Mario Harik: Thanks, Fadi. I’ll start with the service fees and turn it over to Kyle for yield and pricing. Well, service is our top priority and it will continue to be our top priority. And Dave and the team are doing a great job, being able to handle that additional influx in freight that we’re seeing here. And just to give you an example, Fadi, in the month of July, we’ve seen shipment count go up 9% year-on-year, yet, our service metrics improved relative to June. When you think about claims filed per shipment, when you think about on-time service, we see those continue to pick up in the month of July. Now, there’s a few reasons for that. One is that, as I mentioned earlier, we have been investing in capacity over the last year and a half where we’ve added more doors in markets where we needed to have those doors, recently in Salt Lake City and Norcross, Georgia.
We’ve been adding more to our rolling stock, we’ve added more than 1,900 tractors since we initiated LTL 2.0. We’ve added more than 8,000 trailers since we initiated the program as well. Also, we — a lot of the changes we implemented on improving service are now cultural, that’s part of what we do every day, including incentive comp changes, including new technology, and how we load trailers, including overall recognition programs around service. And moving forward, that momentum is building through new training programs we’re launching, new tools we are launching, our people in the field as well now that we have Dave on-board driving a lot of these initiatives. On the labor side, as Ali mentioned, if we need more labor in some of the sites where we’re seeing more volume, we are adding the headcount where we need it.
We could also lean more into purchased transportation in the near term if we need it as well. Then finally, we’re very focused on being selective on the freight we take on. A lot of it goes down to being picky on the freight. We want four by four feet pallets or skids that we on-board from our customers that fits well in LTL network. And at the same time, we’re looking for margin-accretive business that will improve our OR over time. So we’re being very disciplined and our service product continues to be our top priority as we move forward from here.
Kyle Wismans: Hey, Fadi, it’s Kyle. So as Ali mentioned, our yield growth strengthened in the second quarter and into July as a lot of our internal initiatives gained traction. And as Mario mentioned, our focus continues to be on providing excellent service. But given there is less near-term capacity, we are taking pricing action with customers. We implemented a GRI with our transactional 3PL business and we’ve also moved up our target for contract renewals. Now some of these actions will take hold very quickly like the GRI. Others with annual contracts will take time to realize. But our customers understand, when you take 10% of capacity out of the market, it’s going to cost more to move freight. But as we said, our baseline expectation is 3% year-over-year growth. And these initiatives could help us move above that range. But it’s too early to tell what that’s going to look like and we’ll update you later on.
Fadi Chamoun: Thank you.
Kyle Wismans: Thank you.
Operator: Our next question is from Ravi Shanker with Morgan Stanley. Please proceed.
Ravi Shanker: Thank you. Good morning, everyone. Mario, just obviously you guys kind of have been on the growth path for a while. So it makes sense that you’re stepping up your investments. But what would you say to those who believe, I mean, just to reference the point that was just made that you take 10% of capacity out of the market and pricing goes up for everyone. But do you think there is a natural backstop to how much capacity this industry will add so that that rising tide stays high or do you think that the industry kind of backfills that capacity over time?
Mario Harik: Thanks, Ravi. When you look at the overall industry capacity, it has been fairly tight for a long time. Over the last decade, the number of service centers in our industry has stayed flat. And now when you look at taking out 10% of capacity, that’s obviously a big hole in terms of the amount of capacity that is available. But there are a few carriers adding more capacity, us included, but these adds will take time to materialize when you think about the service centers and doors that — to be added across the network. These won’t happen overnight. So we do think that over time — so the freight gets absorbed first and then over time, you will see us and a few other carriers add that capacity, but it’s going to be a longer-term process to be able to get there.
As Kyle said, it’s still early to tell what the impact on pricing is going to be. When you look at LTL, pricing has always been very disciplined, given the dynamic of shortage of capacity versus demand and growth. And when you take out this amount of capacity, we would expect yield to see tailwinds in the quarters and years to come here. And you couple that with the potential freight recovery as we head into 2024, that’s going to accelerate from there as well.
