When you need to move truckload freight, you have several options of where and how to secure capacity (truck and driver).
However, who owns the truck and employs the driver will vary, and your strategy will change based on your business needs.
So when do most shippers use a private fleet? What about a dedicated fleet? And how do 3PLs fit into the mix?
We’ll cover the basics of private fleet trucking, discuss the similarities and differences between private and dedicated fleets, and explain how a 3PL can help make your supply chain more efficient (whether you’re a fleet operator or in need of fleet capacity).
- What Is a Private Fleet?
- Why Do Shippers Use Private Fleets?
- What Is a Dedicated Fleet?
- Why Do Shippers Use Dedicated Fleets?
- Private vs. Dedicated Fleets
- The Benefits of Working with a 3PL
A private fleet is shipper's in-house team of trucks that is primarily used by a shipper to transport its own goods to warehouses, stores and customers.
According to the National Private Truck Council (NPTC), the national trade association dedicated exclusively to private motor carrier fleets, private fleets are operated by companies “whose primary business, such as manufacturing or retailing, is not trucking.”
Generally speaking, shippers with private fleets own their equipment (tractors, trailers, etc.) and employ their own drivers.
However, because private fleets support a variety of business models, shippers can also lease or rent their equipment and hire temporary drivers.
Either way, as long as the shipper responsible for the transportation (rather than outsourcing the equipment and labor to a third party), the operation is considered a private fleet.
A private fleet is an in-house team of trucks, operated by a shipper whose primary business is not trucking.
Shippers use private fleets when they have high-volume shipments on consistent lanes and want complete control over those shipments.
Private fleets guarantee shippers capacity, end-to-end network visibility, and control over how their company is represented on the road — thanks to branded equipment and uniformed drivers.
By hiring and training their own drivers, private fleet shippers get a dedicated customer service representative on every load, as well as a rolling billboard on the road and in-and-out of their customers’ lots every day.
5 Reasons Shippers Use Private Fleets
- Guaranteed capacity
- Complete visibility
- Customer service
- Specialized equipment needs
- Branding and advertising
With private fleets, shippers are responsible for:
- Buying and maintaining equipment
- Insuring their assets
- Hiring and compensating drivers
- Paying for fuel
- Maintaining regulatory compliance.
Although shippers should not take these considerations lightly, those who utilize private fleets do so because the benefits of sourcing their own equipment and labor can outweigh the accompanying risks.
Buying vs. Leasing Private Fleet Equipment
Often times, private fleets are comprised of modified or non-standard trucking equipment (trailers).
Shippers take two aspects into account when selecting equipment:
- The product they are shipping
- How they plan to deliver it
When shippers rely on specialized equipment, it’s more cost-effective for them to buy rather than lease their equipment.
Example: Last-Mile Deliveries
Rather than use a standard 53-foot freight trailer with swing doors meant for a loading dock, a shipper with a large volume of urban deliveries may purchase a shorter truck with a roll-up door and liftgate instead.
Swing doors, which are designed for maximum load clearance, are too wide for residential areas. Roll-up doors, on the other hand, are more efficient and don’t take up additional space.
When paired with a liftgate — a fixed piece of hydraulic or electric equipment that attaches to the back of a truck and moves up and down — roll-up doors make loading and unloading freight fast and easy.
Roll-up doors and liftgates are especially useful for last-mile deliveries, making them popular choices among private fleet shippers.
A dedicated fleet involves for-hire, third-party carriers (aka dedicated fleet providers) that own the tractors/trailers and supply their own drivers to operate the equipment, but provide dedicated service to the shipper.
Most commonly, shippers enter into a 2-4 year contract with a dedicated fleet provider.
During this period, the dedicated fleet provider handles most, or all, of the shippers' transportation needs for the agreed lanes and/or geography.
To set up a dedicated fleet, shippers host a bid to secure capacity from one or more dedicated fleet providers on a contractual basis.
Once shippers sign a contract with a dedicated fleet provider, that capacity is fully available to the shipper.
A dedicated fleet is a for-hire trucking company that provides committed capacity to a shipper, usually involving a multi-year contract.
Shippers outsource their transportation network to dedicated fleet providers when they need guaranteed capacity, but want to avoid the financial risk associated with fleet management.
Because dedicated fleet providers own and operate the trucking operation, shippers are not responsible for equipment purchase and maintenance, driver training and compliance, or asset insurance.
Though the dedicated fleet will be focused on that shipper’s freight, even the most efficient networks can’t keep every driver loaded all the time.
To make use of this excess capacity, the shipper and dedicated fleet provider may enter into a revenue-sharing agreement.
This mutually beneficial arrangement allows the dedicated fleet provider to haul freight for other shippers when they are not busy with their primary shipper’s business.
The easiest and best way to do this is with a 3PL, which can leverage its extensive transportation network to help shippers (and carriers) eliminate empty miles and generate additional revenue.
Revenue Sharing in Action:
Shipper A hires a dedicated fleet and loads it with freight from its warehouse to a retail location (aka a headhaul).
On the return trip (aka a backhaul) the dedicated fleet provider does not have a load, and has an empty trailer.
Shipper A or the dedicated fleet provider can work with a 3PL to source freight from another shipper in the 3PL’s transportation network to avoid driving back with an empty trailer (aka deadheading).
Regardless of which party sources the return load, both Shipper A and the dedicated fleet provider will be compensated based on the terms of the revenue-sharing agreement. Often, the dedicated fleet provider gets paid up front, then gives Shipper A an account credit.
In short, it’s a win-win situation.
The more volume, network density and consistency a shipper has, the more likely they are to use either a private or dedicated fleet solution.
While private and dedicated fleets both function as a capacity solution for shippers, the key distinction is who owns and operates the fleet.
- Shipper owns or leases the assets (trucks, trailer, etc.)
- Shipper manages the trucking operation
- Shipper employs their drivers
When to use: routes are more complex, involve multiple touchpoints and necessitate specialized equipment.
Why: eliminates uncertainty and gives shippers complete control of their supply chain.
- For-hire trucking company owns the assets
- For-hire trucking company manages the trucking operation
- For-hire trucking company employs the drivers
When to use: need a high degree of network control but value the flexibility that comes with outsourcing.
Why: predictable pricing, the ability to adjust capacity more easily in response to volume fluctuations and reduction of many risks associated with fleet ownership.
PRO TIP: When choosing between private and dedicated solutions, shippers need to ask the following questions:
- Can we afford to own our fleet?
- Is owning our fleet worth the accompanying risks?
- Does personally delivering our products significantly benefit our customers?
If you answered “no” to most or all of these questions, then a private fleet is probably not the solution for you.
Shippers with both dedicated and private fleets can benefit from working with 3PLs.
Let’s take a look at how 3PLs can help both shippers who have capacity (available trucks and drivers) as well as shippers in need of capacity.
1. Create revenue-generating backhaul opportunities for shippers with capacity.
Underutilized assets and empty miles can hurt a shipper’s bottom line. Private fleet shippers rely on revenue-generating backhauls to help offset the cost of fleet ownership.
Dedicated fleet shippers count on third-party backhauls to offset their expenses too.
By arranging consistent, compatible freight, 3PLs provide opportunities for private and dedicated fleet shippers to cut costs, reduce waste and inch closer to their annual sustainability goals.
Example: Coyote provided consistent backhaul opportunities for a large brewing company and filled 900,000 empty miles in a single year, which allowed them to offset their fleet costs with additional revenue.
2. Create cost-effective transportation solutions for shippers in need of capacity.
A 3PL can use their expertise and technology to match empty private fleet capacity (backhauls) with shippers that need capacity.
These create highly efficient, reliable and cost-effective capacity solutions.
3. Reposition private fleet trailers.
Shippers that own or lease trailers often experience network imbalances, where trailers stack up at certain locations. Repositioning this empty equipment can be operationally difficult, pulling private fleet drivers away from delivering on their core responsibilities.
A 3PL with a dense power only network can arrange for more efficient carrier options to reposition trailers.
4. Effectively eliminate the need for an in-house sales team.
Rather than spend time and money training a sales team to help them source new freight opportunities, private and dedicated fleets with excess capacity can access loads directly through their 3PL.
Some 3PLs, like Coyote, offer committed freight opportunities to shippers with private or dedicated fleets.
How Coyote Can Help
At Coyote, we have an entire team of subject matter experts focused on arranging private and dedicated capacity.
Shippers with empty fleet capacity can access:
- Consistent freight to maximize the use of your leased and owned assets
Shippers in need of capacity can access:
- Drop trailer solutions
- Scalable dedicated fleets
- Help managing volume surges
If you want to see how Coyote's private fleet specialists can help your supply chain, whether you want to generate revenue with empty fleet miles, or need an innovative source of dedicated capacity, talk to a private fleet specialist.