The Rise of FO

[chillout]

Evolution is inevitable.

The rise of FO. Many see the rise of FO as a decline to their way of life, while others may view the rise of FO as a benefit or a necessary evil to our industry. Everyone, even the dreaded FO (according to some drivers), has it’s place. Whether you consider FO as a friend or foe, may depend on your past encounters with FO or just hearsay from fellow drivers. As with anything else, heed advice from those who might know, but do your homework and sort through the gossip and get down to the facts to make your own informed decisions about FO.

In it's infancy, expediting was primarily owner operator based. As the need for more expediters grew, carriers would add more and more owner operators. As owner operators grew, the logical next step for expansion was more trucks and drivers for them. And just like other segments of the trucking industry, Fleet Owners(FO) became a part of expediting too.

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[Lawrence]

Bump. Great blog by Greg on trends in our industry ....and how it may impact you.

 

[Greg]

Thanks Lawrence.

 

[davekc]

Good article. Just looking at the fleet owner side, it ebbs and flows. Many fleet owners from years past have long gone. Still a good handful out here but more and more are in the van side of things which is a stagnant market to begin with. The obvious reason is the easy financial entry.
Straight and tractors are a little different because most are priced out of the market. Average new straight truck is 150 to 170k so to have a fleet locks out most unless they have been doing it awhile. Tighter credit requirements and higher down payments make it tough for a new person to compete.
Since the better teams will migrate towards the FO's with newer equipment, it makes a startup with used equipment tough. Not to mention, not much in the way of good solid used equipment out there. See a lot of junk actually.
But as I said, it ebbs and flows. This is the current state but could always change.

 

[Greg]

That's a great analysis Dave. Many have come and gone, and your longevity in this industry as a fleet owner must mean you are doing something right. There are still some fleet owners out here that could take a lesson or two from you.

 

[Lawrence]

Good article. Just looking at the fleet owner side, it ebbs and flows. Many fleet owners from years past have long gone. Still a good handful out here but more and more are in the van side of things which is a stagnant market to begin with. The obvious reason is the easy financial entry.
Straight and tractors are a little different because most are priced out of the market. Average new straight truck is 150 to 170k so to have a fleet locks out most unless they have been doing it awhile. Tighter credit requirements and higher down payments make it tough for a new person to compete.
Since the better teams will migrate towards the FO's with newer equipment, it makes a startup with used equipment tough. Not to mention, not much in the way of good solid used equipment out there. See a lot of junk actually.
But as I said, it ebbs and flows. This is the current state but could always change.

Dave - what was very surprising to me is how weighted most carriers are becoming to FO (Fleet Owners). At MATS 2017 I did an informal survey of most of the expedite carriers that where there. The larger ones said that more than 50% of their fleet was run by FO. That is a SEISMIC change in our industry! They indicated it's a natural trend due to the cost of entry. Obviously, they're were talking about straight trucks and tractors. I believe cargo vans are still 95% Owner Operators in most motor carrier fleets.

A FO driven industry - is very different than OO fleet. A FO driver thinks differently and behaves differently. Comparing an OO to FO Driver is interesting. An OO has a vested interest in making sure the truck is maintained - heck even clean. An OO conversation is also generally different in that they are in it for the long haul (motivated by that bank note on the truck).

Another observation is that motor carriers who remain OO heavy have very intentionally made their companies attractive to OO's, through incentive programs etc. etc.

We plan to do a series of articles on this topic due to the massive change it has brought to our industry.

 

[davekc]

Thanks for the plug Greg. lol. Have to do a few things right but you are still standing in front of that giant roulette wheel.

 

[davekc]

Good article. Just looking at the fleet owner side, it ebbs and flows. Many fleet owners from years past have long gone. Still a good handful out here but more and more are in the van side of things which is a stagnant market to begin with. The obvious reason is the easy financial entry.
Straight and tractors are a little different because most are priced out of the market. Average new straight truck is 150 to 170k so to have a fleet locks out most unless they have been doing it awhile. Tighter credit requirements and higher down payments make it tough for a new person to compete.
Since the better teams will migrate towards the FO's with newer equipment, it makes a startup with used equipment tough. Not to mention, not much in the way of good solid used equipment out there. See a lot of junk actually.
But as I said, it ebbs and flows. This is the current state but could always change.

Dave - what was very surprising to me is how weighted most carriers are becoming to FO (Fleet Owners). At MATS 2017 I did an informal survey of most of the expedite carriers that where there. The larger ones said that more than 50% of their fleet was run by FO. That is a SEISMIC change in our industry! They indicated it's a natural trend due to the cost of entry. Obviously, they're were talking about straight trucks and tractors. I believe cargo vans are still 95% Owner Operators in most motor carrier fleets.

A FO driven industry - is very different than OO fleet. A FO driver thinks differently and behaves differently. Comparing an OO to FO Driver is interesting. An OO has a vested interest in making sure the truck is maintained - heck even clean. An OO conversation is also generally different in that they are in it for the long haul (motivated by that bank note on the truck).

Another observation is that motor carriers who remain OO heavy have very intentionally made their companies attractive to OO's, through incentive programs etc. etc.

We plan to do a series of articles on this topic due to the massive change it has brought to our industry.

I see it evolving that way as well. I believe it will continue in that trajectory unless there is a sizable jump in rates or volumes change drastically. Even for the fleet owner, much of the margins are on volume. A single truck operation has way more exposure than years past. We went from a 100k truck to a 160k plus truck and the rates stayed the same. Some differences were recovered through technology but then got wiped out through emissions and other regulatory programs.
As for carriers, they are now basically dealing with large franchise operators. Really have no choice. Kind of like the fast food business. lol

 

[geo]

I would have to agree with this piece ,great piece. Cost of units see is pricing o/o out of this industry

 

[davekc]

I would have to agree with this piece ,great piece. Cost of units see is pricing o/o out of this industry

I would agree. Even on vans it is crazy on the increases in price. Couple that with rates that are .70 cents a mile or less and OMG!

 

[Moot]

Thanks for the plug Greg. lol. Have to do a few things right but you are still standing in front of that giant roulette wheel.

That giant roulette wheel is looking more like Russian roulette with a .45 in one of the cylinders. Give it a spin and pull the trigger. CLICK! I'm good to go for another round.

 

[Lawrence]

Thanks for the plug Greg. lol. Have to do a few things right but you are still standing in front of that giant roulette wheel.

That giant roulette wheel is looking more like Russian roulette with a .45 in one of the cylinders. Give it a spin and pull the trigger. CLICK! I'm good to go for another round.

The good news is this rapid growth of FO's is not impacting Sprinter/Cargo owners IMHO. That group is still OO.

 

[Moot]

Thanks for the plug Greg. lol. Have to do a few things right but you are still standing in front of that giant roulette wheel.

That giant roulette wheel is looking more like Russian roulette with a .45 in one of the cylinders. Give it a spin and pull the trigger. CLICK! I'm good to go for another round.

The good news is this rapid growth of FO's is not impacting Sprinter/Cargo owners IMHO. That group is still OO.

My reply wasn't in response to the piece about fleet owners but to Dave's roulette wheel line. I love that analogy because it accurately describes the expedite freight industry. I embellished a bit on Dave's analogy to reflect how I feel the direction this industry is headed for the O/O; one wrong move (pull of the trigger) and its all over. There isn't much room for error like the old days where any moron could buy a van or truck and make a living. I'm proof of that!

 

[davekc]

Thanks for the plug Greg. lol. Have to do a few things right but you are still standing in front of that giant roulette wheel.

That giant roulette wheel is looking more like Russian roulette with a .45 in one of the cylinders. Give it a spin and pull the trigger. CLICK! I'm good to go for another round.

The good news is this rapid growth of FO's is not impacting Sprinter/Cargo owners IMHO. That group is still OO.

My reply wasn't in response to the piece about fleet owners but to Dave's roulette wheel line. I love that analogy because it accurately describes the expedite freight industry. I embellished a bit on Dave's analogy to reflect how I feel the direction this industry is headed for the O/O; one wrong move (pull of the trigger) and its all over. There isn't much room for error like the old days where any moron could buy a van or truck and make a living. I'm proof of that!

I'm still spinning the wheel. Only occasionally putting my finger on it for a favorable number. lol