Katerina Jones is vice president of marketing and business development at Fleet Advantage, a leading innovator in truck fleet business analytics, equipment financing and lifecycle cost management. The views expressed here are those of the author.
Companies across virtually every industry are reimagining the ways in which they move goods from their warehouses and distribution centers to local retail and grocery stores throughout the country. Challenges arise with the increased need to ship items direct to consumers in many cases – a method growing in popularity stemming from online shopping.
The demand for more dedicated and private fleets is a surging trend, as shippers continuously find it harder to identify and utilize for-hire trucks due to tighter capacity, particularly from an outpouring of online shopping, increased driver shortage challenges, and volatile rates for moving freight (spot rates).
Private and dedicated fleets are often more beneficial to all parties involved – the driver, transport company, and customer. Drivers typically enjoy slightly higher wages with regular routes and newer, safer trucks; companies benefit from higher customer service marks as well as improved corporate image knowing their trucks are cleaner; and customers enjoy more accurate, on-time delivery rates that translates into higher quality of customer satisfaction.
Increased Moves Toward Private Fleets
Traditional for-hire transportation companies have taken notice and are shifting more of their operations over to the dedicated fleet side. Notable transportation brands such as J.B. Hunt and Transport America are increasingly moving more of their operations to dedicated fleets.
The COVID-19 pandemic forced this shift for many retailers and their customers. As the economy saw drastic declines in 2020, some industries saw an increase in demand, such as grocery and convenience stores. This prompted many organizations to place a larger emphasis on private fleet operations to better-control costs and adapt quicker to these business climate changes.
For example, Ahold Delhaize USA says it is transitioning six facilities under its three-year initiative to switch to a fully integrated, self-distribution model driven by its own private fleet. With the transition of the six facilities in 2021, about 65% of Ahold Delhaize USA brand center-store volume will be self-distributed. In late 2019, the company unveiled a three-year, $480 million plan to expand its supply chain operations and shift to a self-distribution model, which includes e-commerce channels.
According to the National Private Truck Council’s (NPTC) 2020 Benchmarking Survey Report, “The primary reason companies reported operating a private fleet was to provide exceptional levels of customer service that is unavailable on the open market, especially at a time when transportation and logistics capacity has been relatively constrained. Operating a private fleet provides control over service levels, guarantees availability, and increasingly assures cost competitive transportation alternatives regardless of market conditions. In this year’s survey, more than 92% of the respondents, in response to the open-ended question, ‘What is the Primary Reason Your Company Operates a Private Fleet?’ answered ‘customer service.’”
Newer Trucks Drive Better Customer Service
There is a direct connection between a high level of customer service and a private fleet’s focus on utilizing newer, cleaner, more reliable trucks that protect the environment and offer advanced safety features.
According to a recent industry report on truck utilization and costs, newer trucks offer significant benefits to a fleet’s bottom line. Fleet operators can realize a first year per-truck savings of $16,856 when upgrading from a 2016 sleeper model-year truck to a 2021 model. For a fleet of 100 trucks, when upgrading to a 2021 model-year, fleet savings can reach $1.7 million.
Fuel economy represents a significant portion of the savings through truck replacement. Fleets can save $5,084 per truck in fuel in the first year following replacement of a 2016 model-year sleeper, a 15% increase in fuel economy and reduction of CO2 emissions.
Per a recent analysis, a Global 2000 and Top 100 Private Fleet health-conscious wholesale grocer reduced over 8,500 metrics tons of CO2, as well as helped conserve 848,575 gallons of fuel by upgrading to a newer fleet of trucks. At $2.44 per gallon that equals over $2 million in avoided fuel expense, along with improved Miles Per Gallon. These savings greatly benefit the bottom line and the fleet’s customer can boast about its attention toward conservation.
Private Fleets See Stronger Driver Retention Driven by Safety
While there remains a national shortage of drivers, private fleets typically enjoy a higher level of driver retention because of fewer truck breakdowns and a higher level of attention toward their safety. The NPTC’s latest benchmarking survey illustrated that 64% of its drivers reported that they returned home every night.
Safety and confidence in the maintenance of each truck is a leading motive. A recent industry survey showed that 11% of transportation fleets estimate they have saved more than $1 million in crash avoidance by upgrading to newer trucks with advanced safety features. The survey also illustrated that 55% of fleets said escalating maintenance and repair costs (M&R) is a leading motivating factor for upgrading to newer trucks.
Each of these factors represents a growing reason why the transportation of goods in America is being reshaped by the structure by which today’s leading transportation fleets operate. Many companies in a variety of industries are retaining their own private or dedicated fleet of trucks, driven by trusted drivers operating newer, cleaner, safer trucks that are more reliable and beneficial to everyone’s bottom line.