Over four decades ago, I was given the task of operating a fleet for bulk deliveries. Since then, I was tasked with managing van fleets, straight truck fleets, last-mile fleets, and beyond that, rail, barge and even a small jet fleet.
I’ve helped companies build up their fleets and also drop their private fleets when they no longer made any sense. And from that experience, I’ve learned that there are four considerations that must get some scrutiny when the organization starts to look at a private fleet as a serious option.
First is not cost as you might expect, it’s really mission. What does the company want the fleet to do that commercial or even dedicated carriers can’t do?
I once told the CEO of a major consumer brand company that the cost of having exclusive use of private trailers was costing them about a million dollars a year in premium cost versus using generic trailer equipment. His response was that a million dollars was cheap compared to his TV and billboard budget. The trucks and trailers are their rolling billboards, and he didn’t want them to carry anything but his clean product.
Second is cost, because the mission does have to have some payback. Where our marketing-focused fleet made advertising sense, the opposite was true of a tar-based product company that wanted to avoid dirtying third-party equipment and tying up carrier trailers while customers slowly unloaded their product by hand.
They had a medium-sized fleet with a storage yard, maintenance and employee drivers, and drivers were seen as key to customer relations. This position was held for years until a trailer rolled over on a customer’s property and the spilled product narrowly avoided a stream.
The potential liability overruled the rationale for a private fleet, and the company beefed up its packaging and outsourced its transport. In short, the high fixed costs and increased risk of a private fleet need a compelling argument in any business today.
Third is density. Although calculated as a part of cost, density has the attribute of requiring planning and coordination of inbound, outbound and possible third-party (e.g. brokered) loads. Density is the utilization of the fleet such that it stays loaded most of the time, and this requires a network analysis much like a carrier does to identify when and where there are loads to be carried.
As identified in the two considerations above, there may be good reasons to have a less than fully utilized fleet, but the search should always be on for higher utilization. When new business or a new supplier is under consideration, the fleet folks should be at the table helping to determine if service and cost, or both, can be optimized.
The fourth is people. They’re needed to operate the fleet, and if you’re in a good geographic location for attracting transport workers, you’re very lucky today. The worst scenario is equipment and no operators or dispatchers.
If the company is thinking private fleet because they can’t get service, they may not get operations personnel either. It pays to know the local market and to have a plan for transport personnel hiring and retention. This is a new business function, and very different from making and storing product.
These are, of course, general consideration topics. Drilling into the details takes time and analysis. Private fleet creation and expansion are career make-or-break initiatives, so make sure to check out what others have experienced before you go private.
About the Author
Peter Moore is Adjunct Professor of Supply Chain at Georgia College EMBA Program, Program Faculty at the Center for Executive Education at the University of Tennessee, and Adjunct Professor at the University of South Carolina Beaufort. Peter writes from his home in Hilton Head Island, S.C., and can be reached at [email protected]