It can be challenging for you to decide the best way to transport your products. Fewer decisions are bigger than deciding whether to operate a private fleet or outsource. On the surface, private fleets appear to be the better option, but you must recognize and understand all that goes into running your own transportation. Some companies believe operating a private fleet gives them more control over the business and operating costs. In contrast, others find that outsourcing their transportation gives them better insight into the market while reducing costs and creating efficiencies. So, which is better? Private fleets or outsourced logistics?
Well-known household names like PepsiCo, Sysco Walmart, and Tyson Foods all run successful private fleets. According to FleetSeek.com, a database of trucking operations, 344,657 private fleets are operating in the U.S. compared to 169,498 for-hire carriers and 203,068 independent owner-operators. So what drives companies to choose a private fleet or outsourcing?
The idea of having your own private fleet to deliver your goods is alluring. On the one hand, you can retain complete control over your supply chain by operating a private fleet. But this can come with staggering costs and resources spent. The time and costs of managing a fleet may not be worthwhile for some companies. On the other hand, it can be difficult for those running and operating their own fleets, especially if it’s not their core focus. While the pandemic has had a small hand in encouraging companies to move away from managing their own private fleets, many of the real motivating factors are the plain challenges that come with operating your own logistics and transportation.
Running your own fleet is a very asset-heavy business on its own. It requires a lot of capital investment in tractors and trailers along with other costs of technology, maintenance, insurance, driver pay, and more. Drivers are in short supply already, so finding a backup for sick drivers or losing drivers puts private fleets at the risk of losing capacity. Motor carrier insurance costs have been on the rise as well. Where a large trucking company could spread increased costs across a range of equipment and business segments, a small private fleet does not have that flexibility.
Driver recruitment is one operation of running a private fleet that you have to consider. Finding talent behind the wheel is an even more significant challenge lately with the driver shortage and driver-related issues are a current top concern of private fleets. According to the American Trucking Associations, the driver shortage hit 60,800 at the end of 2018. Current trends point to the shortage growing to over 160,000 drivers by 2028. In addition, a recent ATRI analysis of census data on employment sectors shows that the trucking industry has the lowest percentage of young entrants and the highest percentage of aging workforce entrants.
In a recent survey by the National Private Truck Council (NPTC), more than a third of all challenges private fleets face are driver-related, like aging drivers and their retirement, recruiting, turnover, hiring, and retention. With the ever-surging freight demand and a growing labor shortage, private fleets must work even harder to recruit and retain drivers. In addition, private fleets must fight with for-hire carriers over drivers as they are working even harder to attract drivers from fleets with more money, better equipment, and better routes for more home time.
Many companies want to operate private fleets to manage their transportation costs; however, many more costs go into a private fleet. First, there are the upfront capital expenses, which can be expensive when starting out. You also have to consider fuel, insurance, driver pay and benefits, licenses, certifications, permits, technology like ELDs or software applications, training, and drug testing. There are also unanticipated costs to plan for, like liability costs for any accidents or claims. According to a study by the FMCSA in 2006, the cost to a company for a non-fatal injury crash averaged $195,258, while the average cost of a fatal crash was $3,604,518. In addition, costs for private fleets are rising with the increasing costs of fuel, insurance, and equipment maintenance as new and used trucks deal with material shortages.
Many companies want a private fleet to have easy access to the capacity to haul their freight. However, having just the right amount of available equipment and drivers is tough to decide. Often you’ll find that you either have too much equipment sitting when you’re slow or too little to cover orders when demand is high, leaving you to use the spot market to cover shipments that need to go out. There are always ebbs and flows to business. Even when planned there will be times when equipment is underutilized or there won’t be enough.
One drawback to operating your own fleet is the time you must put into it. You have to arrange the shipments, make sure you have drivers, cover backhauls or find coverage when you don’t have enough capacity of your own, maintain regulations, insurance, and more. The constant monitoring and configuring of your own transportation demand a lot of time – time that could instead be used for revenue-generating tasks.
There are many benefits to running your own private fleet, such as;
If keeping control over your transportation is something you need then operating a private fleet is for you. By choosing not to outsource your transportation, you’ll have complete control over your supply chain. You’ll know that you always have capacity available, even when the market is challenging. You won’t have to spend time searching for available carriers or negotiating rates, and you’ll keep control over service levels since you’ll have company drivers and equipment readily available.
In the previously mentioned NPTC survey, more than 92 percent of respondents said that customer service was the main reason they had a private fleet. Other factors included flexibility, reliability, dependability, and a desire to put their employees in front of customers. With these factors in consideration, some companies view their fleet as a core competency.
Safety performance is another benefit to private fleet operators. According to the Department of Transportation’s (DOT) crash data, drivers in private fleets have shown to be three times safer than the overall trucking industry.
Additionally, you’ll have scheduling flexibility. Rather than depending on a for-hire carrier to pick up and schedule shipments, private fleet operators set the schedule themselves, giving you more control over on-time deliveries.
Lastly, there’s the marketing aspect to consider. Private fleet trailers essentially act as “rolling billboards” for your company.
In the 2019 Third Party Logistics survey by Korn Ferry, 63 percent of shippers said that overall, shippers are increasing their use of outsourced logistics. Taking into account the pros and cons of a private fleet, it seems some companies find that outsourcing their transportation suits their needs better. There are many benefits to outsourcing your logistics, such as;
In comparison to private fleet costs, there are very few costs to consider when outsourcing. You don’t have to worry about the cost for the labor of drivers, their insurance, their certifications, driver recruiting, vehicle maintenance, fuel costs, and more. The only actual cost you have to worry about is the cost of having your freight transported.
Since you won’t have to worry about the many time-consuming tasks of your own fleet, you’ll have more time to focus on your business versus your transportation. In addition, your employees will focus on revenue-generating tasks instead of all that comes with managing transportation.
Even though private fleets come with some on-demand capacity, when outsourcing your logistics to a third-party logistics provider (3PL), you can be assured that you’ll have access to capacity that you wouldn’t have otherwise. 3PLs take care of all the relationship-building, growing a larger network than you could manage, and take care of covering your shipments for you. There’s no worry about finding available carriers or making sure you have available drivers and equipment. It is all taken care of for you.
Even though there are many benefits to choosing to outsource your transportation needs, there can be some challenges that come with it.
Some people aren’t fans of losing control. When choosing to outsource, you will lose some control of your provider selection, customer service, and rates paid on shipments. Sounds scary, right? That’s why if you’re choosing to outsource, make sure you find a reputable provider that you can communicate your wants and needs. Find one that will keep an open line of communication with you as your relationship grows so that you fully trust them and be okay with letting go.
This solely depends on the provider that you choose to work with and what they offer. Find a good provider with technology applications or processes in place to keep you informed. You may even find a provider that has options to give you more visibility than you would have otherwise.
Time and effort must be invested when developing good working relationships. Your chosen providers must share an understanding of your strategy and provide you with innovative solutions to give you a competitive advantage. It may take time to be in alignment.
If choosing to outsource and make use of a provider’s technology, your IT teams must integrate applications and systems. Make sure your IT teams are capable of doing so and that your provider will provide assistance in the integration.
Companies that don’t want to manage their own fleet have a couple of options when it comes to outsourcing. For one, there are dedicated services. This is an option if you already have a private fleet of your own. Essentially, you convert your private fleet to a transportation company so that they now belong to the transportation company but remain dedicated to serving you first and foremost. Some transportation companies may even let you keep your branding on the truck. This is a nice way to have more control but less responsibility.
Another option is outsourcing to a 3PL completely. They will take complete control and responsibility for your logistics management. You’ll still have access to capacity, reduced costs, and excellent customer service; however, you’ll lose the benefit of your brand on trucks. This option allows you to COMPLETELY focus on your core business.
Looking to have the best of both worlds? There is certainly nothing holding you back from having a mix of a private fleet and outsourcing. Some companies, like Giant Eagle Supermarket, prioritize their private fleet but also use outside carriers for less critical shipments. As a result, they’ve found an advantage to mixing both services.
Regardless of the choice you make, getting your product to customers has never been more challenging. The driver challenge continues to be a problem, capacity remains tight, and freight rates remain high. Though we may be partial to outsourcing, you should look to find a solution that works best for your company.
Be sure to ask yourself these questions when deciding whether to manage your own private fleet or outsource:
If outsourcing some or all your transportation seems like a good solution, consider Trinity Logistics as your provider. With over 40 years in business and Burris Logistics as our parent company, we consider ourselves experts in logistics, especially in more complex or specialty shipments.
We can help you with capacity through our carrier network of over 70,000 carrier relationships available. We have best-in-class technology available to meet your needs and help you with your business’s growth. We work with several modes and through our People-Centric approach, offer you guidance on when and what solutions you should use. You’ll find that when choosing Trinity Logistics as your provider, when given the chance to prove our commitment to great service and communication, we set the bar high.
Author: Christine Morris
Logistics experts estimate high freight rates will remain through 2022, so now is not the time to stress over costs. Instead, you should be focus on capacity, customer service, and communication.
Trinity Logistics takes pride in being a leading name among independent freight agents. We have many benefits to offer you through our freight agent program.
Stay up to date on the latest conditions impacting the freight market, curated by Trinity Logistics, through our Freightwaves Sonar subscription. Not interested in reading? Wondering what’s happening in the LTL market? Check out our LTL […]