PrivateFleets.com

I recently had a conversation with Gary Petty, president of the National Private Truck Council, about the value proposition of private fleets. Before speaking with Mr. Petty, Jason Johnson and I had agreed that this value, whatever it may be, was more than cost savings — or even service.

Many manufacturers, shippers and other companies that use private fleets move freight in lanes where contract carriers and third party logistics providers (3PLs) offer cheaper rates at comparable or better service — or at least claim to. Many companies also use private fleets despite the heavy exposure to volatile cost variables such as fuel, insurance, and accidents.

When I asked Petty what the value proposition is for a private fleet, he began by stating that a private fleet is not an either-or proposition. A private fleet is just one important component of several transportation solutions. Of the companies that operate a private fleet, 40 to 50 percent also have some form of third-party dedicated carrier service, he says. Companies may well decide not to operate a private fleet in high cost shipping lanes or those with low freight volumes, for example.

Fair enough. So then if cost savings and service are only part of the value proposition of private fleets, what is the missing component?

Generally, the private fleet advantage, Petty says, is command and control of transportation capacity. Drivers and equipment are at the disposal of a company around the clock, and customer service can be addressed at the drop of a hat. Petty expanded the private fleet advantage as “unparalleled customer service with extremely high on-time delivery, and the adaptability and flexibility of capacity based on customer needs.”

Companies see the private fleet as an advantage in service and flexibility, but this doesn’t go far enough to define the ultimate value proposition. Surely, it doesn’t stop here. Petty hit the nail on the head with this statement:

“Many companies view transportation as an integral part of the value proposition of their product.”

In other words, private fleets generate value that goes beyond the domain of transportation. Many companies see transportation in the total piece of company and shareholder value. Take Wal-Mart, for example. From the company’s humble beginning in Arkansas, Sam Walton built a private fleet to transport products to his stores to gain a competitive advantage and build a reputation for the low price leader.

Petty says that companies that see transportation as an integral part of their value proposition to the market have made long-term investments in their private fleet for staffing, equipment, and driver culture. The results are hard to ignore. Driver turnover at private fleets is less than 10 percent, Petty says, compared to over 100 percent in the for-hire truckload sector. Drivers become the face and personality of the company and its products. They identify themselves with the value of their company, not just the value of their paycheck.

Another important value proposition for private fleets is the internal benchmarking tool they become to score other transportation service providers. Metrics companies use include cost, on-time delivery and customer evaluations. Successful private fleet managers use these benchmarks internally to continually make a case for their fleet, through annual, monthly, weekly and even daily reports. 

Successful private fleet managers also understand their product brands and challenges in the markets they serve, Petty says. As such, they are continuously looking for ways to add value to the company’s total market position and profits. After all, if they can’t show the differentiating value of the private fleet, the company will outsource its transportation.

“The more able and sophisticated a private fleet is to justify its cost comparisons and customer service, the better success it will have in the long term. It is not just enough to have numbers and customer service ratings. They have to sell the proposition upward,” Petty says.

The private fleet advantage does not always remain internal, however. An interesting trend in the private fleet market is that more companies are growing their sales and marketing of unused capacity. Private fleets typically have between 20 and 40 percent empty capacity, Petty says. Other shippers are taking notice. Petty says that momentum is building among private fleets to form strategic partnerships with their peer private fleet operations to fill each others’ empty capacity.