Penske Truck Leasing

Leasing Helps Ensure On-Time Deliveries

When working with air freight, every minute counts. Even small delays can result in a missed flight, leaving cargo on the ground rather than on the move. For Mike O'Brien, president of Eagle Air Freight, properly maintained equipment helps mitigate the risk of a delay due to a breakdown or roadside inspection.

"You could have a factory in Germany shut down because their trucking company didn't pass a roadside inspection on the New Jersey Turnpike," O'Brien says. "Everything is time sensitive, and there are time cutoffs that have to be made. We have to make sure there aren't delays."

Eagle handles air freight for all major airlines at Boston's Logan International Airport. It also offers daily service from Boston to John F. Kennedy International Airport and Newark Liberty International Airport. Leasing tractors from Penske Truck Leasing helps Eagle keep its commitments and deliver every load on time.

Turning Independent Drivers to Company Drivers

Before turning to leasing, Eagle had relied on owner operators (OOs). But when the financial crisis hit in the late-2000s, those OOs struggled. Around 2010, many OOs started going out of business because they couldn't get financing for new equipment. So Eagle Air Freight chose to lease from Penske and turn those independent drivers into company drivers.

At about the same time, equipment prices started to increase dramatically, nearly doubling from what they had been five years earlier. That further solidified O'Brien's decision to lease. He started with four tractors to gauge the value. Today, the company leases 10 tractors and three straight trucks. "We've plugged in the numbers, and we're better off using Penske than buying equipment ourselves," he says.

Having Quality Equipment at the Ready

O'Brien prides himself on having the industry's best equipment. Leasing high-quality, properly operating equipment protects Eagle's reputation and improves safety. "We are charging a premium for a time-sensitive service," he says. "We have to be good."

Leasing also gives Eagle the ability to ramp up quickly when necessary. In addition, Penske provides a rental vehicle if a leased tractor breaks down, which further enhances Eagle's reliability and reputation. Penske Truck Leasing's coverage helped convince O'Brien to select Penske. "If something major has come up with a tractor, Penske has been able to swap it out within an hour," O'Brien says.

Keeping Drivers on the Move

Eagle must also comply with hours-of-service regulations. Travel time between JFK airport and Boston can range from four to nine hours depending on traffic. Drivers can't waste time on a breakdown. If a driver is pulled over, O'Brien says he has found that DOT officers conducting an inspection know that Penske does a consistently good job of maintaining commercial vehicles. That helps drivers get on their way faster.

To help monitor drivers' hours, Eagle invests in electronic logging devices (ELDs). That keeps the company ahead of industry regulations and helps improve safety.

Overall, leasing provides value and allows Eagle Air Freight to keep its commitments to their customers. "You can do 100 shipments right but do one wrong and you have real issues," O'Brien says. "It is good to have a partner like Penske that understands our business."

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Gain Flexibility, Peace of Mind with Leasing

With deliveries taking place in 48 states, United Furniture Industries needed a nationwide solution for its transportation needs. Doug Hanby, COO and former CFO for the company wanted a provider that could provide comprehensive maintenance, replacement vehicles and short-term maintenance, which allows him to have the service levels he needs while allowing the business to focus on its strengths.

"Our core competency is building furniture and we want to get it delivered in the best way we possibly can," explained Hanby.

The Verona, Mississippi-based furniture manufacturer delivers to 1,400 Big Lots and many other customers' stores every week. Exact locations are based on the previous week's sales. "If you have the ability to flex up on your capacity, that is a great tool. We're going into the same areas every week but there is no rhyme or reason to it," stated Hanby.

Broad Maintenance Coverage

Because of the geography United Furniture Industries covers, having nationwide maintenance makes things easier.

"It isn't our core competency to have a maintenance program on trucks. That is what Penske does," emphasized Hanby. "What I like is that when we have a breakdown on the road they don't gouge you. It is good to have the knowledge that [Penske is] going to take care of it."

Keeping Trucks on the Road

If a breakdown occurs on the road, Penske Truck Leasing either repairs it on-site or provides a replacement vehicle, which improves uptime. "If you're late you have upset customers," Hanby said, adding that one of the reasons the company runs its own fleet is so it has greater control over its deliveries.

Increased Flexibility

Due to driver turnover rates, Hanby tries to keep additional drivers on staff and relies on short-term rentals when he has more drivers than trucks. "A driver is a scarce resource. The absolute worst thing I can have is a truck with no driver."

For example, if Hanby has 100 trucks, he tries to keep 106 drivers and will rent temporary trucks in order to keep the extra drivers busy until he has turnover. "I like to have flexibility. I'll pay just a little more for the temporary trucks, but the ability to keep the right number of trucks for the right number of drivers is important for us."

The Right Equipment

Penske Truck Leasing provides guidance during the spec'ing process, which Hanby appreciates. "I'm happy with the feedback I get when we're spec'ing trucks out. We have good equipment. We have very few problems with it."

Driver Retention

To help retain drivers, Hanby specs trucks with driver comforts. "We've gone to all automatics and have TV hookups and APUs. We'll build as many creature comforts as you possibly can. It is all about drivers." Penske also recognizes this fact and adds value by providing safe, well-maintained equipment as well as offering driver safety training.

Improved Safety

United Furniture Industries also opted for the safety package, which provides alerts to drivers if necessary. Hanby said some of his greatest concerns surround safety and accidents. "The one thing I can feel fairly comfortable with is I'm not having accidents [due to] improperly maintained equipment."

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Leasing Increases Productivity While Reducing Risks

This current customer – one of the largest produce distributors and fresh-cut processors serving the Southwest region – relies on its equipment to get products where they need to be, when they need to be there. For the company's Chief Financial Officer (CFO), reliability is key. "We're dealing with a perishable commodity," he says. "I need my trucks to run 99.9% of the time."

He turned to Penske Truck Leasing to help him manage his fleet. "I look at Penske as a solution," he said. "The reliability and the consistency; that is the biggest value that I see."

At first, he was reluctant to lease, but quickly realized it allowed him to focus on the core aspects of the business. "I want my team focused on buying the right product and having the right inventory and not on maintaining trucks," he said. "Internal operations is our focus, and that is the value of having the lease take care of the transportation-related headaches. I'm not a trucking company, I'm a wholesale produce distributor. You want the crucial thinking in your business to be focused on what makes the company money."

Utilizing leases has helped the company reduce a number of risks and given the company's CFO increased flexibility.

Increase Equipment Uptime

The number one goal of operations is to fulfill the obligations to the customer, which means equipment uptime is crucial. "When a truck fails we irritate our customer. If I fail enough, I'm going to lose business and lose accounts," the company's CFO said, adding that regular maintenance increases the uptime, and if a truck needs a longer repair or fails in the field, Penske provides a replacement vehicle. "I just stress to whoever I'm talking to at Penske: I don't care how you get it done, just get it here and ready to run."

Spec the Right Equipment

The company's CFO said he finds value in the expertise of Penske to spec the right equipment to get the job done for his company. "I know that they know what I'm doing with the equipment and they're not going to go and spec 500 tractors that are completely wrong."

Remain Flexible

Several years ago the company's CFO realized he had the wrong truck for a new customer who was located at the top of a big hill. "If you have an underpowered truck, you're killing the truck trying to run it uphill. We got rid of the truck and replaced it," he said, adding that he has found it easy to work with Penske to get the exact equipment he needs.

Improve Agility

Leasing is a flexible alternative for the company's CFO. "If your needs change, [Penske] will work with you to try and have the right equipment. It's a phone call." That agility allows the company to pursue new opportunities without being bound by equipment.

Reduce Litigation Liability

Not maintaining equipment properly increases the amount of risk a company is exposed to, the company's CFO said. "In this day of everyone wanting to sue everyone for everything, if you don't have a full-service maintenance operation on your equipment, you're exposing yourself to huge litigation liabilities." With Penske Truck Leasing's full-service maintenance program, the company's CFO now has a record of when certain items were serviced or replaced. "When you have a third party doing it and it is documented, you have something to fall back on."

Reduce In-House Liability

Having a third party manage maintenance also reduces the liability an on-site maintenance facility carries with it. "My alternative is to build a shop and hire the guys; that is a lot of additional liability, particularly with the Environmental Protection Agency (EPA) issues you have to deal with if you're conducting your own maintenance on your property."

Retain Drivers

New, well-maintained equipment helps the company attract and retain quality drivers. "The right people value driving a relatively new unit that is in good shape and that they know is maintained," the company's CFO said. "When my transportation manager interviews guys and when they have their initial onboarding and training, they are impressed. The wrong guys don't care."

Support the Brand

The chefs and restaurants the company serves expect top-quality products that are handled carefully and safely. The company's CFO emphasized, "If you are going to be a top provider of high-quality food, then everything has to go along with it and the equipment is part of that."

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Streamlined with Contract Maintenance

Thompson Creek Window Company specializes in the design, manufacturing, sales and installation of economic, efficient, environmentally friendly replacement windows, created specifically for the needs of the mid-Atlantic climate, and sold directly to consumers.

The company made several internal efforts to manage their fleet and develop a preventive maintenance plan, a DOT compliance system and a program for tracking and analyzing their fleet maintenance. But in the end the efforts proved to be insufficient.

Contract Maintenance Program

Penske's Contract Maintenance Program helped Thompson Creek Window Company streamline their operations immediately. All departments — especially accounting — are extremely pleased with the Penske solution.

"We receive one invoice that is timely and precise, and, with the help of Penske's MyFleet.com, we assign an accurate purchase order," notes Scott Darrow, Controller. "The costs are easily posted to the right division or cost center, in the correct month, while recovering eight hours of staff time. We now have vehicle data we trust for budgeting. Penske also proactively handles our fleet's registrations, renewals and state emissions requirements," adds Darrow

But the real winners, according to Rick Wuest, President are the customers. The vehicles in the Thompson Creek Window Company fleet are stocked with proprietary inventory that needs to reach the customers when promised. The local Penske branch has extended evening and Saturday service hours that allow for scheduled repairs and preventive maintenance to be done when most other service stations are closed. "Recently, Penske changed four tires, two pairs of brakes and performed a full preventive maintenance in less than three hours, getting our driver on the road on time."

Thompson Creek Window Company has taken advantage of additional Penske services to enhance their business. Penske helped implement a DOT compliance program and performed a mock DOT audit that Wuest classifies as "realistic, professional and enlightening." He adds, "The corrective action plan we have instituted from the recommendations and resources provided has not only tightened up our DOT compliance program but helped us with our driver safety program for our non-DOT drivers."

Telematics

Another area in which Thompson Creek Window Company relies on Penske expertise is telematics. "Our Penske telematics specialist has listened in on conference calls while we interviewed several Telematics vendors," said Wuest. "He took the time to learn our company and mission and guided us toward the best vendors of the many that fit our needs."

Because Penske has established relationships with aftermarket purchasers of fleet vehicles, Thompson Creek Window Company has benefited from an increased purchase price and reduced disposition time for its used trucks. The company even purchased a used box truck from Penske's off-lease fleet.

Thompson Creek Window Company personnel meet with their Penske Fleet Sales representative on a quarterly basis to review costs and find ways to improve efficiency. "He always brings new ideas — and sometimes additional Penske representatives — to help us improve our overall fleet performance," said Wuest. He marvels that all this progress has taken place in just the first year of their partnership with Penske.

"We believe that this partnership has just begun and that we have only scratched the surface of the ways Penske can help Thompson Creek Window Company," mused Wuest

"As Thompson Creek Window Company expands from a regional to a national firm, Penske's Logistics team will be another valuable partner in fostering the future success of our business."

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Leasing Mitigates Operational and Financial Risks

As the chief financial officer of Foundation Building Materials, a building material distributor with a network of branches across the country, John Gorey needs to ensure the company is providing high levels of service while also managing costs and mitigating risks. Gorey has turned to leasing through Penske Truck Leasing to get and keep trucks on the road and protect the company's balance sheet. Gorey said one of the key benefits of leasing is minimizing risks, both operationally and financially.

Proper Maintenance

According to Gorey, "For delivery situations, your risk if your truck isn't maintained properly is you miss your delivery windows." He added that breakdowns wreak havoc on on-time deliveries. "We measure on-time deliveries. We think it is important for retention of customers."

Meeting delivery windows also allows the company to reduce the risk of fees associated with a missed delivery. "If a customer has a crew waiting four to five hours, he will back charge us for his time," stated Gorey.

Equipment Uptime

What's more, ensuring equipment uptime saves staff time, as nearly everyone in the company – from a dispatcher to the driver – is affected if equipment goes down. "It cuts a lot of back-end time from our dispatchers and our managers," Gorey said.

Roadside Assistance

With a lease, if equipment does fail, Gorey emphasized Penske responds quickly to get a truck back online so the company isn't late for a delivery. "We have fewer issues with our equipment. We rely on Penske to get out to our tractor and they can fix it."

Substitute Vehicles

If more than a roadside repair is needed, Penske Truck Leasing provides a replacement vehicle. "They are always responsive to get us a new substitute tractor," Gorey explained, adding that without the lease, he'd have to maintain backup equipment and hire an independent mechanic, which would add costs.

Predictable Costs

Understanding and knowing costs in advance helps Gorey minimize the financial risk the company faces. "We've established what the financing costs are so there is is less concern about what the costs are going to be," he said, adding that the lease also gives him insight into maintenance costs. "They are more visible and we mitigate any big, large maintenance problems."

The Bottom Line

For Gorey, leasing also has benefits on the balance sheet. "We record the leases as operating leases. This keeps the financing off the balance sheet and improves our debt position."

Improved Safety

Equipment that isn't operating properly or being maintained can lead to accidents and injuries, which is why Gorey said he values the safety component Penske Truck Leasing brings to the table. "We want to make sure we have all of our safety measures in place each time our trucks leave our yard."

Improved Compliance

If equipment isn't properly maintained, a fleet runs the risk of equipment-related violations being found during roadside inspections. Those violations can have a negative effect on fleet operators' scores under the Department of Transportation's Federal Motor Carrier Safety Administration's Compliance, Safety, Accountability program.

Inspections and Regulations

In addition to ensuring equipment is maintained, Penske helps Foundation Building Materials manage its DOT inspections, Gorey said.

Penske also monitors federal and state regulations to ensure equipment meets all the standards. "[Penske] helps us keep up with our fleet."

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Reliable Rentals and Maintenance Reduce Risks

For Cold Front Distribution, a direct-store delivery supplier of frozen products, temperature is crucial. And it isn't always easy to find rental units that can maintain temperatures of 20 below zero. So when Kevin Hocum, chief financial officer for the Denver-based company, needed multiple high-quality reefers on short notice, he reached out to Penske Truck Leasing for help.

"They jumped on it," Hocum says. "Within two days they had units and delivered them to our site in West Texas. That was our first experience with Penske."

Those units performed well. "Historically the rental units we get don't keep ice cream at a cold enough temperature," Hocum says. "The Penske units are much better maintained, better quality reefers. They have always been very clean and ready to go. From a safety standpoint, that is a big deal."

Based on that experience, Hocum and his team chose to rely on Penske for future leases. "Penske had no skin in the game," Hocum says. "But they came in and said they wanted to earn our business, and they did."

Cold Front Distribution currently uses a mix of full-service leases and finance leases, but Hocum says he will only use full-service leases going forward. "We don't have the bandwidth to have a group of people only managing the trucking. Time is money," Hocum says. "We've decided the only way to go is full service."

Ensuring Uptime

Having reliable trucks is crucial for Cold Front Distribution's operations. "Without the trucks, we wouldn't be able to run our routes. If we can't run routes, we lose revenue, and we all know lost revenue can't be made up. It is gone forever." According to Hocum, "If we have breakdowns and can't get rental units, it affects our top and bottom line."

Missed deliveries also damage the company's relationships with its customers. "We distribute for all of the major frozen food manufacturers. It doesn't make them happy when we can't make our customers happy," says Hocum. "If the customers are out of ice cream and frozen pizza, it creates a lot of problems for us, not just lost revenue."

Cold Front Distribution ensures uptime through the maintenance program included within its full-service lease, and through a contract maintenance program with Penske on its finance leased vehicles.

For Hocum, utilizing full-service leases makes more sense than adding maintenance riders to a finance lease. "It is more cost-effective, and the headache is taken out of our hands," Hocum says. "I've decided we are never going to use another finance lease. It will be a full-service lease, no questions asked."

Minimizing Residual Risk

Using a full-service lease helps Cold Front Distribution minimize residual value risk. "I'm not a used truck salesman, and I don't want to be in the used truck business," Hocum says. "The full-service lease is a far better way for us to go."

Streamlining Back-Office Operations

Hocum values the records maintained by Penske, which streamline Cold Front Distribution's operations. "You have the information and keep the data. In case of an audit, you have everything you need to get with the auditors," he says. "To have that additional support from your organization is a really big deal to us."

The back-office paperwork also reduces the administrative workload for Cold Front Distribution. "The invoicing is absolutely bar none the easiest to understand, whether it is a rental or a lease invoice," Hocum says. In addition, a full-service lease minimizes the time and effort the company invests in DOT licensing, all of which is handled by Penske.

Benefit the Bottom Line

While he doesn't have an exact return-on-investment figure from leasing, Hocum sees the advantages. "Some of it is hard to get your arms around as far as putting a dollar value to it," he says, "but suffice it to say, I know it absolutely adds to the top and bottom line."

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