Higham: One Transportation Solution
Need your own fleet of trucks? Interstate Transport's Tim Higham suggests growers try Dedicated Contract Carriage.
June 24, 2011
Dedicated Contract Carriage is one of the fastest growing segments of the trucking and distribution industry. Companies like Walmart, Target, Kroger and a host of name brand distributors use Dedicated Contract Carriage as a way to reduce costs, increase truck capacity and transfer liability and headaches. In fact, many major corporations that need a truck fleet are moving away from ownership (including leasing) and toward Dedicated Contract Carriage for some or all of their trucking operations.
Generally, you have four options when moving your material to your customer locations. The first three of these options are relatively common - and 99 percent of growers fall into one of these three categories.
First, you can buy your own trucks (and I include leasing or renting trucks in this category). Second, you can outsource the entire job to a third party (a third party logistics provider, 3PL or a broker). Third, you can try to manage a combination of trucking companies, brokers and your own fleet. Each of these solutions work for many - but Dedicated Contract Carriage is another option that is gaining rapid traction.
With Dedicated Contract Carriage, you get the benefits of owning and operating your own fleet, but without the headaches or cost. Moreover, Dedicated Contract Carriage not only combines the benefits of owning your own fleet of trucks, but it takes away the huge liability issues of running your own trucks. It transfers the operational headaches to the service provider (including driver hiring and retention), removes your responsibility of staying on top of ever-shifting governmental DOT regulations and, in most cases, reduces your overall cost of distribution
In a nutshell, Dedicated Contract Carriage gives you your own fleet, minus the operational headaches, for a flat rate per mile billed to you monthly for all miles the trucks move. As long as you pay the mileage rate for every mile the truck runs (including empty miles), subject to a minimum per week or month, you get a turnkey trucking solution. You can even have your company's name on the side of the trailer, smartly uniformed drivers and be involved in every aspect of the day-to-day operations (or not, as the case may be).
For example, if today you have 10 trucks (tractors, trailers, drivers) on your books, you are responsible for monthly payments, maintenance, DOT regulations, insurance, driver hiring (and firing), maintaining a separate corporation (to mitigate liability) from your nursery and perhaps hiring separate staff to help keep up with backhauls. Basically, you are running a trucking company in order to service your customer base. But with Dedicated Contract Carriage, you turn over the entire operational activities of your trucks and the liabilities to a third party. The third party, usually a trucking company or 3PL, assumes all operating costs, maintenance, insurance, staffing - everything!
The trucks are still flying your name on the trailers but the tractors, where the official DOT numbers are located, are that of the trucking company or 3PL running your trucks on your behalf. In fact, the trucks and trailers act as if they are your own. They park at your facility (if you want them to). You see the same drivers every day. You can dictate that the drivers wear your uniforms, follow your policies and procedures, and maintain the high standards you aspire to in your nursery operations.
Also, if you choose the right 3PLs to manage your fleet, then you have the amazing ability to fill a portion of a your traditionally "empty" miles by sharing in the profits of their backhaul loads. In other words, the company managing your trucks should have the ability to fill many of your empty miles with paying freight for other shippers. Many have visibility into freight that is available from in-house managed transportation services and even external brokers. The most successful accomplish this by managing everything from the same IT platform, making sure there are no empty trucks passing on the road.
The advantages are clear, but Dedicated Contract Carriage is not for everyone. In order for it to work you need to pull out your calculator and spend 10 minutes running some rough math. If you say "yes" to the checklist items below, then Dedicated Contract Carriage may well work for you.
- You ship at least some material for eight months or more throughout the year.
- You run local or regional operations (4 or 5 states or less) with frequently recurring deliveries.
- You want the same drivers every day or week (ideally with uniforms) to represent your brand.
- You don't want to "run a trucking company"
- You want to transfer the liabilities associated with trucking to someone else.
Again, Dedicated Contract Carriage is one of the fastest growing segments of the trucking industry. But it only works if you can keep the trucks that are under contract for you busy. Providers of Dedicated Contract Carriage will want a guaranteed amount of revenue per week in order to maintain your operational requirements and to retain your drivers. While this is not so different from owning trucks (you will still end up paying a minimum amount if the truck just sits in your yard), the trick to making Dedicated Contract Carriage work for you is in deciding how many trucks you can consistently keep busy.
When you need additional seasonal surge capacity you can always go to the market for the additional trucks you need - and thus pay the prevailing premium seasonal rates. However, with Dedicated Contract Carriage you, will always have your "own" fleet available throughout the year, with pre-determined costs, and only need to dip into spot-rated truck capacity during your busiest time of the year. As one grower told me: "I just want to grow great plants and get them to the stores. I don't want to run a trucking company. Dedicated Contract Carriage is the best of both worlds for us."
About the author: Tim Higham is the CEO of Interstate Logistics Group, the largest dedicated logistics provider to the horticultural market. You can eMail Higham at thigham@InterstateLG.com. Learn more at InterstateLG.com or call Higham, toll free, at 866-281-1281 x1323.
Tim Higham is the CEO of Interstate Logistics Group, the largest dedicated logistics provider to the horticultural market. You can eMail him at thigham@InterstateLG.com. Learn more at InterstateLG.com or call toll free at 866-281-1281 x1323.