Judy McReynolds: What we see whenever we look at the market opportunities and our presence in some of those markets, which is relatively small. We really feel like that the asset light solutions that we have, Stephen mentioned truckload and manage, I would add expedite to that. We’ll continue to, the growth there will continue to outpace the asset base growth, but that’s just a level of maturity in those markets that we have. I mean, we have a national network. We’re mature on the asset base side. Customers still really are compelled by the service offering that we have there, but just the math would take you to a place where over time the Asset Light could be a better part or a greater percentage, I guess, of the total that we have.
And what I see about that is that would be a good thing, particularly, we talked a little bit about managed. That just gives us the closest relationship with the customer. It allows us to help them optimize their supply chain, allows us to enact the capacity that we have a relationship with, whether it’s truckload or LTL carriers or it’s business that runs in our own network. And I’m really excited about the growth potential there as well. What we see is a great opportunity for growth with the Asset Light solution.
Operator: Our next question comes from Tom Wadewitz with UBS.
Mike Triano: This is Mike Triano on for Tom. So, the increase in core LTO shipments post Yellow has been beneficial from an efficiency standpoint and it’s allowed you to bring down purchase transportation costs in the asset based business. Do you think there’s more opportunity for PT cost reduction in ’24 or are you optimized on PT given your current mix of LTL business?
Matt Beasley: I would say we’re pretty close to optimize, but we’re always looking at it’s almost a daily management of resource to business levels and we want to be positioned to scale up when the market turns. But those actions that we took in third and fourth quarter, they’re going throughout the year and we’ll continue to look for reductions where possible. Judy mentioned the rollout of city optimization. That allows us to optimize our city operation, which in turn reduces some of these external city cartage costs. So we’re constantly looking at our optimization roadmap and we feel pretty good about some of the projects that are coming online in 2024. The PT side, we’re down to a pretty optimal level when you look at PT over the road type usage. So, we think that’s still a pretty spot, but we could pretty good spot, but we’re always looking for opportunities as we move through the network to reduce cost to be more efficient.
Judy McReynolds: The other thing that we’ve done is we’ve hired some of the Yellow drivers. And so that helps us with the resource and line haul that added to our road board. And that’s been beneficial as well and should continue to be beneficial as we go forward.
Matt Beasley: Yes. And I think about the investments in the fleet too. So, we had OEM delays as we moved through 2020, 2021, 2022. Now that we’ve seen those more normalized by getting the equipment that we ordered more timely, that’s going to help us reduce our rental expense as we move through the New Year.
Mike Triano: As we think about this volume growth and your ability to scale moving forward, do you think that you’ll lean more on company assets, or do you think that you’ll have to scale up PT as the volume growth comes in?
Matt Beasley: I really think that we want to lean on our own assets as much as possible that’s the most cost efficient and the best experience for our customers when you have one of our drivers show up. So, we’re going to lean more at that side. So, when we talked about transactional business earlier, some of what we’re doing there is trying to keep that consistency in business, so we can keep our headcount in a good spot for when this turns and we also have some fleet capacity as well. We’ve been, in the fourth quarter removing some of our older cost city units, but with the new equipment coming online in ’24, we felt good about that. So, I think we’re positioned well with a strategy we’re deploying to be positioned when the market does turn to service our core customers.
Operator: Our next question comes from Stephanie Moore with Jefferies.
Stephanie Moore: Kind of a two-part question here with a little bit of a focus on maybe the underlying macro environment. So first, maybe if you could just touch on, what you’re seeing on the asset-light side? Saw some pretty strong volume growth this or in the fourth quarter. So, I’d love to get your thoughts on what you’re seeing there? And then maybe more of a medium-term question, kind of your thought on how the freight environment out in 2024 just based on what you’re seeing today and conversations you might be having. And then, I guess, maybe similarly that same question on the underlying freight environment on the asset base side and in your LTL business if you’re seeing any possible ranges?
Judy McReynolds: Stephanie, it is interesting. I mean, we were talking about this as we were gathering for the call about crystal ball that we need to have for 2024, it’s really kind of interesting when you sit back and you think about the length of time that the manufacturing sector has been in recessionary category. I mean, it’s almost going on two years and that’s pretty unusual. You’ve also seen the impact of this, I guess the top-line reduction for truckload in particular and ground expedite, The fact that there’s not really been a spot market to speak of, some of those things are just really unusual. And we’ve asked ourselves a lot about what we’re looking for. And I think, the truckload team in particular has said that they feel like we’re at the bottom, but it seems like we’re there for a long time.
And we’re just waiting for the most part for capacity to exit and there are some signs that we’ve seen capacity beginning to exit, although, not at the pace that we would all like to see. But we look at these things over the long-term and again, I think we discussed a little bit ago just the importance of having the solution set that we have whenever we go to have a discussion with a customer that’s really going to be responsive to their needs. And the only other thing I would add is this Yellow event has really helped the LTL market to have some good opportunities for core business. We have to be careful with those, because we want to be sure that it’s business that works well for our customer, but also works well for us and in our network.
And some of that takes time. I think we mentioned some stats about bids and winning bids and that sort of thing. We’re encouraged by those and they’re running all of that’s kind of running counter to what’s going on in the macro. And that’s a really good thing. But we’re pleased with how we’re positioned and we do see that our strategic positioning is such that we can be in those conversations even if the LTL network is not the ultimate decision that the customer makes. And I really like that. It’s like our company is set up well for what’s happening as far as the Yellow event and where that business ultimately lands. But I’ll stop there and I’m not going to give you a prediction because I don’t really have one. But we are positioned well sort of regardless of what’s going on in the macro, because of what we put together as an approach.
Matt Beasley: Danica, we’ve got a couple of repeats, so let’s if we can kind of squeeze them in. We don’t have a lot of time, but maybe we can go pretty quick on these last two.
Operator: We have Ravi Shanker with Morgan Stanley once again.
Ravi Shanker: Judy, just a bigger picture question for you. What percentage of the business now comes from e-commerce? We are seeing some structural shifts in the e-commerce supply chain with increasing regionalization and falling length of haul, what does that mean for the LTL business over time?
Judy McReynolds: Well, whenever I think through that just real quickly about 15% of our business is retail. Now not a 100% of that would be e-commerce, but a large percentage of it would. I can think of examples that really don’t have an online presence that we do business with and we do that well. But so it ends up being I want to say 11% or 12% of our shipments whenever I think about last mile. And then again, the 15% retail, I think that gives you some perspective on that.
Matt Beasley: Thanks, Robbie. And we’ve got one more question, I think Danica.
Operator: Our final question is from Scott Group with Wolfe Research.
Scott Group: Can you just maybe give us a quick update and where we are with these innovative technology costs and what we’re getting from them and then at what point if any do we need to start thinking about moving those into the sort of core OpEx number?
