Dedicated Fleets 2.0 - Global Trade Magazine
  October 2nd, 2015 | Written by

Dedicated Fleets 2.0

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  • Dedicated Fleets 2.0

Dedicated fleets are surging to new levels of utilization, efficiency and performance. Higher utilization is being driven by both shippers and carriers. Shippers are concerned about access to low cost capacity and carriers see dedicated fleets as one of their best options for attracting and retaining drivers. Shippers’ shifting volume from private fleets and common carriers to dedicated fleets not only lock-in capacity in a tightening market, but gain access to more fleet options than ever before. Today’s dedicated fleets offer more equipment options, operational excellence, access to technology and pricing flexibility than the traditional dedicated fleet offerings of years past.

A shipper that is not familiar with dedicated fleets or has not been using them over the past few years will be surprised at the number of carriers and other providers that are now offering dedicated fleet services. In addition to the traditional common carriers with dedicated fleet divisions, today there are dedicated fleet specialists, many of whom focus on specific industries. Several third party logistics (3PL) providers also offer dedicated fleets as a part of their service offerings.

Often these fleet specialists will offer equipment, networks and pricing focused on an industry. Industry focused equipment now widely available includes light-weight tractors and trailers engineered to maximize payload in industries such as water, beverage and some consumer packaged goods; and at the other extreme, heavier duty trailers to handle goods like large diameter paper rolls. Fleet operators are also more flexible in their pricing and can design pricing programs that best fit a shipper’s profile and network. Offerings include traditional fixed and variable, point-to-point/mileage bands, hybrid pricing with both options based on lane mix, costs plus and gain share or other efficiency incentives tied to well-defined fleet operating key performance indicators (KPI).

Carriers also offer much more compelling fleet backhaul programs today, often with firm “meet or write a check” backhaul volume commitments along with higher backhaul revenue splits than traditional fleets (90/10 or 80/20 have become the industry standard vs. 70/30 split common in past years).

3PLs are also offering dedicated fleets, and often with the added appeal of a shared or multi-shipper collaborative fleet. By leveraging their large and diverse customer base, these providers can operate collaborative fleets to both offer market-competitive capacity and drive network synergies across the customer base. These fleets can include dry van and refrigerated multi-shipper continuous move fleets, regional fleets, as well as cross-border fleets to support tight capacity U.S.-Mexico shipments and lanes. With the imbalance of trade between Mexico and the U.S., access to equipment going northbound is limited, and the strength of the U.S. dollar to the peso will create further imbalance in the months to come. As a result, companies are looking for dedicated solutions to avoid capacity issues during Mexico’s peak seasons. Collaborative fleets can offer shared costs, higher efficiency run rates for trucks and increased backhaul opportunities.

There is a “brave new world” of dedicated fleets, and both shippers and carriers will continue to push for even higher penetration of fleets across shipper networks. Shippers will also continue to push for increased collaboration across shared shipper networks, that either they identify or they expect their 3PL partners to identify, engineer and operate.

Dedicated fleets can deliver in the two most important value buckets for shippers: improved customer service and lower costs. Reduced costs and guaranteed capacity with the same, often uniformed drivers that increase stickiness with their customers and consignees is a strong value proposition for any shipper. Carriers enjoy core committed business that is not purely transactional and allows them to leverage technology and demonstrate value by performing at and above demanding performance KPIs. Carriers welcome an opportunity to grow “share of wallet” with strategic customers versus lane by lane, trading business with other carriers while consistently eroding industry rates and margins via freight bids.

Any shipper considering a dedicated fleet should utilize a formal and detailed sourcing process to maximize the potential benefits of a best-fit fleet partner. The first step is spending the time and involving a wide group of stakeholders (e.g., supply chain, sales, marketing, finance, IT) to define the shipper’s requirements and build an accurate baseline of existing operations (cost, service and KPIs). The next step is a formal sourcing process that brings the best fit potential partners to the table. The carrier selection should be based on a carrier’s ability to meet well-defined KPIs that are built into the contract for fleet services. Post implementation should be viewed as a partnership, with both the shipper and carrier working together to drive continuous improvement and fleet efficiency, identify cost and service constraints, and work together to eliminate them.

Ben Cubitt, senior vice president, Consulting & Engineering, Transplace
Ben Cubitt, senior vice president, Consulting & Engineering, Transplace

Ben Cubitt is senior vice president, Consulting & Engineering, Transplace

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