BY CLIFFORD F. LYNCH
fastlane
to own or not to own?
MOTOR CARRIER CAPACITY MAY BE IN PLENTIful supply at the moment, but that hasn’t 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 rely
solely on for-hire carriers or operate their own fleets.
Although it’s often assumed that companies get
into the fleet business primarily to ensure they’ll
always have the capacity they need, that’s not necessarily the case. There are plenty of legitimate reasons
for operating a truck fleet that go beyond simply providing insurance against a capacity crunch.
For example, for some companies, it’s all about
marketing. They see their private trucks as moving
billboards that roll up and down the nation’s highways every day, and it’s hard to argue with that. If you
spend any time at all on the road, you’re certain to see
constant reminders of the existence of Wal-Mart,
Steelcase, or Coca-Cola. This sword cuts both ways, of
course. If you’ve 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 you’re 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 today’s buyer’s market, many of them would
rather go into a negotiating session with this leverage
than without it. If, of course, you require a service
that’s not readily available, this chip isn’t 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
nation’s 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 revenue.
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 you’re a major drug
chain and need someone to make daily just-in-time
deliveries to 5,000 stores? You don’t. You do it your-
self. And there are hundreds of other examples. For
these companies, there is no reliable substitute for
having their own drivers—drivers who understand
their business, who know
their customers, and who
can be available day or
night—and for having their
own equipment in the right
place, at the right time, in
the right condition.
Clifford F. Lynch is the author of Logistics Outsourcing – A Management Guide and co-author
of The Role of Transportation in the Supply Chain. He can be reached at www.cflynch.com.
