Counting on IT to Deliver Top Investment Returns

Despite YRC's $1.1 billion debt, small IT investments bring more pop than paying it down.
David McCannFebruary 10, 2015
Counting on IT to Deliver Top Investment Returns

This is the sixth in a series of six articles about the volatile financial misfortunes and turnaround of trucking company YRC worldwide. See parts one, two, three, four and five.

Jason Ringgenberg arrived at YRC Worldwide in April of 2014, after the company’s latest debt restructuring and union labor agreement. So, unlike his fellow executives who report directly to CFO Jamie Pierson, all he knows about the worst of the company’s financial woes is what he’s heard.

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Jason Ringgenberg

Jason Ringgenberg

Ringgenberg is distinct from his counterparts in another way: he’s not a finance executive, but rather YRC’s chief information officer. He came on board at an opportune time for a CIO, in that the company was looking to technology to reap top returns on its discretionary investment dollars.

With YRC still sitting on a debt load of more than $1 billion and interest payments topping $100 million a year, it might seem that continuing to retire that debt would be of paramount importance. But small-dollar investments, especially technology-oriented ones, can generate a far better return.

For example, the company invested about $3.7 million in 2014 on dimensioners, which use laser technology to precisely measure freight in order to make sure YRC gets fully paid for its services. That investment will be fully recouped this year, company officials say, and will generate millions in incremental revenue each year going forward. If that $3.7 million had been used to reduce debt, the impact on annual interest expense would have been, figuratively, pennies.

Much the same can be said about new investments YRC is making in sturdy tablet computers for managers at its terminals, aimed at enhancing productivity, and in on-board safety systems designed to reduce trucking accidents, which in turn should pare insurance-claims and workers’ compensation costs. In YRC’s year-end earnings call on Feb. 5, CEO James Welch cited a spike in costly accidents during the fourth quarter as a frustrating drain on the performance of the company’s regional trucking segment.

“The return we can get on technology is much better than the return on paying off debt early,” says Ringgenberg. “Since I’ve been here, we’ve received phenomenal support from finance for things I’ve wanted to do that are aligned with business strategy and provide the appropriate return.” Those include not only IT-based efforts to generate direct financial returns but also those that mitigate organizational risk in such areas as information security, compliance, and governance, he notes.

Another way YRC is investing in technology to maximize financial return may sound odd. Companies tend to believe that IT operations would be more efficient if they were to centralize all of their businesses on a single technology platform running a single set of applications. That would significantly reduce IT head count and other system-maintenance costs, the thinking goes.

But not doing so is an even better financial strategy for YRC, Ringgenberg points out.

YRC Worldwide consists of YRC Freight, a national carrier, and three regional carriers, Reddaway, Holland, and New Penn. Each operates independently, by design. Driving that are the differences in the companies’ operations, customer bases, and typical length of haul. That means there’s a plethora of systems and applications to support, a chief factor in keeping IT head count high.

“The challenge for us is to determine where to standardize applications because the marketplace differences do not necessarily call for unique solutions,” Ringgenberg says, “versus where to continue supporting different solutions at the different operating companies because there is something unique about the services they provide in their marketplaces.”

He adds, “Providing one solution could cause suboptimal operations in the movement of freight and lost productivity for our drivers and dock workers. And it doesn’t take a lot of disruption to that to offset any potential IT savings.”