Technology helps private fleets compete

Private fleets have been reluctant to invest in the kind of technology their for-hire counterparts offer customers. But if they don't start catching up, they could lose the game.

By -- Logistics Management, 4/1/2000

Private fleets are under more pressure than ever. Increasing competition from for-hire carriers together with the changing business models brought about by the growth of e-business are placing new demands on private fleets even as they fight to justify their existence.

Historically, companies have operated private trucking fleets for a variety of reasons. Many found that operating their own fleet was the best way to control costs. Fleets also helped those companies maintain high levels of internal security and quality control, and even promoted brand name visibility when the trucks hit the road.

But times have changed-perhaps more rapidly in the past two or three years than they have in the previous two or three decades. The for-hire trucking business, for example, has undergone significant consolidation, leaving only the strongest competitors on the playing field. Those stronger companies, with their wide range of services, dedicated contract carriage offerings, and advanced transportation technology, pose a greater threat than ever to private fleets.

"The biggest problem for private-fleet managers today is justifying the investment of capital and time it takes to run their operations," says Thomas Sanderson, chief operating officer of Residential Delivery Services Inc., an e-commerce fulfillment company that specializes in large consumer durables. "At the same time," he adds, "the for-hire carriers continue to offer an ever-expanding range of services and keep improving their on-time performance."

Today, technological lag is fast becoming one of the biggest challenges facing private fleets. For-hire carriers have not stinted on the installation of the high-tech routing, tracking, and communications systems that their customers demand, but relatively few private fleets have followed suit. As demand for more precise delivery scheduling and supply chain "visibility" grows, though, private-fleet managers are finding that fleet technology is no longer a luxury. Instead, it has become a necessary tool for ensuring the continued relevance of private carriage.

A Reluctance to Invest

To remain competitive with for-hire carriers, private fleets must focus on technologies that will enable them to improve their service and gain greater visibility of products in the distribution chain, says Sanderson. But companies that operate private fleets have shown a marked reluctance in the past to invest in fleet-related technologies.

The main technologies private fleets should consider include digital cellular and other wireless systems that tie into bar coding and other systems to promote inventory visibility, he says. These would include products such as Qualcomm's OmniTRACS satellite-communications system, which allows two-way communication between drivers and dispatchers; a program called Micromap from Logistics.com, which coordinates loads and available drivers; and Manugistics'order-consolidation and transportation-management software, to name just three of the many products available today.

"This kind of technology will allow them to improve efficiency on the road in terms of improved equipment reutilization and the reduction of empty miles as well as to achieve better driver satisfaction and a reduction in driver turnover," Sanderson says. He cautions, though, that the systems chosen must be linked if they are to be cost-effective.

Private fleets today also must be prepared to deal with another technology-related development: the staggering amount of business that is conducted over the Internet. The Internet phenomenon is having a direct impact on private fleets, as the ease and speed of ordering products over the Web leads customers to expect a proportional shortening of delivery times.

"There is a definite disconnect in this new Internet age in which we live," observes Kenneth Bob, senior vice president at supply chain software developer Descartes Systems Inc. "All of a sudden, the velocity of ordering isn't being matched by the velocity of fulfillment," he says. "This is where the manager of a private fleet is being stretched, because the company's marketing department is setting up neat new ways of ordering, but the company hasn't put in place the systems to facilitate faster delivery."

Without productivity-enhancing technologies, Bob says, it will be difficult for private fleets to meet those new demands. "Business models and the traditional methods of distribution have changed," he says, "and corporate management has to make the decision to spend money on technology if it wants its private-fleet drivers to do more and represent a value-added service."

Some companies that operate private fleets have already done that, in fact. A number of companies in several industries have made significant expenditures on the high-tech systems required to meet heightened customer expectations.

One example is a national meat-products company that has developed its own in-house information system that organizes all information from ordering through shipping. That information is tied into satellite-communications and load-optimization systems. The software also includes a fax connection to drivers so they can receive warehousing and other delivery data. Using these interconnected information systems reportedly has resulted in a 10-percent improvement in the private fleet's overall efficiency and productivity.

Another private fleet that has benefited from an investment in technology is Regent Home Delivery Inc., a private carrier that is dedicated to shipments for Bob's Discount Furniture Inc., a chain of furniture stores in five Northeastern states.

"Routing is critical to our business, because we're delivering to residences," says Lee Goodman, Regent's owner. "We have 35 trucks out there, and our two delivery supervisors used to spend four hours a day routing trucks." To improve routing efficiency and speed up deliveries, Regent recently acquired the Energy Dynamic Routing System from Descartes Systems. Now, Goodman says, a single clerk can route trucks while supervisors devote their time to management responsibilities. Of critical importance, he says, is the new system's ability to extract data from his company's General Electric Retail System (GERS) point-of-sale system, using that information to route trucks, issue reports, and invoice customers.

Goodman doesn't plan to stop there, he says. Regent is a beta test site for a new wireless global positioning satellite (GPS) system with data communications. Each truck will have a docking station with a pager that allows two-way data transmission between driver and dispatcher.

The GPS system will also let Regent know exactly where its drivers are, Goodman says. "Instead of the drivers'calling in to report on deliveries to update our POS (point-of-sale) system-which accounts for 90 percent of the calls coming into our delivery-support department-this system will automate the whole process and make the driver's job much easier," he says.

These are just two examples of how private fleets are making the most of technology to improve their performance, from both an internal and an external perspective. Whether they develop their own systems, go with a single software provider, or mix and match, the goal is the same: to expedite delivery at the end of the supply chain to meet the expectations that were established at the beginning when the order was placed.

Freelance writer John Paul Quinn reports on a broad range of business topics for journals in the United States and Europe.

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