Yellow Transportation Inc.

: The Tech Leader of the Trucking Industry in the US

Abstract: Yellow was set up in the 1920s to provide bus and taxi services in Oklahoma. Very soon, the company realized that freight shipping was a more lucrative business and divested its taxi business to operate full-time in transporting freight. After the trucking industry was deregulated by the US Congress in 1980, the company found itself unequipped to deal with the increased competition and a dynamic industrial environment. It also had a narrow view of what its business was, and did not give due importance to the broader area of service. Consequently, its performance began to decline. Issues: Understand the problems faced by a mature transportation company due to a change in the dynamics of the industry in which it operated Analyze the steps taken by the company to re-establish itself as an industry leader With so many of our routine business transactions migrating to the internet and the quickly evolving e-commerce business opportunities today, our focus as an organization has to be on technology development and deployment." - Lynn Caddell, President of Yellow Technologies in 20001. "We've gone from being a company that thought it was in the trucking business to being one that realizes it's in the service business." - William Zollars, chairman, president and CEO of Yellow Corp. in 2002 Yellow Honored In August 2003, CIO Magazine, a leading Internet and technology magazine, announced its annual list of the top 100 technology companies in the world that exemplified the highest level of operational and strategic excellence. Yellow Corp was recognized for its IT department's regular evaluation of software to eliminate duplicate or underused products. This was the fourth time that Yellow Corp. had featured in this list since 1999. This honor came close on the heels of Yellow Corp being recognized as the 'Most Admired Company' in its sector by Fortune3 in February 2003. "We are extremely honored by this prestigious recognition.

This validation of Yellow as a leader in its ongoing commitment to its customers is much appreciated." said William Zollars (Zollars), chairman, president and CEO of Yellow Corp.4 Yellow Transportation Inc5 (Yellow), a trucking company in the US, set up in the 1920s, was one of the leaders in an industry known as the less-than-truckload-industry (LTL)6. But Yellow found itself floundering after the US trucking industry was deregulated by the government in 1980. The company's performance began to decline sharply and the need was felt for a change. During the late-1990s, under the guidance of Zollars, Yellow managed to bring in changes to reestablish itself as an industry leader. Zollars brought about a number of changes in the processes and attitudes within the company. To assist the turnaround, he made extensive use of technology, to accelerate the change process and improve customer service. By the early 2000s, Yellow had become one of the top transportation companies in the US and was widely acknowledged as the technology leader in the trucking industry. Background Note Yellow's history can be traced back to 1924, when A.J. Harrell (Harrell), an Oklahomabased entrepreneur, started Yellow Cab Transit Co., a bus and taxi service, serving Oklahoma City. Soon, the service extended to other cities as well, and by 1926, the company had added interstate shipping services to its business. Harrell acquired a couple of trucks to handle the freight that they had been hauling on their buses till then. Finding the shipping business more lucrative, the company gradually started moving away from the cab service. The name of the company was also shortened to Yellow Transit Co. Harrell realized that safety was a critical issue in the transportation industry and focused on road safety and accident prevention. To make the shipping trucks safer, he commissioned E.I. DuPont Co.7 to suggest a color with which to paint them, so that they would be visible from the greatest possible distance on national highways. After considerable research, DuPont suggested a color called Swamp Holly Orange8. The company adopted this as its official color and consequently, all its trucks were painted a bright orange. In 1944, Harrell sold his shipping operations to a New York-based investment group headed by financier, Arlington W. Porter. The company's name was changed to Yellow Transit Freight Lines Inc. However, the new management was not successful in running the service and performance began to fall. In 1952, George E. Powell, Sr., of Kansas City and an ownership group that included Powell's son, George E. Powell Jr., and Roy Fruehauf, owner of the Fruehauf Trailer Co.9, acquired the company. Within a year, the Powell family brought the company from near-bankruptcy to profitable growth. Subsequently, the headquarters of the company was also shifted to Kansas City. Yellow before the Transformation

Yellow had been operating in the transportation industry since 1926. It had a set way of doing business, developed over its long years of operation. The company was also resistant to change and there had been very little change in the company's way of doing business since the mid-1900s. Yellow had been under the management of the Powell family since the 1950s, and they ran it like a family business, with a degree of autocracy. Years of operating within a regulated industry had also set in a sense of complacency and Yellow was not equipped to tackle competition or a dynamic industrial environment. Analysts felt that the company did not understand the true implications of deregulation and continued to operate as though the rates and services of all competitors in the industry were uniform, without differentiation... The Transformation of Yellow When Zollars joined the company in 1996, he realized that the inherent weaknesses in the company had to be corrected for it to survive in the new economy. He realized that Yellow had an inexcusably high defect rate, and that although it was one of the largest and most successful companies in the industry, it was not on par with some of the newer competitors. "We wanted to go from being slightly behind our competitors to at least being even with them, if not slightly ahead," said Dan Commiato, Senior Director of ecommerce at Yellow... Zollars undertook an overhauling of most of the company's operational aspects. He began touring the different terminals across the country to contact employees and speak to them on a personal level, to make them understand the need and importance for change. He also understood that the company would not get anywhere without customers and made attempts to increase the level of customer orientation. From employees saying "No, we can't" to some orders, the company moved to saying "Yes we can - and we do" The company's new tag line reflected its commitment to serve its customers better The Technology Angle To bring about system-wide changes and provide better quality services, the company made extensive use of technology. It realized that by harnessing the power of technology and the Internet, Yellow would be able to turn around more quickly and reinvent itself to meet the demands of the new economy. In the mid-1990s, the company launched an initiative called 'Operation Slingshot'. The purpose of this initiative was to 'slingshot' Yellow into a leading-edge position in the LTL industry, by accelerating the deployment of technology within the company and improving relationships with customers.

To further reflect its commitment to technology, Yellow Corp created a new subsidiary called Yellow Technologies (it was earlier called Yellow Services), with a 300-odd member workforce. The primary mandate of Yellow Technologies was to create technological initiatives that would improve the processes at Yellow. Certain conditions were also specified to keep the organization on its feet. No initiative was to take more that 12 months to develop and each application developed was to yield at least a 15 % return on investment. This was adhered to very strictly and when an application crossed its time frame, or did not add enough value, it reflected on the performance reviews of the people who developed it... Conclusion Industry sources estimated that Yellow Corp had spent nearly $ 80 million a year on technology since 1994. Long since recognized for its bright orange trucks, Yellow firmly established itself as the technology leader in the LTL industry in the early 2000s. Like all other sectors, the transportation industry was also badly affected by the economic downturn experienced in the US in the late 1990s and early 2000s. However, Yellow managed to progress even in this difficult economic environment...

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