This post is based on material from the 2013 Spend Matters / Procurian research brief: Summer 2013 – Logistics Pricing Review and Outlook (free, registration required). Contributors from Procurian include Ed Sands, Global Practice Lead-Logistics and Scott Youngs, Logistics Category Management Group Leader. Spend Matters contributors include Jason Busch, Executive Editor, and Pierre Mitchell, Chief Research Officer.
Dedicated logistics is a strategy that is getting more attention these days. Supply Chain Quarterly notes that the term is “also known as ‘dedicated contract carriage,’ [but regardless, it] refers to tractors, trailers, drivers, and other resources exclusively devoted to serving a set of facilities or lanes in a transportation network. They usually are owned or leased by a motor carrier or logistics service provider that is hired by the shipper to manage its fleet operations.”
As companies take advantage of more advanced sourcing strategies, they begin to consider underlying cost metrics and how carriers operate – and whether a switch to dedicated or private fleet approaches makes sense. Private fleet is like running a trucking company yourself, while dedicated fleet is contracting with a third party carrier to dedicate specific capacity to, as if you owned the fleet, but the carrier still owns the assets and operates them day to day. Companies must ask themselves certain questions when considering this opportunity, such as what does a trucking company need to operate, what are their systems, and what do they use internally?
Understanding cost per mile is important from an operating standpoint regardless of dedicated strategies. Logistics sourcing professionals should know precisely the cost for their carriers to operate equipment today. Not so long ago, it was around $1.20 per mile. Now it is $1.76 or so. Too often with shippers, the true costs are buried in different areas – fuel costs within one department, labor costs within another. Sourcing teams need to break through this to understand the baseline cost at which a carrier breaks even – and whether dedicated logistics opportunities make the most sense.
For further analysis of this topic, download the complete Spend Matters and Procurian research brief today: Summer 2013 – Logistics Pricing Review and Outlook.