August Shipping Report: Yellow’s Bankruptcy Announcement and Supply Chain Effects

Yellow Corp, a 99-year-old trucking company, is no more.

Yellow’s bankruptcy announcement did not occur randomly or even suddenly, although it might have been a shock given that they reported $5.2 billion in revenue last year. The company ceased all operations on July 28, 2023, and eliminated all but its customer service staff, stating that those employees were needed to navigate some freight in its network. However, once that issue has been cleared up (and may well have already happened by the time of this writing), those additional employees will be without work. That puts 30,000 employees on the unemployment lines.

What Led to the Bankruptcy

The announcement comes on the heels of a battle with the International Brotherhood of Teamsters over missed pension and benefits payments and new contract terms. A strike was threatened earlier in the summer. But that’s not where the challenges began. In fact, they go back a decade or more.

Yellow made some acquisitions in the early 2000s that were not fully integrated into their system. That led to challenges during the Great Recession and a reported loss of $1 billion in 2008. The company nearly filed for bankruptcy that year and came close yet again in 2014 and 2020. During the pandemic, the Trump administration provided Yellow with a $700 million loan, which didn’t make as big of a difference as might have been hoped.

Because of all this uncertainty, the industry has seen the writing on the wall. Shippers started to remove business from the trucking company a few months ago, choosing alternative options to ship their goods. Companies and freight forwarders were alerted about the potential for this announcement by a notice sent by the Teamsters saying that it appeared Yellow would be “succumbing to its enormous debt burden.”

How Yellow’s Bankruptcy Announcement Affects the Supply Chain

Even though some companies were able to begin rerouting shipments during Yellow’s final days, that doesn’t mean the challenge has passed. With fewer options, prices will inevitably rise, leading to yet another pinch on consumers’ wallets. Yellow was considered a low-cost option that now is no longer in the game. And of course, this news comes on the heels of unprecedented inflation hikes.

But Yellow’s bankruptcy announcement will have far-reaching effects, in addition to higher prices. It could affect the global supply chain yet again. When a key player such as Yellow exits the industry (it was the third-largest less-than-truckload company in the US), there’s a natural ripple effect. For instance, in 2022, the company handled an average of 49,000 shipments daily. Another company will need to fill the void left by Yellow’s bankruptcy announcement.

Navigating the Future of Shipping

Yellow’s departure from the industry has created a domino effect across the entire supply chain. This can be felt by manufacturers, suppliers, distributors, retailers, and consumers. In addition to increases in shipping costs, the uncertainty of the future could prompt businesses to stockpile inventory, which will put a strain on warehouse capacities. No one is quite sure what will occur this time, but we’ve seen similar situations play out in the past during the pandemic and port closures due to strikes. And again, agility and innovation are what will be the difference makers.

This incident serves as a wake-up call for companies to reevaluate their supply-chain strategies and consider the potential vulnerabilities that could be lurking within their operations. Proactive measures, such as investing in contingency plans and forging robust partnerships, will be essential in fortifying supply chains against future disruptions.

That’s why it’s crucial to work with a freight forwarder. The shipping industry is dynamic, and we have seen time and again how one event can lead to multiple issues. Yellow’s bankruptcy announcement is no different. At Cyclone Shipping, we always have contingency plans because we know things can change, and we want to ensure your shipments get where they’re supposed to be when they’re supposed to be there. Contact us today to learn more about how you can add us to your team.