Perfecting the all-owner-operator fleet model
Though owner-operators did not fare well immediately after trucking’s deregulation in 1980, that changed as all-owner-operator fleets proved to be a formidable business model.
One good example is Landstar System, says Charles Myers, former district supervisor with the Interstate Commerce Commission and with a long subsequent career in private industry. Landstar formed from mostly owner-operator carriers in the IU Truckload Group.
From the start, Landstar offered excellent opportunities for what the company calls “business capacity owners,” says Pat O’Malley, Landstar’s vice president and chief commercial and marketing officer. Prior to the company’s formation, O’Malley was with Independent Freightways, which became part of Landstar.
An owner-operator’s destiny in the Landstar network is largely self-determined, he says. The contractor is paid as a percentage of gross revenue, self-dispatched, and works through a network of independent agents and/or an in-company load board for freight.
“We decentralized the decision-making process,” says CEO Henry Gerkens. “The best person to make a decision in terms of how to operate the business is the guy sitting behind the wheel.”
The system has worked out well for the company and its owner-operators. Their net income is among the highest in the industry, according to client averages of ATBS, which provides accounting services to thousands of owner-operators. Landstar is the largest owner-operator-only fleet in the nation, representing 7,711 businesses that control 8,231 trucks, as of July 22.
Some other carriers who lease owner-operators have moved toward Landstar’s self-dispatch, percentage-pay model. At Schneider National, the nation’s largest privately held truckload carrier, “percentage is creeping back in,” says Mike Bethea, director of independent contractors. The company has also made strides in offering more operational latitude to its owner-operators since 2008.
“The technology that’s out there today — the ability for a person to get on the Internet and select their freight — is a game changer,” Bethea says. “You don’t have to have it, but if you do it’s a real benefit for the contractor.”
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