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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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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