It’s not just about squeezing dollars from distribution networks,
says Newbourne, vice president and general manager of Lever-
aged Execution Providers, a Pittsburgh-based logistics network
manager focused on the food service industry.

“The underlying driver of a contracted/dedicated decision is really the perceived value from a service and cost standpoint,” he says. “Sometimes dedicated operations cost more to operate but service levels improve dramatically. In other instances the results may be closer to a wash versus for-hire but the assured capacity availability and generally better service levels are worth the commitment. In the end, it’s a balanced decision making process based on your customer’s requirements and your tolerance for risk and/or expense”

Others suggest a key factor is whether there is a “strong potential for third-party backhaul opportunities.” If you’re already finding significant and consistent backhaul opportunities in the spot market, then the decision boils down to the perceived value of improved service.

Although service and efficiency are key drivers in any dedicat-
ed/contract decision, there are other qualifiers to consider, says
Palmer, senior director of transportation for True Value.

Those qualifiers include the ability to obtain reliable forecasts and evaluate how demand variability might affect the operation; the ability to partition out the dedicated operation without compromising other parts of the business or its resources; the impact of the dedicated operation on price negotiations in non-dedicated lanes; and last but most critical, management’s willingness to make the financial commitment.

When Palmer was asked whether it is hard to sell management on a dedicated fleet, he said that “it’s not hard if it is based on a well-grounded analysis that focuses on cost savings, inventory reductions and service improvements relative to improved on-time pick-up, delivery, shorter or more consistent transit time.”

We completely agree with Gary, but we also recognize that
many shippers are short on logistics talent and may attempt a
program without conducting the needed research. Carriers and
logistics companies need to carefully scrutinize shipper informa-
tion and expectations and not accept everything at face value.
The next exam question appears to be a pretty simple one
— What kind of information do carriers need from shippers
to understand their requirements and prepare a complete and
meaningful quotation?

The Achilles’ heel of any initiative, but especially for a dedicated contract carriage commitment, is the inability of some shippers to recognize the type, depth and accuracy of the needed data. Too often they don’t use analytical tools or conduct the necessary in-depth analysis or engage consultants who can provide the multidimensional perspectives crucial to the development of that analysis. Although most major shippers present carriers with a strong set of requirements, the real world of shipping and receiving often differs from the written word. Carriers bid based

“The more complete the
data set you have the fewer
assumptions you have to make.”
on projected equipment and driver activity levels and productiv-
ity. When this information is not known and simply estimated,
problems quickly surface.
Shippers often aren’t aware of how their loading and unload-
ing practices affect carrier networks or how carriers deal with
unplanned events such as weather emergencies, product recalls
and labor disruptions.

Management is not going to approve any program that does not have a well-substantiated return on investment analysis supported by strong, in-depth data. Palmer suggests that the information provided to carriers should include: Lane volumes by period with variations in lane volumes by season; carrier capacity availability; current rates per lane; load/unload turn times for origins and destinations; impacts on distribution center shipping and receiving labor costs if turn times are too lengthy; the number of open jaw lanes; opportunities for third-party for-hire freight on those lanes to neutralize the cost penalty; safety stock reduction opportunities; and the dedicated carrier’s proposed operating costs. “It is critical that this be assessed within the context of future plans for the company’s supply chain network, making certain the environment doesn’t change soon after implementation,” Palmer says. “Most companies sophisticated enough to be considering a contract carriage/dedicated fleet solution have a sufficiently detailed and reliable data bank of information at hand to build the analysis. If they don’t, then they need to take the time to find out how their operations really