Many private and family-owned businesses operate private delivery fleets. These fleets are justified as NECESSARY to provide a perceived level of customer service only attainable by utilizing in-house resources. Optimizing fleet operations and expense is a goal that is seldom verifiably achieved. Maybe it’s time to take a look under the hood and realistically review the justification for this significant operating cost commitment?
Recently, I had a conversation with the owner of a family-owned wholesale food service distributor who operates a private fleet of nine trucks servicing a four-state area in the Mid-Atlantic region. They implemented their private fleet operation back in 1989. Like many smaller privately-owned businesses, they opted for a turn-key solution from a third-party provider. They employ dedicated drivers running fixed-route multi-stop customer deliveries daily. The owner professes to run an all-cash business (which I seriously doubt). When asked about his fleet operations, he described a manual load plan and dispatch system that consisted of a combination of Google maps, tribal knowledge of customer delivery routes and requirements, and a dedicated team of long-time drivers. When asked if he knew what his fleet operating costs were as a percentage of his total operating cost, he did not have a clue! When asked what constituted a profitable order shipped, he did not know. My guess is that he hasn’t taken a serious look at justifying his private fleet since 1989. It's part of doing business! It's part of the NORMAL Operating Expense! It is viewed as NECESSARY!
QUESTION: How do YOU know if your Private Fleets is PAYING FOR ITSELF?
QUESTION: Is Every Order Loaded on Your Truck a PROFITABLE ORDER?
QUESTION: What are the ALTERNATIVES to Operating Your Own Private Fleet?
QUESTION: Is there a more COST EFFECTIVE Transportation Alternative than Private Fleet?
Small changes that create cost savings, reduce expenses, and free up operating cash have a major impact on the survival and growth of a company. This should be a key objective for the owner of a private or family-owned business. I suspect the above example is not atypical. When it comes to knowing and assessing the real operating cost, efficiency, and productivity of a private fleet, you can't get an honest answer from your inside team (much less yourself). A fresh perspective can open your eyes to the reality of your current situation (Good? Bad? Ugly?)
When was the last time company ownership realistically assessed the opportunity cost of operating and maintaining their private fleet? Or the serious risk to their business survival posed by the impact of one catastrophic traffic accident? Or the alternative cost-saving opportunities to reduce fleet operating expense while improving operations, customer service, and operating cash flow? Does their family or personal ego obscure the impact of actual fleet operating cost on the company’s bottom line?
If you really want an objective assessment of your private fleet operations, you need to get an unbiased third party to conduct such an assessment. If business management or ownership can’t come to grips with the need for such an assessment, then they deserve the impact it has on their operations, cash flow, and bottom line!
SO, ask yourself: Which Is It? NECESSARY? or NECESSARY EVIL? If it's the latter, can you really afford it in today's chaotic economic environment?