A missing or delayed shipment usually means an unhappy customer. If Batesville Casket misses a delivery it can mean adding to the burden of an already bereaved family. That’s one reason the company has invested in its private fleet and why it can reach two-thirds of its customers with daily or better-than-daily delivery achieving a 99 percent on-time record.

For Perdue Farms, having a private fleet meant that when the delivery window to its customers went from 30 minutes last year to one minute this year, it had the control to maintain its 99.1 percent on-time delivery record.

These are just two examples of why companies are increasingly building private fleets-whether it’s moving from outsourcing or expanding the capacity of an existing fleet.

“I would qualify it as a migration in the opposite direction of outsourcing,” said Dr. Gary Petty, president and chief executive officer of the National Private Truck Council. “We’re seeing more private fleet capacity enter the market either by previously outsourced fleets coming back into private fleet management or private fleets growing in their own right faster than their dedicated side of the transportation matrix.”

 “The primary reason for the migration is that the demands for ever-higher customer service are a fact of life for most companies,” Petty said. “Customers want their products when they need them with as competitive a cost as possible and in perfectly good condition. To meet that demand, more and more companies feel like they must control the trucking capacity.”

The most wheels on the road

Private fleets represent three out of four Class 4-8 trucks on the road, according to the NPTC. They represent 76 percent of all U.S. registered medium, light-heavy and heavy-heavy duty trucks. Forty-one percent are “blended” operations that also use dedicated and/or owner-operator trucking services to supplement their own fleets.

Private fleets are predominantly short-haul operations with 75 percent of deliveries performed in less than 500 miles. They also retain drivers better. Private fleets average a 16 percent turnover rate versus over 100 percent for trucking in general.

According to Transportation Technical Services, a research and consulting company specializing in the trucking industry, more than 34,000 companies in the U.S. have purchased or leased private fleets of at least 10 trucks.

Forty-eight companies listed on the Transport Topics 100, the publication’s list of the largest private carriers in the U.S. and Canada, added a total of 5,179 tractors to their fleets between 2004 and 2005, with the entire list showing a net gain of 3,572 vehicles. Industries showing the greatest gains included manufacturing and wholesale and retail distribution.

The case for private fleets

The case for private fleets is compelling, especially in the current environment of high customer demands and shrinking carrier capacity.

Companies that put a high priority on customer service are drawn to private fleets for the control it provides in meeting ever-tighter deadlines. The drivers are also a critical asset-and not just for their driving and route management abilities. They also provide a consistent face to the customer.

“Our drivers might make 10-12 deliveries during the course of the day and that type of service is very customer oriented,” said Michael Frank, senior vice president, operations for U.S. Foodservice. “The best way to look to our drivers is they are more than drivers-they are customer relation folks as well. Once our customers latch on they don’t even like their driver scheduled on a different route. They want to see the same face in the back room of their restaurant day after day. So the service parameters are probably the biggest reason why it’s not outsourced.”

“Companies see transportation as a component of shareholder value and as an important piece of the value that their product brings to the customer,” Petty said. “It’s part of the sales presentation, it’s part of the value statement that their quality product will be there when the customer wants it.”

Private fleets and logistical management represent a competitive differentiator. For Batesville Casket Company, it’s such an important component of the company’s success, its “unparalleled distribution system” figures predominantly in the annual reports of its parent company, Hillenbrand Industries.

No carriers at any price

Tightened capacity in the nation’s third-party trucking carriers has also been a factor in the increase in private fleets.

“In some cases, the availability and the price of outside carrier’s capacity has not been when the shipper needs it,” Petty said. “Shippers have found themselves in situations where they can’t buy capacity at any price-either because the third-party provider doesn’t have the drivers or the inconsistency of driver availability means that they have to price the service at a level that makes it unworkable for the shipper.”

With the capacity issue comes the need for greater flexibility in meeting ever-changing demands from customers. Private fleets allow companies to schedule drivers and equipment to a degree not possible with third-party providers. Most drivers make multiple stops during the day and are often made available for impromptu special runs.

This flexibility also gives savvy private fleet operators with overcapacity opportunities to aggressively seek backhaul opportunities to sell extra capacity and reduce their overall distribution costs.

Flexibility for today and the future

Private fleets give companies the ability to configure the fleet to meet their specific needs. In the short term, that focus is on having the right equipment to haul a specific set of products. For the future, having the right trucks to manage in more congestion will be the concern.

“In the next 20 years, we’re looking to roughly doubling the amount of freight volume on the nation’s highways and growth in terms of lane miles of maybe five percent,” Petty said. So when companies are looking at their distribution systems, they’re asking: ‘What size of trucks do you need to have? Does the big DC make sense? Does the big tractor-trailer running around the urban areas make sense? Should the trucks be smaller, should they be located closer in, should manufacturing be closer to the ultimate customer and smaller?’ These are all decisions that are being looked at now.”

Free advertising

Finally, a fleet can serve as moving billboards helping build the company’s brand through “free” advertising. Although some companies prefer to keep a low profile, for others it’s a perfect vehicle to promote their brand.

“Some companies take a great deal of pride in the fact that their trucks are rolling down the road with their logos on the side of the trailers,” Petty said. “That’s important to them.”

Complex operations

For all the benefits, building and managing fleets is not for the faint of heart-or the inexperienced. The capital expenditures, ongoing maintenance costs, staffing and management necessary to build a successful private fleet logistical operation takes company-wide dedication and a long-term vision.

“The successful private fleet happens because there’s an institutional strategic long-term commitment to it that develops a cultural life of it’s own and keeps people in their jobs-at the management level, supervisor level and driver level-over a long period of time,” said Petty. “Because of the special expedited service and special runs for customers, the higher cost of drivers and quality of equipment and supervision, the private fleet is not necessarily a less expensive proposition. In some cases, it may be more expensive then what the going rate is. But like everything else, you’re paying for a premium service.”

Fleet management best practices

The first priority is having in place an experienced management team. As logistics is considered a strategic business function, managers must have the ability to understand and communicate the business and financial components of the operation to C-level executives and the skill to manage staff and drivers as well.

For the management team at U.S. Foodservice, the key to good management is having good data.

“Clearly it’s the data,” Frank said. “If you think about managing, you can break it into several different categories. The first one is the asset, the second is what’s it doing today and the third is my driver-managing my driver and his time.”

The company, which has a fleet of over 5,600 tractors, 7,090 trailers and 254 vans and pickups, uses a variety of software tools to effectively manage all aspects of their fleet operations, including routing outbound trucks, GPS and truck monitoring, and vehicle maintenance.

“Managing the asset is probably the easier piece,” Frank said. “We use ShopFax maintenance software to manage the maintenance of the asset. We also use a Web-based software called TransCore, which gives us all the tracking of an asset. We keep the visibility of the asset for tracking, licensing, registration. With over 7,000 rolling vehicles, it can be a full time chore.”

A strong management team is also important in attracting and retaining drivers in a market in where they are in short supply.

“With 6,000 drivers, we’re going to face turnover, but we’re probably better advantaged than most companies,” Frank said. “First, we have good equipment, second, with the type of route we have, 90 percent of our drivers are home every night. And it’s good money.”

The company also develops talent from within its employees.

“We’ve developed some of our own driver training programs for people who are with the company and come up through a different area, like the warehouse or customer service. We’ve constructed the program to help them get their license, develop the experience and learn the job to go out and do it correctly and safely. Recruiting is always a challenge, but there are activities you can do to mitigate it.”

Institutional commitment

Constructing a strong business case for the value of operating a private fleet is vital to building support at the executive level.

“It’s a significant capital investment,” Frank said. “Even if you lease as opposed to own, it still encumbers your financial sheet. It takes overhead, like maintenance, whether you’ve contracted it out or hire in. And it takes expertise. And the bigger it is, the more expertise and overhead it requires to manage it properly.”

“It’s not the kind of thing you turn on and off like a lever,” Petty said. “To recruit a team of drivers, get the right piece of equipment, maintenance, technology requires an institutional commitment-and the higher the level that happens the better. This is labor intensive and capital equipment intensive. It’s fraught with potential risk and exposure if it’s not well managed. It’s a venture that can’t really be gotten into casually or with half-baked approaches.”

For companies like U.S. Foodservice, its fleet is such an essential part of doing business, they don’t even consider return-on-investment calculations.

“It’s dead net expense; it’s one of those essentials,” Frank said. “Our business is so personalized on the delivery side, it’s indispensable. It’s like asking UPS how do you cost justify your truck?  ROI is not even considered.”

Dedicated transportation capacity

In a world of shrinking carrier capacity, private fleets help companies achieve a higher level of customer service by providing dedicated capacity that can be managed much more flexibly than for-hire carriers. Private fleets provide a higher level of control to help manage costs, schedules and drivers to deliver significant value to companies.

“If you do it right,” Frank said, “there’s no question in my mind that it’s a competitive advantage.” wt

Sidebar: What's New for Fleets

With skyrocketing fuel prices and concerns about emission of greenhouse gases, truck manufacturers are producing new models that help on both fronts and still deliver power, safety and comfort.

Hybrid engines

Hybrid gas/electric engines have made significant inroads on the consumer side and there are some new offerings now for fleets. Kenworth Truck Company has introduced a new hybrid-electric medium-duty conventional truck. The T270 is powered by the new PACCAR PX-6 engine and features an integral transmission-mounted motor/generator, a frame-mounted 340-volt battery pack, and a dedicated power management system. It operates like a standard diesel vehicle with all power coming from the engine during steady driving conditions above 30 miles-per-hour and uses a combination of diesel and electricity below 30 mph. The system automatically switches between the two modes of operation and is seamless to the driver.

Kalmar is undertaking a two-year project with the West Coast Collaborative of the U.S. Environmental Protection Agency and the ports of Los Angeles and Long Beach to reduce pollution in the ports by integrating three of its terminal tractors with hybrid technology. The green hybrid equipment is expected to reduce air emissions by 93 percent, which equates to 19 tons of nitrogen oxide and 200 pounds of particulate matter. The hybrid units will use either a hybrid-electric system to combine the cleanest available diesel engine technology with an electric motor, or a hybrid-hydraulic system that combines the cleanest available diesel engine technology with components that use hydraulic fluid compression to store energy.

Idle-free comfort

Trucks that idle to maintain cooling and heating in the cab burn more fuel and contribute significant emissions. Kenworth has developed its Clean Power no-idle system which provides engine-off cooling and heating, 110-volt “hotel load” power, new energy-efficient LED (light emitting diode) lighting and a sleeper insulation package that keeps the sleeper comfortable by helping to minimize air conditioning and heat loss. Once the truck is shut off, the battery-powered cooling system-turned on from the sleeper control panel-keeps the sleeper at the desired temperature for up to 10 hours in temperatures as high as 95 degrees F.  The company claims that truckers with high-idling time can achieve as much as an eight-percent boost in fuel economy.

Fuel-efficient power

Sometimes there’s just no substitution for power. International’s ProStar line, which has officially been recognized by the Environmental Protection Agency as a SmartWay eligible tractor for its significantly better environmental and fuel consumption performance, will offer a 600-horsepower option this summer. The high-performance, fuel-efficient and aerodynamic ProStar with a Cummins ISX engine 600-horsepower engine is designed for the 10-15 percent of the market that needs higher performance to meet hauling needs but still want good aerodynamics and low cost of ownership.