Two factors that influence fleet manager’s decisions to rent trailers

  • Two factors that influence fleet manager’s decisions to rent trailers

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    Semi-trailer operators face a challenging decision when deciding to rent or lease a trailer.  Not only is the cost of the trailer a large factor, but a stable source of drivers is also required to ensure the fleet is operating at maximum capacity and efficiency.  At the same time, the operator needs to consider whether to invest in technology such as GPS, automatic air-up on tires, or other technology.
     
    For most operators in the industry, technology is a key unknown.  Technology has proven to be a double-edged sword: if you invest too early or in the wrong equipment, you can end up with expensive and unproven technologies.  Many technology companies are keen to expand rapidly so often show up at sales meetings offering the “latest technology” which in many cases is in a ‘beta’ version, a trial version or some other format.  Pricing for technology often difficult to evaluate and the cost-benefit-analysis is often challenging to complete.  
     
    At the same time technology, when partially implemented, can make operations no more efficient.  Consider the case of GPS units placed on trailers.  If the units are only installed on part of the fleet, then the owner of the fleet is probably running two systems to track mileage, bill clients and so forth.  Not a lot of savings there.  This makes technology often an ‘all or nothing’ solution.  But plowing ahead to the last dry van and reefer van and paying for upgrading the entire fleet is often a test of th
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    Consider the following economics for renting a trailer.  The fleet manager used to rent a trailer for $250 a month.  A new technology for GPS is added.  The GPS provider charges the fleet manager $150 for the GPS unit plus $20 a month as as a data fee for the equipment.  If the GPS unit lasts five years, then the cost for the unit is $30 in fixed costs plus $240 in variable costs per year.  This is an increase of about 10 percent to the cost of operations.  For this reason, before acquiring a GPS unit, fleet managers have to be able to identify one of two things: if the cost can be passed on to the customer (fully or partially) and/or if the GPS allows savings to be discovered. 
     
    Recent surveys have also indicated that fleet managers are thinking of changing the mix of equipment in response to changing market conditions.  One factor that has occurred over the past ten years as the economy has grown and the wealth of the economy has increased substantially is the move to higher price and higher quality trailers.  Firms have been more comfortable in spending that extra dollar to get a trailer that performs better over the long haul.  Many fleet operators have also stated that they want to increase the size of their fleet.
     
    For fleet managers deciding whether to rent or buy, the rental option reduces or eliminates several key risks: financing risk, technology obsolescence, quality concerns of equipment, delays in delivery of equipment and of course fluctuations in consumer demand and demand for haulage services.   
    Technology & the economy: two factors that influence the fleet managers decision to rent trailers.

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