Today’s transportation and logistics environment is incredibly complex and becoming more so. Navigating it is a core competency of a good 3PL.
Companies of all sizes face critical decisions related to fleet management on a regular basis. Making the right decision can have significant positive effects on business performance; making the wrong one can have dire consequences. Not surprisingly, many businesses are turning to third party logistics partners with core competency in this area to help them make the right choices.
The current transportation environment is very complex, and it’s rapidly becoming more so. “Companies are looking to partner with organizations that can help them navigate this very murky environment of what the future of transportation and fleet management looks like,” says Alex Madrinkian, vice president of national sales at Ryder System, Inc.
Assessing—and meeting— fleet management challenges
While needs and solutions may vary from business to business, there are several overriding fleet management challenges that most companies face:
- Regulatory and compliance issues. There is more regulation, it is more complex, and it is more vigorously enforced than ever before. It covers everything from driver certification and hours of service to the Federal Motor Carrier Safety Administration’s Compliance Safety Accountability program.
- Keeping up with rapidly changing vehicle technology. Today’s truck engines are highly computerized and require specially trained technicians to keep them in top running condition. Additionally, onboard technologies like electronic logging devices (ELD), route optimization software, and driver communication tools are increasingly complex, and the pace of change in this area is accelerating.
- Fueling the Trucks of the Future: Advanced fuel systems such as electric and hydrogen powered vehicles, as well as autonomous vehicles, are shaping the future of the industry. Just as electric vehicles offer enticing environmental and economic benefits, they promote the integration of connectivity through additional monitoring of subsystems compared to combustion engines.
- Asset management. Getting the best deal on purchased commercial vehicles is just one part of this challenge. Asset management is a complex process with a lot of moving parts throughout the vehicle’s lifecycle, including managing delivery timeline, truck maintenance, and disposing of the vehicle when it’s no longer needed.
- Driver retention. A severe and worsening truck driver shortage and increasing driver turnover is exerting upward pressure on wages and benefits. There are far fewer qualified applicants than there are unfilled positions. The same conditions exist in the talent pools for technicians and supply chain logistics professionals.
- Safety. Having the right truck driver training programs, procedures, and practices in place to keep everyone safe on the road is a critical component of risk management.
Truck leasing versus owning is one part of this discussion, of course, but even there the underlying parameters are changing. In the past, this has generally been a purely financial decision. But in today’s complex fleet management environment, coupled with a desire to maximize the benefits of the new tax laws that went into effect in 2018, more companies are taking a holistic approach that encompasses financial, operational, and strategic variables when it comes to the truck leasing decision.
“Historically, there has been an emotional element involved in this decision. Some organizations have always owned their own trucks and want to continue doing that,” Madrinkian says. “But as the marketplace continues to evolve, we’re seeing companies rethink their approach and ask some very difficult internal questions around what is really best for the organization. They are starting to look at total cost of ownership over a vehicle’s lifecycle, their own core competencies, and where they can get the best strategic and financial returns on their investments and assets.”
As the challenges related to fleet management continue to grow in scope and complexity, Madrinkian expects more organizations to turn to 3PLs and truck leasing to help meet them. “As a transportation solutions provider, our goal is to meet the demands of our individual customers,” he says. “We have very strong relationships with our clients. We cultivate a deep understanding of their business, so we can deliver integrated, end-to-end transportation and logistics solutions tailored to each client’s particular needs.”
What to outsource when
Rob Holland, vice president of transportation and logistics for Tailored Brands, utilizes a straightforward approach when choosing which aspects of the company’s supply chain operation to outsource. “We’re always looking to improve the efficiency of our operations and reduce our costs. We choose to outsource when an internal operation reaches a tipping point where we realize somebody else can produce the results we need faster and cheaper—and with equal or better quality—than we can ourselves.”
When it comes to choosing a 3PL provider, it’s all about who has a particular expertise and can solve a particular problem, Holland says. “We’re a retailer, and selling menswear is our core competency, and we have a certain delivery model to support our stores that we are able to execute very well. There are always “out of the box” needs, and we look for providers who have an expertise that we don’t have. It really comes down to that.”
One of the first projects on which Holland worked with Ryder was outsourcing the company’s long-haul fleet in 2006. The fleet had grown over the years and was not achieving optimum efficiency.
“We worked with the Ryder team and chose to outsource,” he says. “Ryder continues to manage that business for us, and it works very well. In fact, we’ve grown it, and they’re now supporting our East Coast operations out of Maryland, as well.”
Tailored Brands still operates its own internal fleet for last-mile delivery, running several hundred vehicles leased from Ryder through 27 delivery hubs around the country.
“Strictly from a financial perspective, when you factor in the relatively low finance rate of a lease deal and weigh that against the impact of carrying a heavy capital expense as debt on your balance sheet, it’s an attractive deal,” Holland says. “But there’s so much more that comes with a full-service lease that it’s really more of a strategic decision than a financial one.”
Holland says the Ryder maintenance program included in the lease keeps all his company’s vehicles in top running condition and at peak fuel efficiency, so there is very little downtime. Tailor Brands also saves money by purchasing its fuel through Ryder.
“If there ever is a problem with a vehicle, Ryder provides 24-hour emergency roadside assistance,” he says. “On average, our drivers are rarely down more than an hour or two before repairs are made and they’re back on the road. It’s great for us, and it’s great for our customers who are waiting for their deliveries.”
This article was first published by Entrepreneur Magazine, and was reprinted with permission.