TForce Freight is one of many LTL carriers currently undergoing a ‘transformation’ - which is taking place against the backdrop of a soft freight environment.
In part, this is due to the new ownership of TFI Intl, as they shift TForce away from legacy UPS systems and re-invest where UPS failed to do so;
we saw news of this transition period last quarter, where TForce’s efforts were spent de-tangling the operation and back-office from the prior owner.
This ‘transformation’ with them is also partly due to the realities of a rapidly-changing LTL market. It’s been a struggle for ALL involved.
TFI’s CEO, Alain Bedard, is not being shy about the thoughts he’s shared - he definitely delivered in thew Earnings release for Q1.
Where other carriers bring several executives (sometimes an ARM of them) to the conference calls to answer questions, Mr. Bedard handles these duties all by himself…and he was unusually open / candid.
To get refreshed on TFI’s performance over the last few quarters, take a look at their Q3 and Q4 Earnings analyses below before you get started:
- TForce Freight 2023 Q3 Earnings
- TForce Freight 2023 Q4 Earnings
Otherwise, let’s see what TForce Freight (AKA Mr. Bedard) had to say:
Carrier #4: TForce Freight (TFI Intl)
TForce Freight continues to see revenue figures slide….more than their peers. Compared to last year, revenue dipped -5.1%.
Shipment counts were down -5.7%, and surprisingly, tonnage was actually up 7.3% - TForce realized a HUGE 13.7% increase in weight/shipment. They continue to undergo a massive change in mix.
Sequentially, revenue dropped -2.9%, likely putting them more in line with their peers.
Shipments were down -1.4% and tonnage was up 0.4%, as weight/shipment grew 1.8% -
the increasing weight/shipment from 1,063 to 1,209 (lbs) is VERY encouraging, and the average haul is also growing; we see it up 6.0% over last year from 1,088 to 1,153!
This ‘change in mix’ isn’ tjust from adding Yellow business…
While freight mix is trending favorably, yield numbers are not. Rev/cwt excluding fuel was down -1.9%.
Even when considering how freight mix negatively impacts this number, TForce is not growing yield like they should - OR like their peers are doing right now.
Revenue per shipment was up 6.9%, but that is mostly due to the huge spike in shipment size plus the increasing length of haul.
TForce will need more consistent service over a period of time to be able to price higher.
TForce Freight’s OR (after adjusting to include fuel surcharge) improved Year over Year, from 96.5 to 93.3.
Cost management with the changing freight mix is taking place, even if their OR is still high. Knowing that Management has a goal of 88 for 2024….there’s LOTS of work to do to hit that mark.
What does Mr. Alain Bedard think about this?
Bedard seemed exasperated that it took him 2 years to convince leadership to focus on A) moving larger shipments, B) picking up more freight per stop, and C) pulling back on serving customers located a long distance from the terminal.
He feels like TForce is a bunch of “fat cows” since it takes an army of people to service customers (such as with their billing process); he feels like progress is being made, but it has been long overdue.
TForce is reducing use of rail, but it’s still a healthy portion of their linehaul at around 40%.
TForce must have been using rail for over ½ of their linehaul prior to the TFI purchase.
Using rail = poor on-time service.
So, TForce is reducing rail to improve service and align closer to peers, pricing higher based upon service quality changes.
(It seems every carrier is chasing this model.)
Missed pickups currently average around 2% as Bedard noted…which is WAY too high.
They are now monitoring this so they can improve it, as part of the ‘culture change' that’ll start to take place at TForce.
🇨🇦 Chasing that CANADIAN Dream 🇨🇦
To Mr Bedard, the Canadian LTL operation better understands the LTL business since they have a better weight/shipment.
The US operation TForce has lots of work left match up with Canadian operations - a larger weight/shipment, reduce failed pickups, improve service, cut use of rail…
He did not anticipate that the 2024 environment would be this bad, so Bedard is skeptical that TForce Freight’s team can hit 88 OR goal.
TForce has been harder to fix than expected. It was a carve out - and TFI was not aware how BAD the ‘bad freight mix’ was.
It has taken them 2 YEARS to unhook from the UPS administrative and financial systems…so the focus in 2024 will not be more M&A, but on fixing TForce Freight.
🤏 The Weight/Shipment paradox
What’s interesting about shipment size is that TFI’s small package segment has seen a declining weight/shipment.
What does this mean? That TFI is battling the weight/shipment issue across multiple segments.
This is a topic that Mr. Bedard talked about at length. He felt UPS Freight was stupid chasing low-weight freight, and that the pricing was wrong - HE wants to shift pricing to encourage heavier shipments by being more competitive, which unfortunately means cutting price.
Moving heavier shipments doesn’t increase cost. This could work, as long as shipment density increases.
Otherwise, costs will go up as more space is required to move the heavier shipments.
TForce Freight is currently at 22,000 shipments per day and wants to get to 24,000. Keep in mind, they were at 32,000 per day when the UPS freight purchase took place…
Mr. Bedard thinks they can get there by improving service and not by cutting price.
The soft freight market makes it a challenge to hit the shipment counts that would lead to that 88 OR goal.
TForce continues to shrink terminal network and number of doors so that they can do more with less, while many other carriers are growing their networks and adding doors to provide more service.
They have 35% excess capacity right now, which is too much, and they need to get it closer to 15%.
Interesting that even with the network downsizing, excess capacity is this high while peers continue to add terminals and doors to expand their capacity.
⚔️ A Double-Edged Sword with GFP
The UPS Ground Freight Pricing business (GFP) is 14% of TForce revenue and is still trending downward.
To Mr. Bedard, improving service will allow TForce to raise prices and get better revenue…but this will take time. So, improved pricing will lag improved volumes.
He seems doubtful that TForce will hit their 88 OR target in 2024…unless the LTL market improves.
Tforce Freight’s peers are all seeing lower weight/shipment compared to last year due to the soft economy and possibly also due to LTL freight shifting to FTL.
TForce’s shipment size isn’t just higher than last year - it is remarkably higher.
Growing weight/shipment without pricing to get it is hard in a soft environment, but Mr. Bedard didn’t seem satisfied with the pace of change.
Hopefully TForce isn’t growing this increasing shipment size with price.
Another factor here is the legacy UPS Ground Freight Pricing program…Revenues are down significantly, and TForce is working to prop this program back up.
But the shipments moving on this program are low in weight/shipment, so TForce is asking their sales people to go after larger shipments when moving on TForce trucks and smaller shipments to go on UPS GFP.
That may be a big ask to make both happen at once.
The UPS GFP program might be propping up TForce Freight more than we think it is - the GFP revenue they earn is their cut for sending this freight to UPS, so the costs should be much lower than the revenues.
Take away the GFP business, TForce Freight could have an OR exceeding 100.
🔜 Coming up next: Saia Logistics and XPO Logistics!
The soft economy is proving to be a challenge to TForce Freight’s transformation. It may take them another year to get where they want to be with that 88 OR. They have made some solid strides, and are managing costs, but much work remains here.
Up next in our Q1 Earnings lineup will be Saia Logistics and eventually XPO, who have both released their Earnings reports at the end of April or beginning of May.
We're not done yet with carriers to break down, so stay tuned for those editions of #LetsTalkLogistcs in the upcoming weeks!
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This article was collaboratively written by “LTL Observers” - a collective of industry veterans spanning the carrier, shipper, 3PL, and tech provider spaces who are willing to share their opinions.
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