Blending Private and Dedicated Transport

While owning a private truck fleet shares problems similar to those of commercial carriers, it can pay off in having capacity when needed. Shippers with dedicated transportation contracts with trucking firms do so for needed reliable service without the challenges of asset ownership, maintenance and the running of a fleet. Though the two approaches may seem polar opposites — as dictated by company needs — they are often combined in robust and successful ways for shippers.

A case in point is CMH Flooring Products (www.cmhflooring.com) of Wadesboro, NC, that has its own fleet for transportation needs closer to its headquarters and dedicated service with regional less than truckload carrier, Averitt Express (www.averittexpress.com) for more remote locations.

Kerry Capell, CMH Partner, explains the company is a wholesale flooring distributor that carries every type of floor covering, except for carpet. That includes laminates, hardwoods, ceramics and carpet cushion. The company's major customers are builders and retailers. Its primary geographic coverage is North and South Carolina, Georgia, the Panhandle of Florida, part of Alabama and most of Tennessee, though no further than Nashville, a bit of West Virginia and Virginia up to Fredericksburg.

CMH's main distribution facility is in Wadesboro. Capell characterizes operations as a hub and spoke environment, with small docking points in key areas like Richmond, VA, Cookeville, TN and Lawrenceville, GA. Previously, the company had full facilities at Richmond and Kennesaw, GA (just outside Atlanta). "As we looked at costs for inventory and occupancy," notes Capell, "we questioned if the expense was necessary. There is a great deal of what I call associated expense that comes with owning a building."

On the one hand, CMH got a good offer on its large Richmond building, which it took. On the other hand for the Kennesaw facility, as Richard Hoehn, Vice President Supply Chain Solution Sales, Averitt explains, "We were able to demonstrate that the company didn't need a warehouse, that it could use the Averitt facility in Lawrenceville, GA, to do cross-dock on to his dedicated trucks."

That part of CMH's logistics solution paid off in several ways "It really lets us better manage the inventory . We're not duplicating SKUs," says Capell. "We're not cutting rolls of vinyl, for example, at several different locations. In theory it would have been possible to be cutting the same roll in four or more different facilities. In a short period of time we've substantially reduced our inventory — even with growing sales."

CMH runs a cross-dock operation though there is sufficient space to offload and store flooring if there is need. A big advantage enjoyed, notes Capell is that, "We do a lot of backhaul and have a lot of vendors and suppliers close to us, so there is a great deal of backhaul. It works well for us. We ship very little to the satellite locations. We may do a bit of staging from time to time, but very seldom."

With its dedicated contract, CMH shuttles shipments to Lawrenceville on its own trailers and tractors at which point it's handed off to Averitt. "They have a driver supervisor on site," says Capell, "that has computer access to our home computer. At the end of each day, the supervisor routes for the next day. The reason we never really leave making the final delivery is that we want to be totally in control of getting the product from Point A to Point B."

CMH has a reputation for excellent customer service and expressed its concern about it to Averitt. "We asked Averitt to provide our uniforms for drivers as well as decals for tractors," explains Capell. "When drivers deliver, the customer sees a CMH logo, not a third party logistics driver."

"I think there are three things Averitt can provide," states Hoehn. Number one is the integration of resources. Number two goes to the heart of dramatic changes in a company's business environment: We offer a certain level of flexibility that some companies can't ... the ability to flex up and down. Number three, we can, through various routing software and optimization tools, help create greater efficiencies within a company's fleet."

Another reason CMH uses Averitt is so that it can compare costs and see how well it is doing with its private fleet. Hoehn notes that, "Many companies today are benchmarking their fleets versus contract carriage. They will, from time to time, bid out their private fleet to see if outsourcing is a better solution from a cost standpoint."

That's not an unusual step that's taken by managers of private fleets, explains Gary Petty, president and CEO of the National Private Truck Council (www.nptc.org). It works the other way, as well. "There are companies that have all dedicated transportation that we have as members," he notes. "We call them third party users. They get a lot of valuable information from us that helps them understand how to better manage those dedicated fleets."

For Petty, the well-run private fleet represents a long-term institutional investment and commitment by the company. He says private fleets are asked fairly frequently to qualify their cost and value by customer service evaluations as well as comparative costs of the market. "That's very easy to do.," claims Petty. "If you weigh customer service as a value and compare that cost to what it might be on the outside, it's pretty readily apparent in most cases that the private fleet does provide better customer service, on time delivery and better safety records, generally. Because there is a great deal invested in the safe quality driver. The driver is the face and the persona of the company, as a familiar and reliable source of value that the customer counts on."

Petty says that many of the association's private fleets also function as for hire carriers, selling excess capacity to the market to effectively reduce overall operations costs. He estimates that for private fleets the unused portion of total truck capacity is on average in the 16 to 20% range.

Although the Council focuses on the private fleet business model, Petty doesn't look at one better than the other. "We make the case that the private fleet can be looked at an important part of a number of solutions for a company's total transportation requirements," he explains. "Roughly 40% of our members have some form of contract service with outside carriers. They do so to provide themselves with transportation service where having fully deployed private drivers doesn't make good sense from a business standpoint, either because of the cyclical nature of the business in that particular region or the sparsely populated nature of the community served where it's simply hard to find drivers."

For CMH, combining the use of its private fleet with Averitt's dedicated service has been a smooth and successful operation. Such operations are proving their worth. As Petty notes, "They can be seen as different business models working for different business purposes, or as complimentary business models that work together in what we call a blended fleet operation — the private fleet and the dedicated fleet form a total service for the company."

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