Any growth is welcome

Private fleets still dominate the U.S. trucking scene, but they are challenged by growing regulatory restrictions and the need for greater productivity.

By Staff -- Logistics Management, 7/1/1999

No matter what measures are used, private fleets control the majority of freight and commercial trucking activity in the United States. Private trucking constitutes 3 percent of the United States' gross domestic product, according to industry figures collected by Transportation Technical Services, a research and consulting firm in Fredericksburg, Va. In terms of tonnage, private fleets haul 56 percent of all freight in this country. In terms of the number of vehicles, private fleets own nearly 80 percent of all commercial trucks. Private fleets even dominate in terms of "revenue" earned, controlling 52 percent of all truck-transportation dollars.

"Private trucking will continue to be an integral part of freight transportation in this country for many years to come," says John McQuaid, president of the National Private Truck Council. "Since 1996, private-fleet revenue has been growing 6 percent year to year. That is nearly twice the average growth of the economy."

So, if the private trucking industry is so healthy, why are for-hire truckers, dedicated contract carriers, and leasing companies taking over so many private fleets? According to McQuaid, the answer is that companies increasingly are spreading their trucking needs among private-fleet operations, for-hire carriers, and other types of outsourcing.

Tony Vercillo, president of International Fleet Management Consultants of Ontario, Calif., agrees that "blending" different sources of trucking services is the trend today. In fact, he often is called on to help companies determine the right mix. Vercillo says that decision requires using sophisticated computer models that analyze network optimization, total cost calculations, vehicle routing, and so on.

"There are no shortcuts," says Vercillo. "A company has to develop a total-cost-to-serve model for each individual customer that considers all modal options. It quickly becomes clear that there are huge differences between customers in terms of what it costs to deliver the specific products they buy. Even after factoring in backhaul opportunities," he reports, "many customers and entire freight lanes just shouldn't be handled by a private fleet."

When Vercillo analyzes a fleet, he does not put a great deal of weight on cost per mile, current assets, or other common measures of private-fleet activity. He claims cost per mile is a poor measure of fleet productivity because these costs often are lowest for companies that drive many empty miles.

"Private-fleet size and type should simply be based on what assets are needed to serve specific customers," says Vercillo, who recommends calculating those needs based on 80 percent of customer demand. "If you cover just the minimal customer demand with company-owned or leased equipment," he notes, "you can cover the peaks with rental vehicles or for-hire trucking."

A Legislative Agenda

As a general rule, Vercillo says, private fleets should focus mostly on local delivery while leaving the longhaul moves to for-hire carriers. According to NPTC figures, private-fleet managers are following this advice. The fastest-growing portion of private trucking has been local transportation, up 14 percent, while longhaul private trucking is growing at a rate of only 3 percent. In 1998, the average length of haul for a private fleet was 51 miles. The length of haul for a typical for-hire carrier was 348 miles.

In fact, the NPTC has restructured itself to reflect the new reality of the private-fleet marketplace, McQuaid reports. The group has added a new class of membership for private fleets that primarily operate light- and medium-duty vehicles. The NPTC also has added a new "associate membership" category for leasing companies and dedicated contract carriers.

McQuaid is quick to point out that heavy trucks and long-haul fleets still are a large part of the private trucking industry. For example, 75 percent of manufacturers of concrete, glass, clay, and other heavy products rely on private trucking operations. Private fleets move 64 percent of food products, 60 percent of petroleum and coal, and 54 percent of lumber and wood products, he adds.

Consequently, NPTC has joined other shipper interests, including the American Forest and Paper Association, the National Small Shipments Traffic Conference (NASSTRAC), and the National Industrial Transportation League, in supporting the Alliance for Safe and Efficient Transportation. The coalition, led by the American Trucking Associations, is seeking an increase in truck gross vehicle-weight limits from the current 80,000 pounds to 97,000 pounds, with the addition of a third trailer axle. "We are not talking about wider or longer trucks, an expansion of twin 48s or triples," says McQuaid. "It's pretty much the same trailer, with the additional axle." Raising truck weights some 21 percent to 97,000 pounds won't give all shippers the productivity gains they desire, but it will offer many shippers lower operating costs and higher productivity, while reducing their concerns over air quality, McQuaid says.

Regulatory Hurdles

Other regulatory and legislative hurdles that face the private trucking industry in 1999 include the following:

- A possible nationwide weight/distance tax on all trucking operations;

- Changes in the U.S. Department of Transportation hours-of-service rules that would further limit the amount of time a driver can be behind the wheel or on the job, including loading and unloading; and

- Proposed ergonomics guidelines developed by the Occupational Safety & Health Administration for specific jobs. Private trucking is likely to be one of the professions targeted because drivers typically do a great deal of in-store delivery.

According to McQuaid, regulatory compliance is becoming a major issue in private trucking because each regulation carries with it a compliance cost that reduces fleet productivity. "Private fleets are scrutinized by corporate management primarily on the basis of cost," he says. "Every new cost that is put on a private-fleet operation's back makes the fleet less competitive in the eyes of corporate management."