Supply and Demand Market Volatility Makes Full-Service Leasing a Smart Choice
Some say slowdown; others say recession; still, others say COVID-delayed growth will continue for the next few years. In any case, do you have the right fleet for whatever may come?
The economic upswing that has benefitted most businesses is now looking more like a roller-coaster ride, most evident with the stock market experiencing incredible highs and lows, sometimes in a single day. This volatility can create uncertainty for businesses when it comes to planning for the future. Will sales increase, remain flat, or drop precipitously? While conventional thought on this topic tends to be around the challenge of predicting demand, we’ve recently been reminded that unanticipated supply chain disruptions can create an even more volatile business environment. Coupled with robust demand for new trucks coming out of the depths of the pandemic, the shortage of globally sourced semiconductor chips has added a significant, unexpected, supply-side constraint to the traditional ones of driver and diesel technician shortages. In some ways, this aura of uncertainty can be worse than knowing exactly what the trajectory is, even if that trajectory is heading in the wrong direction.
In today’s increasingly competitive and global economy, companies must be able to adapt to this market reality and manage their working capital more efficiently than ever. Whether the economy is expanding or slowing, organizations with private fleets must routinely assess whether their capital is best suited to core business investments versus purchasing and supporting new transportation assets. In volatile times, providers offering flexible and agile solutions can help a company navigate this turbulence.
This is one of the reasons many companies are choosing to outsource their commercial fleet needs to a full-service leasing provider. Today’s total cost of ownership (TCO) models recognize that the increasingly rising initial purchase price of a truck is just one component of any analysis. Potential increases in the cost of capital, life-cycle maintenance, and administrative expenses cannot be overlooked. And in a constrained transportation ecosystem, with driver and technician shortages, HOS and ELD regulation, as well as the learning and adoption of a myriad of new technology, the effective utilization of fleet assets has never been more paramount. Companies just can’t afford to carry excess assets on the fence or sidelined awaiting maintenance.
A full-service leasing solution may be the answer to uncertainty.
A full-service leasing agreement is structured to enable a company to accurately budget for its fleet and it efficiently parallels a TCO approach. In addition, it can be structured to provide scalability that may not possible with a privately-owned fleet. As an example, consider a company that estimates a need for twenty trucks in its fleet. If that business is susceptible to the aforementioned variables or seasonal demand fluctuations, it may not require twenty trucks throughout the year, which means those idle assets, in actuality, become fixed overhead during these periods. Likewise, if the business climate turns up or down, the agility to flex the fleet accordingly may not be there.
With full-service leasing, that same company may be able to work with the provider to lease fifteen trucks on a long-term arrangement and supplement five, similarly, spec’d, rental trucks on a short-term cancellable arrangement. The payments for those five trucks will likely be higher than the remaining trucks month to month, but far less than the cost of owning and maintaining five trucks that are idle a significant part of the year. This approach can offer companies greater flexibility to use their working capital strategically and reduce the risk of being saddled with assets the company doesn’t need.
Finding the right provider is the key to a successful partnership.
Not all full-service leasing providers are the same so it is very important that you do your due diligence before making a selection. Getting your product to its destination in the most timely and cost-efficient manner plays an integral role in your company’s growth, so your provider should be someone you look upon more as a partner than a supplier. At NationaLease, we work closely with customers in performing a thorough needs assessment of their transportation requirements in order to collaboratively work out a financial, operational, and risk management solution that will deliver the best ROI. Because we regularly reinvest in new rental vehicles, we’re not only willing but able to help our customers navigate these turbulent times while taking advantage of new technology that accompanies a professional fleet planning strategy.
None of us can know, with confidence, what the future may hold when it comes to the economy so smart planning in volatile times can mean the difference between growth and stagnation.
See how NationaLease can give you the freedom to focus on growing your business rather than on getting your product to market.
Supply and demand market volatility makes full-service leasing a smart choice when companies consider their transportation needs.
About Joe Gallick
Joe Gallick is Senior Vice President of Sales for NationaLease. An experienced supply chain executive and spokesperson in the logistics provider industry, he held senior management positions with Penske Logistics before joining NationaLease. He serves as a liaison with the Penn State University Center for Supply Chain Research.