As capacity tightens in the trucking market, especially in the United States, it may be time for supply chain executives to give new thought to an old idea—private truck fleets. Prior to the United States' deregulation of the trucking market in , a lack of competition kept truck rates high and service low, so many companies took matters into their own hands, operating their own truck fleets to ensure dependable pickups and deliveries to customers. After deregulation, it became easier for new motor carriers to enter the business and for existing trucking companies to expand their service territories and offerings. Fierce competition drove down rates, making it less attractive for companies to endure the hassle and expense of operating their own trucks. As a result, many of them abandoned their private fleets.
But they should consider the PPrivate carefully, because this decision can have a significant impact on cost and service. Still many private fleets, including Walmartare taking actions to recruit and retain safe drivers. This investment in technology Private fleet vs llc result in reduced costs based Spankings for boys better route optimization and better asset utilization. When analyzing the Privat impact of a dedicated transportation program, it is helpful for shippers to have historical information about the rates offered by common carriers for various lanes in their networks. Stay signed in on this computer.
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Operators of Kung pao pussies fleets need to ensure that they choose the right methods and technologies to keep their end users happy. Still confused about whether to start an LLC or a corporation? Limited liability companies, like partnerships and sole proprietorships, are pass-through entities. Both register with a state, but an LLC doesn't "incorporate. Scheduling flexibility is another possible benefit inherent in the choice to operate a private fleet. Top 50 Transportation and Logistics Blogs Read post. Your email address will not be published. Petty, private fleets usually Pirvate better. This includes logistics, fleet management and maintenance, and of course, transportation. Owners of an LLC also pay self-employment tax on their income from the business, while corporate owners who work in the business are considered employees Private fleet vs llc pay tax on their Hogtied movie income, along with FICA taxes Social Security and Medicare. Not all dedicated fleets Private fleet vs llc guarantee that vehicle and driver availability will scale along with Privage growth of the company they serve. Petty provided other statistics that shed additional light on this finding.
Fleet Owner Staff Apr 15,
- Why do companies have a private fleet?
- As a shipper, there are many differences between owning a private fleet and using a dedicated fleet.
- On the one hand, shippers can retain complete control of their supply chain and transportation operations by operating a private fleet.
The desire for committed capacity, reliable service, and predictable cost has created a surge of interest in dedicated and private fleets. That will change the complexion of trucking over the next five years.
When Sam Walton decided to launch his own private fleet back in the s, it was to solve a uniquely specific problem: the inability or lack of desire on the part of commercial carriers to deliver goods to Walmart's mostly rural stores, which tended to be located far from established trucking routes. Little did he know that some 50 years later, his business decision would be the seed from which would sprout one of the nation's largest private fleet operations, with more than 8, drivers, 6, tractors, and 60, trailers.
Today, Walmart is the third-largest private carrier in North America and if ranked as a commercial for-hire carrier, would be among the nation's top 10 operators. The issue Sam Walton was trying to solve five decades ago—access to and control of guaranteed truck capacity—still exists today.
It's exacerbated by the modern realities of today's e-commerce-driven and Amazon-influenced supply chains, which require much more short-haul, rapid-response fulfillment. Layer on top of that a robust economy driving record freight levels; an ongoing, worsening driver shortage; increasingly challenging city congestion and highway driving conditions; and rising operating and equipment costs, and you have a perfect storm impacting available capacity—and generating more and more interest in private and dedicated fleets.
What's the primary incentive for establishing a private fleet, or contracting for a dedication operation?
And dedicated is growing. According to his firm's research, from to , there was a At the same time, truck count devoted to dedicated operations rose 6. See Exhibit 1. He cites two truckload carriers to illustrate the trend. Xpress, the number of trucks in one-way service was down 6. Similarly, at Marten Transport, one-way was down And we'll see some dedicated operations converted to private fleets. Although capacity considerations may be the driving force behind fleet launches, customer service and cost play into it as well.
Petty believes that particularly in the ongoing battle for drivers—which is the real source of the capacity crunch—private fleets and to some extent, dedicated contract operations have a competitive advantage. He notes that private fleets pay higher wages and benefits. Private fleets also typically offer a more predictable work schedule, which is highly desired by drivers, and they're able to get home to their families on a more regular basis, all of which contribute to a better work-life balance.
They also tend to stay with their employers longer. Petty cites a study the NPTC did last year that revealed that the private fleet driver-turnover rate was about 14 percent annually, whereas the driver-turnover rate for commercial over-the-road truckload carriers was 94 percent.
The average tenure of a private fleet driver is 10 years, the study noted. Lastly, Petty says the NPTC's research found that private fleet drivers are generally three times safer than commercial industry drivers as a whole.
That's a tremendous upsell value to the customer. Bart De Muynck, research vice president for transportation technology at market research firm Gartner, agrees that demand for private fleets and dedicated operations is on the upswing, echoing the strategic advantages and potential benefits outlined by the NPTC's Petty and others. But, says De Muynck, even with the lure of guaranteed capacity, private fleets do come with some risk.
It's a lot more than just buying trucks, hiring drivers, and sending them on their way. Essentially, it's establishing and running an in-house carrier, which may not be a core competency for a company whose primary business is making and selling products. One way to mitigate those risks—and achieve the goal of guaranteed capacity—is by setting up a dedicated contract carrier operation with a fleet or a third-party logistics service provider 3PL. In this model, all of the aspects of managing and running the fleet are handled by the contractor, who may also provide additional services such as network design and optimization to help the client come up with the most efficient dedicated solution for its operating footprint.
Often, a dedicated solution can provide the same benefits—guaranteed capacity and reliable service—as a private fleet, at roughly the same cost, but with less risk and direct investment on the part of the shipper.
A dedicated solution tends to offer a similar level of control as a private fleet but turns the operating authority and responsibility completely over to the [contracted] carrier [or 3PL]. Well-run fleets and dedicated operations tend to have common characteristics, Moses points out. Good control and management over fuel and personnel.
A high percentage of loaded miles. Ongoing dialogue around KPIs [key performance indicators]. And they are metrics-driven," he says. For Penske, that's led to a certain amount of crossover among customers, according to Moses. It's a similarly fluid picture over at Ryder System Inc.
Speaking to the appeal of dedicated, he says a dedicated solution can help maximize savings and boost service levels, while giving the client access to up-to-date equipment and the expertise of a well-resourced dedicated provider. As an example, Diez notes that Ryder's customers can leverage its investments in modern fleet equipment with the latest safety technologies, its team of expert personnel, and a strong safety program and planning technologies that can help the shipper design the optimal dedicated operation.
The overall package of capabilities represents an investment that shippers can leverage to secure a workable solution and gain the desired guaranteed capacity, at minimal risk, Diez says. After you comment, click Post. If you're not already logged in, you will be asked to log in or register.
Want more articles like this? Feedback: What did you think of this article? We'd like to hear from you. Please include you name and the name of the company or organization your work for. Transportation May 3, Use of dedicated fleets will are rising, and will continue to do so for the next two to three years, says Satish Jindel, president of SJ Consulting. Private fleets do come with risk, says Bart De Muynck of the market research firm Gartner.
Well-run fleets and dedicated operations have common characteristics, such as a strong safety focus and good management of fuel and personnel, says Andy Moses of Penske Logistics. Gary Frantz Contributing Editor Gary Frantz is a veteran communications executive with more than 30 years of experience in the transportation and logistics industries. Gary is currently principal of GNF Communications LLC, a consultancy providing freelance writing, editorial and media strategy services.
More articles by Gary Frantz. Change can be hard! Not changing can be lethal! A lesson from Sears. Here are three important interviews that will help you understand the transportation marketplace.
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The profits and losses of the corporation are held by the corporation and are not passed through to the owners directly. I was somewhat surprised that customer service, instead of cost savings, was the top driver for having a private fleet. Having a private fleet can offer a greater level of flexibility to do this if local dedicated carriers are not equipped with the fleets or manpower to scale. Limited liability companies, like partnerships and sole proprietorships, are pass-through entities. While this is more complicated, it combines the simplicity of the LLC with the tax benefits of a corporation. It also tends to be a piece of the problem when it comes to just about every other disadvantage shown below. Perhaps the most underrated of these factors is the ability to run the core business side-by-side with the transportation and logistics business, without a hitch.
Private fleet vs llc. Dedicated Fleets
These companies still rely heavily on trucking in their operations. Those who choose to own a private fleet should consider the cost factors associated with owning a private fleet along with the demand of trucking within the organization. Some of the cost factors we assess when helping determine whether a private fleet is for you include:. A dedicated fleet is owned by a company that focuses on trucking.
A dedicated fleet is a group of tractors, trailers, drivers and other resources that are assigned to carry out shipping operations for a facility or transportation network. Using a dedicated fleet can be useful in industries with fluctuating demand or those that need specialized equipment. Also, many companies prefer using a dedicated fleet vs. To learn more about the benefits of using a dedicated fleet check out this blog article. Limited liability companies, like partnerships and sole proprietorships, are pass-through entities.
Corporations as Separate Business Entities. Corporations are separate businesses entities. The profits and losses of the corporation are held by the corporation and are not passed through to the owners directly.
Yes, some earnings of the corporation may be paid to the owners in dividends, but this isn't direct. Some earnings may be kept by the corporation.
Corporations and LLCs are different in how they are taxed. Because corporations are separate entities, they are taxed at the corporate rate, while LLCs are taxed based on the total Adjusted Gross Income of the owners. Here is an example:. That profit is taxed at the corporate tax rate 21 percent, beginning in The income from the LLC is included in the owner's personal tax return on Form on line 12 and is considered along with other income for that person or couple for that year.
Corporate shareholders aren't self-employed so they don't have to pay this tax. The tax consequences to LLC and corporate owners are different.
Owners of a corporation are not paid, but they receive dividends; they are taxed on their dividend income. Owners of an LLC are taxed like partners in a partnership; that is, they receive a distributive share of the profits each year and pay taxes on that share on their personal tax returns that pass-through concept discussed above.
Owners of an LLC also pay self-employment tax on their income from the business, while corporate owners who work in the business are considered employees and pay tax on their employment income, along with FICA taxes Social Security and Medicare. How you are paid - and taxed - as an owner of an LLC or a corporation could be a major factor in determining which form of business you choose.
This owner is taxed as a sole proprietor, filing a Schedule C form with the owner's personal tax return. Just to muddy the waters, you might want to consider forming an LLC and then electing to have the LLC taxed as a corporation or S corporation.
While this is more complicated, it combines the simplicity of the LLC with the tax benefits of a corporation. Still confused about whether to start an LLC or a corporation? It's a complex decision and one you shouldn't make quickly. As noted above, the tax consequences can be a deciding factor. Before you make a decision, talk to two people:. An attorney who has experience with both LLC's and corporations.
A good attorney will consider LLC's in addition to traditional corporations. This article about 7 questions to ask before deciding on a business type might also be helpful. For more information, check out this complete outline to my Guide to Business Types.
Outsourcing Options for the Private Fleet - Transervice
Some of the most successful fleets today are not from conventional trucking companies or common carriers. They can be found operating as private carriers for some of the largest, most successful companies in the U.
This is especially impressive because these companies are not necessarily transportation focused. Their private fleet is the means of transporting products to customers. If you examine the top private fleets, you will notice that a majority of them are from the food and beverage industry. The grocery retailers face extreme challenges each day as many of their products have a very limited shelf life and their stores need continuous resupply. With so much on the line in this hyper-competitive sector, companies must have transportation assets dedicated to their operation only.
The energy sector is also highly represented on the top of private fleets. Their need for specialized equipment does not allow service by common carriers. The transport of industrial gases, providing of oilfield services and the deployment of assets in support of military operations cannot be adequately accommodated by conventional common carriers.
It is for this reason that private fleets are the norm for these specialized niches. Consequently, private fleets comprise the largest segment of the trucking industry. The retention rates for private carriers are considerably better than those of the long-haul common carriers. The large disparity in driver turnover between private fleets and truckload common carriers is one possible reason why private fleet performance is better.
If a company is not getting the kind of service that is required from common carriers, then they should consider starting their own private fleet. Various truck leasing companies can help specify, order and lease the right equipment for the job. They can also perform the maintenance and offer bulk fueling in order to start a new fleet off on the right foot. It will not be easy, but with the help of leasing companies and industry organizations like the aforementioned NPTC, the way forward can be made simpler.
Comments 0. Joey has been in the trucking industry since Forgotten username. Forgotten password. Thousands of trucking companies available; why privatize? The main reasons companies opt to start their own fleet are: guaranteed capacity — no more excuses from common carriers enhanced customer service — a third party carrier will not typically perform at the highest level scheduling flexibility — there are predictable cycles for each company; complete control of staffing helps reduce labor costs and increase efficiency If you examine the top private fleets, you will notice that a majority of them are from the food and beverage industry.
Ask Joey a question. Read These Next Know the Freight Market before you call the Broker March 04, Joey Slaughter. Tax Effects of Divorce or Separation September 16, Sean Bryant. Username Login Sign in using your username and password Username. Stay signed in on this computer. Forgotten username Your e-mail address. Your e-mail.