Dive Brief:
- TFI International will train TForce Freight terminal managers on cost management in 2024 — and replace them, if necessary — as it pressures the U.S. LTL operation to lower costs, Chairman, President and CEO Alain Bédard said on a Q3 earnings call Tuesday.
- It will be many terminal managers’ first time having to manage costs to such a degree, Bédard said. But he noted the turnover at the top of TForce Freight since TFI acquired the subsidiary from UPS in 2021. “If we need to do the same kind of adjustment in the people at the terminal level,” he warned, “that's what we'll do.”
- TFI will provide terminal managers with cost tracking tools their Canadian counterparts use to react more quickly to swings in demand. The company is pushing the business to align staffing more closely to fluctuations in demand, he said.
Dive Insight:
The lack of real-time information led TForce Freight to bring back too many workers as it scrambled to handle the surge in average daily shipments it received after Yellow Corp.’s exit, Bédard said.
The U.S. LTL operation saw average daily shipments rise to about 26,000 from about 23,000. In response, the company added workers to handle the freight. But then, average daily shipments fell off over time.
“So then we have to readjust our labor force again,” he said, noting that providing TForce Freight more updated financial information by the day or week is designed to help avoid such staffing mismatches.
TForce Freight’s revenue before fuel surcharge was down 12% year-over-year on a 4% decline on shipments in Q3, and its operating income of just over $100 million was virtually flat YoY. And although the LTL’s operating ratio was also flat at 90.8% for the quarter, it was higher than Bédard envisions for 2024.
“We say 90 for us in '24 should not be our target,” Bédard said about TForce Freight’s operating ratio. “It's got to be closer to 87, 88, OK, keep improving that.”
TD Cowen honed in on TForce Freight’s struggles in an analyst note Wednesday, saying the company “had a challenging time readjusting its labor force to account for the swings in volumes.”
TFI has tasked EVP Bob McGonigal and TForce Freight President Keith Hall with executing the cost-management initiative at the Richmond-based LTL carrier. Terminal manager trainings and new technology will begin rolling out in Q4 and into next year, Bédard said.
