Private Fleets Eyeing Third-Party Freight Must Clear Three Hurdles First

A private fleet that cannot pass three tests — a clean FMCSA safety rating, accurate cost-per-mile data, and a clear picture of what the parent company pays outside carriers — should not touch third-party freight at all, according to Uriah Clise, an associate professor at Cleary University in Howell, Michigan, who has spent more than 20 years in supply chain analysis roles across four companies running private fleets, from a three-truck operation to a top-20 U.S. private fleet.

His argument is blunt: third-party loads stress a fleet's systems. If those systems already wobble, outside freight makes things worse, not better.

What does legal compliance actually require?

The first prerequisite is a satisfactory Motor Carrier Safety Rating from the Federal Motor Carrier Safety Administration, and no active risk of losing it. Taking third-party loads draws regulatory attention, Clise warns, so any existing compliance problems get amplified once more freight enters the network.

He puts it plainly: you do not want to lose your private fleet operating authority while chasing cost reduction. Equipment must be in good working condition too — not only for compliance, but because third-party loads add service requirements and raise breakdown risk. Customers notice missed loads, and a reputation for missing them shrinks your customer base and revenue.

Insurance needs to be current, and possibly upgraded. Brokers and shippers often demand different coverage amounts, and a policy that falls short of agreement terms will need raising later.

The risk list is long. Clise itemizes what taking outside loads can trigger:

• Operating in unfamiliar areas or heavier traffic, driving up incident counts
• Working — inadvertently — outside the fleet's operating authority by serving too many different customers
• Drivers pressured into hours-of-service violations or speeding to finish routes and avoid overnight stays
• Improperly secured loads when multiple customers load the same trailer
• Accidents at unfamiliar pickup and drop-off points in narrow or hard-to-see locations
• Drivers sent into neighborhoods with unexpectedly high violent crime rates
• Equipment damage from added mileage, poor road conditions or steep hills the tractor and trailer were never meant for

More incidents mean a higher chance of an FMCSA audit. His mitigation advice: keep fleet counsel inside the parent company, or hire an outside provider, to stay legally covered.

Do you know your cost per mile?

The second prerequisite is arithmetic. Without a firm cost-per-mile figure, a fleet simply cannot tell whether third-party revenue becomes third-party profit.

Three variables matter most: driver variable cost per mile, maintenance variable cost per mile, and fuel cost per mile. Driver variable cost is the driver pool's total cost divided by total miles driven. Maintenance divides total maintenance spend by miles. Fuel divides total fuel spend by miles.

Fleets can slice these hierarchically — by geographic area, driver wage type, or long-haul versus short-haul. Use a rolling one-year window, Clise advises, because some expenses hit only seasonally, and a good average needs the highs and the lows. Fixed cost per day for the driver and the equipment also belongs in the model.

Recalculate periodically against actual financial performance. Project changes forward, too: a new fuel contract, for instance, might cut fuel cost per mile for three years, and that improvement should flow straight into the third-party freight analysis.

How do your costs compare to the market?

The third prerequisite is knowing what the parent company pays outside carriers. If the parent procures transport externally, negotiated rate sheets — refreshed periodically under contract — let the fleet analyze real profit against actual transport alternatives.

One discipline matters here: the parent company should bid out the lanes the private fleet expects to cover. That shows the fleet how competitive its costs really are. Clise adds a caveat on external rate data — market rates skew higher than negotiated contracts, because contracted volumes are worth more to carriers than one-off spot loads.

Comparison work needs care. Historical lane costs get murky when the private fleet was the only operator on that lane. Rate sheets alone mislead in the other direction: they show the least-cost carrier, who may only handle a fraction of the lane's volume. Accessorial fees actually incurred deserve scrutiny as well. If the parent company pays nothing for outside freight, this step can be skipped entirely.

Clear all three hurdles, Clise writes, and the foundation is in place — ready, in his words, to build. What comes next, he promises, is the profitability analysis itself.