PrivateFleets.com

As the cost of fuel continues to set new records, I continue to sense something very distressing happening to many fleets I’ve talked to recently. The root cause of their troubles, generically speaking, is the same economic problem that is facing consumers: inflation is rising faster than business growth and income. 

Amazingly, one private fleet I interviewed is faring much better in this difficult environment than most. C.N. Brown owns and operates 87 Big Apple Food Stores and 32 Red Shield Heating Oil locations throughout New England, and also delivers fuel to over 100 independently operated gasoline stations. The company fleet consists of 20 leased tractors. 

While the price of diesel was significantly lower in 2007 than this year, it was still at record highs. Even so, C.N. Brown was able to reduce its net operating costs by 3 cents per mile over 2006 while driving 90,000 more miles, resulting in a $57,000 savings. 

To reduce fuel consumption, Transportation Manager Ken Cannell turned to his drivers and opened up the communication channels. Driver turnover was well below 10 percent. Its fleet of tenured drivers took pride in the company and in their performance, he says, and welcomed Cannell’s use of onboard computers to monitor gallons, mileage, idle time, unauthorized stop time, etc. 

“A lot of it is just education,” he says. The fleet trained its drivers to better understand its CAT engines, such as where the “sweet spot” is and how to drive within it. They also adjusted some engine parameters to improve fuel economy. “We tell (drivers) what kind of cost is involved and what their expenses are on a daily or monthly basis. We tell them exactly what it costs them to run a truck,” he adds. 

The company also reduced costs by improving utilization. Major cost savings came by operational designs that eliminated two trucks and being able to not replace four drivers that left. Daily routes of each driver are analyzed to find any out of route miles or extra time and engine idle spent at stops (both scheduled and unscheduled stops). Idle time is broken down into engine idle versus PTO time, as some locations drivers have to use the tractor’s PTO to pump fuel. 

“We are trying to cut all costs down. We Let drivers know that the more money we can save, the more money is available to them as an employee,” he says. The company increased driver pay to between $18 and $20 per hour. 

As the transportation manager, Cannell says the people he reports to at the corporate level scrutinize anything in the fleet budget that comes in at 3 percent or over in any given field, from labor to lease expenses. This year, the budget increased less than 5.5 percent over last year, even though fuel prices have shot through the roof. Fuel expenses are over budget, as expected, but the fleet is under budget overall. 

Every year, C.N. Brown measures the success of its private fleet by comparing its operating costs to would-be transportation providers. With only a 5.5 percent increase in operating costs this year, it’s a safe bet that for-hire carriers can’t compete. 

Recently, I interviewed some private fleets about what I consider to be a very interesting topic: activity-based pay for drivers. In the truckload world, paying by the mile is the standard. Private fleets typically have dedicated schedules and runs, and therefore hourly pay is more common. Among private fleets, activity-based pay for drivers is becoming more common. The definition of activity-based pay varies, but one of the ways fleets are using activity-based pay is to pay drivers according to time standards for an activity.

One of the advantages of this approach is that fleets can establish driver pay according to the time an activity should require, not how long it actually does require. A mild version of this approach is to deduct time from drivers’ paychecks when certain activities recorded on their logbooks take longer than they should.

For Mattingly Foods–a distributor of dry, frozen and refrigerated goods to major restaurant chains in the Midwest–one of its productivity indicators is “cases per hour.” Management doesn’t want drivers to focus on the metric, as the drivers job is to service the customer–not to offload his freight as quickly as possible. Mattingly pays drivers by the hour, but it adjusts its drivers’ hours if certain activities exceed its time standards, such as for pre- and post-trip inspections, scheduled breaks or unplanned stops.

The company developed an automated payroll system using an onboard computing platform from Qualcomm that catches exceptions to its business rules. Its computer systems automatically adjust driver pay each payroll period, according to the data captured by the onboard computers.

“All data is collected, easily reported, measured and managed,” says Brandon Hess, executive vice president. “It has made a driver more productive by being managed better than before.”

With this type of activity-based payroll system, I imagine it would not be that difficult to incorporate third-party backhaul into activity-based pay. Fleets with fixed routes, such as Mattingly Foods, would just continue to pay drivers by the hour and determine and evaluate their rates based on time.

According to the results from the Private Fleet Backhaul study I am doing (see previous article), 31% of fleets pay drivers by the hour for transporting third-party backhauls. The same percentage said they pay drivers the same way for backhauls as they pay them for hauling company freight.

Interestingly, 25 percent of fleets said they pay drivers with activity-based pay. I didn’t break this question down further to see what fleets actually mean by activity-based pay. My intuition tells me that they might be doing something close to the following.

I spoke with a food distribution fleet today that pays its drivers not by the mile or by the hour. They pay drivers by the trip. The company hauls most of its outbound freight and about 60 percent of its inbound freight with a small amount of third party backhaul. As its business volume changes, so does its routes/trips. Management therefore has to adjust its driver routes to keep their pay the same, including adding new backhaul freight where they can, I assume, to keep drivers whole.

Under this activity (trip) pay program, the incentive for drivers is to do the same amount of work more efficiently to earn more free time at home with thier families. On the other hand, this approach does not seem to give the fleet, or the driver, much flexibility or incentive to add more work (i.e. backhauls) to drivers’ schedules. Therefore, adding some incentives might be required such as a flat fee for making an extra pickup or drop. In the survey, 6.3 percent of fleets said they offered drivers a flat fee.

To find out more about how private fleets are compensating drivers through activity-based pay, I plan to speak with a consulting company called TZA in Chicago, Ill., that has helped several fleets implement activity-based pay programs. I’ll be back soon to report on what I find out.

A couple of weeks ago, I sent out emails to dozens of private fleet managers asking them to complete a short survey on the success of their third party backhaul programs. To date, I have received 45 responses. I am astonished at the response rate. During this next week, I will be compiling the results and writing a white paper on best practices in private fleet backhual using the results from the survey. To receive a free copy of the paper, you have to complete the survey if you haven’t already. You can simply click Here to get started. It should only take about 10 to 15 minutes. Just in case this link doesn’t come through in your e-mail (if you subscribe to this blog), here is the full link: http://www.surveymonkey.com/s.aspx?sm=n8CFspQsTt_2bBT8xa8S9edw_3d_3d.

When the National Private Truck Council caught word that I was doing this survey–most likely they received a tip from one of their members–they issued an alert advising their members not to participate. I suppose that they are just trying to look out for the best interests of their members, but I must admit I was surprised that they would even care, to be honest. I respect the NPTC very much and in no way am I trying to supercede the many benefits they offer their members. It is obvious, however, that no research by the NPTC or any other organization has looked at how successful private fleets are measuring the success of their backhual programs with shippers and brokers. Please make sure you are among the fleets who participate in this survey and receive the results. 

While attending the Truckload Carriers Association annual meeting this week, I met Lyn Simon, president of OneWayTrailers.com. Simon operates an online service for matching trailer owners – carriers, dealers, etc. — that need to move trailers (i.e. reposition) with the owners of trucks searching for opportunities to improve their asset utilization. Think of it as a load board, except instead of posting and searching for freight, you search for trailers that need to be moved. Intrigued, I asked Lyn if any private fleets use the service to fill their empty backhaul lanes. They certainly do, he said; some use it to find carriers to reposition their own trailers as well.

Fleets that find trailers that need to be moved can negotiate a rate that includes a provision that allows them to use the trailer to pick up and deliver their own freight before dropping the trailer off at the proper destination.

I didn’t have time to go into much detail with Lyn Simon about what the typical rate-per-mile is to move trailers. Given the choice between running your own trailer empty or bobtailing back to a distribution center, however, perhaps a one-way trailer move could fill a void in your network and increase revenue and decrease net operating costs.

If OneWayTrailers.com were started by a computer programmer looking to earn a few extra dollars, I would probably think it was doomed to fail. However, Lyn Simon is an experience trucking executive. He operates Simon Transport, a small dedicated fleet operation in Utah. He is also the son of Dick Simon, who was once the owner of a very large company, Simon Transport Services (remember the “Sweet Simon” Skunk on the back of the trailers?). The company was bought out by Swift, DBA Central Refrigerated Services in 2002 following bankruptcy. Central Refrigerated has grown to become one of the largest refrigerated carriers in the nation.

Perhaps OneWay Trailers might fill a niche in your operations. Or it may not, but you’ll never know until you give it a try. Besides visiting the website by clicking the link above or going to www.onewaytrailers.com, you can contact Lyn Simon at lsimon@onewaytrailers.com or call 801-746-7811.

In a previous article, I wrote about a new tool from Intelek Technologies called StripMiner. If you work directly with shippers for third party backhaul freight, chances are that some of your customers require you to use their website to accept load offerings, to submit load status updates, and file invoices. Fleets can use the StripMiner tool to automate these functions without using electronic data interchange (EDI). Many shippers require carriers to use their websites rather than EDI. Carriers can automatically receive loads into their dispatch system from shippers’ websites, instead of wasting time visiting websites throughout the day to check for new load postings. They can also automate other manual keystrokes.

Recently, I spoke with another vendor that has developed a very similar product. EBE Technologies has released Internet Data Interchange (IDI). The product was developed with input from Heartland Express, which had been manually entering a large amount of information into WalMart’s website. IDI uses the data contained in fleet’s accounting and dispatch systems to populate the related fields in the shipper’s website. IDI is also able to receive data from an internet site to update the fleet’s dispatch and accounting systems. For example, if a load confirmation number is needed in order for a shipment to be dispatched, the data needed to create it is entered into the shipper’s site, and then automatically captured and placed in the dispatch system. It can then be automatically sent to the driver via mobile communications.

With these emerging load automation tools for the Internet, it seems that private fleets might be able to increase the efficiency of their backhaul programs, leaving more time to concentrate on fleet performance.

Since one of the purposes of this blog is to track the trends in private versus contract carriage, I recently interviewed a large fleet that provides dedicated carriage for several large manufacturers and retailers. I found an interesting development that could impact the value equation for whether to use a private fleet versus a dedicated carrier/3PL with significant information technology resources.

In the age of e-commerce, people have become comfortable buying things that they can’t take home with them. Most online retailers at least provide an estimate for when orders will be shipped, followed by shipment tracking information through carriers like UPS and FedEx.

Although shopping from home is a major convenience of online commerce, there are many items that buyers want to see and touch before buying. For many home improvement products such as kitchen cabinets and windows, this is the case: items must look and feel just right to buyers before they can decide.

Just as in online commerce, buyers are comfortable ordering items from retailers that stock only showroom merchandise; but only if the wait is short. After all, e-commerce has come to mean visibility of order status from purchase to the time of home delivery.

When shopping for home improvement products, why should the visibility provided by the best e-commerce sites be any different than the experience of ordering directly from a retailer with a physical showroom?

When a key customer approached Cardinal Logistics with this challenge, the company turned the challenge into big opportunity for new business. The Concord, N.C.-based company developed a dedicated delivery system for its retailer customers to provide buyers (its customers’ customers) total visibility of their order status, regardless of where the order originates — through the Internet or in person at a showroom.

The idea was first put into practice in 2004 when Kraftmaid Cabinets asked Cardinal Logistics to track its orders all the way from point of sale to home delivery, says Clay Holmes, director of information systems for Cardinal Logistics. Traditionally, Kraftmaid received orders from distributors of its products such as Lowes or Home Depot. Neither Kraftmaid nor its big-box retailers managed the home delivery.

After the successful launch of a dedicated fleet and order tracking system for Kraftmaid, Cardinal Logistics began to market its ability to provide complete supply chain visibility and delivery to other customers. In 2006 the company announced the Signature Delivery Network.

Today, when a buyer comes into a Lowes or Home Depot and purchases a custom window that the store does not carry in inventory, for example, the order flows through Cardinal Logistics’ information systems. To enable this flow of information, the company developed a platform agnostic system, Holmes says, that uses data mapping technology to translate data feeds from any source — e-mail, Excel files, EDI, XML, etc. — into a standard format.

“Regardless of what the customer sends us, we get one data transformation,” Holmes says.

To view the order status, the buyer goes to a website that is maintained by Cardinal Logistics but designed to look like the customer’s site. Cardinal Logistics places the buyer’s order directly with the manufacturer, such as a window company. When the order is ready to ship, an advance shipping notice (ASN) comes to Cardinal Logistics, which then shows when the items were shipped and in transit, received at distribution center, put away, and waiting to be scheduled.

The next step is to call the buyer in person or by computer to schedule an appointment for delivery. The order is picked and ready to load on truck, and once an order is out for delivery, the buyer can see the real-time delivery status — i.e., the time or distance remaining. At delivery, the driver captures a signature and notes any abnormalities, and transmits the completed order to the retailer. The retailer can immediately take note of any exceptions with the order and proactively call the buyer, Holmes says.

“It expands visibility from the time the buyer creates an activity with our customer until that buyer’s needs have been satisfied,” Holmes says. “That’s pretty powerful.”

With most home delivery systems, buyers do not find out about the status of their orders until they are ready to be delivered, Holmes says. This is because the majority of private fleets or contract carriers can’t schedule delivery until the product arrives in their warehouse or is loaded onto their trucks.

Because Cardinal Logistics’ Signature Delivery Network is an entire order management system, the company can pick up a 5 to 6-day advance on scheduling delivery. As soon as the order is picked up from the manufacturer, an ASN is sent to the warehouse that says the order will arrive in four days, for example, and fleet dispatchers can begin to schedule delivery appointments with buyers.

Fleets that specialize in dedicated contract carriage know that by improving the satisfaction of their customers’ customers, they always end up the biggest winners of all.

Today, I had the chance to interview a fleet manager for a large private fleet based in North Georgia. I would rather not give their name, but I will tell you who they are privately if you really want to know. Last year, the company made a remarkable achievement: it increased overall revenue by 25 percent without growing the size of the fleet.

If any for-hire carrier had an increase in revenue by 25 percent in one year, especially amid a stagnant freight market, it would be a notable accomplishment. But you wouldn’t expect to hear this from a private fleet. What is a private fleet to do, ask for rate increases from its parent company?

“Sure, you can have your rate increase–I’ll take it out of your salary,” would be the response from corporate. The company accomplished this feat by reviewing all of its lanes in detail and increasing backhaul revenue where possible.

The fleet increased revenue from one shipper alone by 78 percent, reaching $1 million in backhaul revenue, by finding more backhaul opportunities and by demonstrating its technology prowess by moving to all EDI transactions versus using a labor-intensive process of retrieving loads from the shipper’s website and entering shipement status updates online.

Fleet managers created reports to show revenue by lane and the percentage of overall revenue by lane. By looking at graphs, they were able to identify many lanes where 60 percent or more of its revenue was internal revenue from hauling raw materials inbound to Georgia. The fleet couldn’t do much about some of the lanes that were already heavy in internal revenue.

But, by identifying lanes where backhaul opportunities were available and by talking to area supervisors, fleet managers in the central office were able to identify what constraints were limiting opportunities to improve backhaul revenue. On a weekly basis, the fleet uses a report to compare external and internal freight for each lane. Revenue totals and percentages are put into a control chart and statistical software package, MiniTab, to capture trends up or down with overall percentages.

“We are trying to avoid making point-to-point decisions, such as ‘where were we this time last year or this time last month?’” my contact told me. “You can’t see a good picture if you are not looking at the change of the process over time.” You have to see 6 or 7 weeks of data to see what direction backhaul revenue is trending, he said.

Based on the trending information, they can determine the best lanes for growing backhaul revenue by marketing its excess capacity to external shippers. Their area supervisors are able to focus more of their energy on sales and marketing in specific lanes versus comparing budgets and looking at the overall picture. For example, one area supervisor may only need to focus on growing revenue out of Columbia, S.C.

“Without these tools, and this reporting, there is no way to judge the health of a lane as a whole,” he said. “You become overwhelmed unless you can dissect and manage.” 

I’ve been getting some feedback from a few private fleet managers about what type of measurements for third party backhaul they use internally, and which measurements would lend themselves to comparisons with other private fleets.

Originally, I supposed that private fleets use empty mileage and cost-per-mile as key indicators of their fleet’s success for incorporating third party backhaul into their freight mix. As empty mileage decreases, cost per mile should also decrease. However, it appears this is not the case.

One reader told me that their fleet primarily tracks how much income and revenue is generated by third party backhaul moves. One of the traps in third party work, he said, is showing a great amount of revenue AND reduced empty miles, but getting no profit or losing money on the moves. To make this more clear, it would seem that private fleets actually track income–that is, profitability–for their third party backhaul.

If this is true for other carriers, I would like to know. This is interesting since there would appear to be no difference in how a private fleet accounts for third party freight in their general ledger versus a for-hire, common carrier. If enough private fleets track income and revenue for third party work, this would actually be quite easy to capture in a survey and develop a report that you could use to compare your fleet with others in terms of third party revenue and income by fleet size and type.

If this is what you do, and would be interested in me pursuing a report that looked at revenue and income for third party backhaul among various private fleets, please let me know by responding to this e-mail feed or by leaving a comment at www.privatefleets.com. Otherwise, if you have different metrics that you measure and are held accountable for, I would like to know as well.

If you’ve ever set your sights on an item on eBay, you’ve experienced the frustration of losing your bid in the closing seconds. The competition might have been a savvy eBay enthusiast using an automated, last-second bidding tool such as EZ Sniper (www.ezsniper.com) that gives no one time to respond to their bid and keeps their knowledge of the value of the item private.
            In the transportation industry, scavenging for loads on shippers’ websites is beginning to follow a similar trend. Most large shippers have built, or are in the processes of building, Web portals that carriers use to view, bid on, and accept available loads. Shippers also require carriers to use these same Web portals to update the delivery status of loads.
            Many carriers have already invested in software to automate the basic transportation transactions via electronic data interchange. However, EDI is no longer a competitive differentiator in this new environment. EDI is used to exchange load offers and load acceptances between shippers and carriers, but it is typically used just for those loads and lanes that are already under contract.
            Increasingly, carriers that use EDI are manually visiting various shipper websites to find loads to transport on their equipment or to broker out to other carriers. To a lessor extent, private fleets may have to search several load boards for backhauls or monitor shipper websites as well.
            “One of our EDI customers posts loads on a website, and these loads are available for low bidding,” says Kenny Cornett, vice president of operations for D&D Sexton Inc., a refrigerated truckload carrier based in Carthage, Mo. “All other loads are EDI offer, a phone call or email offer when we are not primary or secondary on a lane.”
            Having to manually search for loads on shipper websites puts many carriers at a disadvantage. Smaller carriers and private fleets often lack the resources to dedicate staff to monitoring websites to quickly grab new load postings.
            “The problem right now is that carriers have people sitting in front of a machine, hitting the refresh button looking for new loads,” says David McCarty, marketing director of Intelek Technologies. “It is very human and time intensive.”
            In November, Intelek Technologies released StripMiner, an electronic data interchange (EDI) load automation tool that continuously gathers new loads from multiple trading partner websites. StripMiner works by logging into secure sites and checking back at regular intervals to “scrape” load information that is posted in HTTP. It translates the HTTP code into standard EDI load offers (called a 204s).
            Fleets can set up unique business rules and criteria for loads in StripMiner such as length of haul, origin and destination, McCarty says. When StripMiner finds loads that meets some of the criteria, it pulls a load tender into a carrier’s dispatch software system automatically as a standard 204 transaction. Load planners and customer service representatives can then review the load offering directly from their dispatch screen.
            If a load meets all criteria, users can set StripMiner up to automatically accept the load and generate an EDI load acceptance (990) transaction to the shipper, or accept the load directly on the website. StripMiner can also automatically update the status of the load directly to a shipper’s website, McCarty says.
            The time and labor savings gained by using StripMiner depends on the number of websites a carrier has to monitor. A large trucking company that has been beta testing StripMiner, McCarty says, had been using 20 people to monitor 12 websites each day.
            StripMiner integrates with DiamondMine EDI, by Intelek Technologies, and other EDI translation software to process, track loads and communicate directly with carriers’ enterprise software.
            After over six months of development and testing, StripMiner is now available. For more information about the product, including a video demonstration of how the product works, go to www.stripminer.net.

Recently, I have been trying to tackle a difficult problem: how to measure the size of the backhaul market for private fleets. With some input from those who read this blog, and some research on my own, I would like to produce a periodic report and analysis of trends in this market. I’m confident it would be a very useful tool for private fleets with common carrier authority that use third-party shippers and brokerage firms to fill empty miles on outbound or inbound movements.

The first step is to determine how many private fleets have common carrier authority. This is difficult to determine for the following reasons. When a private fleet registers with the DOT, it can register in one of two ways: as a private fleet or as a common carrier. Private fleets that have their own authority register in either category, making it difficult to differentiate them.

Surveys I’ve seen that ask private fleets if they have for-hire authority, such as the annual benchmarking survey by the National Private Truck Council, are based on samples of 100 to 150 fleets. Results from the 2007 survey indicate that 50% of private fleets operate as for-hire carriers. Even if this sample were larger, because of the reasons mentioned in the previous paragraph, you can’t just say that half of the total number of carriers registered as private fleets have for-hire operating authority.

Once we know the approximate number of private fleets with for-hire authority and the average fleet size, we move to the second step: determining the number of inbound or outbound miles that are either 1) empty or 2) loaded but with loaded with freight from a third party.

According to the 2007 NPTC survey, 26 percent of private fleets have average length of hauls over 500 miles. Realistically, unless a haul is over 500 miles, it probably does not make much sense going out of route or locking up your equipment and drivers for a backhaul. The survey also found that 28 percent of private fleet miles are empty. Yet fleets with for-hire authority have 25 percent less empty miles and run nearly double the mileage compared to fleets without such authority.

Ideally, I’d like to determine 1) the average (for private fleets with for-hire authority) number or percentage of loaded miles with third-party freight for backhauls and 2) the percentage of empty miles excluding backhauls which are availble for loading. Since many private fleets routes are for interplant transportation, for example, a fleet with for-hire authority might not want to find freight to fill an empty run of 200 miles.

Getting to this level of detail might be nearly impossible from any public or survey data I’ve seen. I’m still looking for possible scenarios by which I could do this, though. One scenario is to do my own survey if I could get enough interest in the value of this data. Please let me know if you’d be interested in a benchmarking report that your fleet could use, for instance, to rank yourselves against other private fleets in terms of your success in growing your backhaul business.

In the meantime, I’ll be working on pulling this report together and provide the results soon.