by Tim Hampton
The only thing predictable about the current state of the supply chain is its unpredictability. Fleet managers — especially those in charge of over-the-road (OTR) fleets — understand the flexibility required to successfully operate in 2022.
The supply chain challenges fleets are facing have been compounded.
The onset and continuation of the COVID-19 pandemic created driver shortages. The early stages of the pandemic caused conservative buying habits, and once the world got back to spending, the supply chain just couldn’t catch up. Add in high fuel prices and a constantly changing inventory for haulers who operate warehouses, and the supply chain crisis continues to impact fleets of all sizes.
Yet Fleets have willed their way around these issues, taking a challenging situation and making the most out of it. They’ve excelled in many ways.
Ports on both U.S. coasts continue to see cargo records. The ongoing supply chain crisis, which began in 2020, is snowballing and is expected to continue into 2023. Overcoming the supply chain crisis is a tall task for fleet managers, but resiliency from businesses around the world inspired the following best practices to combat the supply chain problems.
Five best practices for fleet companies to mitigate supply chain issues
1. Evaluate your business partnerships and make them work for all stakeholders
Not only do the supply chain issues impact the delivery of consumer goods, but they also cause issues with the availability of hauling infrastructure itself. Trucks, semiconductor chips, and other equipment are hard to come by for fleets of all sizes. A shortage of trucks, aka a shortage of capacity, reverberates across the industry.
One way for fleets to counteract capacity shortages is by adjusting the prices they charge based on current demand and market conditions. Businesses, both shippers and sellers, need goods delivered, and consumer demand is high. With fewer trucks available, charging a higher fee per mile to move goods is a sound and necessary strategy. Fleets should keep prices fluid. It's key to incorporate the rising cost of equipment, driver pay, maintenance, variable fuel costs, and other expenses into your overall budget.
There’s a new floor to the cost of hauling freight, but it’s expected that the industry will normalize, capacity and demand will get more into equilibrium, and when that happens, rates will come down.
2. Weigh the pros and cons of buying new vs. refurbished fleet equipment
“In need of an upgrade? New equipment isn’t the only option,” said Susan Kirkpatrick, Executive Vice President and Chief Financial Officer of Birmingham, Alabama-based Buddy Moore Trucking.
With a 325-truck fleet (75 of which are driven under a lease agreement with owner-operators), Buddy Moore Trucking felt the impact of supply chain issues positively and negatively.
The good: Buddy Moore Trucking played a key role in delivering consumer goods at the pandemic’s outset, transporting toilet tissue from the warehouse to the end-user. At one point, demand was so high that the product went straight to its trucks from the factory without sitting in a warehouse.
The opportunity: While much of the world stopped, fleet equipment needs did not. New reefer trailers, which are refrigerated vans, couldn’t come fast enough, so Buddy Moore Trucking instead decided to refurbish its own.
“It’s a way to save some money but also upgrade our fleet,” Kirkpatrick said. “We’ve always been a really big advocate of running new equipment, but because of supply chain constraints we’ve had to rethink that a little bit.”
Kirkpatrick and her team identified a handful of vendors to refurbish their 50 reefer trailers, providing specifications to ensure uniformity. Refurbishing costs between $10,000 and $15,000 per trailer, a significant difference from the nearly six-figure price tag for buying new. It’s also a matter of weeks, not months to upgrade.
“This will be a capital expense that we can amortize over the life of the trailer, so we think it’s a smart move on our part,” Kirkpatrick said. “And we’ll get usage of the equipment a lot quicker than if we were waiting for something new.”
3. Don’t be afraid to repurpose unused fleet equipment
Some fleets have trucks sitting idle when there is a blip in the supply chain, curbing potential money-making opportunities. In this situation, identifying creative ways to utilize an unused vehicle provides an additional revenue source. For example, fleets can lease unused equipment to other companies, alleviating some of the costs, such as necessary maintenance and insurance. In this case, the lessor gets immediate access to equipment and fleets receive some utilization revenue.
4. Take advantage of fleet card spending controls and secure transactions to optimize efficiency without compromising your bottom line
Fuel prices fluctuate, so using fleet card spending controls on a gallon-by-gallon basis serves OTR companies well, especially during a financial crunch caused by supply chain issues. Fleet card spending controls are set by a fleet manager to create limits on both product types and dollar amount per transaction. Although limiting total spending dollars could translate into partially filled tanks, limits by gallon allow fleet managers to make sure drivers get the most out of each fill-up.
“In our business, perception is reality,” Kirkpatrick said. “If a driver’s fuel card isn’t working like they think it should, the first thing they’ll think is the fleet company I’m driving for doesn’t have money to pay for my fuel.”
Using gallon limits, rather than a dollar amount, avoids this issue.
Verifying the capacity of a truck’s tank and setting a purchase limit for that amount of gallons is beneficial for both the fleet manager and drivers. Limiting the number of gallons discourages any overspending. With WEX’s SecureFuel technology, fleet managers can reduce fraud risk by verifying a truck's location with the corresponding fuel purchase, and that the amount purchased does not exceed the tank capacity.
Payments made via single-use virtual credit cards can help limit fraud risk. After payment is made, the single-use number cannot be reused, resulting in a safer transaction. WEX’s SecureFuel technology helps protect OTR fleets by catching unauthorized purchases in real-time, further cracking down on any card misuse.
5. ‘Go with the flow’ when managing your fleet during these uncertain times
Kirkpatrick and the rest of Buddy Moore Trucking’s executives learned early in the pandemic the importance of flexibility, whether it is refurbishing the existing fleet rather than buying new equipment, or dealing with broken-down trucks without immediate access to help.
“We learned you just have to go with the flow and not panic,” Kirkpatrick said.
The supply chain challenges persist, but that doesn’t mean your fleet can’t thrive.
To learn more about WEX, a growing and global organization, please visit wexinc.com.
All fleet cards are not the same, and different types of fuel cards suit the needs of different kinds and sizes of businesses. View WEX’s fleet card comparison chart to see which fleet fuel card is right for you.
New York Times