Fleet Outsourcing Fills Hole in Krispy Kreme's Growth
That’s because the Krispy Kreme Doughnut Corp., which hired him in January to operate its burgeoning distribution operation, doesn’t have a fleet anymore at its operations center.
Krispy Kreme, a privately owned producer of doughnuts and other pastries, unloaded its trucks in 1995 to concentrate more on logistics and less on day-to-day truck management.
“We sold our rolling stock, and our drivers went to work for another company,” said Pennell, the company’s director of distribution. “Basically, we didn’t want the liability of heavy equipment anymore.”
Outsourcing equipment to dedicated truck fleets and leasing companies has been a trend for the past five to 10 years, some analysts say. It’s part of an effort by companies to focus more on core competencies and less on trucks.
“I think in the end, shareholders want returns on their assets, and the shareholders of companies not in the trucking business don’t want to have capital employed in a truck,” said James J. Valentine, a transportation analyst for Morgan Stanley Dean Witter in New York.
In addition to eliminating equipment, Valentine said a dedicated arrangement can help companies find quality backhauls, which saves money and uses equipment more efficiently. “Very often in a dedicated fleet, there is more responsibility on the part of the provider in that they begin to work on all logistics, and control where the truck is,” he said.
However, while outsourcing works well for some companies, for others it might not be such a good fit, said John J. McQuaid, president of the National Private Truck Council in Alexandria, Va. “There is clearly an allure there for certain companies, but you had better get past the allure and do some good analysis before you make that decision.”
Whether a company decides to keep its equipment in-house or let someone else handle, it is a very complex issue. Factors to consider include philosophy and customer service, as well as economical and operational aspects, McQuaid said.
What’s the biggest drawback to outsourcing?
“I guess the control issue,” McQuaid said, noting that it can take more time to get things done when a company doesn’t have more of a say in how things work.
One reason Krispy Kreme chose outsourcing was to keep pace with its tremendous expansion. In recent years, the company has grown from a handful of stores in the southeastern region of the United States to 145 shops in 25 states.
Outsourcing has its plusses and minuses, Pennell said. “So far, it has gone really well for Krispy Kreme. Maintaining equipment is one aspect of the job I don’t have to worry about,” he said.
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