By Clifford F. Lynch
Motor carrier capacity may be in plentiful supply at the moment, but that
hasnít dampened interest in private fleet ownership. Over the past several
years, an increasing number of companies have been wrestling with the decision
of whether to use for-hire carriers or operate their own fleets.
Although itís often assumed that companies get into the fleet business
primarily to ensure theyíll always have the capacity they need, thatís not
necessarily the case. There are plenty of legitimate reasons for operating a
truck fleet that go beyond the mere availability of common carrier services.
For example, for some companies, itís all about marketing. They see their
private trucks as moving billboards that roll up and down the nationís
highways every day, and itís hard to argue with that. If you spend any time at
all on the road, youíre certain to see constant reminders of the existence of
Wal-Mart, Steelcase, or Coca-Cola. This sword cuts both ways, of course. If youíve
ever been cut off by an 18-wheeler, the experience may have soured you on the
brand in question. Generally speaking, however, trucks are an advertising
bargain, particularly if youíre going to invest in them anyway.
Other companies see their private fleets as bargaining chips. For them, the
fleet is an important hole card when they negotiate rates with for-hire
carriers. Even in todayís buyerís market, many of them would rather go into
a negotiating session with this leverage than without it. If, of course, you
require a service thatís not readily available, this chip isnít worth much
in a negotiation.
For still others, private fleets are a source of revenue. Many companies
operate their private fleets as profit centers, earning valuable revenue by
hiring out their excess capacity. Today, more than 50 percent of the nationís
private fleets operate with for-hire authority. And indeed, about the same
percentage of the total transportation of goods in the United States is handled
by private fleets. Private carriage can be extremely important in that it offers
not only for-hire front haul opportunities, but also can provide backhaul
But for all these potential benefits, in the end, the fleet ownership
decision inevitably comes down to service. Almost every company that runs its
own fleet does so because it has unique service requirements that it believes
can be met only by a private fleet. And indeed, that is often the case. For
example, which common carrier do you call if youíre a major drug chain and
need someone to make daily just-in-time deliveries to 5,000 stores? You donít.
You do it yourself. And there are hundreds of other examples. For these
companies, there is no reliable substitute for having their own drivers Ė
drivers who understand their business, who know their customers, and who can be
available day or night Ė and for having their own equipment in the right
place, at the right time, in the right condition.
So how do you know if fleet ownership is right for you? Obviously, there is
no standard answer to this question. The decision will depend on your companyís
individual needs and characteristics, as well as the availability of services
that meet your specific requirements.
But if your interest in fleet ownership lies primarily in protecting your
company from price run-ups in times of tight capacity, a word of caution is in
order. Operating your own fleet will not shield you from rising costs. Private
fleets face many of the same cost pressures that other carriers struggle with.
In fact, smaller fleets might find themselves at a disadvantage because they donít
have the buying clout the big players wield when they bid for new drivers or
negotiate the price of fuel, tires, or maintenance services. If youíre mulling
over the idea of fleet ownership, be sure to weight all the cost and service
components before making a decision.