Deciding whether to insource or outsource your transportation is a decision that many shippers face. In the CSCMP 2015 State of Logistics report, it was reported that the total cost of U.S. logistics was estimated at $1.449 trillion for 2014 with transportation costs being about 62.6% of that total. Of that proportion, trucking-related costs made up about 77/3%1. Insourcing your transportation can be overwhelming so many choose to outsource and reap the benefits of a dedicated fleet provider. Armstrong and Associates expects the use of third party logistics providers to increase drastically over the next few years due to the fact that they can “provide the infrastructure necessary to support the increasingly complex supply chains involved in [supporting] global trade”2. Utilizing dedicated fleets can help alleviate many business challenges that may come with operating a private fleet.
Ensuring Capacity Meets Demand
Freight capacity is ever changing. In the past few years, capacity has drastically tightened and loosened3. Challenging capacity issues have had many question whether utilizing private fleets would make them more prepared and in control when capacity issues arise. However, having a private fleet does not always equate to guaranteed capacity. For instance, seasonality and increased demand can lead to an influx in inventory flow, in which your existing available assets may not be able to handle and keep inventory moving. Expanding the private fleet could address the surges, but purchasing more trucks and maintaining equipment is costly. Working with a dedicated fleet provider, it could leverage resources from nearby operations to deliver an immediate solution without investing in assets long term.
The Risk Associated With Transportation
Capacity has loosened in the past quarter, however, risk has increased. There is a lot of risk to take on when running a transportation operation. When operating a private fleet, shippers must also be expert in insurance, maintenance, and regulations like electronic logging devices, hours of service, and the Food Safety Modernization Act. Aside from following state and federal regulations, each truck driver has to ensure that they are complying with the policies in place for the types of goods they are carrying. A dedicated fleet partner is responsible for ensuring that regulations are met and take on all the responsibilities of operating the fleet.
Navigating The Driver Shortage
No matter the type of transportation you rely on, drivers are essential to a successful operation. Unfortunately, the driver shortage is at an all-time high. At the end of 2015, driver turnover was over 100%4. It’s become increasingly difficult to find and retain drivers – even for private fleet operators. Recruiting, hiring, and retaining drivers can be challenging and may require extensive resources. Dedicated fleet providers hire and employ hundreds even thousands of drivers and are continually investing in resources and developing best practices to address this industry-wide challenge. This expertise allows shippers to focus on their core competencies while their logistics partners ensure that their transportation operations are successful.
Improving ROI with Asset Utilization
When operating a private fleet, minimizing empty miles can be a challenge. There is an average of 20 billion empty miles incurred by trucks every year5. In these cases, shippers are missing an opportunity to improve asset utilization and drive savings into their operation. With a dedicated fleet provider that also offers brokerage capabilities, shippers could generate lucrative benefits into their supply chain.
The world is ever-evolving and as the transportation industry changes to meet demand, you need to be prepared for potential challenges. By partnering with a 3PL and implementing a dedicated fleet, you’ll benefit from their expertise and resources that can help improve efficiencies, drive savings, and steer the future of your company.