The private fleet model has committed practitioners. No markup on rates and no fighting with other shippers for capacity have contributed to the private fleet model’s strong appeal for almost two decades now. And the model’s immunity to historically high rates during the pandemic reinforced its popularity in recent years.
For private fleet owners, the ideal of having your own branded and loyal fleet comes with the reality that you are, in fact, in the trucking business. Ensuring continuous ROI requires hiring experts in trucking, keeping up with industry trends—everything from equipment shortages to new emission standards—and staying up to date on best practices in trucking. It is a big commitment—especially for companies that don’t consider themselves trucking companies.
In this post we’re exploring the primary transportation models for shippers and reviewing how they measure up to shippers’ priorities. We refer to these priorities as the “Three C’s” (customer service, cost control, and control over the supply chain) which we addressed in Part 1 of 3 of this series.
Ready to learn more? We dive deep into these topics and offer expert insights for shippers who are considering their options in our recently published White Paper: Stay Private or Go Dedicated, now available for download at: https://news.tadedicated.com/stay-private-or-go-dedicated
Shippers Choose from Three Fleet Models with Many Variations
There are three main models shippers use—private in-house fleets, outsourced 3rd party carriers, and outsourced dedicated fleets. Shippers aren’t limited to one, in fact in the first blog in this series, we explained that even among private fleets, 17% of their freight moves by for-hire carriers and 12% moves by dedicated fleet.[i]
Businesses may choose to outsource some or all of their freight operations to a third-party carrier like a third-party logistics (3PL) provider or for-hire carrier. This bypasses many of the drawbacks of running a trucking company—but also takes away many of the benefits.
A third-party can give you access to more trucks and drivers, but you may find yourself competing for trucks and paying higher rates when the market shifts and capacity becomes tight. With a third-party model, you do have the opportunity to ride the wave of low rates when the spot market drops; however, you are also vulnerable to high rates when the market spikes.
The other variation of outsourcing is to partner with a dedicated third-party carrier. Under this arrangement, a third party provides a fleet of trucks and drivers to a company that serves them exclusively on a contractual basis. For companies that like the benefits of a private fleet but don't want to be in trucking, a dedicated fleet can be the answer.
Dedicated Fleets Provide the Best of Private Fleets and Better
An outsourced, dedicated fleet strategy can provide many of the benefits provided by private fleets and 3PLs, while sidestepping pitfalls inherent in both options.
1 — Customer Service from Drivers Who Are Regulars of Your Business
Drivers with a dedicated fleet provider can be as committed to the business as a private fleet’s drivers. “We are the customer’s fleet,” explains Steve Dabbs, the Director of Business Development at TA Dedicated. “Our drivers don’t work for other companies. Their job is dependent on the success of their customer.”
Customer-driver relationships can last for decades—and include much more than just picking up and dropping off freight. “We have drivers who date inventory and even mop floors after deliveries so they don’t leave tracks. Nothing is off the table."
Additionally, dedicated fleet drivers can be trained in companies’ SOPs and brand standards. TA Dedicated often provides such training. Dedicated fleets’ wide experience working with many companies enables them to customize delivery and reporting solutions to customers’ unique needs.
“If our customer is concerned with something specific—cost per mile, per ton, idle minutes, cost of fuel, sustainable or alternative fuel options—we track and monitor those KPIs and provide data every week,” Dabbs says. “If we hit a goal, we can up the KPI or focus on a different one. They can direct us to a concern and we’ll focus on that particular need. We’re all about continuous improvement.”
2 — Control Over Liabilities Contributes to Greater Control Overall
One of the biggest advantages over a private fleet, says Dabbs, is alleviating liability concerns for businesses. “Whether they’re thinking about it or not, accidents are a huge risk and a huge liability to their company.
A fatality caused by their driver would be tragic and can also average over $7 million in legal fees. Not to mention the fact that their equipment will be impounded—and their brand might be on that equipment and thus all over the news. One major accident could cost them more than using a third-party fleet.”
Dedicated providers are also well-equipped to tackle the ongoing challenge of driver hiring and retention. “If a private fleet has 40 drivers, they may replace three or four a year, so their hiring experience is somewhat limited,” McNeil says. “A dedicated fleet provider will have a strong recruiting team that understands what it takes to hire a good driver in their region.”
Dedicated fleet providers also have a built-in staffing capacity that private fleets can’t match, says Dabbs. “With a private fleet, if your driver calls in sick, you’re out of luck. A dedicated fleet ensures there’s an experienced driver in the seat every day.”
Private fleets have built-in equipment capacity as well. When shippers come under strain during demand surges and peak periods a dedicated provider has a large tractor and trailer pool to draw from and direct to your needs. A dedicated fleet provider can easily provide additional capacity to enable you to scale up seamlessly in order to avoid disruption and missed deliveries, and scale back when volumes subside.
3 — Cost Savings through Exclusive Access to Technology and Resources
Through route planning the right dedicated fleet partner can offer an enormous advantage, saving their shippers money, time and fuel. Top-line equipment can be another intrinsic benefit a dedicated provider brings. TA Dedicated’s tractors and trailers have an average age of 2-1/2 years and feature modern safety and efficiency features. Dedicated providers’ access to technology and talent resources can also provide additional advantages.
“A company running its own private fleet may not have a full-blown engineering group and the same software resources as a carrier,” Dabbs says. “Our engineers continually look for ways to minimize mileage and get full use of drivers’ time. If a customer is opening or closing stores or changing locations, for example, we’ll look at their network and redesign their routes to handle all the stops with the least miles possible.”
Through contract pricing and also by handling all expenses, a dedicated fleet provider provides balance-sheet predictability. Especially when it comes to unexpected repairs, this can help immensely with financial forecasting.
“If a privately owned truck’s engine blows, you have a $20,000 expense you weren’t planning on that quarter,” Dabbs says. “With TA Dedicated, that engine is on us. So are driver turnover, accident costs, stolen loads—we’re 100% responsible. Our customers’ costs stay consistent week to week, month to month. We keep surprises from impacting customers financially.”
Private Fleets Find Crossover Benefits with Dedicated Fleets
Switching from a private inhouse fleet to a fleet provider is understandably a big undertaking for shippers used to doing it themselves. By focusing on the key benefits most valued by private fleets, it’s clear that private and dedicated fleets both have a strong case when it comes to consistent drivers, reliable performance, and stable costs.
But dedicated fleets offer much more in the areas of risk management, scalability and modernization. All important factors which are sure to only become more important in time.
Ready to learn more? We address these topics and discuss how shippers will know when it's time to switch to a dedicated fleet in our recently published White Paper: Stay Private or Go Dedicated? available for download now!
Sources:
[i] https://www.logisticsmgmt.com/article/transportation_best_practices_trends_private_fleet_growth_soars