As James Williams knew there had to be a better way. As Domestic Transportation Planner for telecommunications giant Alcatel, Williams oversees, among other things, the company�s shipping and receiving operations. With Alcatel�s headquarters in Dallas, he is responsible for 800 to 1,000 monthly shipments just within the Dallas and Fort Worth areas.
�We�re a telecommunications company so we ship everything from skidded materials to racked items that have to be strapped down,� he explains. �Last year, we shipped two million pounds of materials each month.�
For years, the company had used local delivery services on a case-by-case basis. It was expensive, and the results were not reliable. So in February of 2001, Williams and his staff began researching alternatives. �We considered using common carriers or negotiating better pricing with local courier services,� Williams recalls.
Ultimately, they decided that the pricing and service promised to be better with a dedicated fleet. The use of company trucks was eliminated as an option because of liability risks (worker�s comp, collision and general liability insurance) and all the other administrative burdens that go along with running a company-owned fleet (vehicle replacement and management and driver discipline, hiring and retention). So Alcatel turned to an option that is becoming increasingly popular in today�s economic environment: outsourcing.
Last April, the company selected Dynamex, who agreed to provide a fleet of trucks dedicated solely to Alcatel�s needs. Williams says the results have exceeded his expectations.
�We�ve seen significant savings in cost since going with a dedicated fleet,� says Williams. �But in addition, we started achieving higher service levels from a time perspective as well as a claims perspective. We had only one claim in 2001, and we usually have seven or eight a year.�
Additionally, Alcatel was able to drastically improve the timeliness of all its deliveries. Prior to outsourcing with Dynamex, approximately half of Alcatel�s local shipments were delivered on the same day they were shipped. With a dedicated fleet, that percentage has improved to more than 80% of same day shipments for the company. The remaining shipments are completed the next business day. �And those that aren�t delivered on the same day are because the pickups are made after our docks are closed,� Williams explains.
Initially, the dedicated fleet was used only for inbound shipments, but management was so impressed with the results it decided to have both inbound and outbound shipments handled by the dedicated fleet service. Williams� story of turning to outsourcing increasingly is becoming the norm rather than the exception. During an economic slowdown, as costs come under scrutiny, companies of all sizes find that outsourcing their dedicated fleets can result in tremendous savings in time and dependability.
And the outsourcing trend isn�t just affecting the shipping industry. Rebecca Scholl, a Gartner Dataquest senior analyst, told Information Week magazine that business outsourcing is on target for substantial growth over the next year. �While the market for business process outsourcing services (companies outsourcing entire departments) will reach $128 billion this year, this total is expected to rise to about $234 billion in 2005,� Scholl says.
Companies such as Alcatel and Office Depot have discovered that turning to a dedicated fleet allows management to focus on the company�s core business rather than worry about whether a delivery is going to reach its destination on time.
The key, says Mark Pistorius, director of Fleet Services at Dynamex, is understanding the customer�s needs and finding a way to make sure those needs are met.
�We send in a team to ask customers what areas they would like to change about their current shipping strategy,� says Pistorius. �Then we go in and design a custom system to provide the solutions. Through this tailored approach, we have been able to help our clients cut down on some existing inefficiencies and sometimes, like in the case with Alcatel, we are able to help them realize actual cost savings.�
How popular has outsourcing become? Already as much as 35% of Dynamex�s business in Canada and 20% of its business in the United States is dedicated fleet. Pistorius expects percentages to climb as high as 60% before leveling off.
Don�t expect the interest in outsourcing to disappear should the economy continue to gain steam. Companies understand that opportunities for outsourcing can be equally strong during boom times as well. Gartner�s Scholl says that outsourcing grows in bad times because companies want to cut costs and improve services, but it also tends to grow in good times because companies want to focus on growth.
Another factor in the increasing popularity of outsourcing is technology. Thanks to the explosive growth of the Internet as a communications tool, it is now easier for companies to outsource important services such as shipping without losing control of the process. For example, Alcatel is fully integrated with, the proprietary Dynamex service that allows customers to place orders online, track shipments and print out customized reports. Many companies have limited personnel, resources, time and, in some cases, expertise to oversee the technical aspect of fleet operations.
And then there are the little things that can make a difference. Dynamex, for example, provides uniformed drivers with badges and can even provide branded trucks. Ultimately, however, there is no substitute for turning over such a critical part of business to the professionals. In addition to the dedicated vehicles that work only for Alcatel, Dynamex is able to transfer trucks from its on-demand fleet to handle additional workload within a moment�s notice.
�Being in business with a company like ours allows for situations where there are immediate, time-sensitive shipping needs,� adds Pistorius. �Because we run an on-demand business as well, we can handle all of the last-minute needs that companies have. If a company were to do this on its own, it would have to own trucks that sit in the parking lot not being used in order to effectively handle seasonality or sales spikes. That makes outsourcing an important value-add to management because it doesn�t have to incur the costs of trucks that are not utilized year round.�
For Williams, all of those things are important, but one figure outweighs all others. �We have saved a significant amount in our costs by outsourcing our fleet,� he says. So when it comes to deciding whether to outsource, the bottom line often is the bottom line.
Jim Wicker is chief information officer at Dynamex. For more information, please