Long taken for granted, dairy fleets look to provide competitive edge

Operating on margins with no more fat than skim milk, today's dairy manufacturers are looking to achieve new levels of efficiency in the way they bring their milk and ice cream to market.

Traditionally, these private carriers operate regular routes - hence the term milk runs - using drivers that are focused more on sales than trucking. These fleets have held on to their highly specialized equipment until it drops, choosing instead to invest in maintenance. But tradition is giving way, slowly but surely, to today's business realities.

"Local delivery operations are incorporated into management information systems that integrate the point of delivery with automatic replenishment of product," says Don Wilson, a seasoned private carrier executive who now runs the Dairy Distribution and Fleet Management Conference. "So what has historically been the least-managed portion of the distribution chain can now be minutely managed."

Another trend putting pressure on dairy distribution is the courtship by full-service leasing companies in search of new revenue streams. Traditionally, leasing has had low penetration because of the highly specialized nature of the equipment and lengthy trade cycles. But, says Wilson, the advent of new generations of onboard or in-transit refrigeration has opened the door to more flexible equipment styles and more interest by lessors and even third-party logistics providers.

The quest to milk out inefficiencies is often complicated by the product itself. Most milk and dairy products find their way to market in crates that must be returned to the manufacturing facility. Not only do the crates not pay their own way, they also eat up space for what otherwise could be revenue-producing backhauls.

Eugene, Ore.-based Cascade Glacier, a fleet of four tractors and six trailers, vp Mark Gustafson feels the pressure to fill his trailers after delivering a load of his premium ice cream and frozen desserts. Armed with for-hire authority, he is filling 75% of his return loads with potatoes, canned goods, beer, and cheese.

Not all challenges are financially motivated. Perhaps the biggest management issue is what faces the over-the-road segment - lack of good drivers.

Drivers for T.G. Lee Dairy in Orlando are responsible for ordering and stocking products, pulling dated merchandise, growing sales, keeping equipment clean, and maintaining a good personal appearance and a friendly rapport with customers.

To retain drivers, dairies have put a little more cream into driver pay. T.G. Lee has upped route sales compensation by $200 a month and instituted a guarantee of a minimum base salary. They have also dropped the average workweek from 70 to 55 hours. As a result, driver turnover has dropped from 78% in 1998 to 60% so far this year.

Like other dairy operations, T.G. Lee is really two fleets in one - the first an over-the-road tractor-trailer transport division, and the second a wholesale delivery operation using medium-duty units to deliver dairy products to retail outlets.

The mixed-fleet concept and corporate purchasing requirements that often result in a hodgepodge of equipment complicate maintenance strategies.

The mixed fleet "has created some challenges," says Jeff Jaeger, T.G. Lee's division operations manager. "But we solve it by simply outsourcing maintenance and telling our suppliers they must carry parts for all the vehicles."

Jaeger holds his straight truck chassis for six years while the boxes last twice as long. Tractors are replaced every four years, with semi-trailers running for 12 years.

Another fleet manager, who asked not to be identified, has a different maintenance perspective. Three on-site mechanics handle routine PMs, brake and clutch work, and some warranty work. To get better utilization, he assigns older units on shorter runs.

One of the ways he hopes to recapture some lost productivity is by installing a drive-through inspection bay with a pit. By doing it that way, a driver can stay with the truck while a mechanic conducts the inspection and makes any minor repairs on the spot.