In the face of a driver shortage and seemingly endless regulations, there seems to be little good news to come from 2016. Yet, in spite of all this there was some positive growth to come from the otherwise abysmal year for the freight industry. The dedicated trucking sector experienced some rather substantial growth, with one company experiencing as much as a 26.4 percent. When you consider that the top 25 trucking companies in the U.S. saw an overall drop in combined revenue, anything positive to show for the year is something to celebrate.
The dedicated trucking sector experienced some rather substantial growth.
Given that trucking freight rates are still under siege by weak demand and dropping fuel rates and surcharges, a number of companies are turning to dedicated fleets for their clients, according to the Wall Street Journal.
“So-called dedicated fleets, where shippers hire trucks to drive only for them, have swelled over the past year, even as large trucking companies cut the overall number of vehicles they operate, particularly in the “spot market,” where loads are arranged at the last minute. The shift is a sign that some carriers are bracing for months more of weak demand from shippers. While rates show some signs of recovering from a year-long slump, analysts don’t expect significant improvements until later in 2017,” according to the WSJ article.
Analysts don’t expect significant improvements until later in 2017.
The Advantages of a Dedicated Fleet
So why would a shipper chose to use a dedicated fleet? Well, there’s stability for starters, which goes both ways. Shippers that decide to work with a dedicated fleet means that they can lock in a rate and capacity. As for trucking companies, having a steady source of revenue can help to offset other flailing sectors in their business. However, while this seems to be a mutually beneficial arrangement for both sides, it’s not without a risk for the carriers as they risk missing out on opportunities when rates start to climb as their trucks are tied up in a long term contract.
Having a steady source of revenue can help to offset other flailing sectors in their business.
Overall, dedicated trucking offers the stability that has been missing (on both sides) for the trucking industry. Being able to have some predictability in an otherwise unpredictable time can be a boon to shippers and carriers alike.
How Does a Dedicated Fleet Work?
Rather than booking based on availability, contracting a dedicated fleet means that those trucks are reserved for the company who contracts them. A set rate is negotiated which isn’t subject to the volatile nature of the industry, which allows both the shipper and the carrier to plan on a certain rate regardless of what the future might hold. Carriers get steady business and the shipper has access to a fleet to get their goods where it needs to be when it needs to be there.
The shipper has access to a fleet to get their goods where it needs to be when it needs to be there.
“Implementing a dedicated fleet—assigning a group of tractors, trailers, drivers, and other resources exclusively to carry out operations for a chosen set of facilities or lanes in any transportation network—offers a number of potential advantages,” according to an article from Inbound Logistics.
“Among the benefits shippers may derive are, improved on-time delivery performance, guaranteed capacity, and reduced freight transportation costs. Relying on dedicated carriers’ transportation management expertise also frees shippers to focus personnel and financial resources on business operations, such as manufacturing,” they add in addition to a number of tips when it comes to helping you decide whether or not a dedicated fleet is right for your company.
Making it Work for Your Supply Chain
There are a number of shippers that can really benefit from having access to a dedicated fleet. One of the major advantages is when your company needs access to specialized equipment such as refrigerated units. There are, however, limitations to a dedicated fleet which means it might not always be suitable for every company. This article from The ELITE League goes into more detail about the companies that could benefit most from having access to a dedicated fleet.
Understanding the structure and limitations of a dedicated fleet can help you to make the decision.
Understanding the structure and limitations of a dedicated fleet can help you to make the decision between whether or not they’re the right fit for your business. For example, do you know if your business needs a network based fleet or a depot based fleet? Understanding the different structures of a dedicated fleet can help you to make the right choice and make the most of working with a dedicated fleet.
If you need stability, efficiency, and the reliability necessary to be able to focus on what really matters for your business, the customer, then a dedicated fleet might be the right choice for you.