BY MARK B. SOLOMON, SENIOR EDITOR
Trucking’s dedicated contract carriage model was hard
hit by the recession. But backers say the winds have
shifted in their favor.
THE PAST FOUR YEARS HAVE BEEN A ROUGH RIDE FOR U.S.
trucking, and the segment known as “dedicated contract carriage”
was dinged up like the rest.
The business model, which has been around for decades, is
aimed at shippers who want the advantages of a private fleet
without the attendant headaches. Under a dedicated
service arrangement, a shipper outsources its fleet
operations to a third-party specialist that “
dedicates” rigs, trailers, and drivers for that customer’s sole
use. The standard dedicated contract runs three to five
years, and usually requires the customer to compensate the
provider for an agreed-upon number of miles driven on a
round-trip basis. Companies with enough freight to justify round
trips—often from DCs to stores and back—may find dedicated a
better value proposition than paying for one-way truckload service.
For shippers and their customers, the dedicated model has two-tiered
appeal: Not only does it shift a non-core competency to a third party, but it
enables users to lock in dependable and consistent truck capacity at predictable
rates for a multi-year period.
However, the trucking environment of the past four years has worked against the
model’s success. Freight demand began declining around 2006 and then plummeted following the financial crisis and broad-based downturn in 2008 and 2009.
Carriers responded by taking capacity out of play as fast as they could. Despite that, space
remained so abundant that shippers often found it cheaper to contract for one-way hauls than pay
for round-trip service and worry about filling backhaul miles in a weak economy. One trucking exec-
utive, John Simone, president and COO of Dallas-based dedicated service provider Greatwide
Logistics Services, LLC, describes the past four years as “the longest period of overcapacity I’ve seen
in 28 years in the business.”
Annual data on third-party logistics providers (3PLs) from research and consulting firm