DENVER, April 16, 2014 - “Past performance is not indicative of future results.”
That’s a phrase often used in the financial world. But for Chad Johnson, executive manager of Bailey’s Logistics, that’s a phrase that rang true when the logistics company moved from rental trucks to a full-service lease with PacLease.
“It’s akin to a long-term test drive,” said Johnson , who rented several Kenworth T270s for three to six months at a time. “We wanted to see how MHC Truck Leasing (the local PacLease franchise in Denver) performed before we would consider them for a full-service lease. We felt the condition of their rental units and the service behind those trucks would be indicative of how they would work with us if we were to engage in a full-service lease.”
The ‘test drive’ of PacLease began in 2010, but prior to that the company had made a shift in transportation.
“We had been a company that historically owned its trucks,” said Johnson, who oversees the 50 vehicles used in the company’s logistics business at four locations located in Denver, Salt Lake City, Oklahoma City and Birmingham. The company originated in 2005 after being spun off from its parent company Bailey’s Moving and Storage, a household moving company that started operations in 1952. The logistics business now represents about half of Bailey’s revenue.
“Our logistics operation began when we secured a contract with GE for delivering household products it sells through Home Depot,” said Johnson. “All told we’ll make up to 1,000 home deliveries to Home Depot customers per day during the busy season, but on average, each vehicle we operate will make about 18 deliveries per day.”
According to Johnson, when he joined Bailey’s, he saw an aging “owned” fleet racking up unexpected service expenses. Equipment breakdowns began hampering service. “Our mechanics couldn’t keep up and trying to budget for transportation became a guessing game – repairs were getting out of hand,” he recalled. “And equipment reliability began to affect our performance – we failed some DOT inspections. If we missed a delivery day due to an out-of-service truck, that meant calling customers and working with them to reschedule.”
To infuse reliability, DOT certification certainty, and budgeting control, Johnson turned to full-service leasing. He began by working with a large national firm, but after several years wasn’t completely satisfied with the level of service he was receiving.
“We decided to open up the bidding process to a select few, but the precursor would be how they performed with rental equipment,” said Johnson. “It didn’t take long before we were thoroughly impressed with MHC and PacLease, coupled with Kenworth equipment.”
In 2011, Bailey’s awarded MHC a lease contract for three Kenworth T270s. “Price was a factor, but even more so was the level of service that MHC would commit to,” said Johnson. “We asked for a quick response in the event of a breakdown. MHC exceeded our expectations with response time that was far better than what our other leasing company provided.”
Another part of the equation was vehicle reporting. “MHC committed to giving us data from the Kenworth T270s, after they were in for maintenance,” said Johnson. “We wanted fuel consumption information – miles per gallon, idle percentage readings, along with hard-braking reports. We wanted a report card on the vehicle and the driver so we could see which drivers needed more training, and perhaps an adjustment in the way they operated vehicles. It’s very easy to let a vehicle idle while loading and unloading and we saw idle times up to 45 percent with some of our drivers. Without these reports we would have never been able to adjust their behaviors. Today, our idle times are less than 10 percent.”
Johnson said “the service level of MHC was head and shoulders above what we experienced with the other leasing company we were working with.”
It led to more PacLease vehicles being put into service. In 2013, 10 more Kenworth 270s were added to the Denver fleet, as well as two T270s being placed into service in Salt Lake City, and five more in Oklahoma City. The trucks are outfitted with 24-foot box vans with lift gates. The majority are powered by the PACCAR PX-7 engine rated at 250 hp, and Allison 5-speed transmissions.
According to Johnson, vehicle performance is saving the company at the pump. “We’re getting tremendous fuel economy with the T270s,” he said. “Our reports show our fleet average with the T270s is at 8.5 mpg. With the other non-Kenworth trucks on lease, we’re only getting up to 6.5 mpg. That’s a head turner right there.
“PacLease has really earned our business,” continued Johnson. “The level of service – at all the locations – is very consistent and top-notch. We love being treated as if we were a large national company. We can talk easily and comfortably with the top people at PacLease since they’re decision makers at the local level. It makes a difference.”
According to Johnson, equipment makes a difference as well. “We love the Kenworth product – it’s like driving a luxury car, very quiet and solid. What’s more, our drivers say our trucks and agreement with PacLease without a doubt makes a difference in their staying with our company. We’re like many companies where we pay our drivers on a piece-rate basis. They know with the Kenworth equipment and support of PacLease that they’ll be on the road making deliveries. They’ve seen first hand the benefits, and so have we.”
From a budgeting standpoint, Johnson said leasing takes away the unknown. “We have our lease payment and can budget appropriately,” said Johnson. “Before, we couldn’t really budget. If one of our trucks broke down, we’d have to call around and get the vehicle towed, then find a replacement vehicle. And who knew what the monthly repair bills could be. Those were wild-card costs that played havoc with our business. And it led to a lot of sleepless nights. Those headaches are now all gone. We couldn’t be more pleased with how things have gone with PacLease.”
Sidebar: Leased Kenworth T270 Has Some Giddy Up
It’s probably the most photographed Kenworth T270 in the country. It’s adorned with the Denver Broncos colors and logo and is dedicated to the Denver Bronco football team, which played in this year’s Super Bowl.
“Several years ago we began work with the Broncos to become the team’s official mover,” said Chad Johnson, executive manager of Bailey’s Logistics. “The deal actually came together very quickly and they needed a truck fast. We worked with PacLease, who did a great job of getting us a T270 that we could put to work, and they worked miracles to the graphics package applied in time for our first commitment with the team,” said Johnson.
While the truck is used year-round for various Bronco functions, its main purpose is to get equipment to the stadium, and to the airport for away games.
“When the Broncos play at home, we deliver all their equipment to the stadium for game day,” said Johnson. “We then park the truck in front of the stadium and it instantly becomes a magnet -- there is a constant parade of fans who get their picture taken in front of the truck.”
About PacLease and PACCAR
PACCAR Leasing Company (PacLease) is one of the fastest-growing commercial truck leasing companies in the transportation industry. PacLease has independent and company-owned full-service leasing locations throughout the United States, Canada, Mexico and Europe. PacLease provides customized full-service lease, rental and contract maintenance programs designed to meet the specific needs of customers. A combination of reliable, custom-built trucks and complete service offerings allows customers to maximize the value of their transportation resources.
PACCAR Leasing is a part of the financial services group of PACCAR Inc, a global technology leader in the design, manufacture and customer support of high-quality light-, medium- and heavy-duty trucks under the Kenworth, Peterbilt and DAF nameplates. PACCAR shares are traded on The NASDAQ Stock Market, symbol PCAR, and its homepage can be found at www.paccar.com.