What it means
The alternative to a private carrier is a for-hire carrier, which is a transport company that moves other firms' goods for a fee. A business chooses between the two by comparing the cost per delivery, the control it needs over timing and service, and how much money it wants tied up in vehicles.
Running a private fleet means owning or leasing trucks, employing drivers, paying for fuel, maintenance and insurance, and meeting transport safety rules. Many of these costs are fixed, which means they do not fall when deliveries slow down.
The attraction is control and brand presence. A company with its own fleet can guarantee delivery windows, keep a branded vehicle in front of customers, and have drivers who understand the product, which matters for fresh food, specialist equipment or installation work.
The weakness is utilisation, meaning how much of the fleet's capacity is actually used. Trucks that return empty or sit idle at quiet times spread the same fixed costs over fewer miles, so the cost per mile rises quickly.
Some companies use a hybrid model, running a core private fleet for regular routes and hiring for-hire carriers for peaks. Others try to fill empty return trips by carrying other firms' goods, but doing so can change the legal category of the operation and the rules that apply.
In practice
Real-world examples.
Example
A supermarket chain runs its own refrigerated trucks from distribution centres to stores. It controls delivery times to the minute and protects food quality. Finance tracks cost per mile weekly against a benchmark from hired carriers.
Example
A furniture maker delivers and installs its products using branded vans and trained staff. Customers see the company's own team on the doorstep, which supports its premium positioning. The vans earn their keep because every journey is a sales and service contact.
Example
A regional bakery runs a small fleet for daily deliveries but hires an outside carrier during the holiday peak. The split keeps the fleet fully used in normal months. It also avoids buying trucks that would stand idle for most of the year.
Formula
Calculation
Cost per mile = (annual fixed costs + annual variable costs) / annual miles driven
Suppose a building supplier runs six trucks with annual fixed costs (leases, insurance, driver salaries) of $420,000 and variable costs (fuel, tyres, maintenance) of $180,000. The fleet drives 400,000 miles a year.
Cost per mile = (420,000 + 180,000) / 400,000 = 600,000 / 400,000 = $1.50 per mile.
A for-hire carrier quotes $1.80 per mile for the same routes. The saving is (1.80 - 1.50) x 400,000 = 0.30 x 400,000 = $120,000 a year. If utilisation drops so that the trucks drive only 300,000 miles, fixed costs stay at $420,000 while variable costs fall to 0.45 x 300,000 = $135,000 (the original $180,000 / 400,000 = $0.45 per mile). The cost then becomes (420,000 + 135,000) / 300,000 = 555,000 / 300,000 = $1.85 per mile, which is more than the $1.80 quote.Case study
Seen in the real world.
Greenfield Produce is an illustrative, fictional wholesaler that delivered fruit and vegetables to restaurants using a for-hire carrier. Complaints about late arrivals were rising, and the carrier raised its prices by 12% at renewal.
The finance manager modelled a private fleet of five trucks. The lease, driver and insurance costs came to $350,000 a year, fuel and maintenance added $150,000, and the trucks were expected to drive 250,000 miles, giving a cost of $2.00 per mile against the carrier's new price of $2.40.
The saving looked attractive, but she also tested a case where deliveries fell by 25%. In this illustrative story, with fixed costs unchanged and fuel falling in line with mileage, the fleet cost then rose to about $2.47 per mile, above the carrier's price, so the board agreed to buy only four trucks and keep the carrier for peak days.
Watch out
Common mistakes.
- Comparing only the fuel and driver cost of a private fleet with a carrier's price, and ignoring leases, insurance, maintenance and the cost of idle trucks.
- Assuming a private fleet is always cheaper, when low utilisation can make it more expensive than hiring.
- Treating the fleet as a free service to the business, when it should be measured as a cost centre with its own targets for cost per mile.
Questions
People also ask.
What is the difference between a private carrier and a for-hire carrier?
A private carrier moves its own goods as part of its main business, while a for-hire carrier sells transport to other companies.
Can a private carrier carry goods for other firms?
It can in some cases, for example to fill an empty return trip, but doing so may change its legal status and licensing, so the rules need to be checked first.
How should a private fleet be assessed?
Look at cost per mile, utilisation, on-time delivery rate and the cost of the same journeys if hired out, and compare them at least once a year.
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