Private fleets for hire

Today’s best-run private fleets now compete with common carriage to eliminate deadhead miles, have fully embraced technology, and are consistently improving their company’s logistics efficiencies - they're even putting a little on the bottom line.

by John D. Schulz, Contributing Editor -- Logistics Management, 7/1/2007

• This gun's for hire
• Fully embracing technology
• One word: Communication
• Ready to solicit backhauls?
• NPTC to the Rescue

There was a time when private fleet managers could send any of their trucks out on a delivery, have them return empty and still be profitable. That was back when diesel was 85 cents a gallon, drivers were plentiful, shippers didn’t have as many options, and few top corporate executives deeply cared whether their private fleets ran profitably or not.

Then came motor carrier deregulation, the communications revolution, a driver shortage, and a sharp focus on all parts of a corporation adding to the bottom line. “Deadheading,” that practice of running empty miles, is now as unfashionable as bell-bottom pants.

“With diesel priced as it is, it’s critical to obtain backhauls,” says Gene Boudreau, owner of Buffalo, N.Y.-based Point to Point Logistics, an adviser to private fleets. “Diesel prices are draining a lot of fleets,” he adds.

Today, as private fleets come under increased scrutiny to justify their corporate return on investment, astute private fleets can be run nearly as efficiently as the best for-hire common carriers. In fact, many have obtained for-hire operating authority; and they’re utilizing all the technology being put to work by best for-hire carriers. Many private fleets, for instance, utilize Qualcomm technology to maintain a strict miles per gallon policy to ensure timely delivery and minimize off-route miles. Others run as a “blended” fleet, running privately for their own deliveries while operating as a common carrier for backhauls and other loads that optimally fit each private carrier’s own operational matrix.

“The proliferation of load brokers, all of which are seeking low-cost capacity, has provided more avenues for the private fleets to fill their empty miles or empty backhaul lanes,” says John Larkin, trucking analyst for Baltimore-based Stifel Nicolaus. “Private fleets seem to have become sophisticated with regard to offering up their excess capacity to these brokers.”

Throughout the 1980s and 1990s, for-hire truckload carriers grew in part because private fleets were unable to keep up with rising costs and that business converted to for-hire carriers. Although figures are hard to obtain, Larkin says “perhaps” that conversion has stemmed. “I believe the conversion from private fleets to dedicated fleets operated by for-hire carriers has accelerated,” he adds.

In the meantime, private fleet managers and their drivers are in the forefront of technological revolution in trucking. Whether it’s advancing planning of loads by computer, instant communication with drivers, or web-based options for seeking backhauls, technology is driving much of the changes in private trucking.

“One of the big breakthrough changes in private fleets is the embrace of technology by drivers,” said Gary Petty, president and CEO of the National Private Truck Council (NPTC). “We see this focus on productivity and technology as the most important way private fleets differentiate the quality and quantity of what they do.”

This gun’s for hire

The big trend nowadays is for private fleets to obtain for-hire authority and charge into intercorporate hauling. They may not have the size of a Schneider National or J.B. Hunt, but experts say that doesn’t mean they can’t operate nearly as efficiently.

It makes dollars as well as sense. According to a recent NPTC survey, 53 percent of respondents have for-hire authority. Those fleets with for-hire authority operate at an average cost per mile that is 10 percent less than those that don’t haul outside freight.

Point to Point’s Boudreau advises private carriers to obtain for-hire authority and to use third-party sources as a provider of backhauls. A former private fleet manager, Boudreau currently plans backhauls for several private fleets. “My advice to private fleet managers is to sharpen your pencil, do your homework, and have your numbers in order. If upper management agrees with it, I say go with a profit center concept in operating your fleet.”

That’s just what Greg Mathein did. The fleet manager for Cincinnati-based Senco Products, a manufacturer of fastening systems, Mathein says backhauls account for about 25 percent of Senco’s total mileage by revenue. Working with brokers to solicit freight, Mathein has reduced his overall empty miles by 15 percent to stay competitive.

Without backhauls, he says, the size of Senco’s fleet would probably be half its current fleet of 20 trucks. “We started backhauling before 1980 when the only thing a private carrier could haul were exempt commodities,” Mathein says. “When it was deregulated, I started looking for raw materials as a solution. It now allows us to go places we couldn’t go if we didn’t have a backhaul.”

Fully embracing technology

The manner in which the best private fleets lower their net delivery costs can vary. There are as many different solutions as there are types of freight; however, sometimes it’s as simple as arranging for a “triangular” delivery system to augment backhaul revenue. Some fleet operators report equipment utilization rates as high as 85 percent with such a system. 

Others have looked toward technology, especially wireless, to achieve better network balance and improve efficiency. Some fleets have installed comprehensive wireless job management hardware and software to increase the visibility and maximize utilization while minimizing fuel tax and idle time costs. By embracing the wireless revolution, private fleet mangers now have an up-to-date view of the location and direction of the fleet and can also give real-time reports on the usage of equipment and other accessories. These technology advances also aid in understanding maintenance requirements regardless of the location of the fleet.

For example, Paul Boyce, manager of field services for Hill-Rom, a medical services company based in Batesville, Ind., a unit of Hillenbrand Industries, says he has installed J.D. Edwards-licensed software to help manage its distribution and return of product to end users. This has given him the ability to manage placement of new rental products as well as existing products across its 208 service locations and distribution centers. It also has implemented a structured “cycle count” process that verifies and validates the placement of those products.

Smaller fleets are taking advantage of technological innovations once thought reserved for only the large fleets. Matt Waldbart, project manager for Air-Ref Co., a Boynton Beach, Fla.-based air conditioner and electrical contractor, said it installed a GPS integrated system with its dispatch software on its 31 trucks. “This has allowed us to better organize call flow, reduce driver time, reduce fuel and personal use of the trucks on the weekends,” he says.

With the system, the entire psychology of drivers has changed, Waldbart says. “When they know you know where they are, it becomes an awareness thing. It reduces theft and shrinkage. They can’t drop equipment and tools off to do extra jobs, they spend less time driving around asking for directions, and they know they’re accountable,” adds Waldbart.

And as qualified drivers become harder to find, fleet managers are finding that one of the best ways to retain drivers is through systems like Waldbart’s that eliminate wasted time and help them be more efficient in the cab. “The quality of the private fleet driver job is the best in the industry, without question,” says NPTC’s Petty. “Private fleets invest lots of money in training, systems, and processes to make it a better job as opposed to the churn-and-burn methods that we see in other parts of the industry.”

One word: Communication

Overall, there’s simply no doubt that communications is revolutionizing the manner in which well managed private fleets can hold on to their drivers and compete in the for-hire sector.

“Communication, is the key,” says Boudreau of Point to Point Logistics. “If a terminal is backed up or a load is not ready, I don’t need to contact dispatch anymore. I can call the driver directly,” he says. “Satellite technology with the big fleets is another tool…it all comes down to information flow and communication.”

Looking to the future, Waldbart of Air-Ref said his $7 million contracting business is looking for better inventory tracking procedures. He believes technology companies soon will be targeting the small-business sector with such solutions. “I hope there’s a trickle-down effect of enterprise technology,” he says. “I think you’re going to see more efficiencies from technology in areas such as barcoding and inventory control.”

Looking into the future, it seems as if private fleets are here to stay. Truck revenue forecast reported by the Arkansas Trucking Association shows private fleets growing their revenue by an average annual growth rate of 5.4 percent from now to 2011 and 5 percent annually from 2012 to 2017. All this growth will impact for-hire carriers eventually, Larkin says.

“Considering that the freight that is now being brokered to private fleets used to be hauled by for-hire fleets and to the extent that dedicated operations are hauling freight formerly hauled by for-hire carriers, then we have seen less freight available for the fire-hire carriers,” Larkin adds. “That freight that is available tends to be more of the peak type business as the base load volumes are handled by the private fleets and the dedicated fleets.”

Whatever its impact, it’s hard to hard to argue against the fact that the evolution of the intelligent private fleet manager continues to add efficiencies to the nation’s supply chain.