Exploring the Benefits of Dedicated Fleet Services

About 53% of all carriers are private carriers, for a total in the U.S. of about 620,000 registered carriers, according to the ATA. Close to 70% of outbound freight moves on private fleet trucks.

When a company decides to manage its own private fleet, it’s essentially creating a trucking company and assuming responsibility for everything from leasing the trucks to hiring and retaining the drivers to marketing backhauls to pay for the significant overhead investment.

With Dedicated Fleet Services, a 3PL will ensure equipment is available to handle your volume and will operate like your transportation department. The 3PL makes all the investments in equipment, maintenance and personnel and charges a fee to cover these costs. In many ways, a dedicated fleet service gives shippers the best of both worlds – dedicated capacity, but without any of the overhead or headaches.

A 2021 Armstrong & Associates survey report notes that the dedicated transportation market is separated into two models:

• Dedicated Contract Carriage (DCC), where specific trucking assets are dedicated to a customer account for a given contract length
• Dedicated Truckload Capacity (DTC), where a 3PL agrees to provide ongoing trucking capacity in specific lanes, but equipment can be shared across that carrier’s customers

According to Armstrong, the Dedicated Truckload Capacity model has seen tremendous growth over the past 10 years, with 30.6% growth in 2020. Freight capacity issues and the driver shortage are pushing more shippers to move from a private fleet model to an outsourced or hybrid 3PL model. But misperceptions about dedicated trucking services keep many from taking the leap.

Misperceptions about Dedicated Fleet Services

When comparing the private fleet option versus a dedicated fleet service, there are some long-held beliefs that no longer apply.  

• “Outsourced fleets cost more.” When doing a cost comparison, private fleet operators often fail to account for all of their own costs, such as ELDs, insurance, TMS software, driver benefits and training, drug screening, and the cost of having millions of dollars of capital tied up in equipment. Dedicated carriers can spread certain costs, like software, across multiple customers, plus they tend to have greater purchasing leverage with fuel suppliers, insurance companies and other suppliers.
• “I won’t have the same guaranteed capacity with an outsourced model.” Not true. This goal can be achieved just as easily by a dedicated carrier with a good understanding of your requirements.
• “When you outsource, you lose control.” You may actually enhance control by outsourcing. Dedicated Fleet Services often come with an onsite or assigned Fleet or Driver Manager, whose primary role is to ensure the logistics operation is running in a manner consistent with your expectations.
• “I’ll have more flexibility if I manage it myself.” Really? Ever tried to get out of multiple truck leases if capacity requirements decrease? It’s a lot easier to renegotiate a 3PL contract. Also, a carrier like KANE, which offers dedicated fleet services along with brokered transportation, allows you to add flex capacity as you need it.
• “The driver turnover rate for common carriers is extremely high.” Actually, that is true, but not across the board. KANE’s driver turnover rate, for instance, is an incredibly low 15% compared to turnover of 92% at large truckload carriers.
• “Truck branding is only possible if we own the trailers.” Not true. In a DCC model, some dedicated carriers will wrap trailers to create the moving billboards brands desire.
• “Customer service will degrade.” Private fleets do a great job of indoctrinating drivers with a customer-first philosophy. But so do dedicated fleet operators. After all, transportation is their core business. They invest in the people, systems and training required to deliver the highest level of service because they know that, if they don’t, they are out of a job.
  
  

Why are more fleet operators considering the dedicated fleet model?

Consider what outsourcing your transportation requirements could do for your business:

• Free up capital. Money once spent on buying and maintaining trucks can be invested to grow your business.
• Improve equipment utilization. Many private fleet operators plan fleet investments around peak demand periods, so capital is tied up in vehicles that they don’t often need. Dedicated fleet providers can work with you to guarantee certain ongoing capacity, but then plan for flex capacity around predictable high-demand periods.
• Outsource driver recruitment, retention and training. No one needs to tell you what a monumental challenge this continues to be. Common carriers have staffs dedicated to these responsibilities. In contrast, private fleets must lean on busy corporate HR teams to develop this capability and, frankly, they often struggle because they are not specialists in this area.
• Reduce risk. Risk associated with running a transportation operation is assumed by the carrier. Just one accident can result in very costly litigation and settlements.
• Increase business focus. Running an internal trucking company is complex, costly and time-consuming. When you allow all the equipment, people and regulatory costs and details to be handled by an expert, it frees you up to focus on your core business.

Dedicated Fleet Services in 2021 and beyond

Freight capacity these days is the tightest we’ve seen it in a very long time.  This is not a temporary situation. As it continues, the demand for dedicated fleet services will continue to get stronger. 

A few years ago, we wrote about the need to build strong carrier relationships. At the time, companies were placing their freight on load boards to take advantage of low rates or shopping lanes regularly with RFPs to attract freight-hungry carriers.

Boy have things come full circle. The companies that invested to build carrier relationships are enjoying those benefits, while those who took a shorter-term, more tactical approach are scrambling to get loads covered.

If you’d like to discuss how dedicated fleet services could benefit your brand, reach out to KANE today to start a conversation.