In the national trucking industry, there are many variables. It is a challenge for shippers and manufacturers to deal with increasing demand. The competitive prices, expansive innovations in technology, and appalling driver shortages create hardship in choosing the optimal medium of transportation for the products. The shippers mostly retain their control of the supply chain and transportation operations by administering with the private fleet. The private fleet management increments astonishing costs because the carriers streamline numerous resources beyond the competencies of the company's business operations.
There are diverse variables around the fact that whether the fleets should be kept in-house or outsourced, therefore with this guide you can formulate an accomplished decision.
Private Fleet Operations
The companies that manufacture products basically need a medium of safe and reliable transportation of their products to the end users.Therefore, there are some pros and cons of in-house or private distribution. The company becomes a private carrier in the operation of in-house fleets which moves consumer goods, raw materials, or industrial products to the end consumers who need to be adept in every aspect of the supply chain industry.
The fundamental aspects involved are logistics, fleet maintenance, and management and transportation.In order to keep the distribution and deliveries of the products in-house many private carriers deviate from the core competencies because of the complications involved. Most of these carriers run small trucking companies or courier companies in addition to their own business.
The companies that need to transport the produced items often choose to operate with in-house fleets. According to the ATA, 53.3% of all carriers are mostly private carriers for a total of 620,000 in the United States.
Advantages Of Operating The Private Fleet
In the world of business, the choice between a dedicated fleet and a private fleet is cut and dry and often depends on size and nature. Majority of the private fleet companies can trace several benefits of internal logistics operations.
- Approved Capacity always: Some companies become apprehensive about the issue of capacity when it comes to outsourcing. If the fleet of transportation partners is adequate, the customers will be satisfied with the quality and speed of the service, and the business will deliver fulfilled results.
- Direct Impact on Customer Service: Private carriers recruit their own drivers. The drivers are often contracted on a project-to-project basis, therefore there is less separation down the line between the private carrier's human resources and experienced truck drivers. The arrangement of private carriers instills philosophies and operations of the business from standards of safety and customer service.
- Custom Fleet: If the carrier performs operations privately, the company will have the capacity to shape the fleet and embrace the present demand according to future needs. Therefore, it results in a similar concept of guaranteed capacity. Therefore, private fleets can guarantee the availability of vehicles and drivers along with the growth of the serving company.
Example: A company manufactures biomedical equipment and operates with a private fleet. Most of the business operations are local and the fleet is composed of 7 refrigerated sprinters for both short and long distances. Therefore, if the company experiences regional and national growth within a few years, it may consider investing in larger refrigerated dock trucks for larger distances.
Therefore, the private fleet offers more flexibility than the local carriers which are not equipped with enough fleets or manpower.
- Advertisements and Brand Awareness: One of the major benefits of the private fleet is the capacity for the creation of brand recognition through the medium of advertisements. Therefore, the company's logo on the truck and van will support the carriers to grow exponentially through advertising mechanisms.
- Flexibility: The flexibility of scheduling carriers is one of the possible benefits of the operations of the private fleet. Therefore, not all dedicated fleets are equipped in handling higher levels of discrepancies when it comes to the timing of shipments.
Disadvantages Of Operating A Private Fleet
When operating a private fleet there are many potential benefits, but there are significant drawbacks that result in the private owners seeking outside services.
Soaring Prices: The prices of dedicated carriers are one of the most significant factors which cause the shippers to shift towards common carriers and dedicated fleets. Therefore, the companies that are operating private fleets are mostly responsible for purchasing, fueling, and in the maintenance of their own private fleets. The application of input from private fleets requires a logistics apparatus that is responsible for scheduling, routing, and technology implementation. Therefore, after combining this with the cost of insurance, driver recruitment, and driver wages, you have a recurring bill that can bankrupt the company.
Maintenance: The owner of the delivery vehicles is directly responsible for the maintenance of the fleets. This results in the incurring of significant costs and it also takes time for approval thereby keeping the trucks off the road and decreasing their efficiency.
Logistics and Technology: Quality logistics technology is quite expensive and it takes time and training for implementation. The operators of private fleets need to ensure that they adopt optimal methods and technologies for keeping the customers satisfied.
Driver Recruitment: Usually, common carriers and private fleets do not have enough infrastructure therefore, there are always shortages of drivers. Though the common carriers have a reputation in place to manage, retain and recruit drivers. If private fleets aspire in being competitive, they need to have resources for attracting and employing more drivers
Regulatory Compliance: Since the past decade, the transportation and logistics industry has been under an immense deal of regulation. Therefore, these regulations have affected the industrial elements from its core like the number of consecutive hours a driver can operate a commercial vehicle to the types of tracking technology used. The private fleets may find them inconvenient but the dedicated carriers can easily comply with the regulations.
Fleet Outsourcing Services and Dedicated Fleet Carriers
The key benefits and drawbacks of operating a private fleet have been discussed, but what should be done to make an accomplished decision with fleet outsourcing, and what methods must be adopted?
Some of the concepts, variations, and benefits of fleet outsourcing have been discussed in detail.
What is Fleet Outsourcing?
Fleet outsourcing is the business model which provides companies with 100% dedicated trucks and drivers from third-party transportation providers. The fleet market is currently worth somewhere around $13.78 billion and is estimated to hit roughly around $28.66 billion by 2023. This increase in revenue is a Compound Annual Growth Rate (CAGR) which is estimated at around 15.8%.
There are four major types of fleet outsourcing:
Leasing of Equipment: The private carriers that want to reap the probable customer service, advertisements, and capacity benefits or run fleet operations in-house often opt to lease vehicles and equipment rather than purchase. Most companies in the United States offer several varieties of makes and models to fit in with the carrier's needs. Therefore, many companies also take into consideration the administrative facet and even provide maintenance for recurring monthly costs. The benefits of leasing are beneficial for carriers who prefer a fixed monthly expense which enables more access to the capital than the absolute ownership of fleets that have depreciating assets.The drawback of leasing can be stated by the need of the carrier and the pricing provided by the companies. Therefore, in many cases leasing may not be cost-effective.The leasing also fails to make private carriers' fleet management, logistics, and human resources responsibilities easier because the private carrier will still be responsible for the internal operation of these processes.
Recruitment of drivers and outsourcing of Human resource operations: The workforce solutions provider (WSP) tackles internal driver shortages of the private fleet operators. Usually, this way the private carriers can maintain control of every aspect of their in-house fleet. The WSPs take care of most human resources work which is related to hiring, payroll, and recruiting. The WSP is liable for employer-related liabilities which are workers' compensation and employee-related lawsuits. The WSPs are also beneficial when it comes to dealing with compliances and regulations as they deliver employee training and development. The business with a WSP is profitable for private fleet operators who want to avoid the headaches of recruiting and onboarding drivers. This way they can alleviate compliances and liability-related issues. The benefit of outsourcing to a WSP depends on the significant reasons for keeping the fleets private. The private fleet operator values capacity and working with the WSP will be beneficial in the long run.
Outsourcing Human Resources and Equipment from different companies: The renting of vehicles and conducting business with the WSP is not a proposition. Many companies outsource the equipment, HR, and administrative functions related to driver recruitment and onboarding. In such cases, the carriers maintain the retention of their supply chain and logistics operations.
Hiring Dedicated Contract Carriers (DCCs): Working with a dedicated contract carrier (DCC) is one of the most comprehensive fleet outsourcing solutions a carrier can pursue. Some of the key benefits of working with a Dedicated contract carrier.
- The DCC takes care of the shipper's transportation-Related Human resource demands.
- The DCC provides a custom fleet that takes care of fuel and maintenance expenditures.
- The DCC delivers marketing benefits of the operation of private fleets.
- The DCC has access to greater advanced technology.
- The DCC is designed to provide advanced customer service and on-time delivery.
- The DCC can single-handedly cut down invariant and recurring costs.
What Are Your Business Needs?
This article has covered the advantages and disadvantages associated with private fleet operations, along with major factors in which outsourcing helps businesses cut down costs and enhance efficiency.
The following questions must be taken into consideration when it comes to operating with a private fleet or outsourced dedicated common carriers.
- Will the operation of a private fleet distract or hinder the operations of core business?
- When all the variables are considered, including physical equipment, human capital, and industrial knowledge, what will be the value proposition for keeping each aspect in-house versus outsourcing?
- Why do I want to manage a private fleet? Will all these goals be met in a more cost-effective manner through fleet outsourcing?
At National Freight Logistics we find that some of the advantages of operating a private fleet are the same and often achieved more successfully with a dedicated fleet or even with a partially outsourced fleet management and freight transportation services across the US. Therefore, if we come to a conclusion, we are happy to help find out the perfect supply for any demand with fleet management and outsourcing.