Private Links: Private fleets secure capacity
Some interesting articles on the subject of private trucking have crossed my desk over the past few weeks. For a sector of the trucking community that has been under-appreciated and in some cases entirely written off, we’ve made a remarkable comeback. Mark Twain’s often erroneously quoted note to a journalist in 1897 leaps to mind: “The report of my death was an exaggeration.”
Lou Smyrlis, editor of Motortruck magazine, penned an interesting editorial on the subject of private fleets in the July/August issue. Lou made several points about the value these fleets deliver when their operations are linked to the goals of the corporation whose goods they transport.
In his article Lou referenced a study by the University of Western Ontario and the Georgia Institute of Technology that tracked the costs of 861 examples of major supply chain glitches that occurred in publicly traded companies over a 10-year period. The study identified costs that went far beyond those of temporarily downed production lines, or customers that were upset with late deliveries. On average, the publicly traded companies in the study experienced a nine per cent drop in stock value as a result of the announced glitches, with an estimated total cost of over $100 billion!
Lou argues that this is clear evidence of the importance of the transportation and logistics function in any company. Security of the supply chain is paramount and, Lou says, has led to a new approach to private fleet management, one that has moved beyond the traditional emphasis on safety and maintenance. The new style of logistics and private fleet management encompasses a broader, big picture approach to ensure a contribution to the company’s overall competitiveness and financial performance.
This was definitely the case within a logistics function that I had the privilege of working in a few years ago. We made a concerted effort to link the private fleet’s goals and business plans to those of the corporation. As a matter of fact, every function in the logistics group was required to do just that, and to prove that it was making both a financial and a service contribution to the company. For that we had Ernie Barber, our director of logistics to thank. That was his vision of how a logistics function should work. He got us all to buy in, and he made it work very well.
Another article appeared in a recent issue of Transportation Trends & Outlooks, the newsletter published by PacLease. The article discusses some of the challenges facing trucking operations today. Those challenges include the shortage of qualified drivers, high fuel prices and more freight than ever that has to be moved, combined with insufficient capacity to move it.
The adverse effects of this supply and demand ratio have perhaps never been more prevalent in the trucking market. The situation manifests itself in several different ways: higher freight rates; the charging of significant ancillary fees; service interruptions and deficiencies; and bankruptcies in the for-hire sector to name but a few. An American Trucking Associations study estimates that 1,000 for-hire carriers go out of business with every 10-cent rise in the price of fuel. That leads to even less capacity, fewer choices for shippers, and higher freight rates.
Not so long ago, it was popular for companies to shed activities that they considered to be outside their ‘core business,’ and using that rationale some companies moved to downsize or eliminate their private fleet. Today’s environment demands a distinctly different approach.
In that same PacLease article I referred to above, I offered the following thoughts: “The idea that transportation is not a core competency and, therefore, should be contracted out, just doesn’t wash today. Getting the product to market in a timely, reliable and cost-effective manner is as important as producing the product itself. In order to guarantee that you have the capacity you need while controlling transportation costs, operate your own fleet.”
There is no doubt that capacity and cost are serious issues for shippers today. When you can’t buy the transportation you need when you need it, or when the cost of purchasing that transportation encroaches too far into the company’s bottom line, there is one sure alternative: secure capacity and control costs with a well managed private fleet.
The articles that appeared in Motortruck and the PacLease newsletter further confirm the view that private trucking plays a significant role in meeting the transportation needs of the nation’s businesses. It’s now up to the managers of those fleets to ensure they are contributing to the goals of their companies.
-The Private Motor Truck Council of Canada is the only national association dedicated to the private trucking community. This column presents opinions on trucking issues from the perspective of private carriers. Your comments are invited and can be addressed to firstname.lastname@example.org
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