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Tips and Tools for Evaluating the Use of Dedicated Fleets

By Jeff Metersky, VP, Customer Success Strategy, LLamasoft, Inc.

Jeff Metersky, VP, Customer Success Strategy, LLamasoft, Inc.

Managing the balance between cost and service is a pervasive challenge for nearly every supply chain professional when managing their transportation strategy. Pair that with an increasingly competitive marketplace, and determining the right approach is formidable. Nearly every organization requires or at least considers outsourcing some of their transportation needs at one point of another, but what are some of benefits or considerations when opting to use private, or dedicated, fleets?

Specific Needs

Often dedicated fleets are deployed when there are very specific requirements that need to be met. This can depend on the company and their end customer. These considerations include when the product requires specialized equipment, such as curtainside or lightweight trailers. These items not only require specialized equipment for transfer, they depend on drivers as the customer-facing representative of the company. Some companies with a customer base that requires complex or time-consuming deliveries may want to offer white glove service. Other considerations like multi-stop routes, driver uniforms with company logos and equipment branding can also drive the decision to utilize dedicated fleets.

"Supply chain design can help companies weigh the costs and potential risk factors that are common among companies that leverage fleets versus carriers"

Balancing Uncertainty

Forecasting future capacity in the carrier market is akin to forecasting the price of fuel: it is nearly impossible to do. While there is a baseline of uncertainty in any situation, leveraging dedicated fleets can serve as a means of hedging bets against future capacity changes. But then how do you determine which freight to carry via dedicated fleet versus what should be outsourced to an external carrier?

What may seem like a simple cost issue is not so due to the ripple effects of each decision. For example, once a fleet is in place, keeping a steady flow of work to all drivers on the payroll is imperative. Jumping between options to net the best price can lead to fluctuations in work, which can lead to high driver turnover and inconsistencies in coverage. The economics of a decision can change when backhauls are available to the dedicated fleet side of the operation and can impact service capacity (although fleet operators must be careful to avoid the temptation of operating like a carrier when considering backhaul opportunities). Lastly, are there delivery locations notorious for excessive wait times? Delay charges can rapidly exceed the savings that avoiding shipping costs would provide.

Using Supply Chain Design Technology to Overcome these Challenges

What is the right choice for you? Supply chain design technology can help you make the most strategic decision for your organizational goals. Leveraging supply chain design can help companies weigh the costs and potential risk factors that are common among companies that leverage fleets versus carriers. Sensitivity and scenario analysis can provide companies with not only the information required to know when fleets should be increased or decreased based on fluctuations in one-way freight costs, but also provide them with the opportunity to test out these scenarios within the safe confines of a model prior to real-world implementation. An unlimited number of sensitivities can be tested depending on the organization, such as deploying lightweight equipment, future fuel costs, merging freight from multiple facilities, greenhouse gas emissions reduction goals and much more.

You can also leverage transportation optimization in concert with network optimization. Network optimization on its own is very useful in identifying high-level costs associated with transportation. However, it only uses average costs and shipment sizes with no concept of multi-stop routes and cannot answer the question of how routes might change when the network changes. The two technologies complement one another. Using transportation optimization you can verify the route efficiency of network sourcing allocations outputs. Additionally, transportation optimization’s outputs can help in calibrating lane based costing allocation for network design. Network optimization is the right tool for evaluating sourcing, production or inventory decisions but is even more powerful when used in tandem with transportation optimization.

By implementing the use of this optimization technology as a business process, supply chain leaders are able to make fleet decisions based on facts, with the confidence that they are making not just the right choice for today, but for tomorrow.