There is something about private fleets that is deeply American, that springs from the nation’s do-it-yourself taproot. Private fleets speak of commitment to service, pride of personal workmanship and even a sense of history. But make no mistake about it, while the concept of private fleets may reflect timeless values, today’s private fleets are also as technologically savvy, financially acute and tuned in to the demands of the 21st century freight transportation market as it is possible to be. There is no other choice.
“The sharing of best practices has helped to foster world-class distribution companies,” Kenny Vieth, president of ACT Research Co., recently told an audience of private fleet executives gathered for the annual National Private Truck Council (NPTC) Management Conference and Exhibition in Cincinnati, OH. “If you weren’t better, somebody else would already be doing your job.”
Being better is only half the battle, however. Private fleets have to prove their worth, quantify their value to the companies they serve. “No matter how you stack it, the [private] fleet must prove to be a core asset to the organization in order to remain viable,” says Olen Hunter, director of sales for Paccar Leasing Co. “Fleets that can demonstrate and quantify their value to senior management within their organizations are the most likely to succeed.
“Fleet managers who want to learn how to quantify their value and develop a solid private fleet value proposition should get engaged with industry trade groups such as NPTC. [The organization] has an excellent Private Fleet Management Institute, held annually in January, which specializes in laying out industry best practices and how to build a private fleet value proposition.”
Gary Petty, president of NPTC, agrees. “Private fleets can never take their perceived value for granted,” he observes. “There is a lot of change going on in corporate America. The bar continues to rise for what constitutes a successful private fleet.”
For the private fleet at Bridgestone Americas Tire Operations, this is all in a day’s work. What is more, according to Andy Montpas, private fleet general manager for the company, it is just a part of being a responsible business unit like any other within the organization.
“As with any business unit within our organization, you need to be driving value for external as well as internal customers at an expense level that is competitive,” Montpas says. “We compare the fleet metrics against historical actuals, budgeted allocations and industry data. Being proactive is beneficial for internal audiences as the data tells our story and it is there for all to review.
“As a general observation, waiting for someone to compare your operations is a defensive position,” he adds. “We find it more beneficial to have performance indicators and financial information available to view at any given time without request via an internal SharePoint site. Keeping management aware of projects, performance, gains, and testing provides insight into how we are consistently seeking to improve the fleet.”
Happily, many private fleets have a long list of attributes to tally up on the plus side of the ledger, including high levels of service, lower driver turnover and its corollary improved safety, plus a reputation for using technology to help drive continuous improvement.
If a company already has a private fleet, they are in a very competitive position because they have a huge leg up over those dependent on outside services,” says Petty. “They are able to control their own destinies, and they can deliver very focused customer service. Particularly if the products the company makes are perceived to be the same [as competing products], the quality of transportation services can be an important competitive advantage.”
In fact, the ability to provide consistently good service is generally seen as the most important benefit a private fleet can provide to the parent company. “The primary advantage a private fleet provides is a consistent and controllable level of customer service,” notes Hunter. “Oftentimes, the private fleet driver is the person who comes in contact with the customer—perhaps more frequently than a sales rep. This connection provides a relationship touch point that a for-hire alternative cannot always provide. There’s an advantage to having a company driver who’s tied into the company’s customer service goals and is often measured by customer service metrics.”
Mike Schreurs, regional director of Traffic-West Region for Sherwin-Williams, likewise stresses the service advantage a private fleet brings to the organization. “At Sherwin-Williams, the role of our fleet is to be the final mile of our supply chain, and since…we actually manufacture the products which are sold exclusively in our stores, the quality of our service truly is a reflection of our brand,” he says.
“At Sherwin-Williams, we like having a stockholder delivering the paint to our stores,” Schreurs adds. “They get our business and understand the needs of our ultimate customers. If they show up at a store and employees are [all busy] servicing painters, they pitch in and make sure the paint gets unloaded without disrupting the customers. By the same token, the store manager and other employees know and appreciate our drivers and will help direct traffic or whatever it takes to ensure a smooth stop for the driver.”
Service is seen as a key differentiator at Bridgestone, too. “For Bridgestone Americas, consistent weekly deliveries that typically involve the same delivery driver provide an advantage in building customer rapport,” notes Montpas.
Another factor that will help private fleets continue to prosper in the future is their lower rate of driver turnover. Turnover, which recently hit 106% among for-hire carriers, remains as low as one-tenth of that figure for private fleets—or somewhere between 10% and 20%.
High driver turnover has been associated with higher crash risk, regardless of the experience of the driver, according to a number of studies, including a Federal Motor Carrier Safety Administration (FMCSA) study, Commercial Motor Vehicle Driver Retention and Safety. It is also a significant expense. Recent reports peg the cost of finding and training a new or replacement driver at about $7,000.
Hunter notes that some of the reasons for the lower driver turnover rate among the private fleet segment include tight selection processes, good pay rates and generous benefit packages. “Private fleet driving positions can also provide career progression opportunities in which a driver can move into the dispatch office or warehousing operations and eventually work into a management position,” he says.
“Many private fleet drivers are home every night or have minimal over-the-road requirements. These attributes should allow private fleets to weather the driver shortage storm that is on the horizon a bit better than for-hire fleets, but they will not be totally immune,” Hunter adds. “As several industry surveys have concluded, we have a significant number of drivers reaching retirement age and fewer CDL age-qualified drivers entering the workforce. That said, given the positive work environment at private fleet operations, they should continue to attract good talent.”
“Our driver turnover [at Sherwin-Williams] is very low, especially when compared to the trucking industry as a whole,” says Schreurs. “This helps private fleets [like ours] keep costs in line by eliminating the costly on boarding of a new employee. In times of driver shortages, you have much better control of your own destiny. You make the call on what it will take to get the quality of drivers you want, as opposed to hoping your stable of carriers is doing a good job attracting the right people.”
Depending upon who you ask, private fleets are either ahead of the game when it comes to deploying technology or perhaps just keeping up the pace set by for-hire carriers. It is not a moot point… no matter how you call the game, being adept at using technology is clearly mission-critical.
According to Hunter, for example, private fleets have led in the use of technology in some cases and lagged in others. “For-hire fleets were the first to deploy telematics and related integrated business systems to drive efficiencies in their operations,” he notes. “Private fleets were slower to adopt this type of technology. But more recently, they’ve caught up quite rapidly. Adoption of technology is usually tied to capital expenditure budgets. We are seeing an increased adoption of safety technologies such as electronic stability control, air disc brakes, enhanced forward lighting packages, lane departure warning, and adaptive cruise control by private fleets. Fleets are adopting these technologies to reduce the frequency and severity of accidents.”
While it is not easy or maybe even fair to generalize, some private fleets are clearly using technology to get ahead. “We cannot verify what the industry as a whole is leveraging in terms of technological enhancements,” says Montpas, “but Bridgestone Americas has been operating EOBRs, trailer tracking and other technologies for several years now. We also utilize dispatching software that integrates with our company’s TMS platform. At any given time, our team is testing current technological offerings such as electronic BOLs, telematics platforms, etc. We are focusing on those that can provide ease of use and customization. Solutions that lower training time are intuitive to use and if hardware related, reduce installation complexity.”
Rules of engagement
When it comes to keeping private fleets thriving, the rules of engagement have to be constantly changing. For example, private fleets, like for-hire carriers, are increasingly exploring hybrid business models that combine private with for-hire carriage or take advantage of full-service lease options to cope with various operating and financial pressures.
“Many businesses believe that they have more control over their service with a private fleet, but for-hire carriers offer flexibility,” says Dennis Cooke, president of fleet management solutions for Ryder. “We have also found in talking with managers of private fleets that many do not have a strong sense of the real total cost of ownership [for their fleet operation]. In particular, they are apt to leave the cost of capital out of the equation.”
Other pressures are also putting the squeeze on private fleets, according to Cooke, including the high up-front costs of purchasing new equipment, the extreme complexity of today’s vehicles, fuel cost volatility, and the growing shortage of drivers and technicians. For these reasons, he notes, outsourcing will only increase over time.
Ryder’s transportation management services give private fleets the option to do a little or do a lot in the way of outsourcing, Cooke explains. “In some cases, fleets want to own their assets and have us handle maintenance, which we can do at their own facilities or at ours,” he says. “We begin by helping with the ‘pain points.’ Then, as fleets gain confidence in us, we often take on more functions for them.”
Many private fleets today have also begun carrying freight on a for-hire basis to help offset the operating costs formerly associated with empty backhaul miles or even working with other for-hire carriers to add flexibility to their own operations.
“For Bridgestone Americas, consistent weekly deliveries that typically involve the same delivery driver provide an advantage in building customer rapport,” says Montpas. “With a private fleet based at our distribution points, we have operational flexibility and maximize it for intercompany replenishment as well as for-hire backhaul opportunities to assist in offsetting expenses.
“We are an LTL-based fleet and as such, for-hire partner carriers fulfill our truckload needs and the LTL volume outside our operating territory, as well as elevated shipment levels,” he adds. “It’s a complementary relationship as we all bring different strengths needed to satisfy our customers.’
Matt Menner, senior vice president for Transplace, says that the 3PL company has been working with private fleets to help create mutually beneficial collaborative relationships between shipper customers. If a private fleet is hauling east loaded and returning west empty, for instance, Transplace can incorporate that available capacity into its other shippers’ westbound freight hauling needs, he says, typically at a lower cost.
“Even if the private fleet is just covering variable operating costs for its backhaul, it is still a win-win,” Menner says. “We look for high-quality, dependable loads. It is not necessarily easy to do. There can be competitive issues, out-of-route miles issues or equipment compatibility issues, for instance. The devil is utterly in the details. But when these collaborations work, they work really, really well.”
Transplace is also working on another collaboration model where compatible shippers share capacity, according to Menner. For instance, a retailer with excess capacity in its private fleet might also haul products for a packaged goods supplier—all in the same trailer. In this case, the truck operator delivers to his or her own company’s customers and also drops off product at a cross-docking facility for the company sharing trailer space. “You have to have the right mind-set to do this,” Menner says. “It doesn’t work for every shipper.”
Thanks to inherent strengths and a commitment to change, private fleets will continue to play an important role long into the future, according to most industry watchers. “Private fleets will continue to provide a competitive advantage for companies that run fleets through control of the customer service experience and will continue to leverage technology to improve equipment utilization, control costs and increase speed of product to market,” predicts Hunter.
Private fleets should, however, “look for more competition as for-hire carriers roll out more dedicated service products,” cautions Kenny Vieth. “Still, private fleets have a head start.”