan George, manager of transportation for 3M.
All of the shipping company representatives reported strong surges in demand for their products at the start of the crisis, with demand tailing off to various degrees since then. But they also were consistent on another observation – they hadn’t changed modes of transportation.
Cooper of Del Monte appeared to be the heaviest user of intermodal services on the panel. He said that transit times had improved for both trucks and for intermodal. He noted the “pretty significant downturn” in spot trucking rates, but “we’re not going to be doing modal shifts just based on price.”
There’s plenty of capacity in the truckload sector. Del Monte’s Cooper said that over the last six weeks, his company has gotten “upward of” 97% acceptance on its loads. “I’m getting no indications that it’s going to get worse for at least the next quarter,” he added.
George of 3M topped that – he said most acceptance rates have been in the 99% range.
“When we go to the secondary market, loads get covered almost immediately,” he said.
Group asked about the use of third-party logistics providers (3PLs) by the shippers, and the answers varied widely. Stone of J&J said about 90% of its shipments were using asset-based carriers; Guzzi said Home Depot was “always” asset-based, though conceded there was some use of brokers who “act like asset carriers,” with drop trailer service. George of 3M put the use of 3PLs as carriers at 5%.
Guzzi said even with dropping spot rates, Home Depot is not changing its approach toward who carries its freight – mostly asset-based carriers. “We’re going to stay true to who we are,” Guzzi said.
He conceded that might mean that Home Depot would be “leaving money on the table,” but that it was “comfortable” with its decision. He said there were four truckload carriers that did the bulk of Home Depot’s business. He did not identify them but said the company would be staying with them “through the good, the bad and the ugly.”
But Cooper said Del Monte is approaching 25-30% use of 3PLs to move its freight. “Some of it is for cost reasons but we have seen excellent service from our broker partners,” he said. He added that use of brokers at Del Monte tends to focus on three unidentified companies.