Protect the future for your fleet
February 28, 2020 Comments Off on Protect the future for your fleet
The past two years have seen a record number of companies opting to outsource their private fleets in favor of dedicated models. Fleets have felt the pressure of new and tighter regulations on driver hiring, driver shortage and retention issues, heightened risk profiles, and new accounting standards. We sat down with Brian Webb, Senior Vice President of Dedicated at J.B. Hunt, to find out what exactly is behind these trends and what to expect in 2020. Now is the perfect time to evaluate your fleet’s performance in light of industry trends, whether you manage your own fleet or outsource it to a dedicated provider.
This past year we’ve seen some insurance companies begin to back away from underwriting fleets or dropping them altogether. What’s your take on this?
The risks involved with private fleet ownership have never been higher, leading the insurance industry for these fleets to grow more volatile overall. When it comes to securing fleet insurance, many fleets are facing significantly higher premiums just to maintain their coverage. For others, the rates are simply becoming too cost prohibitive. This could be due to higher premiums after an accident, or even federal regulations regarding your company’s safety ratings.[i] We recommend avoiding these risks and high associated costs altogether by outsourcing fleet management to dedicated providers who have a proven track record in safety and in maintaining insurance coverage.
Digitalization of freight has become a hot topic and is seen as a differentiator that sets the industry leaders apart from the rest of the pack. What does this mean for fleets?
Technology features such as shipment tracking, predictive delivery, and mobile app platforms have disrupted the shipping market and completely changed the game of freight management. These technological capabilities are no longer bonus features that impress customers. They have become a “must-have” in order to compete in a digitalized freight market.
This has become true in both the B2C and B2B worlds. Customers of private or dedicated fleets often come with consumer expectations for transactions, including how they manage their shipments and receive updates on the status of orders. This places a very real and urgent demand on fleets to stay current with latest trends in technology and to invest time and capital into keeping their fleet competitive. Some private fleet owners have realized this is too far outside their core competency, and they can no longer justify the capital investment in maintaining a private fleet. These fleets usually end up choosing a dedicated provider that can keep them competitive and meet their customers’ expectations on tracking and delivery.
Some sources say the driver shortage is still an issue, while others disagree. How would you say fleets are experiencing the driver shortage?
The booming economy the last two years, combined with low unemployment rates during that period, did put pressure on the driver supply. However, what private and dedicated fleets are experiencing is not just a shortage of drivers, but a lack of qualified drivers. These fleets are usually looking for drivers with additional specialized skill sets. They may be required to perform unattended deliveries for customers, restock a store, take product temperatures at predetermined intervals, or follow food safety and biosecurity protocols. Finding drivers that meet these criteria has not been easy.
This driver shortage could be further impacted by a recent law mandating drivers to register with the new national Drug and Alcohol Clearinghouse and requiring fleet managers to query the clearinghouse for negative drug and alcohol program violations prior to hiring a driver. This law became effective in early January, and while it’s intended to help keep unsafe drivers off the roads, it will almost undoubtedly have some influence on driver supply.
New FASB accounting standards for leases went into effect last year. What does that mean for private fleets who lease equipment?
Fleets used to be able to avoid listing trucks and equipment on their balance sheets by leasing them instead of purchasing, but that’s no longer generally accepted. After 10 years, the FASB has introduced new accounting standards in an effort to address off-balance sheet financing. These changes suggest most equipment leases be reported on the balance sheet, which could be a significant financial adjustment for some fleets.
However, companies with fleets can still avoid showing truck equipment on their balance sheets (while following accepted accounting principles) by signing a service agreement with a dedicated provider. Because these providers operate their own trucks as a service instead of leasing them, this arrangement offers the benefits of a private fleet without the financial liability that comes with purchasing or leasing equipment.
Most of these trends will continue growing in 2020, leaving fleet owners and managers to navigate the increasingly complex task of operating and maintaining a fleet. Now is the perfect time for private fleets to consider the benefits of outsourcing their fleet to a dedicated provider. The right dedicated provider can help companies with private fleets stay competitive from a logistical standpoint, while freeing them to pursue more profitable business ventures that are within their core competency.
J.B. Hunt has been offering dedicated service to fleets for more than 25 years. To learn more about how to prepare your fleet for the year ahead, contact us at (800) 325-1068 firstname.lastname@example.org.