Dedicated Fleet Services

How Does Dedicated Fleet Services Work?

Dedicated services are similar to leasing; the dedicated fleet provider (a 3PL or other logistics provider) owns the trailers and employs the drivers, but they are at the shipper’s disposal. This allows the shipper to have a high amount of control over their supply chain.

However, a significant distinction between leasing and having a dedicated fleet is that the shipper also does not have to handle the responsibilities of owning a private fleet. The provider actually owns, maintains, and employs the vehicles, drivers, and equipment used.

Dedicated fleets are also distinct from freight shipping with common carriers in that the shippers are buying space on a trailer. Whether the shipper books a part of the trailer (LTL shipping) or books an entire trailer, they only have that trailer for the duration of the shipment, even if the shipper makes regular shipments.

In contrast, shippers who utilize dedicated fleet services have control over an entire unit of trailers. While the provider is responsible for maintaining the trailers and employing the drivers like common carriers, they are at the command of the shipper, who dictates when and where the routes and shipments are going.

To acquire a dedicated fleet, shippers can organize a bidding process that allows multiple dedicated fleet providers to compete for the opportunity to secure capacity. Once a provider is chosen, the two parties will enter into a contract lasting from two to five years, which will detail the terms and conditions of their agreement.

A dedicated fleet is primarily suited for larger businesses that require frequent, high-volume deliveries. This is because dedicated fleets can be costly; companies need to manage multiple trailers and cover the salaries of drivers. Additionally, dedicated fleets demand significant management and resources, which smaller businesses may not be able to afford.

However, the benefits are alluring for businesses that can manage the capacity. By outsourcing a personal fleet, companies can:

• Focus on core business objectives without worrying about the logistics side.
• Lower their costs by having a centralized transportation system under your belt.
• Have access to logistics expertise and advanced technology for supply chain efficiency.
• Scale your business to be flexible for future expansion and match operational growth.
• Manage operational risks and compliance.

Revenue-Sharing Agreement

Aside from the standard contract, dedicated fleet providers and shippers can also sign a revenue-sharing agreement. This mutually beneficial arrangement allows providers to ship freight from another shipper when they are not busy with the primary shipper’s freight shipments, earning additional revenue from the additional transaction.

This sounds confusing, so here’s an example: say Shipper 1 is using a dedicated fleet from A Logistics. A driver has finished a delivery for Shipper 1 but now has an empty trailer. The driver could move the trailer back to headquarters, but the driver would create empty miles, costing both A Logistics and Shipper 1 extra.

So, instead, the driver can pick up a load from Shipper 2, who is booking their freight with a separate 3PL. This 3PL is usually contracted with A Logistics, leveraging the former’s extensive transportation network to pick up extra loads on their behalf. In exchange, A Logistics and Shipper 1 will be compensated based on the agreement terms.

Shipper 2 gets their freight shipped, A Logistics eliminates empty miles, and Shipper 1 gets additional revenue alongside A Logistics; it’s a win-win situation for all parties involved.