Using Shared Dedicated Transportation Networks MAKING THE CASE FOR
When companies use shared dedicated fleets, they get higher service levels, more flexible pricing options and a solution that helps them overcome some of their most pressing supply chain and logistics challenges.
Efficient and Sustainable Transportation for an Uncertain World
There are a lot of issues keeping logistics, transportation and supply chain managers up at night right now.
Labor shortages, transportation capacity crunches, persistent supply chain disruptions, rising fuel costs and geopolitical disputes are just some of the outside factors impacting the steady flow of goods. Customers also expect faster deliveries and are placing more online orders, two forces that only add to the complexity of planning, securing and budgeting for transportation.
“This is one of the most challenging times ever for shippers,” says Jeff Jackson, EVP, Operations - Dedicated Contract Carriage, Penske Logistics. “Add the semiconductor shortage, clogged automotive supply chain and limited availability of key inventory and parts to the equation, and don’t forget to include inflation, escalating wages and higher input costs on the list of pain points that companies are grappling with right now.”
“In the transportation sector, everyone is seeking ways to be more efficient and to get more done with fewer drivers and less equipment,” says Jackson. The challenges don’t end there. Companies are also responding to their customers’ and business partners’ requests for better environmental sustainability, reduced carbon footprints and lower emissions.”
Managing in a perfect storm
The “perfect storm” of logistics and supply chain challenges is forcing many companies to rethink their transportation approach. They’re seeking innovative ways to address their current problems while also planning for future growth. For many, the answer lies in shared dedicated transportation networks that leverage shippers’ synergies within geographical areas to share truckload space.
Penske Logistics operates five regional shared transportation networks across the continental U.S. that serve key industries like automotive, retail, industrial distribution, and agriculture. By moving from a dedicated to a shared dedicated transportation strategy, companies can effectively reduce miles driven by anywhere from 15%-20%. They also
save money while gaining the power of a dedicated fleet and operating in a more environmentally friendly, sustainable way.
“When you’re facing challenges like driver and equipment shortages right at a time when e-commerce sales are increasing and customer expectations around
freight handling and consistent delivery times.
Better for the environment
Along with reducing miles driven, shared dedicated transportation uses less fuel, creates less traffic congestion and minimizes wear and tear on the nation’s roads, which require a lot of natural resourc-
“In the transportation sector, everyone is seeking ways to be more efficient and to get more done with fewer drivers and less equipment.”
— Jeff Jackson, EVP, Operations - Dedicated Contract Carriage, Penske Logistics
fast deliveries are rising, shared dedicated fleets can solve these issues and help companies improve their efficiencies,” says David Eaton, SVP, OperationsDedicated Contract Carriage, Penske Logistics.
By providing an innovative shipping solution designed for a wide range of different shippers, shared dedicated networks provide all the benefits of dedicated contract carriage.They also offer high-touch deliveries, customized execution based on the company’s specific delivery requirements and specialized equipment—and all at a lower cost than most other options. The solution provides high service levels with next-day delivery, minimal
es to maintain and repair.
“The more we can load trailers up to capacity in a shared scenario,” says Eaton, “the more efficient we can be in terms of fuel consumption and the more sustainability benefits we can incur.”
Shared transportation arrangements also require less packaging and packing materials. Product can be loaded into retainable conveyances and reused—an option not available to companies using one-way transportation modes. It also helps companies manage activities like inventory repositioning.
The health care company that wants to position its inventory closer to the hospitals that need it, for instance, but doesn’t have the products situated in the right geographic
regions, can use a shared dedicated network to efficiently move those goods between distribution centers or warehouses.
Economical and efficient
Shared dedication transportation, an approach used frequently by the auto and truck parts distribution sectors, is becoming popular in other industry verticals due to the current supply chain, logistics, transportation and labor strains.
To work through these and other issues, more companies are looking for new ways to get their critical parts, supplies and products from
By moving from a dedicated to a shared dedicated transportation strategy, companies can effectively reduce miles driven by anywhere from 15%-20%.
point A to point B in the most reliable, economical and efficient manner possible.
This Making the Case explains how shared dedicated transportation works, the evolution of this innovative freight approach, and the return on investment that it provides for companies of all sizes and across most industry sectors.
It’s Just Like Carpooling, but for Freight
Rising fuel costs, equipment shortages, freight capacity crunches, an escalating driver shortage and the push to use more sustainable delivery solutions are prompting companies to leverage the power of shared dedicated transportation networks.
These networks offer all the benefits of a dedicated fleet at a lower price. They allow companies to make consistent, dedicated deliveries to out-of-area locations without the expense and complexity of less-than-truckload (LTL), parcel or expedited shipments.
It works like this: Penske’s dedicated, multi-client delivery network is structured around five regions comprising the 48 contiguous states. The network includes 14 dedicated cross-docks in addition to shared facilities. There, inbound product from specific shippers is inducted into the shared dedicated transportation network.
Outbound loads containing customer orders from multiple shippers for specific geographies are then loaded in delivery sequence. The trucks depart soon after arrival. They’re then moved through the network supported by nearly 300 relay points that serve over 7,000 destinations nationwide.
“Because not every shipper has DCs in every geography, we’re transporting freight from the Southeast network to the Midwest, and from the Midwest to the Southwest and the Southwest to the Southeast, on a nightly basis,” says Jeff Jackson, EVP, OperationsDCC, Penske Logistics. “We can also interconnect those routes in order to give shippers even more operating flexibility.”
The benefits add up quickly
Similar to how a carpool setup operates, shared dedicated transportation combines freight loads from multiple shippers in a single truckload. This gives each individual shipper:
• High service levels with next-day delivery at a time when more customers are demanding shorter delivery lead times.
• Consistent, reliable delivery times in an era where driver, equipment and capacity shortages can significantly impact this key performance indicator.
• Return handling for containers or packaging that would otherwise have to be disposed of if the company was using a one-way transportation option. The driver picks up any conveyances or product that are indicated for return at the time of delivery, and those items move in reverse sequence through the network en route back to the original shipper.
• Minimal handling and reduced damage because shared transportation networks combine multiple shipments, thus allowing companies to share the cost without sacrificing service.
• The ability to leverage economies of scale by paying only for the freight volume and distance traveled. Routes are designed and engineered to efficiently serve given geographies daily, five times per week, ensuring consistency and reliability of delivery times.
• Improved service levels and better shipment accuracy thanks to advanced scanning systems that prevent the comingling of orders across different shippers.
Adept at handling shipments with similar freight characteristics and handling requirements, both drivers and dock associates know how to move specific items, thus reducing incidental damages from mishandled items. By leveraging order volume from shippers that have similar freight characteristics and service needs and traveling to common geographies, Penske helps its customers realize the benefits of traditional dedicated transportation, but with greater efficiency and across more activity.
Shippers get high service levels with next-day delivery within an offering that provides high levels of sustainability, better utilization of resources like drivers, equipment and fuel, and fewer average miles per shipment handled.
To ensure delivery accuracy, Penske uses an advanced scanning system that ensures that the right freight is loaded on the right truck. All deliveries are also geofenced and scanned, thus minimizing any claims.
Closing the loop
Transportation isn’t a one-way street. Many companies need their containers, roll cages and/or shipping totes back once the goods have been delivered. Retrieving those items can introduce complexities when one-way transportation is used, but it’s significantly easier with shared dedicated transportation.
The shipper that uses roll cages to ship fragile products to a customer, for instance, can pack those conveyances up, secure them, transport them and then receive the roll cages back once the shipment has
been delivered. Then the roll cages can be reused for the next order.
Companies may also have to send returned goods back to an origin source due to buybacks, obsolescence or some other factor. Because shared dedicated networks operate as “closed loop” services, those items can quickly and efficiently be returned to their origin.
A large industrial distributor that’s sending product out to various locations from a larger distribution hub can also leverage this closed loop, knowing that its
By adding shared dedicated transportation network capabilities to an existing dedicated approach, the same shipper can effectively service 100% of its customers or destinations with the same level of service. Using driver relay points, Penske keeps the freight moving at a high rate of speed until it reaches its destination.
For a shipment that moves from Chicago to Denver on a nightly basis, for instance, two different relay teams—one in Des Moines, Iowa, and the other in Fort Morgan,
“Because not every shipper has DCs in every geography, we’re transporting freight from the Southeast network to the Midwest, and from the Midwest to the Southwest and the Southwest to the Southeast, on a nightly basis…We can also interconnect those routes in order to give shippers even more operating flexibility.”
EVP, Operations
totes, roll cages or other returnable items will make their way back to the hub without the need for further intervention or cost.
Even companies that are using pure, dedicated transportation networks can benefit from a shared dedicated option. “It can be difficult for companies to service all of their customers and/ or destinations with dedicated carriers because some points have a very high cost to serve,” says David Eaton, SVP, OperationsDCC, Penske Logistics.
For example, some of those locations may be remote or they may lie outside of the normal dedicated routes. Companies may enlist costly courier services or another expensive option to help fill in those gaps.
Colorado—share the responsibility of getting the shipment to its destination on time.
“We can service most points by 7 a.m. the next day for a shipment that was received by 7 p.m. the night before,” Eaton explains. “That’s accomplished using highly engineered routes and relays that involve multiple drivers moving the product at the same time, and coming from opposing directions.”
And because the shared dedicated routes are set and run on a repetitive basis, five days a week, shippers get very high levels of service and consistency at a time when more and more of their customers are demanding both.
— Jeff Jackson,
- Dedicated Contract Carriage, Penske Logistics
The Evolution of Shared Dedicated Transportation Networks
Like many innovative solutions, shared dedicated transportation networks came about in response to shippers’ needs for a more streamlined, efficient delivery process. After transportation deregulation in 1980, most large shippers developed their own dedicated fleets to provide high service levels for their own critical parts.
The shared dedicated network concept emerged when some of the European luxury brands in the automotive segment decided to pool their efforts. Situated in close proximity to one another, they realized having three different parts delivery trucks bringing orders to three dealerships was unnecessarily redundant.
In 2009, Penske came up with a solu-
tion to their problem. And while the idea of sharing services across competitors—whose parts would be transported on the same trucks as those competitors—sounded odd at first, the European dealerships warmed up to the idea pretty quickly. Credit the long list of benefits that shared dedicated transportation networks provide with helping to turn them into believers.
“Ultimately, these auto dealers decided that they really don’t compete for business in the service area; they’re competing on the showroom floor,” Jeff Jackson, EVP, Operations - DCC, Penske Logistics explains. “As one of our customers told us: ‘Once we figured out that the parts don’t actually talk to each other on the back of the truck, we were okay with shared services.’”
In collaboration with its customers, Penske
developed networks in the same sequence that is shown on the map. As the networks were built out, and as more shippers wanted to leverage the benefits of shared dedicated services, Penske began further building out those networks.
“It became a self-fulfilling trend,” Jackson says. “As the benefits were realized, more and more companies wanted to participate.”
Traditionally, OEMs operated separate dedicated eet networks
Dealerships for multiple OEMs were in same area for luxury brands
Luxury brands typically lack good density resulting in higher transportation costs Find a way to have a model to include multiple OEMs on same truck to drive out cost
Using Shared Dedicated Transportation Networks
When organizations use shared dedicated transportation networks to manage their freight, everyone wins.
FOR THE LOGISTICS OR TRANSPORTATION MANAGER: Establishing and maintaining inbound and outbound shipment schedules, directing the flow of materials and products through an organization and implementing both immediate and ongoing improvements are some of the top responsibilities for logistics and transportation managers.
In light of the uncertain business environment and more-than-usual supply chain challenges, these professionals need both high reliability of on-time delivery and reduced claims damage. Shared dedicated transportation networks provide both, plus high shipment visibility during transit and reassurance that the same, experienced driver will be handling the route.
Logistics managers have a single point of contact for any issues that might arise, and an easy way to manage packaging and product returns.
For the VP of supply chain, shared dedicated freight also provides double-digit cost reductions compared to using dedicated fleets combined with courier or parcel services to help fill in the gaps.
MAKING
SHARED DEDICATED TRANSPORTATION INBOUND CONSOLIDATE OUTBOUND
Outbound
Screening and sorting
Consolidation crossdock
Customer orders are shipped via Penske Dedicated eet to a Penske Dedicated Crossdock for consolidation.
Penske Dedicated Inbound
Customer orders are then consolidated based on destination pairings.
Penske Dedicated Outbound
Penske Dedicated Crossdock
FOR THE VP OF SUPPLY CHAIN: No one likes receiving calls from an unhappy customer because deliveries are missed or late. Using a shared dedicated network, companies see high customer satisfaction rates. For example, because the same driver always handles the same route, he or she can be given keys or codes needed to make unattended deliveries.
This ensures that the freight is always there within the expected time frame (usually before normal working hours), thus reducing labor needs at the receiving site. For the VP of supply chain, shared dedicated freight also provides double-digit cost reductions compared to using dedicated fleets combined with courier or parcel services to help fill in the gaps.
Customer orders are shipped for nal mile delivery, driving lower cost per delivery by creating denser routes.
Destination Relay point Customer orders
FOR THE COO: Second in command in a company, COOs manage and handle the daily business operations of the company, working closely with department heads and supervisors to support the day-to-day activity. For the COO and other members of the C-suite, being able to benchmark service levels against different industry and peer groups is an important contributor to continuous improvement, customer satisfaction and other key performance indicators.
By combining order volume from companies with similar freight characteristics and service needs— with similar destinations—shared dedicated transportation offers greater efficiency across more activity.
Some of the other key “wins” include high service levels, next-day delivery, high levels of sustainability, better utilization of resources and fewer average miles per shipment handled. Combined, these benefits translate into happier customers that keep coming back for more.
“It’s very important that C-level executives offer a service that gives customers what they’re being promised,” says Jeff Jackson, EVP, Operations - DCC, Penske Logistics. “Ultimately, this will drive their current and future business and potentially allow them to enter new markets at a lower cost.”
Solving for the Now, Preparing for the Future
As they continue to work through current challenges, shield themselves against future roadblocks and prepare for future growth and success, shippers across many industries are reimagining their traditional transportation strategies and coming up with innovative ways to tackle all of the uncertainty that’s swirling around them.
For help, these shippers are turning to logistics providers like Penske, which since 2009 has been finding unique ways to help its customers leverage economies of scale and operate more sustainably using shared dedicated transportation networks.
Open to all industries
While the automotive industry continues to be a major user of shared dedicated transportation, Penske also offers it to other markets including food and beverage, grocery, retail, consumer goods, health care and industrial distribution. Other sectors could also benefit from this innovative transportation strategy.
“There’s a real opportunity to use the shared dedicated transportation network across additional industries and market segments,” says Jeff Jackson, EVP, Operations - Dedicated Contract Carriage, Penske Logistics, “all of which would benefit from the high levels of service, cost benefits and sustainability improvements that these networks provide.”
Shared dedicated transportation networks provide all the benefits of
less susceptible to damage, more cost efficient and more likely to meet scheduling timelines. And because all returning trailers can be loaded with goods, shippers can also save money on packaging through the use of returnable containers and dunnage.
“Shared dedicated transportation networks help companies with a lot of the pressing issues that they’re facing right now,” says David Eaton, SVP,
“There’s a real opportunity to use the shared dedicated transportation network across additional industries and market segments, all of which would benefit from the high levels of service, cost benefits and sustainability improvements that these networks provide.”
— Jeff Jackson, EVP, Operations - Dedicated Contract Carriage, Penske Logistics
dedicated contract carriage, with added rewards like high-touch deliveries, dedicated drivers, customized delivery requirements, specialized equipment and lower overall costs.
And because it reduces the number of miles needed to get multiple deliveries from origin to destination, this option also lowers fuel consumption, minimizes vehicle wear and tear, and extends the life of the nation’s roads.
The benefits are compelling
An alternative to less-than-truckload (LTL) shipments, shared dedicated transportation combines freight loads from multiple shippers going to a shared geographic area. This makes them
Operations - Dedicated Contract Carriage, Penske Logistics. “It also gives them the ability to service more of their geographic area with fewer resources, and in a more fuel efficient and cost-effective manner. The tougher the logistics environment becomes, the more compelling those benefits are.”
As the logistics environment continues to evolve, more shippers will turn to shared dedicated transportation networks for the full range of benefits that they provide. Those that make the move find that it’s a natural fit for their growing operations, while those that don’t may continue to struggle under the weight of increasingly complex logistics, transportation and supply chain environment.
Penske Logistics provides dedicated contract carriage services through its expansive network in North America with safe, professional drivers, and a modern truck fleet integrated with advanced safety systems, transportation management and real-time freight tracking systems. Penske Logistics handles deliveries for a variety of leading companies in industries including automotive, CPG, food, grocery, beverage, manufacturing, quick-service restaurants, health care, and convenience store chains.