For a variety of reasons, businesses decide to operate private fleets to distribute the products they manufacture. Many do so because they believe moving to a dedicated contract carriage model is expensive and inflexible.
The reality is that dedicated does not have to be either of those things. In fact, many businesses may not fully understand the risks they assume by operating a private fleet.
One of the biggest risks of operating a private fleet revolves around people. It is not just about recruiting and retaining employees; it also encompasses managing all human-resource functions, including training, health care benefits, workers' compensation claims, and drug and alcohol testing.
Then there are the operational costs that must be managed, none more volatile than fuel. Historically, diesel fuel prices have fluctuated, but earlier this year they skyrocketed. While they seem to be coming down some, they are still over $5 a gallon, according to the U.S. Energy Information Administration. A spike in fuel costs can seriously impact a company’s transportation budget.
Another significant risk businesses face when handling their own transportation is rising insurance costs. According to the American Transportation Research Institute, liability insurance premiums rose by 18.6% from 2021 to 2024, which happened at the same time there was a reduction in truck-involved crashes. In recent years, the trucking industry has seen a rise in what is known as "nuclear verdicts" — awards of more than $10 million to plaintiffs.
There is also demand fluctuation for a company’s product. A business must ensure it has enough vehicles to meet peak demand, but when demand wanes, the business will find itself with assets that sit idle and cost money while finance payments continue.
Moving to a dedicated transportation model shifts those risks from the business to the dedicated transportation provider. The provider takes over all operational aspects of the transportation function, working to right-size the fleet, improve asset utilization, handle labor-related issues, and manage fuel, insurance, and compliance issues.
The objective of a dedicated transportation provider is to replicate the top-level service a company is known for while assuming its operational risks.
