Dairy Fresh selects new fleet, new headquarters
Jun 1, 2004 12:00 PM, By Gary Macklin
Owning the truck fleet provides a measure of control that nothing else can equal, says Joel Must of Dairy Fresh Foods. Must, who handles purchasing and transportation is one of two co-presidents of the Taylor, Michigan, specialty food distributor.
Dairy Fresh has tried truck acquisition through leasing and through purchase and after just finishing a seven-year, full-service lease on 24 refrigerated straight trucks, two tractors, and three refrigerated trailers has changed its mode of purchase to financial leasing. The bulk of the new Dairy Fresh fleet — 40 power units and 20 new refrigerated truck bodies — is held on a seven-year TRAC lease from General Electric Commercial Finance. The TRAC lease provides the benefits of off-balance-sheet financing with the control of corporate ownership, Must says. “At the end of seven years, we can pay GE 10% of the original purchase price for the vehicles and own them outright,” he says. “In addition, it gives us the flexibility to adjust fleet capacity. We can walk away from the lease at the end of five years or six years without difficulty.”
Dairy Fresh operates a fleet of 45 refrigerated straight trucks and 14 tractor and refrigerated trailers. The trailers are from a wide range of model years, with one from 1983 still in service.
New quarters, new fleet
The new fleet represents a continuing evolution of the company, including a name change in 1997 and a move to new quarters in 2002. Prior to June 2002, Dairy Fresh operated from a facility in Highland Park, Michigan, just six miles northwest of downtown Detroit. The move to Taylor in the southwestern suburbs provides Dairy Fresh with 200,000 sq ft of warehousing and offices — three times the cubic capacity of the Highland Park facility — in a neighborhood relatively free of the high crime rate of the inner city.
The renovated distribution center has 25 new doors on a dock maintained at 45° F. Enclosures for freezer and cooler space are all new, built from prefabricated insulated panels and cooled with an ammonia refrigeration plant. In addition to temperature-controlled space, the building provides 65,000 sq ft for dry grocery storage. It also houses a one-bay maintenance facility that can hold two 24-ft straight trucks at the same time. Must says that Dairy Fresh can double its present sales volume before any addition to the building becomes necessary.
While change at Dairy Fresh appears to be constant, the company made its biggest change in 1997 to the new formal name — Dairy Fresh Foods. That change was accompanied by a new logo and new graphics packages for the fleet using decals supplied by Modagrafics.
Never sold milk
For 50 years prior to the name change, the company operated as Detroit City Dairy, but it was never a dairy. It did not process milk, nor did it sell milk. Dairy Fresh was originally the brand name for the company's product lines.
“The company began as a cheese distributor,” Must says. “My brother Alan and I run it as co-presidents. The business was founded by our grandfather in the 1920s. He was an immigrant from Poland who eventually made his way to Detroit following stops in London, Cape Town, and Montreal.”
The name and logo changes coincided with a fleet acquisition in 1997, Must says. Essentially changing any one of the three required a total change. The name couldn't be changed without changing truck graphics, and it made no sense to put new decals on an existing fleet that was nearing the end of its useful life. That change took place on the fleet that the new Dairy Fresh trucks are replacing.
As other product lines were added, Detroit City Dairy — now Dairy Fresh — evolved into a specialty supplier to retail stores, especially independent grocery stores. Dairy Fresh now distributes a full line of deli products including processed meat, cheese, butter, yogurt, and frozen meat, seafood, and bakery items. Frozen foods are among the most recent additions to the product line starting in 1991. Frozen products now account for the fastest growing portion of the sales volume. In recent years, the company has expanded into foodservice on a limited basis, while the foundation of the Dairy Fresh operation remains distribution to independent and chain retailers with delivery both at the warehouse and store door level. Foodservice customers account for only about 10% of Dairy Fresh volume.
Great Lakes trade area
Dairy Fresh distributes throughout the central Great Lakes states with routes reaching as far west as Chicago and as far east as Youngstown, Ohio. The company runs as far south as Cincinnati, and north to Mackinaw, Michigan. Customers in Indianapolis have recently been added to the account list. The fleet is used to backhaul product for the warehouse when possible. For instance, all the trucks assigned to routes in Chicago have designated backhauls. The company also picks up product from vendors in Cincinnati and Dayton, Ohio.
Obviously a fleet of straight trucks handles less backhaul volume than a comparable number of trailers. However, the ability to bring back product has a big impact on inbound transportation costs. A lot of Dairy Fresh product is purchased in small lots that fit easily on straight trucks with the result that the company can avoid paying the high rates that would otherwise apply to shipments of refrigerated LTL freight. Another benefit to hauling as much inbound freight as possible is that many vendors are within easy reach of Taylor. Many of the Dairy Fresh cheese suppliers, for instance, are located no farther away than Ohio or Wisconsin.
Dairy Fresh operates continuously from Sunday night until the following Friday evening. Customers are offered a relatively short order cycle so that orders in by 6 pm are delivered the next day or the second morning if the route requires an overnight layover. Delivery frequency depends on customer demand and sales volume with some receivers getting two deliveries weekly, others weekly service, and still other receiving product every other week.
The goal at Dairy Fresh has always been to run a fleet that can cope with the company's continuous operation. That was one of the reasons for leasing in the previous fleet replacement cycle. In fact, Must credits the leasing company for teaching Dairy Fresh how to keep a fleet running efficiently. “We learned a lot during that lease, especially about how to make use of extended warranties,” he says.
Better fleet administration
Leasing also helped Dairy Fresh improve its approach to fleet administration. The leased trucks with full-service maintenance were for the high mileage part of the business; Dairy Fresh never quit performing maintenance on the 20 trucks it owned during the term of the lease. Those 20 trucks were used for local routes. In some ways, fleet administration is a hassle factor more than it is a cost factor, Must says. “Somebody has to make sure that all the trucks start every morning,” he says. Somebody has to take the call if a driver has a problem on the road. A lease is supposed to take care of all that, and in a way, it does, but scheduling can become difficult. When we own the fleet, we have total control and can schedule things to be done when we need them done.”
Must says that finding road service has changed remarkably in the past seven years. Prior to just a few years ago, finding service providers without calling a leasing company was difficult. Today, the Internet has made finding service much faster and easier, he says. “Certainly road service is easier, because now we have a contract for service with TravelCenters of America,” Must says.
Leasing also taught Dairy Fresh to put equipment on a regular replacement cycle. In the past, the company worked hard to keep trucks it owned in good repair, but it used those trucks until they had no remaining service life. For instance truck bodies have a useful life of more than seven years and can be removed from a used chassis and remounted on new equipment when the body is still in good condition. “We also learned that maintenance requirements for refrigerated trailers are too low to make leasing trailers a good idea,” Must says.
Selection of new equipment for Dairy Fresh owes a debt to the selection process that accompanied the previous lease. In that negotiation, Dairy Fresh requested Ford Louisville chassis. That request was countered with an offer of International trucks by the leasing company, and when the deal was complete, the company was furnished with Freightliner chassis. In a way the new trucks go back to the original request seven years ago, because both tractors and trailers follow in the Ford Louisville lineage with Sterling AT9500 tractors and Sterling Acterra straight truck chassis. Sterling has changed the trucks radically since buying the Ford heavy truck operation, but the bloodlines still show.
More leg room
Must says that one of the deciding factors in favor of the Sterling chassis is that they offer more leg room to drivers than any other truck Dairy Fresh considered. The Acterras are built with a 106-inch BBC steel, conventional cab on a setback front axle chassis. Trucks are powered by Mercedes-Benz MBE900 medium duty diesel engines. The 6.4-liter, six-cylinder engines produce 280 horsepower at 2,500 rpm. In a continuation of past practice, the Sterling trucks are equipped with Allison MD-3060P six-speed automatic transmissions. In validation of that choice, Must says that in seven years of hard use, not one of the transmissions in the previously leased Freightliner chassis failed.
Trucks have a projected GVW rating of 33,000 lb at delivery with ArvinMeritor steering axles rated for 12,000 lb and RS-23-160 single drive axles from ArvinMeritor rated at 23,000 lb. After trucks have been in service for at least six months, they will get a higher GVW rating after air-lift tag axles from Watson & Chalin in McKinney, Texas, are installed. Must says the six-month wait allows Dairy Fresh to avoid paying federal excise tax on the auxiliary axles as equipment on a new truck. Auxiliary axles are necessary, because the cheese and other dense products handled by Dairy Fresh can easily overload a 24-ft body on a single axle chassis. Drivers are trained to raise the tag axle when trucks are about half empty. “This improves fuel economy and saves wear on the tag axle tires,” he says.
Final drive ratio of the rear axles is 5.63:1, a relatively high numerical ratio for trucks intended for local distribution. Must says that a lower gear ratio might provide slightly better fuel economy, but the 5.63 gearing allows trucks to accelerate from a stop more effectively, a strong factor in driver satisfaction.
Control fuel consumption
Dairy Fresh is willing to provide adequate performance, but the company still wants to control fuel consumption. With a delivery operation, the best way to improve fuel economy is to limit idle time, Must says. This is accomplished partly by using a vehicle tracking and communication system from Discrete Wireless. In addition to providing vehicle location, the cellular system allows Dairy Fresh to track truck maintenance intervals and to monitor engine idle time. All this information is available across the Discrete web site.
“Our company policy requires drivers to shut down the engine upon arrival at every stop,” Must says. “If a truck's route duration on any given day is 10 hours, we don't want to see more than 30 minutes idle time. The MBE4000 engines in our new tractors use two gallons per hour at idle, and the smaller MBE900 engines in the straight trucks burn one gallon per idle hour. We want those engines shut down. They are new; we are not worried about them not starting after sitting for a while on a cold morning. In fact, we would rather buy starters than fuel.”
The new trucks mount a 24-foot Kidron Ultra refrigerated truck body on a 242-inch wheelbase. Bodies are built with four inches of urethane foam insulation throughout. To ensure long life and good cosmetic appearance, the bodies have a stainless steel rear frame.
Two side doors
Drivers have access to the bodies through a two-inch Whiting insulated roll-up door at the rear or two doors in the curbside wall. The first door on the new bodies is one foot back from the front corner post, and the second is halfway back on the sidewall. The bodies retained from the previous fleet mount the first side door immediately aft of the front corner post. Second door placement is the same for new and remounted bodies. A 16-foot sliding Todco ramp allows drivers to move products out of the body with a hand truck.
Truck bodies are equipped for dual temperature operation with a bulkhead and fan arrangement. They use R•O•M Loadmaker folding bulkheads. The fan and duct for moving air into the second compartment was developed at Dairy Fresh. “We know for a fact that fan kits installed in a bulkhead don't work,” Must says. “Years ago, we developed a system that picks up air right at the nose of the truck and moves it well into the second compartment to ensure good air distribution. The system uses blowers from a cargo heater connected to a length of four-inch PVC pipe mounted in the upper corners of the body. We drill holes in the pipes to allow air to spill out along the length. In the first version of this system, we used a single blower and pipe along the streetside wall. Since then, we have switched to a dual blower system with blower and pipes on both sides of the body.”
The front compartment for frozen foods is maintained at 0° F. The second compartment for medium temperature products such as processed meats and cheese is held at 35° F. Dry products are loaded in the medium temperature compartment. Dairy Fresh does not handle any fresh meat or produce.
The new bodies are cooled by Carrier Transicold Supra 844 refrigeration units. Must says the 844 series units have more capacity than required for Dairy Fresh loads, but the extra capacity reduces running time and wear and tear on the units. Start/stop operation allows the high capacity units to pull down to thermostat set point and then shut the engine down for extended periods. A recent check of refrigeration unit operation shows that in 1,225 hours of refrigeration unit operation, engines actually ran only 593 hours.
Prior to the lease that began in 1997, Dairy Fresh had a long relationship with Carrier Transicold of Detroit. However, the leased equipment was equipped with Thermo King units supplied by Michigan Thermo King. “The Thermo King dealer gave us great service, so it was literally an emotional decision on my part to go back to Carrier Transicold for these new trucks,” Must says.
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