Private carrier development plan
- A private carrier is different from a common carrier in that its main purpose is to transport its parent company’s product.
- As the primary source of freight transportation for their parent companies, private fleets are integral to the management and control of inventory, including supplies, raw materials, and finished product.
- A private carrier development plan must be well thought out and researched to assure continued and long-lasting success of a business.
A private carrier provides transportation and delivery of goods or services for a single entity, often a larger manufacturing corporation or central warehouse facility. Usually, the entity’s primary business is not transportation but rather something else. Examples of businesses that create and use their own private fleets include large grocery chains and various manufacturing organizations.
A private carrier is different from a common carrier in that its main purpose is to transport its parent company’s product. A private carrier may haul general freight for other customers, but this is usually as a backhaul to reduce operating costs. Private carriers can prioritize their parent company’s freight over all others and may refuse to sell their services at their own discretion, whereas common carriers must treat all customers equally.
As the primary source of freight transportation for their parent companies, private fleets are integral to the management and control of inventory, including supplies, raw materials, and finished product. Private fleets operate between manufacturing facilities and distribution centers as well as customer locations.
Simply put, private fleets are the backbone of a company’s supply chain. In many instances, they are the logistics arm of their manufacturing parent, providing local, regional, and national freight transportation services. This places them in competition with for-hire carriers, demanding that they operate as productively and efficiently as possible in order to remain cost competitive.
In the development of a private carrier fleet, it is imperative that there is an understanding of the expense-to-revenue ratios of a company in order to decide how the fleet will support the total business plan.
Transportation is a necessary cost to get a company’s products to their customers. A private fleet is often viewed as a pure cost. However, if the cost of a private fleet is directly compared to the overall cost of transportation of the parent company, and equipment is utilized efficiently, a private fleet can be a break-even or better, a profitable division of the parent company.
Why would a business create a private fleet or offer their services as a private fleet for another company? The opportunities for growth of the company in the transportation industry are endless. If this is a direction that a company wants to take, it should be part of their business plan, their mission, and their vision. When should the business become a private carrier? This should be identified in their action plan. It may be one year, five years, or twenty years; a business needs to plan their route and follow that plan.
Remember, business plans and action plans are ever-changing and evolving. It may be a good idea to start a trucking business as a common carrier to learn the many intricacies of the transportation industry. As the company grows in knowledge and strength, the concept of being a private carrier, or even creating a second division of the company as someone else’s private fleet, may become a viable and profitable consideration.
It’s important to note that a private carrier development plan, just like any business plan, must be well thought out and researched in order to assure continued and long-lasting success of the business.
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