For-Hire Carrier
or Private Fleet?

by Mike Starling

QUESTION: FOR-HIRE CARRIER SERVICE SUPPORT or COMPANY PRIVATE FLEET?

Stepping back from your day-to-day Transportation Operational activities, have you ever asked yourself, “Is there a better way?” How do you minimize RISK, maximize SERVICE, and minimize EXPENSE? All too often, the Transportation Manager has inherited the ongoing operations, and because the train has already left the station and he is on it, the default focus of attention and effort is on TACTICAL EXECUTION. Hence the Transportation Manager gets STUCK with the type of carrier base/service he has inherited (i.e.; For-Hire? Private Fleet? Or a MIX?).

Think about two common transportation support scenarios. For-Hire carriers (common carrier, contract carrier, or dedicated contract carrier) and company private fleet operations. What are some of the considerations that should be taken into account in choosing one over the other?

RISK: From a RISK standpoint, you are typically better off using the For-Hire Carrier. Use their insurance rather than your company having to bear the expense of company insurance, driver hiring, administration, training, management, private fleet maintenance and upkeep, etc.

Private Fleet on the other hand, while it is nifty, (and often a stealthy ego trip for the company owner(s) having their name on the side of the truck) it has a down side. The down side is that the company bears the RISK rather than the carrier, and as such, has greater exposure in the event of an accident. Oh yes, and did I forget to mention that there are added negatives: bad press, government tracked safety record impact, disruption to the supply chain, unanticipated expenses impacting operating cash flow, and the ever-present danger of overactive thyroid, ambulance-chasing Lawyer activity?

SERVICE: From a SERVICE standpoint, it depends on the focus of your Transportation Service requirements. Inbound, depends upon the volume. Small volume, vendor carrier provides the service. Larger volume, consider For-Hire Inbound Collect shipment to provide greater control over not only SERVICE, but scheduling and expense control as well. Outbound, depends. For-Hire works well for single or stop-off delivering to multiple customers. Private Fleet works well for inventory replenishment to company stores, or perhaps multiple-order deliveries to customers. Again, the RISK factor should be weighed from a STRATEGIC standpoint of the impact of a worst-case scenario on the company’s survival. The final choice from a SERVICE standpoint, is what makes the most sense given the service requirements at this point in time. SERVICE is not a fixed object. Your STRATEGY needs to be able to satisfy MULTIPLE Tactical Situations effectively and efficiently.

EXPENSE: There are several critical factors to take into account here. 1) Control; 2) Minimization; 3) Unnecessary Expense; 4) Flexibility; 5) Predictability;

In My Opinion:

⦁ Control: Easier with For-Hire than with Private Fleet.

⦁ Minimization: Easier with For-Hire.

⦁ Unnecessary Expense: More likely with For-Hire.

⦁ Flexibility: For-Hire trumps Private Fleet any day.

⦁ Predictability: Private Fleet probably better, For-Hire requires close management.

For-Hire Transportation generally will provide you with the best mix of these critical factors. Contract-For-Hire is better than Common Carrier-For-Hire, as a general rule. Leased and or Company-Owned Private Fleets provide the greatest opportunity for slapping you, your budget, and your operations around without notice. Consider Dedicated Contract Carriage as a more controllable alternative. Enough said.

STRATEGY?? Well the first question is, do you have one? The second question is, if you don’t have one, don’t you think you should have one? The third question is, taking into consideration RISK, SERVICE, and EXPENSE, what should your Transportation Strategy be? Vs. What YOU have Inherited (and feel duty bound to continue to perpetuate into perpetuity). Or is that NOT a STRATEGY?

By stepping back, and seeking the advice and counsel of an EXPERIENCED SUPPLY-CHAIN COACH who has broad industry experience and has developed TRANSPORTATION STRATEGIC PLANS over the course of a distinguished career, the Transportation Manager can quickly develop a comprehensive STRATEGY that will serve to provide effective and efficient operational control of transportation services being provided while minimizing both risk and expense.

SOOOOOOO, Isn’t it about time you stepped off that train, and reflected on how to do it better? Hmmmm?

WHICH MODE SHOULD WE USE?

TRANSPORTATION SPEND MANAGEMENT – STRATEGY or TACTIC?