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Dedicated carriage revenues grow

New report shows carriers grew revenues, but not capacity, in 2011.

Dedicated contract carriers kept their fleet sizes relatively stable last year but grew revenue sharply, according to a recent report from Armstrong & Associates Inc.

The report, Dedicated Contract Carriage: New Life in a Mature Market, focused on the 25 largest carriers in the segment.


According to the report, the overall number of power units in dedicated fleets fell by 1.5 percent last year from 2010 levels. But Armstrong estimates that revenues grew by 13 percent to $12 billion in the segment. With fleet sizes remaining stable, Armstrong analysts attribute most of the revenue gains to rate increases. The analysts estimate growth this year will slow to about 4 percent.

Retail and consumer products make up the largest share of commodities handled in dedicated contract carriage operations—36 percent, according to Armstrong estimates, followed by food and beverages (24 percent), automotive (12 percent), and industrial products (11 percent.)

The report also notes a growth in demand for dedicated services resulting from conversions of private fleets in response to the regulatory requirements imposed by the Federal Motor Carrier Safety Administration's Compliance, Safety, and Accountability program, a far-reaching initiative aimed at removing unsafe commercial drivers from the nation's roads.

The report also briefly traces the history of the business from 1980, when trucking contract arrangements were largely deregulated. Truckload carriers developed dedicated businesses as arms of their over-the-road operations. Three of the top 25—Ryder, Ruan, and Penske—grew their dedicated businesses from their leasing operations in the 1980s. Over time, truckload carriers became more sophisticated at meeting variation in demand for capacity by shifting units among dedicated operations and from their regular truckload fleets. The leasing specialists use transportation management tools and resources from their dedicated fleets to meet capacity requirements.

The report draws a sharp distinction between dedicated contract carriage and dedicated capacity agreements. While contract carriage provides exclusive use of vehicles and drivers, dedicated capacity promises needed capacity, usually from the operator's truckload fleet.

The use of owner-operators in dedicated operations has also increased over time, according to the report.

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