It's hard enough to manage a private fleet these days, with fuel costs soaring and drivers in short supply. Now private fleet managers are being asked to take on an additional task: orchestrating complex transportation solutions involving company-owned fleets, third-party contract carriage, and for-hire carriers.
Called "collaborative logistics," these initiatives are designed to provide companies with the best overall mix of cost effectiveness and customer service. And they go well beyond the traditional search for backhauls, says Garry Petty, president and CEO of the National Private Truck Council (NPTC). Petty describes collaborative logistics as more of a matrix that integrates the various components of transportation into an integrated whole.
What does that mean for fleet managers? The short answer is additional responsibility. Under a collaborative logistics strategy, the fleet manager is responsible for developing the right mix, making the company's equipment and service requirements clear to third parties, and monitoring the performance of contract and for-hire carriers to make sure they adhere to the private fleet's standards. "It's almost like fleet managers are symphony conductors, orchestrating the best transportation solution," notes Tom Moore, NPTC's vice president of public affairs.
The NPTC is doing a couple of things to help its members cope with the new demands. First, it has organized an educational session that will address some of the challenges involved. Titled "Collaborative Logistics and the Private Fleet— It's Not Just About Backhaul Anymore!," the program will be presented at the group's annual meeting, which takes place from April 29 to May 1 at the Indiana Convention Center in Indianapolis.
The NPTC is also launching a new service for members seeking outside partners for some of their transportation needs or looking to offer their own services to others. Called Member Match, it is essentially an online clearinghouse to help members match available capacity with other members' transportation requirements. Petty expects that private fleet managers will embrace the service because of the confidence they have in their peers' high standards for drivers, equipment, and customer service. And there should be ample capacity: The group's most recent benchmarking survey shows that fleets average about 25 percent of their miles running empty.
The fleet's growing reach
In fact, Petty says that kind of collaboration is already starting to happen. He estimates that 40 percent of NPTC members make use of dedicated contract carriage to some extent.
Dave Belter, group director of transportation management for Ryder, confirms that his company is seeing more requests for dedicated contract carriage and says it stands ready to meet those demands. "It all starts with logistics engineering," he says. "When we look at transportation management, we look across a customer's portfolio—his DCs, private fleet, contract carriage, maybe a combination of both."
Moore believes the new emphasis on outside service is partly a reflection of a changing business environment. "In the past, there used to be more competition," he says. "Now, there's more synergy. You walk into a fleet operation, and the dispatcher for the dedicated carrier sits next to the dispatcher for the private fleet. It is critical to their success that they blend in the different elements."
Still, that's not to suggest that private fleets are being phased out. Petty reports that as a result of a capacity crunch in the truckload sector in recent years (capacity did loosen up a bit last year), some companies that had been considering abandoning their private fleets have instead strengthened them. In many cases, he says, the crisis made them realize how heavily they rely on fast, dependable transportation service. "Getting product to market is as important to shareholder value as the product itself," he says.
All things to all people
Results of the group's most recent benchmarking survey bear Petty's observations out. In fact, a full 85 percent of the respondents to the NPTC's 2006 benchmarking survey say they expect their private fleets to handle more freight—not less—in coming years.
At the same time, it appears they're expanding their activities well beyond their traditional function of hauling outbound freight. The benchmarking survey indicates that while moving outbound freight remains the fleets' primary role, a majority of respondents also use their fleets for interplant movements and to move goods from plant to DC.
But they aren't necessarily doing it alone, says Olen Hunter, director of sales for Paccar Leasing Co., which operates 30,000 vehicles—primarily for private fleets—in the United States and Canada. Though he acknowledges that plenty of companies expanded their private fleets during the capacity crunch, he says the trend has started to taper off. "We're seeing a little bit of a change in the business right now while trucking tonnage is down," he says. With for-hire carriers willing to take on more business, he adds, private fleet managers are not making significant expansions to their fleets.
Hunter also notes that recent regulatory changes have given Paccar's business a boost. He points to new environmental rules affecting truck engines (which took effect in January) as an example."Our customers are saying they need to have truck fleets to serve internal or external functions, but they do not want to be in the business of hiring and training technicians, buying tools, or EPA compliance," he says. Belter sees another explanation as well.With a private fleet, he says, "you want to drive utilization to 85 percent if you can.Where you cannot get that, you can start to balance the cost and service tradeoff with a for-hire solution."
Belter notes that in some cases, these collaborative solutions go well beyond filling the transportation gaps to include areas like reverse logistics and even network design. He cites the case of a consumer products company that developed a solution that involved for-hire inbound transportation, a DC with a cross dock operation, and dedicated carriage for delivery to customers. The key to the arrangement was the establishment of the DC, he says."The enabling component was being able to establish a physical facility to flow product across."