Evaluating your private truck fleet: does the ROI make sense for your firm?

Do you have a full understanding of your company’s truck fleet costs and efficiency?

If not, you are not alone. According to the 2014 Private Motor Truck Council (PMTC) Canadian Private Fleet Benchmark study, 61% of companies do not benchmark their private truck fleet costs.

Benchmarking your fleet costs will position your company for future growth and provide you with the information and insight you need to fully understand your company’s strengths and weaknesses and gain a competitive advantage.

Running a private fleet has many benefits, including control over the delivery process, guaranteed truck capacity on-hand, driver training customized to specific situations, and the branding opportunity that comes with having your company logo rolling down the highway. While these benefits are important, there is more to consider when looking at the value of a private fleet.

Without a full understanding of your fleet costs and efficiency, you won’t know if the ROI makes sense for your company. According to David Cullen in “Rethinking the Private Fleet”, “The impetus to starting a private fleet is due to corporations wanting the control they cannot get from for-hire [LTL and truckload] fleets.” The article goes on to say that “[fleet managers] may have difficulty truly understanding and acting upon their operational costs”.

A 2013 study by Ernst & Young revealed that the majority of companies do not fully understand their fleet total cost of ownership (TCO), and have systematic biases when evaluating fleet options. According to the study, “…trucking fleet managers have historically not considered detailed total cost of ownership benchmarks to measure fleet management and cost effectiveness and efficiency.”

The challenge in determining a private fleet’s TCO is calculating both the “hard” and “soft” costs. The hard costs – items such as truck payments, tires, maintenance, insurance, fuel, and driver wages – are relatively straightforward to identify and quantify. The more difficult costs to determine are the soft costs of fleet ownership, including administration time, safety training and on-going oversight, driver management, recruiting, and many more. Senior management time and attention is also a factor to be considered. Another area that is often overlooked for private fleet operators is the significant risk and liability that the business is carrying by running its own trucks. In a 2006 study by the U.S. Federal Motor Carrier Safety Administration (FMCSM), the cost to a company for a non-fatal crash averaged $195,258, while a crash that resulted in a fatality averaged $3,604,518 in costs to the fleet owner. One accident alone could spell financial ruin for some businesses.

For many Canadian companies, fleet outsourcing is a viable alternative to private fleet ownership. It offers many of the same benefits of a private fleet, but without the risk, liability, labour management, equipment underutilization costs, and capital cost of private fleet management. And according to Clifford Lynch in “Why Shippers Can’t Afford NOT to Convert Their Private Fleets”, “…many companies find that service levels measurably improve after a private fleet conversion…as does the company’s bottom line.”

To weigh the pros and cons of fleet ownership versus outsourced fleet management, Canada Cartage has introduced a series of three reference guides to help senior managers evaluate what makes strategic and financial sense for their company.
These guides include:

Fleet Outsourcing Evaluation Guide

• This 13-page introductory guide objectively covers the pros and cons of private fleet management versus outsourced fleet management

Fleet Management Self-Assessment Guide

• This interactive tool poses important questions in the areas of fleet management, safety, corporate risk, and regulatory compliance and calculates a fleet proficiency score for your firm – and helps you uncover areas of improvement

Private Fleet Total Cost of Ownership (TCO) Calculator

• The TCO calculator will help you to determine the true costs of fleet ownership so you can determine the ROI for your firm

These tools offer an objective way to conduct benchmarking of your private fleets versus industry standards and the outsourced alternative, as well as providing a total cost of ownership calculator. Once you’ve read and completed these three guides, you should have all the information you need to make an informed decision on insourcing versus outsourcing your fleet.

The first guide in the series is available at www.canadacartage.com/evaluationguide/. If you find the information valuable, there are detailed instructions on how to receive the other guides in the series.

For questions regarding the benchmarking process, please contact us at info@canadacartage.com.