FLEET MANAGEMENT

Transportation Management
 Introduction
• Fleet management is the management of Commercial motor
vehicles (cars, vans, trucks), specialist vehicles (forklifts and
trailers), private vehicles used for work purposes, aviation
machinery (aircraft and equipment), ships, rail cars and other
transportation modes

• Can include a range of functions, such as:

 vehicle leasing, financing and maintenance
 licensing and compliance
 Speed and driver management,
 fuel management,
 health and safety management, and vehicle remarketing

• The decision to transport freight could be by private transportation

or for hirer carrier along with their consequence and impact for
business process
Private Carrier and For-hire carriers
• Private transportation is the movement of goods owned by a
firm that also owns or leases and operates the transportation
equipment for the furtherance of its primary business.
• A private carrier does not provide service to the general
public or serves itself by hauling its own raw materials and
finished products.
• Private transportation is not the opposite of public
(government) transportation.
• For-hire carrier provides services to the public and charges
a fee for the service

Do it by Buy it (transportation
ownself services)
Private Railcar
• There are no businesses that own a private railroad to
transport their freight on an intercity basis since the cost
of the infrastructure is prohibitive.
• Many businesses purchase or lease specialized rail
equipment, such as hopper, temperature-controlled,
and tank cars, to ensure an adequate supply of vehicles
• It is common for agribusiness firms to own (or lease) a
supply of hopper cars to haul grain from the farms to the
grain elevators to end users during the harvest season

Manufacture/ For Hire Railroad

Plantation Facility (station) Intercity
private siding
or spur track
Private air transportation
• Extensively used for transport people and normally used by upper
management while lower-level managers using commercial flights
• Usually not to make routine deliveries of freight.
• May also be used in certain emergency situations:
 Transport documents for an important sale or
 Transport repair parts to prevent an assembly line from breakdown
• The private airplane projects could be an image of success both for the
company and its managers
• The cost can possibly be three, four, or more times greater than on
commercial flights depend on services and facilities
• The reason for using private air transportation:
 Save the time of their highly paid, valuable employees
 The cost of the managers’ time while waiting for commercial flights
 Provide service to certain smaller or more remote communities where
access is difficult and time consuming because of stops and/or plane
changes
 Private Water Transportation
• Private water is common for the transportation of bulk, large-volume
products such as coal, ore, and oil. These products are usually moved
regularly and in large volumes from mines, grain silos, and ports of
entry to steel mills, electrical generating plants, refineries,
processing mills, or storage facilities.
• Large Capital Investment is required for vehicle (ship, barges and
towboat) and dock facilities for loading and unloading.
• Dock facility expenses would be incurred if either private or for-hire
water transportation were used
• It is required land transportation (truck or rail) to move the cargo
between the public port and the shipper’s plant with an amount of fee.
Private Oil Pipeline Transportation
• It is common for the major petrochemical and oil
companies to own for-hire oil pipelines.
• A very large investment is required to develop a pipeline
• The large fixed costs necessitate high traffic volume for
the service to be economical
• Duplicate or parallel oil pipelines can create excess
capacity and economic waste
• Shipper ownership, especially multiple shipper
ownership, mitigates the high start-up cost barrier to
entry and provides a requisite economic volume of
shipper-owner traffic to be moved through the oil pipeline.
Ethylene Pipeline in Cilegon

http://www.chandra-asri.com/files/attachments/downloads/public_expose/Presentasi%20Paparan%20
Publik%202014.pdf
Private Trucking
• Private trucking is the most frequently used and most
pervasive form of transportation
• Private trucking is an integral segment of the
transportation system employed by the shipping public
• The Reason for Private Trucking:
 improved service and/or lower costs
 improve the marketability and profitability of its products
 improved levels of service, the firm attempts to
differentiate its product (lower transit time)
 increase its sales and profits
Advantage and Disadvantage
 Advantage
• Greater control and flexibility thus can increase
responsiveness customer (internal and external) quickly.
• Direct control over dispatching, routing, and delivery
schedules of fleet can lower transit time, inventory level,
and possibility of stock out
• Driver is under employment of company so he has a
vested interest to satisfy customer (improve relation),
greater care for handling freight and reduce freight
damage
• Avoid lack capability of hired carrier on transport special
freight i.e cryogenic liquid, pressurized tank, hazardous
product, etc.
Disadvantages
• Higher driver retention due to better pay, benefit and
human resources policies
• High capital investment for fleet, garage and equipment
• Risk of accident, damage and theft
• Cost of paperwork and maintenance for long distance.
Including cost for fleet and driver license or permit for
different state required for crossing border
• Breakdown away from home terminal need emergency
road service. This consume more time and more expense
than normal maintenance
Cost Of Private Trucking
 Private Trucking Cost Analysis
Manager Objective

knowledge of the actual facts affecting the Effective decisions that

cost of operating the individual cost elements lower costs and improve
fleet of private trucking service.

Fixed Cost Operating Cost

Not vary in short run
Varies inversely with the number of
distance operated
Increase utilized of fleet to spread FC
over large distance operated
Vary in short run
Consist of fuel, driver wages,
maintenance, tires, uses taxes
The greater the number of distance
operated, the greater of total operating
cost
Operating Cost
Equipment Selection
Leasing The Equipment
• Leasing the equipment for a private truck operation
reduces demands on company funds
• Enables existing capital to be used in the primary
business of the company
• There are two basic types of lease arrangements
available: the full-service lease and the finance lease
• The full-service lease includes the leased vehicle plus a
variety of operating support services.
• The finance lease is only a means of financing
equipment. This cost not include maintenance and other
operating support services
Controlling the Private Fleet
A key element to an effective and efficient private truck fleet
is control over cost and performances
Controlling the Private Fleet
• The performance criteria to be considered are miles
operated (loaded and empty), human resource hours
expended, vehicle operating hours, number of trips
made, tonnage hauled, and the number of stops
made.
• Fleet manager is able to measure the fleet’s utilization
and the drivers’ productivity
• From this productivity data, individual drivers who drive
fewer miles per day, make fewer stops per day, or take
a longer time to make a run than the standards (fleet
average, for example) are singled out for further
investigation and corrective action.
Empty Back Haul
• A common problem many private fleets face is how to
eliminate the empty backhaul.

• One option that eliminates the requirement for for-hire

authority is trip leasing. This is an agreement between a
private carrier and another firm, for a single trip