DC Velocity - May 2018

In periods of slack capacity, or when supply and demand are roughly in balance, the shipper could use the fleet for one-way irregular-route service, with P&S charging the prevailing per-mile rate. P&S, which also operates third-party logistics (3PL) and brokerage operations that are integrated with its asset-based service, would then find loads to fill the trailer for the next move in its network.

However, in brutally tight conditions such as the flatbed industry finds itself in today— consultancy DAT Solutions reported in mid-March that an unprecedented 88 flatbed loads were posted on its spot-market loadboard for every truck that posted—the shipper-owner could notify P&S that it wants to convert to dedicated contract carriage to assure it has adequate equipment and drivers. Because the assets are under the shipper’s full or partial ownership, the conversion can occur within one or two days, according to D. Houston Vaughn, P&S’s president and chief operating officer.

The key for the shipper, as in any dedicated relationship, would be to ensure sufficient vol-work for the return trip to the shipper’s location, meaning the shipper would effectively pay just the rate for the outbound move, Vaughn said.

The model eschews the multiyear commitments that are a core part of traditional dedicated agreements, again because the shipper is also an owner or part owner, Vaughn said. Shippers can mix and match their fleet needs, using some of the assets for irregular-route operations and others for dedicated service. There are opt-out clauses for non-per-formance, and the shipper can sell its equity position back to P&S, he added.

“We are providing customers [with] the control and
capacity assurance that comes with a private fleet operation
without the cost burdens and the headaches of running
one,” Vaughn said in an interview in April.

The model works best in the flatbed world, which has
predictable volume flows because demand for commodities
such as construction equipment, flatbed’s bread and butter,
and early fall). However, Vaughn said there’s no reason the
model couldn’t also be applied to dry van operations. “It all
comes down to knowing your customers, their freight, and
their requirements,” he said.

TRY EVERYTHING AND HOPE SOMETHING STICKS

Initiatives like the P&S partnership are not cure-alls for the capacity crisis afflicting all parts of trucking. Even Vaughn acknowledged that flatbed carriers are not yet doing a great job managing the problem. Yet it reflects the slew of ideas, some completely foreign to traditional trucking, being marshaled to cope with what some are starting to call the worst crunch in the industry’s long history. “The market is looking for every option it can get its hands on,” said Chris Jones, executive vice president, marketing and services for Canadian logistics IT (information technology) company Descartes Systems Group Inc.

For example, Miami-based Ryder Systems Inc. unveiled a program in late March matching businesses needing short-term tractor-trailer capacity with asset holders whose equipment would normally sit idle, the first time the asset-shar-ing platform popularized by hospitality site Airbnb has been deployed in trucking. A multiparty dedicated model has been developed in the last-mile delivery space allowing small to mid-sized retailers that otherwise can’t justify their own networks to share space and technology aboard vehicles as long as each retailer’s data is aggregated so it can’t be seen by others. Jones, whose company is out front in the initiative, said large truckers are expressing interest in participating, particularly in areas where density is relatively low and assets are available.

Truckload carriers are looking to expand their presence in the multistop delivery market to offer a lower-cost alternative to traditional less-than-truckload (LTL) services. However, Mark Cubine, vice president, marketing and enterprise systems for Birmingham, Ala.-based IT firm McLeod Software, said the discussions are focusing on building dedicated agreements for these services. According to Cubine, in the new era of compliance with the government’s electronic logging device (ELD) mandate, where drivers must now operate within their lawful hours of service rather than add a couple of hours to their runs and then fudge their paper logbooks, few truckers will commit to multistop routes that might take more than one day to complete without the assurance of dedicated agreements. Hours-of-service compliance “is the new definition of capacity,” Cubine said.