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.