Do I Use My Own Trucks Or A Common Carrier?

Do I Use My Own Trucks Or A Common Carrier?

Many growers call me here at Interstate and tell me they have their own trucks and drivers and they only use common carriers for the “occasional load.” They justify this by telling me how common carriers are too expensive, so they bought their own trucks and trailers. My next question to them is always, “What is the cost of your freight as a percent of your shipped goods?” Surprisingly, few growers know or, even worse, they guess.

If you are shipping on your own trucks, you need to know what the true cost is. What is interesting about our business is the seasonal component. Consider this: if you were shipping a consistent amount of freight over 12 months, you would be getting near 100 percent utilization of your equipment. That means your trucks and drivers would be used five days (or more) each week for 12 months of the year.

However, most (perhaps all) growers do not run their equipment anywhere near 100 percent of the time, but for some reason, they insist on having trucks and trailers sitting idle, collecting dust until they are needed again. Because drivers don’t have consistent work, they tend to move on, only to be replaced again when the next seasonal need arises. If you have read this far, you may be saying, “Oh, that’s not me.” You may be justifying the fact that you use your own trucks, yet you supplement your needs with common carriers as needed. This may be a better solution, but not necessarily the best. Why? Simple economics. Maybe you remember Economics 101 and Adam Smith’s division of labor and the economies of scale? For a refresher course, please read on. 

 

Climbing Costs — No End In Sight

The bottom line is this: if you can get the same or better service from a provider that charges the same or less, it makes sense to outsource your transportation. Economically speaking, owning trucks and trailers is almost never going to be a cost-saving proposition. Fuel cost is through the roof and, some say, not coming down to those wonderful “inflation-adjusted 1983” levels. Insurance costs are insane. Drivers are hard (some say impossible) to find. Maintenance is a pain, and costly, too. Oh, and did we mention the lease payments for the equipment (or the cash you used to buy it)?

Anyone can see the inherent costs of owning the equipment and running it is up and it keeps climbing, with no end in sight.

However, the real advantage of outsourcing transportation rather than owning your own trucks is one that not many people consider. Your trucks must return back to your nursery or farm, usually empty or perhaps with a few of your racks. If your truck went 200 miles to its last delivery, the driver must turn around and drive back with nothing to show for it. If you ever do this, you have just doubled your cost of transportation. You are still paying fuel, driver pay, maintenance costs, wear and tear, which is draining your bottom line. On top of this, the wasted money has an “opportunity cost.” The use of that money for other things, such as more advertising, sales staff, new crops or just putting it in an interest-bearing account, could actually provide a return.

Over the last year, we have done many projects at Interstate where we look at a grower’s total transportation cost outlay and analyze what the cost would have been if a properly focused and managed transportation outsourcing program would have been in place. The results are often very surprising and almost always in the favor of the grower using common carriers and logistics companies.

Remember, an outsourced transportation plan can take many forms. You may decide to work with a set number of “core” carriers. You may decide to work with one carrier. The key to every program, however, is its ongoing management and setting the correct expectations with your carrier partners. This starts with a simple communication plan and choosing the right partners for your needs. 

Choosing The Right Partner

A good partner will be fairly priced — that is a given. But more importantly, it will provide better service than you could with your own trucks. Remember, problems with maintenance, drivers, breakdowns, insurance and DOT audits are now the responsibility of your core carriers, not you. Strategically, you should give them enough business to be important throughout the year, but not too much that they don’t have the extra “surge capacity” you need when the season hits its peak. You want core carriers that will divert capacity away from their other customers to fill your seasonal peaks. This comes from a simple “load allocation matrix” and will set out the seasonal expectations before the needs arise.

Common carriers, when managed correctly, will almost certainly save you money. Managing them correctly is the key. Using spreadsheets and white-boards will not cut it in today’s fast paced world. You need to look to automate your transportation needs using commonly found software (go to www.interstate-transport.com for more information).

So, the question begs, “Is there a situation when owning your own trucks does work?” The answer is yes. For growers, that almost exclusively means that to deliver locally (less than 100 miles or so), you need your own trucks. A common carrier will simply not be interested in your freight unless these “local” runs are part of a larger program.

The other scenario is if you are a huge shipper (with relatively consistent freight for 10 months or more each year) and you are willing to start your own common carrier trucking company. This will allow you to deliver to any location and get a “backhaul” load back to your nursery or nearby. This means your truck is full almost all the time with paying freight from either you or a third-party shipper. This decision takes some heart though. You will actually own a trucking company, along with all the headaches that come with one.

The vast majority of growers simply aren’t willing to take this difficult step. Those that do generally don’t stay in the trucking business for more than a year or two. If you are a large shipper, a good option is to outsource the trucking company operation to a proven carrier or logistics company and then provide them with office space at your location. They staff it, you use it. This can be the best of both worlds.

Hopefully you will make the decision to look closely at your transportation spending before the next season hits. The off season is the perfect time to see if outsourcing your transportation needs is right for you. The analysis will take you 30 to 60 days and the implementation 30 to 90 days depending on your expertise in this area. Most growers tell me they want to focus on growing and the trucking can be handled by those who have the expertise. Those growers are right on the money!

Leave a Reply

More From Finance/Operations...
Pansy ‘Cool Wave Blue Skies’ (Wave)

September 20, 2016

PanAmerican Seed Settles Alleged Trade Sanction Violations

PanAmerican Seed, a division of Ball Horticultural Co., has been charged with violating trade sanctions to Iran over a number of years. According to a release from the U.S. Treasury department, PanAmerican Seed made 48 indirect sales of seeds to two Iranian distributors. The company shipped the seed to consignees based in countries in Europe and the Middle East. PanAmerican Seed’s customers then arranged for the re-exportation of the seeds to Iran. The release states that the Office of Foreign Assets Control (OFAC) determined PanAmerican Seed did not voluntarily self-disclose the alleged violations to OFAC, constituting an egregious case. “We believe that the settlement was extreme; however the alternative was to litigate with the U.S. government, which would take months, if not years,” says Todd Billings, Chief Financial Officer for Ball Horticultural Co. When asked what Ball Horticultural Co. has done to ensure that violations to trade sanctions do not […]

Read More
young-plants

September 20, 2016

The Top Young Plant Growers, And Four Critical Challenges Facing Them

In Greenhouse Grower’s 2016 Top Young Plant Growers Survey, growers discuss the latest challenges and opportunities in fulfillment, shipping, labor, and crop protection.

Read More
Cavicchio Greenhouses

September 6, 2016

Cavicchio Greenhouses Wins Inaugural Sustainability Award

The Sudbury, MA, growing operation sustains more than 250 acres of annuals, perennials, and nursery stock, with a number of practices to mitigate its impact on the environment.

Read More
Latest Stories
Pansy ‘Cool Wave Blue Skies’ (Wave)

September 20, 2016

PanAmerican Seed Settles Alleged Trade Sanction Violati…

PanAmerican Seed, a division of Ball Horticultural Co., has been charged with violating trade sanctions to Iran over a number of years. According to a release from the U.S. Treasury department, PanAmerican Seed made 48 indirect sales of seeds to two Iranian distributors. The company shipped the seed to consignees based in countries in Europe and the Middle East. PanAmerican Seed’s customers then arranged for the re-exportation of the seeds to Iran. The release states that the Office of Foreign Assets Control (OFAC) determined PanAmerican Seed did not voluntarily self-disclose the alleged violations to OFAC, constituting an egregious case. “We believe that the settlement was extreme; however the alternative was to litigate with the U.S. government, which would take months, if not years,” says Todd Billings, Chief Financial Officer for Ball Horticultural Co. When asked what Ball Horticultural Co. has done to ensure that violations to trade sanctions do not […]

Read More
young-plants

September 20, 2016

The Top Young Plant Growers, And Four Critical Challeng…

In Greenhouse Grower’s 2016 Top Young Plant Growers Survey, growers discuss the latest challenges and opportunities in fulfillment, shipping, labor, and crop protection.

Read More
Cavicchio Greenhouses

September 6, 2016

Cavicchio Greenhouses Wins Inaugural Sustainability Awa…

The Sudbury, MA, growing operation sustains more than 250 acres of annuals, perennials, and nursery stock, with a number of practices to mitigate its impact on the environment.

Read More
Charlie Hall Feature Image

September 6, 2016

10 Insights From Charlie Hall’s Green Industry Economic…

With the uncertain current economic climate, Texas A&M economist Charlie Hall says now may be the perfect time to invest — as long as you do it smartly.

Read More
Penn State Plant Bud

August 23, 2016

AmericanHort Is Helping Plant Importers Adjust To New R…

A report from Craig Regelbrugge at AmericanHort says the government is implementing a streamlined system for imports, in which all required data will be submitted electronically through a single window.

Read More
Plug Connection Assortment

August 9, 2016

AmericanHort’s Plug And Cutting Conference Will Feature…

This year’s conference, which takes place Sept. 19-21 in Carlsbad, CA, features discussions on water, pest and disease control, and production inputs, as well as a biocontrols workshop and tour of local cuttings facilities.

Read More
Cannabis In Greenhouse

July 27, 2016

The Top 5 Myths About Cannabis Production Cleared Up

There is a lot of misleading information going around about growing cannabis. Industry insider James Lowe makes sure you know the truth about cannabis production.

Read More
Joe Bischoff

July 26, 2016

SAF Partners With Cornerstone Government Affairs To Adv…

A new partnership between the Society of American Florists (SAF) and Cornerstone Government Affairs ensures that SAF will continue its highly effective work advocating for issues that affect the floriculture industry. “SAF and Cornerstone together provide experienced voices on Capitol Hill to protect our growers’ interests,” says SAF CEO Peter Moran. “We’ll continue to move major policy priorities forward on behalf of small business and agriculture.” Cornerstone is a public affairs firm specializing in government relations, strategic consulting, and advocacy. Its team of more than 50 senior professionals includes former senior professional staff from both authorization and appropriations committees and the U.S. Department of Agriculture (USDA), as well as veterans of the horticulture industry. Agricultural and horticultural issues of primary concern to SAF members include access to labor, immigration, crop protection, international trade and other matters related to the day-to-day operations of growers. Before she retired this year, SAF lobbyist Lin […]

Read More

July 26, 2016

AFE Releases New Videos Highlighting Industry Successes

The American Floral Endowment (AFE) recently released five new videos, created to highlight floriculture successes through industry collaboration, support, and participation. “Each video shares real stories from industry members on career development through scholarships and internships, and true examples of research solutions that have shaped how the industry operates today,” says Laura Shinall, President of Syndicate Sales, Inc., and AFE Public Relations and Development Chair. “We’re excited to be able to share some great success stories in an effort to increase industry participation.” The introductory video “Heard of the American Floral Endowment?” helps educate those who aren’t currently aware of AFE’s programs, while other segmented videos (retail, wholesale, grower) share how Endowment programs complement each group and why it’s so important that everyone in the industry participates: Retail Florists Share Why They Turn to AFE New Resources for Floral Wholesalers and Suppliers AFE Helping Growers Profit Ready for a Career in Floriculture or Horticulture? […]

Read More
Briscoe White, Growers Exchange

July 6, 2016

The Grower’s Exchange Unlocks The Secret to E-Commerce

In the Internet era, Briscoe and Kenan White knew they had to adapt or die and specialize to survive. Here’s how they took The Grower’s Exchange online.

Read More
Brie Arthur

July 6, 2016

5 Can’t-Miss Events To Watch For At Farwest 2016

Whether it’s classes on biocontrols and gardening trends, or networking opportunities in and around the trade show floor, there’s plenty happening at Farwest 2016 in Portland, OR, in August.

Read More
Cannabis states 2016

July 1, 2016

Adult Use Of Cannabis On The Ballot In 2016

25 states have legalized cannabis and public opinion is increasingly positive. Here’s where things may be headed as we move toward the fall elections.

Read More
Practical Software Grower Vertical

June 18, 2016

Practical Software Solutions Increases Accessibility, E…

Practical Software will demonstrate Grower Vertical, its customizable and scalable enterprise management system for the horticulture industry, at Cultivate’16 in July.

Read More
Battlefield Farms Company shot

June 14, 2016

Battlefield Farms Is A Finalist For 2016 Operation Of T…

Battlefield Farms in Rapidan, VA, is one of three finalists for Greenhouse Grower’s 2016 Operation Of The Year award and winner of the Excellence In Innovation award for 2016.

Read More

June 7, 2016

Ball Seed Offers Full Mobile Ordering Capabilities With…

The latest update for Ball Seed’s WebTrack To Go mobile app now includes full ordering capabilities for the industry’s largest assortment of seeds and plants. App users can also complete order fulfillment via seed count or package size, find product substitutions, get personalized “contact us” information, request plant tags, and more. “Upgrading WebTrack To Go to the full suite of ordering and management tools is where we’ve always wanted to be,” says Mark Morris, Director of IT for Ball Seed. “With this new roll-out, we’re keeping up with our customers on-the-go and providing them the information and access they need –- even while away from their desks.” The Ball Seed WebTrack To Go app lets customers: Check order status and shipment tracking 24-7 Access up-to-the-minute product inventory from hundreds of suppliers Place orders by seed count, packet size, and more Find product info, culture and photos when and where they […]

Read More
Gotham Greens Atrium Style Greenhouse Chicago

May 23, 2016

What’s Good For The Environment Is Good For Business [O…

Investing in technology to become more sustainable “always goes hand in hand,” says Abe VanWingerden, co-CEO of Metrolina Greenhouses. “If it is good for the environment, it normally is good for business over the long term.” That connection was abundantly clear in the responses we received to this year’s Top 100 Growers Survey. VanWingerden points to three investments Metrolina has made as good examples of how technology can reduce an operation’s carbon footprint and pay dividends financially. Its biomass system burns locally sourced waste wood — a renewable resource; its ozone water treatment system cleans irrigation water, reducing the need for fertilizers and pesticides, and improving plant quality and precision growing; and electrostatic sprayers reduce water and chemical use, and provide more targeted chemical applications. Other Top 100 Growers have found VanWingerden’s theory to be true, as well. Costa Farms’ investment in solar energy panels on three buildings at its […]

Read More
Petunia 'Supertunia Violet Star Charm' (2015 University of Georgia Field Trials)

May 10, 2016

New Southern-Centric Ornamental Production Conference T…

The 2016 Academy of Crop Production is dedicated exclusively to sharing information on advanced ornamental crop production and business management techniques for ornamental producers.

Read More
University of Florida Online Greenhouse Training Courses

April 25, 2016

University of Florida Offering Online Training Courses …

There will be five courses offered, with the first starting on May 30. Courses are available in both English and Spanish and range from beginner level to advanced education.

Read More
[gravityform id="35" title="false" description="false"]