dedicated contract carriage

Operating private fleets often provides fleet operators with a greater perceived sense of control over things like customer service, capacity, over-the-road performance, cost controls, safety and more. Yet, more and more private fleet operators are challenging their thinking and operating models by turning to dedicated contract carriage (DCC) solutions.

“Managing a private fleet is a daunting task,” said Kandice Nadeau, vice president of DCC solutions for Penske Logistics. “Companies interested in transitioning to a dedicated fleet are generally ready to minimize risk, outsource driver management and equipment maintenance and take advantage of new technologies.”

The Benefits of Outsourcing

There are several reasons private fleets choose to outsource transportation, but Nadeau said six stand out.

1. Risk Mitigation

Risk mitigation is often the main reason private fleets tap into DCC, especially as the number of lawsuits and high-dollar verdicts increase. A U.S. Chamber Institute for Legal Reform study found that verdicts started accelerating in the 2000s. Nuclear verdicts — those over $10 million — have increased, but even smaller verdicts and settlements can be inflated and severely impact a trucking company’s operations, according to the study.

“A lot of companies don’t want to deal with it anymore,” Nadeau explained, adding that Penske Logistics has unwavering safety standards, invests in late-model equipment and uses a powerful mix of technology and training to improve safety.

2. Driver Management

Recruiting, training and retaining drivers can be challenging, and high driver turnover or a lack of drivers can impact customer service. “Managing drivers can be a large task depending on the size of the private fleet,” Nadeau said.

Penske Logistics has more than 10,000 drivers and uses a centralized Driver Hiring Center to attract, onboard and help retain its drivers. Penske also works with private fleets to transition their company drivers to DCC. “Oftentimes, the drivers are considered an extension of the customer’s family, and we view our drivers the same way. We strive for seamless driver transitions,” Nadeau said.

3. Fleet Maintenance and Uptime

Equipment maintenance has gotten more complex, and maintenance costs are increasing throughout the trucking industry. The American Transportation Research Institute’s Analysis of the Operational Costs of Trucking: 2023 Update found that repair and maintenance costs rose by 12%. “Depending on [their] fleet’s age, companies will find their maintenance tends to creep up, or service is impacted by their inability to keep those tractors on the road,” Nadeau stated.

Unscheduled maintenance and roadside breakdowns can cause delays and disrupt service. Plus, the number of roadside violations fleets experience can increase if equipment isn’t properly maintained. Penske has created a robust preventive maintenance program that helps reduce the risk of downtime. If a breakdown occurs, replacement vehicles are available to keep freight moving.

For private fleets operating on-site shops, Penske coordinates with Penske Truck Leasing, which operates shops nationwide and provides on-site service at customer facilities, to help transition technicians.

4. Increased Visibility

Expectations surrounding visibility continue to rise, and supply chain partners expect real-time information on their loads. “They want to know where their freight is and when it will get to its destination,” Nadeau said.

Increased visibility also has operational benefits. It improves the flow of inventory, boosts customer service, optimizes routes, syncs deliveries with production schedules and mitigates supply chain disruptions. If a disruption occurs, having real-time visibility helps speed reaction time, resulting in significant savings and better service.

Penske’s ClearChain[AT1] ® technology suite connects all pieces of the supply chain on a single platform, which not only increases visibility but also improves decision-making.

5. Fluctuations in Demand

Seasonal surges, planned promotions or other shifts in production can increase capacity needs. “In the DCC network, we have several ways of flexing up and down,” Nadeau said. “Because we have such a big footprint, we have customers with countercyclical cycles, shifting resources to a location that is surging to help offset our customers’ needs.”

Penske can also tap into its elite driver team, which is made up of about 80 drivers who are brought in as needed to any location across the country. “Another option is partnering with our brokerage team when the volume increases. We can also work with our freight management team to plan ahead,” Nadeau said.

6. Regulatory Compliance

The number of regulations the trucking industry must comply with continues to increase at both the state and federal levels. California, for example, has new regulations fleets and drivers operating in the state must adhere to. “As companies move to a dedicated fleet, they can shift some of those responsibilities so they’re not having to track these ever-changing requirements,” Nadeau said.

The Conversion Process

Penske can meet with companies considering a transition to a dedicated solution to discuss costs, equipment, value and service. “We work closely with our customers to have open dialogue, transparency and collaboration throughout the solution development to have a seamless transition for Penske to become an extension of their business,” Nadeau said.

Every private fleet conversion is customized to meet each customer’s needs. “We have a team that works with our customers to make sure we have the right people in the right place at the right time to move as quickly or slowly as our customer needs,” she said.

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Change can be hard, especially in complex operations with multiple moving parts. In transportation and logistics, the stakes can be even higher — ensuring business continuity, maintaining legacy knowledge and business data, and retaining staff are all top priorities when a transition occurs. Penske Logistics has transitioned hundreds of companies to its dedicated contract carriage services and has developed critical best practices to minimize disruptions and maintain continuity.

“One of the most critical things we do is ensure we have a good communications plan,” said Jeff Jackson, president of Penske Logistics. “We have a dedicated project management team that runs the implementations, and we put together robust customer-specific plans that provide full visibility so they can see where we are with the launch and have full transparency.”

One of Penske’s more significant transitions involved 35 sites and 400 drivers and was done in one day. “We sent teams to 35 sites to make the announcements and train and onboard drivers. We had over a 90% stick rate, meaning we kept nine out of 10 drivers,” Jackson said.

Retaining Talent

Employees are critical to a smooth transition. “In most cases, our objective is to retain all the customer’s existing drivers, provided they meet our hiring requirements. Our driver hiring center is engaged early on and provides a white-glove treatment to new drivers. We have a centralized team that does nothing but engage with drivers, which helps with continuity concerns.”

Additionally, Penske has over 11,000 drivers on staff and offers a breadth and depth of talent for any additional needs. “We also have an elite driver program with 100 drivers in various parts of the country and dispatch them for three to four weeks at a time. We can leverage that program to bring drivers in early to fill any gaps,” Jackson said.

As a best practice, Penske errs on the side of caution and tends to over-resource initially, pulling in extra drivers and equipment from its internal resources to reduce the risk of disruptions. “We have a dedicated person with Penske Truck Leasing who works with logistics and will handle the transition. It takes a huge burden off to know we have equipment available, and we’ll have priority when the fleet utilization is high,” Jackson said.

Penske also has a full suite of training videos covering various topics, from leadership to core functionalities. “It is easy for our team to train new staff quickly, which leads to a clean transition early,” Jackson said.

Maintaining Knowledge

It is essential to maintain critical data and information, which include electronic data and employee knowledge, and successful integrations are key. “We like to connect IT to IT, and HR to HR, and have those teams work together directly. They speak the same language and can run testing before the implementation starts,” Jackson said.

Penske Logistics has made extensive investments in technology and has expertise in IT integrations to ensure nothing is lost. “We have integrated with all kinds of TMS and ERP systems,” Jackson said.

On the labor front, Penske wants to understand the current compensation and benefits packages. “We have our own, but we want to know if ours is superior or inferior. We want to keep drivers whole,” Jackson said, adding that Penske’s strategy is not to move wages backward and this makes the compensation process as easy as possible. Plus, some customers fund retention bonuses to incentivize employees to stay.

Emphasizing Communication

A large part of a project’s overall success comes down to communication, starting with the request for proposal. “When companies put an RFP out, they need to have confidence that it represents the real solution. That is a common pitfall,” Jackson said, adding that the best start-ups happen when the customer looks at their processes and data before they come in so they can communicate them clearly. “The more transparent they can be with us, the better we can be. It takes both of us to partner to get the transition done.”

External communication is also important, so the customer’s sales department must understand the reason for the change and the value it will provide. Then they can articulate it to their customers. “Sales cannot be out of the loop. Customer communication is key,” Jackson said. “You have to build trust, and you need to build it quickly.”

With a robust communications plan, access to a wide range of internal and external resources, and extensive experience transitioning companies to dedicated contract services, Penske Logistics possesses the tools and experience to ensure a smooth transition with minimal disruption.

Transporting goods is a complex process, and the trucking industry faces a wide range of operating challenges. Shifts in capacity, fluctuating rates, rising insurance and fuel costs, and the ongoing driver shortage create uncertainty for shippers. At the same time, customer service demands and regulatory requirements continue to increase, leaving many shippers looking for a solution that will provide secure capacity, steady rates, and high levels of service, all while mitigating the risks of operating a private fleet.

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When it comes to choosing a Dedicated Contract Carriage (DCC) provider, it’s important to identify your requirements and fully understand the benefits of a well-structured DCC arrangement before starting the selection process. That’s why we created this guide – to make available the critical information you need to make the best decision possible. Whether you currently operate a private truck fleet, utilize common carriers, or are evaluating the options available in ground transportation, this booklet will be a helpful resource in determining if DCC is right for you. It also provides a “how-to” in selecting a specific provider as your dedicated carrier.

There are many new entrants into the DCC market as the product continues to evolve. The more you know about DCC, the better decisions you can make for your transportation needs.

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The second largest dedicated contract carriage provider

Penske Logistics acquired Black Horse Carriers in December 2020, integrating with the existing dedicated contract carriage (DCC) operations, and joining the already expansive DCC network in North America. Penske Logistics handles deliveries for various leading companies in a wide range of industries, including automotive, CPG, food, grocery, beverage, manufacturing, quick-service restaurants, healthcare, and convenience store chains.

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Penske Logistics, a leader in dedicated contract carriage solutions, has combined the operations of Black Horse Carriers, bringing together great career opportunities nationwide.

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Dedicated contract carriage (DCC) is a third-party service that dedicates equipment (vehicles) and drivers to a single customer for its exclusive use on a contractual basis. Using a DCC allows shippers to reduce costs, increase truck capacity and transfer liability. It provides all the benefits of owning a fleet while avoiding the worries. Some DCC providers also take on white-glove responsibilities, such as direct store delivery, front-door delivery, customer interaction, cross-docking and more.

Penske Logistics is proud to recognize and welcome 22 drivers into its 2020 and 2021 Diamond Classes, the highest level of safety recognition at the company. The inductees have achieved 20 consecutive years of preventable incident- and injury-free driving, an accomplishment that less than 1 percent of Penske drivers achieve.

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A pair of Penske Logistics professional truck drivers are finalists for the 2022-2023 American Trucking Associations (ATA) America's Road Team. PJ Singh and Scott Wood are among the 36 finalists announced this week by the ATA. Singh and Wood have a combined 50 years of industry-leading safe driving experience.

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Penske Logistics customer Cardinal Health has been employing a pair of Kalmar T2E electric truck yard tractors at its Riverside, California, facility for the last year. The overarching goal is to assess how implementation of electric vehicles can establish more efficient and sustainable operations.

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For the past 17 years, the American Transportation Research Institute (ATRI) has released its yearly report on the top issues facing the transportation industry.

The annual report is based on ATRI's vigorous surveying system, a cumulation of responses from truck drivers, motor carriers and other industry stakeholders. Each respondent ranks their top three concerns from a list of 30 pre-determined topics – along with their top three preferred approaches to address each main issue head on.

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Paving the way in innovative transportation and logistics solutions, Penske Logistics has been selected as a 2021 Top Trucker by Inbound Logistics.

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