The president and CEO of Lamonica's Pizza Dough Co. is also proud of his three bright-red Kenworth trucks that deliver pizza dough to Costco and other customers in southern California.
Contrast Lamonica with some of the nation's biggest private fleets, like PepsiCo, Waste Management or Walmart. These fleets operate thousands of trucks and have sophisticated private fleet managers, some of them Certified Transportation Professionals through the National Private Truck Council's education and testing program.
Yet these very diverse fleets share many of the same challenges and trends in today's environment, including safety and compliance under the federal government's new Compliance, Safety, Accountability enforcement regime, dealing with rising equipment costs and the decision to buy or to lease, and the complex balancing act of using private fleet trucks, for-hire fleets and third-party logistics to ensure the best customer service.
“The number one issue is just change,” says Chris Maccio, director of sales for PacLease. “Change in EPA regulations, change in federal motor carrier safety requirements, change in the driver landscape. It's coming at us faster and faster.
“So there are just a lot of heavy issues facing private fleets. And they are under tremendous pressure every day to be a value-added service to their companies.”
1. Measuring success every day
For larger private fleets that operate as an entity within a larger corporation, there has always been pressure from the parent organization for the trucking operation to prove it can do the job better than, and just as cost effectively as, outsourcing the transportation duties to an outside forhire carrier.
However, with today's sophisticated analytical tools, that process is changing, says Gary Petty, NPTC president and CEO.
“I think the importance of restating and revalidating the justification of the private fleet is a never-ending cycle,” Petty says. “Even the best world-class private fleets cannot take their value for granted. They are in a constant mode of measuring success and defining outcomes — every day, every driver, every turn, every piece of equipment.”
Today, a company can crunch the numbers to determine if some lanes are more cost-effective to outsource.
Bill McCouch, vice president of business development for AmeriQuest Transportation Services, a truck fleet management services company, sees the same trend. Today, if you're a private fleet, you're working to gain “in-depth knowledge of what you're doing and how you're doing that,” he says. “Doing the whole activity-based costing breaking things down, looking at the different elements and posing the question: ‘Is there a better way?’ The old adage, ‘We always did it that way,’ those days are gone.”
McCouch says logistics engineers are re-optimizing their routes, whether it's different routes, different hours of delivery, or reloading the trucks in different ways so they go out full.
“The private fleet community has learned how to position itself for success,” says Tom Moore, NPTC senior vice president. Where they cannot offer a cost-competitive option, he says, these companies turn the business over to outside fleets and third-party logistics providers, keeping a strong, viable private fleet in areas where it makes sense.
In the past, Petty says, many private fleets did not have a good handle on their costs and weren’t as competitive as they should be with the for-hire fleets, opening the door to for-hire fleets to come in and take over. That's no longer the case.
“The private fleet is being seen as one component of transportation in a matrix of network solutions, rather than a one-size-fits-all, all-encompassing mode.”
2. Eyeing a driver shortage
Even though private fleets do not experience the high turnover that for-hire truckload carriers typically do, the combination of demographic changes and stricter federal driver qualification standards does concern private fleets.
“If housing starts to improve, the predicted and existing driver shortage isn't going to get better,” notes PacLease’sMaccio.
Private fleets have a legacy of low turnover, typically around 11% or 12% annually compared to the 100% or higher turnover seen by long-haul truckload fleets, according to NPTC. Drivers also typically stay with companies for a long time, 15 to 20 years. Pay is higher, both in terms of salary as well as benefits such as healthcare and vacation, plus “soft benefits” like home time and shorter routes.
Some private fleets, such as Talon Logistics, the private fleet of Giant Eagle, are using alternative fuels such as natural gas.
Nevertheless, as the available driver universe shrinks, private fleets will feel the pinch as well.
“Fewer drivers mean higher wages” across all types of trucking, says AmeriQuest's Bill McCouch. “Business operators are under extreme pressure to drive cost out of the business.”
Petty says one large private fleet hired more than 200 drivers last year and plans to hire 250 this year to accommodate corporate growth.
“How are they finding those drivers? They home-grow them through proprietary custom training programs that they have with truck driver training schools right in their own backyards,” Petty says.
3. Upping the game on safety and compliance
Overall, private fleets tend to have excellent safety records. Moore says NPTC members exceed the industry average in terms of accidents as well as CSA BASICs performance. But the FMCSA’s new CSA enforcement program is one area where small private carriers may have a very different challenge than larger ones.
Liberty Fruit in Kansas City, Kan., has a full-time employee who coordinates the company's compliance with CSA for its fleet of about 50 straight trucks and tractor-trailers. Scott Danner, chief operating officer, says concerns over food safety are driving increased safety scrutiny among customers.
“I think it's because there's a perception among foodservice and retail customers that if you have a poor CSA score or if your suppliers have poor CSA scores, then you're probably not handling their food products in a safe manner,” he says. “After all, if you're not even taking care of your own trucks, then how are you handling the cargo?”
Maccio says CSA is pushing private fleets to do a better job of documenting their safety efforts.
An example is pre-trip inspections. Private fleets have long been early adopters of in-cab technology, such as electronic logs, so electronic Driver Vehicle Inspection Records are being implemented by some private fleets.
“The larger fleets, they've got somebody dedicated to monitoring their SMS scores,” says Jeff Kaley, truck engineer with GE Capital Fleet Services. “I find in discussions with smaller fleets, when you ask, ‘Have you checked the SMS system the FMCSA has out there?’ you get a lot of'What is that?’ Sometimes they don't even know their DOT number or if they even have one.”
Many smaller private fleets don't really think of themselves as being in the trucking business. They're in the pizza business, or the bakery business, or the construction materials business. And they may have only a few commercial trucks out of a larger fleet of light-duty delivery or service vehicles, Kaley explains.
“The biggest thing is the fleets that just don't know what's out there; they don't know what they don't know,” he says.
Some larger private fleets, says McCouch, are outsourcing many safety tasks to professional risk management companies.
“If you own eight or nine distribution centers and have 700 or 900 drivers, a risk management group that has a nationwide footprint can go out and train all these drivers as opposed to doing that in house.”
For smaller companies, McCouch preaches partnering and collaboration with industry experts, including joining trucking associations such as state trucking associations, the American Trucking Associations or NPTC.4. Leasing and buying equipment
Private fleets, of course, face the same rising costs for trucks, power units and trailers as the rest of the industry. NPTC says about half of its members lease their equipment, while the other half own.
Private fleets often lease because their expertise lies in their core business, not in buying and maintaining trucks. In addition to being able to outsource maintenance, leasing allows companies to more easily try new technologies.
For instance, when it comes to trying alternative fuels such as natural gas, “We already have the knowledge capital in place to spec, maintain, and ultimately dispose of the vehicle,” Maccio says. “We're able to give them more confidence with sticking their toe in the water on new technology.”
In addition, AmeriQuest's Mc-Couch says he sees private fleets increasingly looking at “unbundling” full-service leases. They might decide it makes sense for the leasing company to handle some tasks but not others. This goes back to the trend of fleets scrutinizing every part of their operations for efficiency.
For fleets that own, NPTC says the average trade-in happens at around seven years old and 800,000 miles.
“That sounds like some big numbers, but remember the private fleet equipment is typically not going across country,” notes NPTC's Moore. “They're on top of their maintenance, they have the same driver in and out every day, so there's a control over that and it allows them to get the best utilization out of their equipment.”
Just as with for-hire fleets, however, a lot of that equipment got even older during the recession, according to Jeff Weber, vice president of sales and marketing at Ervin Equipment, which buys and sells fleets of trailers.
“Private fleets were not exempt from the recession. In order to survive, many private fleets did what we all did: Made do with what they had, looked for ways to extend dollars, and held onto equipment longer,” he says.
When it comes to trailers, Weber says there are 80% more used buyers than new, but “used equipment's increase in value is forcing customers to consider new, because there are not a lot of options for the used equipment market right now.”
As a result, he says, private fleets are facing some decision dilemmas: Do they spend money on repairs of existig fleets, or take on the expense of new or updated used fleets?
5. Private fleets and technology
At one time, industry observers cited distinct differences in how private fleets deployed technology as opposed to for-hire operations. For-hire fleets were considered to be more interested in technologies that helped them locate and dispatch their trucks, while private fleets adopted on-board computer systems that monitored driver and vehicle performance. Private fleets were early adopters of electronic logs, for instance, while for-hire fleets were adopting GPS-based tracking systems.
The nature of each segment has changed in recent years. Many for-hire fleets are also taking on brokerage and logistics work, while private fleets are hauling other people’s goods on their backhauls. Looming regulations requiring electronic on-board recorders for logkeeping have prompted for-hire fleets to deploy those technologies.
Pete Allen, CEO of Cadec, says that for-hire fleets are more interested in dynamic routing systems while private fleets seem more interested in route-based applications. But, “they are generally looking for the same thing.”
Mark Cubine, vice president marketing, McLeod Software, agrees there isn't much difference in the types of technologies for-hire and private fleets are now deploying.
Since some private fleet operations are relatively small operations within much larger companies, cloud-based or software-as-a-service products are attractive, says Brad Young, director of marketing at TMW Systems.
At one time, private fleets had been considered more likely to deploy on-board safety technologies, such as collision-avoidance systems or rollover prevention systems. While the deployment of such systems is still not widespread, for-hire fleets and private fleets are showing similar interest.
“I don't see a difference,” between private and for-hire fleets, says T.J. Thomas, director of marketing and customer solutions, controls group for Bendix. “The questions I get seem to be the same. They are facing the same challenges when they get out on the roadway.”
Looking forward, NPTC's Petty predicts future strides in productivity.
“The biggest missing value-added strategic plus for private fleets, and frankly the rest of trucking, is the lack of a standardized national increase in truck size and weights,” Petty says. “That alone would have a huge, huge impact on getting more product to market safer, more efficiently, with less people used and less crowding on the roads. It's probably going to take 10 years to get this done, but it's going to happen.”
John Lamonica would sure like to be able to get more pizza dough on his trucks. “What would really be nice would be if the trucks carried more weight, if we could get another 4,000 or 5,000 pounds on each truck,” he says.
In the meantime, though, he's looking at potentially expanding his California pizza dough business into neighboring states. “I like my trucks and hope we grow into a few more.”
Many private fleets have taken the lead in testing and implementing alternative fuels such as natural gas. Such moves are often part of larger corporate sustainability initiatives that help boostthe perception of the company being “green” with customers and potential customers.
“They're looking for alternatives, whether it's alternative fuels like LNG or CNG, or companies turning to solar power to operate liftgates,” says AmeriQuest's Bill McCouch.
GE Capital's Jeff Kaley says he gets a lot of questions about natural gas fuel, especially the requirement for regular inspections of compressed natural gas tanks, required every three years or 36,000 miles.
“Right now we've got a few fleets in our portfolio that are starting to use the Smith electric vehicles, but it's a small percentage. Fleet managers are looking for alternative fuel vehicles that meet their range and cost requirements, so that's a big area of focus for us,” he says.
Talon Logistics, the private fleet of food and fuel retailer Giant Eagle, is one fleet that's been proactive in the area of alternative fuels, both for its customers and its own fleet. In 2011, Giant Eagle unveiled its first two CNG fueling stations in the Pittsburgh area. With the help of a grant, it replaced 20 diesel-powered trucks with CNG-powered VolvoVNM daycabs.
Interactive training on-the-go for private fleet managers
Now private fleet managers can get access to the same type of professional training content as those earning the National PrivateTruck Council's Certified Transportation Professional designation.
NPTC teamed up with InstructionalTechnologies Inc. to create Fleet Management Online, an interactive training curriculum for transportation managers.
The training focuses on all aspects of a trucking operation, including:
• Fleet operational management,
• Safety, security and compliance,
• Human resources and workforce development, and
• Equipment and maintenance strategies.
Unlike the big three-ring binders that were the core of the CTP training, this interactive online training can be accessed via computer, smartphone or tablet. Each time you log in, the most up-to-date information on changing regulations will be there, including notifications of changes.
There are interactive elements such as videos, charts and graphs, downloadable worksheets, sample spreadsheets, and links to government websites and other resources.The system remembers where you left off, even on a different device. And you can take notes.
The curriculum is based on a job analysis study NPTC conducted of its members.The study identified 47tasks focusing on the knowledge, skills, and abilities essential to successful private fleet management.
Contributing Editor Jim Beach provided content for this article.