YELLOW FREIGHT IS ON THE MOVE

Prepared by

Princy Priyadarshini John

Index No: PQHRM / 44 - 23

Case Study 24th April 2010

Professional Qualification in Human Resource Management

Institute of Personnel Management Sri Lanka

Background of Yellow Freight

Yellow Freight was found as a Trucking Operation in 1924 by Oklahoma City cab driver A.J. Harrell as Yellow Transit Company and in 1944 it was sold and company was renamed as Yellow Transit Freight Lines. In 1968 Yellow Transit Freight System renamed as Yellow Freight System. It entered the regional less than truckload (LTL) market with the purchase of Preston Trucking Company in 1992. In 1993 Yellow Freight restructured into a holding company and changed its name to Yellow Corporation. Yellow Corporation is a transportation holding company with subsidiaries that specialize in regional, national, and international transportation and related services. Its largest and best known subsidiary, Yellow Freight System, Inc., provides less-than-truckload (LTL) shipping and specialty shipping of heavy loads and chemicals. Through other subsidiaries--including Yellow Global, Saia Motor Freight, and Jevic Transportation. Yellow offers overnight and second-day trucking services and worldwide ocean and air transportation and forwarding services.

The Case Question

Yellow Freight System is a trucking company which started as a small business and developed, but in 1994 yellows growth had slowed, Teamster strike in 1994 resulted in more than $25 million in losses for Yellow, while the rough winter of that year further slowed the trucking industry and depressed profits. LTL demand continued to slow, and discounting among truckers became more and more competitive. A 5 percent wage increase instituted in April 1995--a result of 1994's Teamsters strike--further ate into Yellow's earnings, and the company posted a $30 million loss for the year. After Bill Zollars became the new CEO of Yellow he found that the firm was losing money, suffering from labor strikes, was trapped in old fashion and inefficient business practices, and so many other problems. Although Yellow now has overcome with some problems faced by them, not fully met all the challenges and coped up with them. This Case Study is to identify the current and future challenges that Yellow Freight faces or will face in the future and give recommendation to cope up with the challenges and solve the problems.

Question No. 01

The contemporary challenges that Yellow Freight faces.

Challenge No. 01: Reasons: The Changing Environment It has been clearly shown that Yellow Freight is still trapped in oldfashion, and although they have come up with some technological issues they have to still improve in technical side and keep on changing according to the environment. Yellow Freight needs to change their Policies, Procedures, Practices, and Systems according to the environment change.

Recommendations:

Yellow Freight should train and develop all their employees including the management to change according to the environment and face the challenges. Introduce new technology, train employees to use computers and provide better service to the customers. Better compensation system should be introduced,(If the competitors salary scale for the same position is high, staff might leave Yellow and move on to another company) Challenge No 02: Reasons: High Defect Rate When Bill Zollars became the CEO of Yellow, the companies defect rate was 40%. The staff of Yellow didnt think about the quality of the product or undamaged deliveries, but they wanted to deliver as quickly as possible, although the current defect rate of Yellow is 5% the company needs to improve and make the defect rate into 0%.

Recommendations: Pack the goods in a way that it doesnt cause damage to the product. Use a proper transportation system (Eg: Car or Van) for goods that damage easily rather than using a truck. Check all the goods before taking it to deliver.

Challenge No 03: Reasons:

Attitudes of Staff The staff of Yellow Freight had an attitude that they are as good as anyone else in the industry. When Bill Zollars recollected his early days at Yellow he said that he remembered a caller called in and said Id like to get this stuff from Chicago to Atlanta in two days, and we said, we can get it there in three days, They didnt think that there was anything wrong with that, the attitude was If you dont like what we do, too bad.

Recommendation: Better Training and Development System Train the staff on Customer Service / handling customers

Challenge No. 04: Reasons:

Inefficient Business Practices Yellow Freight was trapped in inefficient business practices, the staffs were not worried about the late, incorrect or damaged shipments, but they just wanted to deliver it. Unpunctuality, not willing to work properly or do thinks at correct time, and careless of handling goods. All these were inefficient business practices at Yellow.

Recommendations: Give training to employees on efficient business practices Providing incentives to motivate employees

Challenge No. 05: Reasons:

Decreasing of Industry Profitability The ground transportation industry was changing, starting with deregulation in 1980, which encouraged to new entries and made the price war and the total profitability was brought down because of the heavy competition.

Recommendation: Maintain the industry standards accordingly and build the brand where people could rely on. Though there is a price war, people still believe in brand and what brand could deliver. A strong brand could keep the company surviving at a price recession. Yellow Freight has to maintain the standard and work towards making and giving a customer a unique experience at Yellow Freight. Since there are lots of competitors, company has to focus on more promotional side, since people look for more benefits when there is lots of competition.

Question Number 02

Additional Challenges that Yellow Freight will face in the future.

The Changing Environment For the past decades or so, the environment has been extremely changed. Organizations have to change accordingly to cope up with its business. The changes or trends include Globalization, Changes in the nature of work and Technology. Challenge No 01: Globalization or Going Global Globalization is the tendency of firms to extend their sales, ownership and manufacturing to new markets aboard. In order to grow and prosper, many companies are seeking business opportunities in global market. Competition and cooperation with foreign companies has become an important focal point for business. Reasons: Although Yellow has covered some international areas, going global completely is very important. To cope up with the business and beat up the competitors globalization is very important. Introduce Yellow to the global market. Open up branches in other countries Outsource a company to provide yellows services in other regions and countries. New Technologies and Trends in Nature of Work Advantages in information technology have enabled organization to take advantage of the information explosion. With computer networks, unlimited amounts of data can be stored, retrieved and used in a wide variety of ways. Reasons: Yellow has not been 100% computerized, and it has been surrounded by old fashion. Although it has a website for customer to track the deliveries Yellow does not have facilities to check availabilities and pay online as well. Yellow needs to improve more in technology like their competitors.

Recommendation:

Challenge No. 02:

Recommendations: Make the web site to be easier to customer by adding up, checking availabilities and pay online. Train all the employees at Yellow to use computers and automated machines Computerize all the works including tracking the delivery (whether it has been delivered at the correct time)

Challenge No. 03: Reasons:

Changing Management Style. All these problems of Yellow Freights such as, labor strike, inefficient business practices, dropping profitability, difficulties with union relation and high defect rate is because of improper management style.

Recommendations: Train and Develop the entire management on changing environment Teach them the best business practices and management style Obliterate resistance to change Put up a Human Resource Department and Implement best HR practices

Challenge No 04:

Responding to the Market Meeting customer expectations is essential for any organization. In addition to focusing on internal management issues, organization must also meet customer requirements of quality, innovation, variety, and responsiveness.

Reasons:

Yellow did not fulfill customer expectations, when a caller who asked to get goods from Chicago to Atlanta in two days, Yellows employees told that they can deliver that in three days which was not customers expectation.

Recommendations: Teach employees to see Customer as the King and give preference to them. Training on Customer Service. Provide after sales services. Challenge No. 05: Problems in Transportation Delivering the goods on time without damage is very important to a trucking company. Organizations need to invest a large amount of money to this to satisfy their customers. Reasons: Yellow faces problems in delivering goods on time, and undamaged goods. When it comes to deliver larger amount of goods, Yellow has a problems in vehicle, it applies to distance deliveries too.

Recommendations: Out sourcing transportation services Out sourcing Air plane services

Question No 03

The benefits that Yellow Freight gains if it cope ups with the challenges
1. High Profit By maintaining the standard of Yellow Freight and making customers to rely on the brand Yellow Freight can cope up with the challenges, beat the competitors and gain High Profit.

2. Good recognition When Yellow freight go into global market and provide best and quality services to their customers, Yellow Freight will get a good recognition of their company among the competitors. 3. Gain motivated and Committed staff By training and developing staff, implementing good reward or compensation system, the employees of Yellow Freight will be motivated and achieve their targets on time. 4. Good Market Share By facing the challenge globalization and provide quality service Yellow will get a good reorganization in the market, because of good will of the company, Yellow Freight will have a major market share. 5. Decrease of Defect rate

Training and developing both the employees and the management, Implementing best transportation systems, Yellow will deliver correct, undamaged goods on time, this will make Yellow to bring its defect rate to 0%.

The Negative consequences that Yellow Freight gain if it does not copes up with the challenges
1. Low Profitability If Yellow does not maintain its standard among the competitors and global market, the good customers of Yellow will move into another trucking company, so Yellow will lose both their customers and profitability.

2. Less customer satisfaction If Yellow keeps on deliver incorrect, damaged goods and late deliveries the trust that customers have on Yellow will break and Yellow will lose their customers.

3. Increasing Defect rate

If Yellow does not copes up with the defect rate and do the same mistake over and over again, it will have to face an increased defect rate.

4. High Employee Turn Over When employees does not have proper training and developing programs, and good reward systems they will get de- motivated and will seek for another employment in another company or in a competitor organization. Talented staffs can be picked by head hunters too.

References
http://www.yrc.com/about/history.html Book of Human Resource Management by Scott Snell and George Bohlander Eleventh Edition of Human Resource Management by Gary Dessler

http://www.cioinsight.com/c/a/Past-News/Case-Study-Yellow-Corporation/ http://www.fundinguniverse.com/company-histories/Yellow-Corporation-CompanyHistory.html