"In the private fleet arena, we've seen dramatic examples of this optimization to lower the cost of logistics, to increase the productivity, getting goods to market in the most efficient manner possible," says Petty, who spoke about private fleet trends during a Stifel Nicolaus webcast on Monday. According to NPTC's independent private fleet benchmarking survey, 60% of private fleet companies expecting to add capacity in the short term.
Private fleets at a glance
Currently, private fleets represent 47.6% of trucking. They operate 75% of Classes 4-8 trucks, two-thirds of all Class 8 trucks (50% of new sales), and 75% of private fleet deliveries are less than 500 miles.
In the U.S. right now, there are about 200,000 private fleet companies, not include farmers.
Regarding the legislative and regulatory environment, Petty says the position of private fleets is largely consistent with the for-hire side of industry. Although, Petty says there is one area that could dramatically enhance productivity for private fleers: legislation to increase gross vehicle weight to 97,000 pounds GVW.
"We are able to show on the private fleet side several examples where larger trucks are permitted by state regulations where companies are able to deliver dramatically more product per day with consistent level of safey and efficiency to 80,0000 pound equipment," Petty says.
Optimizing for productivity
A capacity shortfall in the industry is projected to peak in late 2013, with 130,000 fewer trucks in the U.S. Petty says despite this statistic, companies with private fleets will be "masters of their own destiny."
"For companies that have private fleets, they will be at an significant advantage as they look to meeting the needs of their customers and having that capacity on demand when they need it," he says.
It also helps private fleets that 70% have their have own for-hire authority, meaning they sell unused capacity to the open market.
"We need not think of this as either or world, or one better than the other," Petty says. "It's a question of where the private fleet is best suited, under what applications and for what customers, and where dedicated 3PL works better. It's the combination of those that very often creates a matrix of optimized transportation."
Other growing trends that could give private fleets a productivity boost:
- Natural gas: "Is it the path to extending the private fleet edge? It could be," Petty says. "Domicile fleets and shorter length of haul are ideal conversion candidates. It does require an initial investment but we're seeing this as an important trend for private fleets."
- Slip seating: This is the practice of using two drivers in back to back work shifts using same truck. "Equipment itself may be operating 22 hours a day," Petty says. "This is for large operating fleets that want to make sure the equipment is getting most use in 24-hour basis."
- Onboard technology: Use of onboard technology has increased to 80% in 2012. "Onboard technology is a huge movement and goes a long way to helping explain why private fleets operate more efficiently today than in years past," Petty says.
Little worry regarding driver turnover
"Generally, trucking turnover ranges from ranges from 75% to 120% annually," Petty says. "Yet in private fleet market in 2011, we're at about 10% turnover. We have companies that have 2%, 4% and 6% turnover." The turnover they experience, he says, is largely due to drivers retiring or leaving because of illness.
"This retention is a huge competitive advantage," Petty says, "and it's one they use as a strong selling point for recruiting and retaining the new generation of drivers."
The low driver turnover rate might be largely due to driver pay being higher and the fact that drivers often play different roles than in for-hire fleets. Petty says up to 20% or more of private fleet drivers' work day is spent in non-driving functions such as unloading or setting up product. Some companies even refer to their drivers not as drivers but as customer service representatives.
"The relationship they have with customer makes them face and personality of company," Petty says.
The pay for private-fleet drivers is also an incentive to stick around. "Keeping drivers over the long haul is not inexpensive," Petty says.
He says private fleets have some of the best-paid transportation workers in the world, and starting pay continues to go up. According to NPTC, in 2011, starting pay came in at just less than $50,000 and max pay for private fleets was more than $80,000 dollars.
Petty says, "We have companies where 25-30% of drivers, with overtime, can make more than $100,000 a year."