P&D Fleet Solutions with Grace Bay, Hello Truck Lease
Welcome to Industry Insights with Route Consultant! In this episode, we sit down with Grace Bay, CEO of Hello Truck Lease, to discuss how HTL is revolutionizing the last mile delivery space. Grace shares her journey from managing one of the largest FedEx contracting entities to founding HTL, a full-service lease program for FedEx contractors. We dive into the challenges of fleet management, the benefits of leasing versus owning, and the impact of Network 2.0 and peak season on logistics. Tune in to learn how HTL is providing scalable solutions and improving business efficiency in the logistics industry.
About Grace Bay
Grace Bay is the results-driven CEO at Hello Truck Lease, an industry-leading truck leasing company that provides last-mile trucks and turnkey logistics solutions to contractors at an affordable, fixed cost inclusive of maintenance and repairs. With a proven track record of leadership and innovation, Grace has been at the forefront of revolutionizing how last mile contractors execute and profit on their final-mile deliveries. As the former Chief Operations Officer of Patton Logistics' entire operation of FedEx Ground routes across 10 different states, Grace brings first-hand experience and expertise to the table that enable her to identify contractor pain points and provide valuable, creative solutions for logistics businesses.
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Josh Gregory: [00:00:00] Welcome to Industry Insights with Route Consultant, your front row seat to the fast moving world of logistics and beyond. Each week we bring you game changing insights, real world strategies and fresh perspectives to fuel smarter investments and build stronger businesses. Join us as we sit down with expert guests to explore emerging trends and pressing topics across a wide range of industries.
This is industry insights.
Welcome to the studio. Today we have Grace Bay, the CEO of Hello Truck Lease, and Grace has built HDL to solve a really specific need that she was seeing in the last mile delivery space. Mm-hmm. And since then, has helped thousands of contractors and clients to solve some fleet strategy decisions. Mm-hmm.
And really help them scale their business. So. Grace, it is a pleasure to have you in the studio today. You too. Thank you for being here.
Grace Bay: Thank you for having me.
Josh Gregory: Yeah. So, so that was a really brief [00:01:00] overview, but I, I'd appreciate it if, you know, for people who've never met or never heard of HTL. Mm-hmm. Can you just give a little background on what HTL is today?
Grace Bay: Yeah. Uh, so HTL is the first of its kind program for last mile FedEx contractors, mostly, um, where we provide full service. Maintenance inclusive solutions for, um, step vans and transits. And we help create a program that stabilizes the, um, traditionally very spiky expenses that come along with maintaining and owning your own fleet.
Um, so we cover all of that in our lease program so that contractors have one stable payment that they make every single week for their trucks, and there's nothing else they have to worry about.
Josh Gregory: Okay. Well that makes sense. It sounds easy, but we'll get into it. Yeah. So, uh, I think before we get too much farther, I've known you for a long time and I do know that this is not where you started your FedEx career, so can you take me a little bit back to when you first decided to kind of form HTL and why?
Grace Bay: Yeah, of course. Um, so my background [00:02:00] for the last 10 years has been in the last mile and, um. The, the line haul space as well. But, um, I started in 2015 running p and d operations in FedEx and then grew that to be one of the largest FedEx contracting entities in the United States. And we had about 250 trucks across 10 states.
And then we added Linehaul on top of that as if we weren't busy enough. And, um, in the line hall space, I started to learn about, um. Truck leases that really didn't exist in the p and d space at the time and full service truck leases to be specific, uh, with Ryder and Penske. And that really changed the game for our linehaul operations because we could take an expense that was so unpredictable, so spiky could literally.
Diminish any good cash flow that we had on a given week or month. And, um, and, and it, it stabilized that expense [00:03:00] for us so we could budget for it, we could plan for it, we could model off of it because everything started to be formulaic off of a cost per mile basis when we had that fixed expense. Um, and so.
As we grew, we started to ask the question, you know, why is this not something that exists in the p and d space? Because the same spikiness and unpredictability of repair and maintenance exists with p and d. It's just on a smaller scale, obviously, because the repairs that happen for set vans are less expensive than what you're gonna experience in the line haul side, uh, on tractors.
And so. We said, well, if it doesn't exist, let's create it.
Josh Gregory: Perfect. Yeah. Yeah. 'cause I mean, for, I, I agree with you completely. For years and years, I was just told this, this model doesn't work. Mm-hmm. You can't do leasing and p and d. No one does it. Right. You can't do it. So you said let's create it. But, you know, how did you actually go about solving a problem that I think, like I said, that was the general prevailing knowledge is it's not gonna work.[00:04:00]
The, the cost metrics just don't work.
Grace Bay: Yeah. So I, I think that, um, there's always a way to Yes, right? Like, yeah, you can always find a way to make something work. It's just what do you have to do to get there? Mm-hmm. And so we started a partnership with Ford, okay. And we get, um, the, the, the benefit of scale, right?
When we're buying these trucks and these maintenance plans at. Hundreds of truck, uh, you know, increments per order. Mm-hmm. We're able to get really great deals and subsidize the maintenance component on those vehicles. And so by us stepping into the space and creating that, um, benefit of scale, then all of our clients get to benefit from that and have the subsidized maintenance plans on these trucks so that all of the maintenance is inclusive of that singular payment that they make each week.
Josh Gregory: Okay. Yeah. 'cause. In the FedEx space, it's pretty fragmented. Everybody would like it to be able to have the purchasing power of 6,000 contractors. Right. But most of the time you don't get [00:05:00] those benefits. So you guys are basically able to create a small version of that for the leasing space in particular.
Yeah. You got it. Okay. Well that makes sense. Uh, so, so was this an easy path? You know, I think we're talking about it like, oh, this was the problem and we solved it. You know, was this an overnight. Success story. What was kind of that building process like?
Grace Bay: Yeah, that's a great question and kind of a funny story.
Um, so I actually went on maternity leave in the beginning of 2021, and my first day back to work, Spencer said, welcome back. We started a truck leasing company. I said, oh, great. Um, tell me about it. And, uh, and he gave me the, the building blocks of the plan. Uh, and then said, here you go. Yeah. And classic fashion said I built it, but.
Josh Gregory: You're gonna run it. Congratulations. Yes. So
Grace Bay: I think we had six trucks on the road when I started Uhhuh back in July of 2021. And we've grown it to over 500 in less than four years. Yeah. Um, and so [00:06:00] really our. Our growth path has always been understanding the pain points. Mm-hmm. And crafting really creative solutions so that everybody wins because we understand the pain points of our clients in the space and we continue to chase after that understanding.
Right. It's not just a static we have understood. So therefore we understand. Mm-hmm. It's. We've understood and we want to continue to evolve that understanding as your businesses change and grow. So we've developed a lot of. Programs and changes and nuances for our program to stay really lock in step with our clients to make sure that as their business changes and evolves and grows, our solutions do too.
Um, and we all know that there's so many changes that happen all of the time in this space that if you think you've got it figured out today, like tomorrow, it's, it's a moot point. Um, and so that's really been our key growth strategy and, [00:07:00] um. I will say like one of the things I'm really proud of with this company is we, is that we've grown to this size and the scale with almost zero outbound sales.
It has all just been people coming to us because they have heard about us and they know our reputation and they know us and um, and they know what our philosophy is, so.
Josh Gregory: Mm-hmm.
Grace Bay: That's been very cool
Josh Gregory: and obviously it's been years, so you've continued to do well, continue to grow that brand, so that's been great to see.
Yeah. So, you know, let's talk a little bit more and kind of, you know. Brass and tax here. Mm-hmm. So the, the leasing model that you're building, you, you built it to solve some specific issues. We talked about spikiness, right? Kind of how did you design the program? What does this lease model look like, and and what all are you solving for there?
Grace Bay: Yeah. So, um, that is a very. Uh, complex question and I'll try to break it down, but, uh, just surface level. So our program is a 36 month program. It's a three year lease. And, um, within those three years, we cover all of the expenses that [00:08:00] come with owning, operating, and maintaining that vehicle. So we cover all of the preventative maintenance.
If you have an engine that blows at 63,000 miles, which they all seem to do at this point, uh, and most people only have a 60,000 mile powertrain warranty, we cover that. We pay for it in full. We just ask that our clients, um, uh. That they honor the service intervals that we ask them to get preventative maintenance within.
Um, and everything else is covered. The only three things that we don't cover are tires, glass, and physical damage. Um, and it's really nice for our clients to know that there's no hidden expense that's gonna pop up. There's no, you know. One time every year they get hit with these taxes or they have to register their vehicles or licensing fees fais, like all of that is covered.
Okay. Um, and so we try to package it up really nicely so that they have nothing else that they have to worry about.
Josh Gregory: Okay. So three years, everything's included outside of a couple things, but everybody understands what that is. Yes.
Grace Bay: Yes. [00:09:00]
Josh Gregory: How does the maintenance actually work? So we, we talk about it being fully covered.
What does the process look like there?
Grace Bay: Yeah, so most of our clients are gonna work with. Their local Ford dealership. Okay. And they're gonna take those vehicles into Ford to be serviced. Um, the nice thing about us, having been around for a few years now mm-hmm. Is we've developed some really great relationships with the local Ford dealerships all across the country.
And, um, it is a, they, they are franchised. Mm-hmm. And so each one is a little bit different, has its own flare and flavor. Um, but we've worked with so many of them at this point. They know our program, they know what they're. That we're, they know what we are doing. Mm-hmm. And so we've negotiated some on yard service options and mobile service options for our clients that aren't at any additional charge.
So, um, so in, in certain markets we can offer that. And then we've also partnered with a group called Slick. Slick is in about 10 to 15 major metro markets at this point. Okay. And really hungry to grow, but they offer free on yard [00:10:00] service for every Hello Truck lease unit in any area that they have operations.
So as they grow, more and more of our clients will become eligible to have that service added on to their um. To their Hello Truck lease units and it's totally free.
Josh Gregory: Okay. Yeah. So that's huge. So they've got two different options in, in some of the biggest areas. Are there parts of the country that there's no Ford option?
You know?
Grace Bay: Yeah. So there are some, so my people out in Montana and North Dakota and, you know, out, out in the boonies, um, it can be difficult to find a Ford dealership within a reasonable distance for, you know, for, for contractors too. Manage the burden of taking their trucks to be serviced every 5,000 miles.
Um, sometimes the Ford dealership is just too far and it doesn't make sense. It crushes efficiency and leads to too much downtime, and in those instances, we'll work on a client's behalf to try to get another shop approved. Okay. To do kind of like the, the Ford in network. Work. [00:11:00] Um, and there are areas where we've had that approved.
There are some that we haven't, but for the most part, we can get some solution in place.
Josh Gregory: Okay. So what I'm hearing is there's some conversations on the front end. So this isn't just like, I go online and I click to buy a truck. Totally. Yeah. Can you kind of walk through what those Yeah. Those early conversations are like for clients?
Grace Bay: Yeah. That's a great question. Um, and I think this goes back to our philosophy of trying to be a, a partner with clients. Mm-hmm. And not just a vendor, right? Like we're, this isn't transactional. This is relational. Mm-hmm. And we wanna make sure that we are setting your business up for success. And my sales team knows that there is never an instance where.
We hear this isn't a fit and we continue to try to push this, right? Mm-hmm. Like it, it's only gonna be a win if it's a fit for the, the client. Um, and so we typically have a sales call, um, at the beginning of the, of the conversation just to make sure that some parameters within our program are met for you met for.
Us and we can check the box to say, yes, we wanna move this forward. [00:12:00] And from there we work with a client until they are through the underwriting process, approved for a certain amount of trucks, and then we help them decide exactly what they wanna sign up for and take. Um, we regularly are having fleet strategy calls, so it's very, uh, frequently, uh, or it's very frequent that we have conversations with clients where we get to that point to say.
This isn't a fit, but we wanna make sure that you figure out what the fit is. Hmm. And we invite those conversations. We wanna see. Yeah, all contractors succeed and if there is a nugget of information that we've gained throughout our years of doing this that we can give and help somebody be successful, we're happy to do that.
So we invite all those conversations.
Josh Gregory: So are there any things that would rule somebody out from being able to leverage a HEA truck lease?
Grace Bay: Just a couple. So the major one is a mileage component and we've actually expanded our mileage band. Options both on the low end and the high end [00:13:00] since we started the program just to accommodate more territory and, and, um, contractors.
But for the most part, if you are doing more than about 110 miles a day mm-hmm. That's going to exclude you. From our program, we've uh, we've got a top end of about 35,000 miles a year included in our package that fits within our lease program.
Josh Gregory: Okay, so is mileage the only thing that would rule somebody out?
Grace Bay: For the most part, there, there are some wonky territories. If you're driving 95% gravel roads, we may need to have a conversation. Yeah. Um, but the, the mileage is the main component. And then obviously we have an underwriting. Component to the application process, but, um, outside of those two things, that's it.
Josh Gregory: So I'm thinking about this and, and you, you know, you operated for years. How would you have felt like, you know, how would this have impacted things when you were an operator? Some of the situations where a model like this could have been, you know, a game changer?
Grace Bay: Yeah. I mean, um. That's [00:14:00] another great question, I think of a couple things.
Yeah. Uh, one most specifically is unique to how we grew, right? We, we had a lot of opportunities to have, um, we had a lot of contingency opportunities. Mm-hmm. And we had a lot of those panicked calls from our business partner, uh, and they'd say, Hey, can you get here in 24 hours with trucks and drivers? And if you get here, then we can like wink, wink, nod, nod, give you this contract.
And, um. I just think back to some of those moments where we had the duct tape rolls out and bungee cords going, and we were trying to patch up any old truck from the boneyard to limp it along to wherever we had to go to get that opportunity. And if I had had a partner in the space to call and say, Hey, I need 10 brand new trucks.
I need to lease them, and they need to be in St. Louis on Monday. I just, I can't even imagine the exponential growth we would have experienced [00:15:00] even faster than what we did because we would've had that solution ready to go.
Josh Gregory: So if that's possible with you guys. So in my head, I think of this as the only way I would be able to get a truck that fast is if I had a pile of cash and I went into the dealership.
Yeah. And it was like, this is, you know, I've gotta find it right now. So you, you guys actually can move really quickly at times like that. We
Grace Bay: can move pretty quickly. And I will say a lot of that is determined by. Are, uh, the responsiveness of the contractor, right? Yes. Yeah. Yeah. So we, we can't skirt the underwriting process, right?
Um, we do have boxes that we have to check. However we can move real fast. Okay. And our team knows the importance of moving really fast because we've been in those situations. Yeah. And we know that if you aren't there in 24 hours with those trucks and those drivers. Goodbye opportunity, right? Yeah. And so we've had a lot of clients that have come to us in those specific situations and we've been able to fast track and say, all right, application today, get assist by tomorrow, underwriting on it approved, let's get the trucks, you know?
Okay. Yeah. And so,
Josh Gregory: yeah, I mean, that is. [00:16:00] That I hear you on that and, and I know how many times I've talked to contractors that are like, Hey, do you know where I can get some trucks? And it's like, mm-hmm. I mean, is it on Facebook or is it on Craigslist? Yeah, maybe. But that's a, I think that's a very different type of partnership to, you know, to be working with somebody who can provide things quickly.
And, you know, it doesn't always mean that you have to drop. All the cash in the world to buy upfront.
Grace Bay: Totally, totally. And I think that's a really important part to our program too, to highlight. Um, we don't require any down payment for any of these trucks. We have a 1995 refundable security deposit that we collect for each unit.
Josh Gregory: Mm-hmm.
Grace Bay: Um, and that amount could fluctuate based on the underwriting determination, um, and, and some other factors. But for the most part, generally it's 1995 per truck. So it's not a debilitating Yeah. Amount to have to put forward to get new units when we're used to having to put 10% down on a minimum, an $85,000 truck.
You know, you're talking $8,500 per truck.
Josh Gregory: Mm-hmm.
Grace Bay: That you have to pay upfront in cash. And if you need 10 of those, I mean,
Josh Gregory: yep.
Grace Bay: Gosh.
Josh Gregory: Yeah.
Grace Bay: [00:17:00] Can you make payroll this week? Yeah,
Josh Gregory: exactly. Yeah. And that's always the challenge. Mm-hmm. And I think that does lend itself to, you know, just a, an overview conversation.
We don't have to go super deep, but when I'm sure you get this question every time somebody comes to you, how do you think about buying versus leasing? Mm-hmm. How do you think about the pros and cons there?
Grace Bay: Yeah, I mean, I think that there is a place for both solutions in almost all fleets really? Yeah.
Like I'm, I'm almost never gonna go to. Any business and say it makes sense for you to lease every single one of your vehicles. Yeah. Um, maybe if you're super, super low mileage and you do like 25 to 40 miles a day, let's have a conversation. But outside of that, um, I think it's really great to have a mixed fleet.
Mm-hmm. First of all, you're not beholden to any singular solution and you have multiple vendors that you can pull upon and, um, and relationships you're developing to get. Trucks as needed. Based on the opportunity. Based on the timeline. Yeah. And you don't have a singular source that you're really having to depend to depend on.
Um, so the diversification is really [00:18:00] great. But then also when it comes to a fleet strategy, I really love to talk about this refresh strategy. Okay. It's something that changed the game for our operations when I really started committing to it and doing it. Every single year. And that refresh strategy, just, it helps to protect your fleet mm-hmm.
From ever getting into a situation where you become reactive to major catastrophic events that are happening across your fleet. Mm-hmm. Um, and the way that you avoid that is making sure that you never have the majority or all of your trucks in your fleet. Past a certain age or past a certain mileage point.
Yep. And we like to identify about 250,000 miles as a great point in a truck's life to say, should probably start to look at exiting, right? Mm-hmm. Like it doesn't mean it's the total usable life of a truck, right? But. We don't ever want you to get to the total usable life of a truck because then you lose [00:19:00] all of the value that you could extract from being able to sell that truck.
Josh Gregory: Mm-hmm.
Grace Bay: In the event that there's a catastrophic event, like an engine failure, a transmission failure, and then it's worthless unless you go spend $14,000 sometimes on an engine repair, right? Mm-hmm. And a truck may not be worth that investment. So, um. With all of that said, leasing is a really great component that can unlock that refresh cycle.
Mm-hmm. Especially for people who have mixed mileage territories where you have some lower mileage stuff, some higher mileage stuff, and you can use leasing as a way to age out some of your older vehicles bring in new vehicles. With no down payment. Mm-hmm. Just a small, you know, refundable deposit. And you can keep that cycle going without having to fork up a bunch of CapEx and, you know, ruin your cash, position your cash flow and spend all of this money with traditional financing.
Yeah. Um, or buying trucks with. Just cash. Uh, so it's a great way to unlock that. But, but I do think [00:20:00] that there's a place for both solutions in almost every fleet.
Josh Gregory: Okay. That makes sense. I mean, I think, uh, exactly like you're saying, there is a lot of value in just having more than one neck to choke when you need it.
Yes, yes. So, so you touched on it a little bit that, you know, it's a three year lease. What happens at the end of it, and, and I think mm-hmm. In, in particular, talking through a couple of the things you've touched on where you talk about fleet strategy at the beginning. Mm-hmm. How much does that conversation come back at the end?
Grace Bay: Um, totally. Yeah. You know, it's, we, when I, when I. Go back to the transactional versus relational mm-hmm. Component of this business. This is a three year relationship we're having. Right. Like, at least. At least. And, and that's if you're not renewing. Yeah. And most of our clients do renew. Um, so this is a three year long relationship.
We are side by side with you in the trenches the whole time.
Josh Gregory: Yeah.
Grace Bay: Um, we schedule your maintenance for you. We're an advocate for you on. We're an advocate on behalf of U Ford. If there's issues that we need to get resolved, [00:21:00] um, we handle the billing. We, you know, it's, it's, yeah, we're, we're with you on it throughout the whole 36 months.
And so at the end, um, you do have a few options, and again, it's. How are we going to move this relationship forward? Not, you know, there's a single transaction and we want a yes or no answer and we need to move forward, right? Like we're working with you, we're strategizing with you. Um, but ultimately there are a few paths that you can decide to take.
So one is you can turn the truck back in. No problem. Mm-hmm. Um, you can even leave the decals on, we'll come and pick it up from your, from your lot or from your local Ford dealership. So that's nice.
Josh Gregory: Sometimes when you're just at the done with it, at the end of it you're like, yeah, take this off my hands.
Yeah. The fact that you'll do it for you. Yes.
Grace Bay: That's great. Yes. Yes. So we'll come get them. Um, the other option is to purchase the vehicle. Mm-hmm. So. We have a residual value on the unit that will float throughout the life of the lease until it's locked in. Most of our clients wait until the end of the lease to just get the purchase price, um, to see what the market does.
But, um, we'll give that residual value and then the client can decide [00:22:00] if they wanna purchase it or not. And with either of those two options, you can backfill with new leases. So especially if you wanna start that refresh process, this is a great opportunity to purchase the unit. And then maybe you, um, offload some of your older units and get a new lease to bring back into the old leases place, and you can kind of just start that refresh cycle there.
Um, and we at, in most events, can even just transfer that security deposit. So it's super, super smooth. Okay. Um, but I will say right now we're in. A little bit of a strange inventory environment mm-hmm. Which I'm sure we're gonna touch on. Um, but with that being the case, we're offering most of our clients the opportunity to extend their leases.
Okay. Especially with peak season upon us.
Josh Gregory: Yeah.
Grace Bay: Um, we don't want to put a contractor in a situation where they're having to. Swap out vehicles and inventory in the middle of peak in November peak, unnecessarily. So, um, I'd say like 98% [00:23:00] of our clients right now are opting to extend their leases and then wait until early next year to backfill with new leases.
Okay.
Josh Gregory: Yeah. And we're definitely gonna talk about inventory in peak. Yeah. But just quickly, you know. When you, when you've started these relationships and you're helping people with fleet strategy, how often do you find people just kind of call you in the middle of the cycle with questions? Even if it's not about the leases, if it's just about their vehicles in general?
Grace Bay: All the time. All the time, yeah. And we actually offer some free resources to at least structure that conversation a little bit. We have a free fleet analysis and we have a little template that contractors can fill out where they'll give us information on their current fleet. Mm-hmm. Just year, make, mile, mileage, all of that.
Important information and we will provide kind of like a health summary to say, based on the information you've given us, these are the vehicles that we think you probably should have sold like seven years ago. Yeah. In some instances. Um, and then here are the ones that we think you have a little bit more time mm-hmm.
To, to run before we really need to talk about aging [00:24:00] those out. And here are the ones that are. In the middle, and here's our recommendation based on that. Okay. And I think one of the key differences when clients work with us versus other fleet vendors or or truck vendors, is we actually, like when a contractor says, I have a lot of gravel in my territory, or I have low hanging branches, or I'm in downtown Chicago, and the turn radius isn't like the, I can't have a tail swing that is the tail swing of a P 1200 because I'm going through these tiny narrow little alleys.
I've run that territory. Yeah. It was like, you've driven that truck. I've driven that truck. I, I've, I've done the gra like I know what it does. I've had, I've ripped the canvas on top of a step van in a, in a super rural area. And so
Josh Gregory: you've had to have that conversation with your boss. Yes.
Grace Bay: Yes. Um, oops. You know, so with that, we just can make better recommendations.
Mm-hmm. And so yes, it is a spreadsheet and yes, it is a formula recommendation. And yes, we have a conversation after to [00:25:00] say, given what you're telling me about your fleet, even though the spreadsheet says this, I think we could tweak here and tweak there. And this sounds like a good fit for you.
Josh Gregory: Okay, perfect.
I, I think one thing before we move on. You know, we've talked a lot about FedEx. Do you guys only work with FedEx drivers? FedEx contractors?
Grace Bay: Mm-hmm. Yeah. So right now a hefty majority yeah. Of our clients are FedEx, but we have diversified in a couple different areas. Um, one of my favorite projects we're working on right now is, uh, a client with propane distribution.
Okay. And no, that was a thing. I mean, I
Josh Gregory: guess I understand that it has to be distributed, but Yeah.
Grace Bay: Yeah. It's, it's very, it's actually very similar to the FedEx space. Okay. Where, um. It's super fragmented. Mm-hmm. A lot of mom and pops and there's no one really aggregating that. Um. That flow of business.
Mm-hmm. And so we're working with a client that's kind of trying to do that for the first time and Okay. It's super interesting.
Josh Gregory: Okay. Yeah. So if somebody isn't with FedEx, they can still come totally. Still have the conversation like we talked about, this is a conversation. Yeah. And if it doesn't work, they're, you're gonna tell 'em on the front end.
Grace Bay: Yep. Totally. [00:26:00]
Josh Gregory: Awesome. So you touched on it, uh, it sounds like there are some different inventory challenges right now than what we might normally see. Mm-hmm. So what are you seeing right now in the market?
Grace Bay: Yeah. Um. It is tough out there. Okay. Yeah. Yeah. It's tough out there. Uh, so Ford's in particular has produced about 50% of the number of chassis that they typically.
Uh, manufacturer on a given year, and we can talk about why. Uh, there's, there's a few reasons why, but all of that to say we're in a, a situation where trucks are really hard to come by and order. Banks are closed. You can't order anymore for the year. Dealerships have zero to very little inventory and then.
As a result of that, people aren't selling their used trucks, right? Mm-hmm. Because if they can't backfill with anything new, then they're gonna hold onto what they got. So that's [00:27:00] further. Just complicating the issue of inventory, but then we're also seeing a rise in the purchase price of used inventory.
Josh Gregory: Mm-hmm.
Grace Bay: Um, so it's hard out there. Yeah.
Josh Gregory: Well compare it a little bit. So I know there were some crazy times during COVID where everything grew so fast, so there were shortages. I, I heard a lot about it then. I haven't heard as much about it now, and I think it just could be because people haven't realized the shortage is there yet.
Yeah. How do you feel kind of comparing that shortage to, to where we are today?
Grace Bay: I mean, everything's cyclical. Yeah. Right. And so we are coming back around to a very similar mm-hmm. COVID feeling environment of 2021. 2020, early 2022. And what happened when COVID hit was our businesses doubled. Tripled overnight.
Right. And we couldn't get our hands on enough trucks. And so orders were being placed like crazy. And then by the time that the manufacturers were able to fulfill those [00:28:00] orders, the volume had dropped. Yeah. And so the need wasn't there. And it flooded the market with inventory. And so since 2022, when all of that inventory became available, the dealers have been sitting on this.
Unbelievable floor plan footprint of hundreds and hundreds and thousands of trucks. Mm-hmm. That sat for years. Yeah. And a lot of manufacturers put their foot down and slapped the dealership's wrists and said, we're not making anymore until you sell what you got. Yeah. And so you'll be hard pressed to find like 20, 24 model years of a lot of step vans because they just weren't being produced because there was so much inventory still available to sell.
And. We've finally gotten to the point where we've churned through that inventory, but now it's created a similar, um, supply demand issue where the demand is now there and the supply is gone and we're behind the eight ball with production. Yeah. And so we're waiting for that to be produced [00:29:00] Now, I think I, I think in some instances, at least for the manufacturers and the dealerships, it may be a good thing that the production was capped and limited a little bit so that we don't end up in that same.
Situation of excessive amounts of inventory, but we're also not experiencing a, a pandemic where we're inclined to see volume drop again. I think we're pretty stable with volume levels right now. So.
Josh Gregory: So in light of that, what, what are you guiding clients on right now? Like, you know, if they need vehicles mm-hmm.
Or if they don't have 'em, or if they're trying to extend 'em. I know part of it is the extension of the lease. Are there anything else you're telling people?
Grace Bay: Yeah. Um, a few things. So number one. As much as I believe in that refresh cycle. Mm-hmm. Obviously you don't wanna get caught. Without a solution. Right.
So hold onto what you got for now, and you see that reflected in our extension period. Mm-hmm. We have a lot of clients that are saying, I wanna extend into perpetuity as long as you'll allow me to and get new vehicles, because I just don't know [00:30:00] where my next, you know, my next solution's gonna come from.
And that's another great example where. We can think creatively about that. Okay. And we can, you know, we can be flexible with that and say, what do you need? How can we say yes? Sure. You know? Yeah. Um, in light of the, in light of the situation we're in, we can make that happen. Um, but I would say hold onto what you have until you have another solution in place.
And, um, yeah.
Josh Gregory: I, and that takes us right into. You know, that would be, that's advice for normal times. Mm-hmm. We're heading into the busiest time of the year. Yeah. For most last mile deliveries we're November and December, black Friday and Christmas. You normally are expecting to bring in a bunch of additional trucks.
Mm-hmm. So what are you seeing there? Are there ways you guys are helping in that process?
Grace Bay: Yeah, so we do have. Inventory available right now, and I will say it's limited. Yeah. Uh, we do have more on order and we're hoping to get that before peak season. But [00:31:00] one of the things that we are doing to try to at least have temporary solutions for people is, uh, when trucks come off of the lease program, if someone does decide not to keep that, we're kind of hoarding that used inventory right now to offer as.
Substitute vehicles are kind of like temp vehicles. Yeah. Between now and when people can get their permanent vehicles in case we don't get the inventory before peak season. So we're, we're trying to be creative and think outside the box a little bit. But I am hoarding Chuck like crazy. Yeah. I'm like, Chuck here, Chuck here.
And I just. I'm, I'm compiling my little war chest, but, um, but we're, we're trying to do that as a temporary solution. And then, you know, I, I think that people are gonna have to rent more vehicles this year than maybe they have in the past if they've had the strategy to purchase vehicles before peak and then reduce their rental burden or, or needs.
Um, so I think we'll see people in more rental vehicles than what we have in the past.
Josh Gregory: Okay. Yeah, which means that. There's gonna be the early, even earlier competition [00:32:00] for rentals. Yes. But how much do you think that people have realized, really recognized that there's a shortage yet? Because you guys, you, you kind of have a mountaintop view.
Yeah. Where you're looking out.
Grace Bay: I think they're starting to feel it. Okay. I think they're starting to feel it, especially contractors that are, um. That are in that reactive
Josh Gregory: mm-hmm.
Grace Bay: Position where maybe they don't have the healthiest fleet and they're experiencing engine failure and they're experiencing transmission failure and they're kind of at that crossroads to make a decision to say, do I spend yeah, a bunch of money to repair these, or what are my other options?
And we have a lot of people coming to us right now saying, I've had three or four or five trucks have these catastrophic events over the last couple of months. How can you help me? Yeah. Because I don't wanna keep doing this and,
Josh Gregory: and I, I think there's a cost there that people don't, you don't always think about it when you're just trying to model numbers.
Mm-hmm. You don't think about the mental cost and the [00:33:00] problems that Yeah. Snowball when you have the, the vehicle malfunctions and especially multiple mm-hmm. At the wrong times.
Grace Bay: And I will say one of the things that people think about the least is how it affects driver turnover. Mm-hmm. And that's one of the most expensive things that you experience in your operation on so many fronts.
Like not just monetarily, but like it's a hit to your morale. It's a hit to your culture. It's a hit to your manager's ability to have confidence that something's gonna get done with a driver that they trusted. And now there's a newbie, like the mental load Yeah. That your manager has. To then bring on to babysit a driver for a while until they feel like they got it.
Um, that is money being spent on their time and their focus that's being pulled away from other parts of your organization. And so I'll say one of the things that really changed. The game for us when we started bringing in Hello Truck lease units to our [00:34:00] operations was the reduction of driver turnover because the drivers were in vehicles that they felt safe in.
Mm-hmm. That they knew were reliable. They weren't gonna be sitting on the side of a highway and 95 degree heat waiting for Yeah. A roadside call or a tow truck driver to come get them. And that, I mean, if you think about it, like you wouldn't want, you wouldn't wanna do that. No. It only takes a
Josh Gregory: couple of those and you're out.
Yeah.
Grace Bay: Yeah. Especially if it happens. On this truck, and then you get in this truck and it happens on that truck. Like you lose the confidence in the operation you're working for to provide you a vehicle that can, like what if you came to work every day and your computer just stopped working? Yeah. But then you were still expected to get the same amount of work done.
Exactly. It's just, it's, it's crazy. So,
Josh Gregory: okay. Yeah, I mean, I think those are. I, I do think, you know, we, we often talk about the lease versus own and what are the costs. And I, and I think those are real things to consider and real things to think about, but there's a lot in terms of the consistency of your business mm-hmm.
And how much that can create, uh, you know, culture drive. Yeah. But, and I think the [00:35:00] driver costs alone are, are huge. Think about, and people don't, those are soft costs that don't. You know, put into your p and l, but you'll feel them then you'll feel them. Yeah. Yep. When
Grace Bay: you look at the end of the year, what you spend on Indeed.
Mm-hmm. And what you spend on recruiting. Yeah. What you spend on payroll adjustments. It, it really adds up.
Josh Gregory: Okay. And we, we touched on peak, but I, I know that you guys often do. Kind of a, a promo for the inventory you do have. Yes. So, so what does that look like this year?
Grace Bay: Good question. Um, I think we're all still figuring that out a, a little bit.
Yeah, a little bit. We're kind of at the mercy of, uh, of these manufacturers. Yes. But, um, but every year we typically offer a promotion called Free for Peak. And this was born from my personal experience, uh, with rental companies. Came to loathe because every single year they would require that we commit and pick up vehicle, commit to and pick up vehicles earlier and earlier and earlier to um, basically [00:36:00] say, we promise you'll have the vehicles that you're asking for.
And so in exchange for that security, we had to pay months of additional. Rental expenses. Um, just to know that we were gonna have them and they, and they literally just sat. They just sat, or they would rotate in and we'd send some of our other trucks to get work on mm-hmm. Work done that needed to, to be done.
And, um, and so that really frustrated me. You know, I just, I felt super taken advantage of, and so there's
Josh Gregory: nothing you can do. You have to get, you have to do it. Yeah. You
Grace Bay: have to do it. You just feel so beholden to mm-hmm. To those rental companies. And so when we rolled out Hello Truck Lease, um, I was on a mission to turn that upside down and say, you know what?
Peak season already has so many expenses built into it. You have to get additional drivers, train them. Pay them. There's so many factors that go into preparing for peak season that just continue to add up, and it seems like every year there's more and more and [00:37:00] more. And so my goal was to say, let me take one of those away, and one that consistently seems to get worse every year.
Josh Gregory: Yeah.
Grace Bay: So instead of charging people more, we charge them nothing. So we offer eight weeks of free lease payments, uh, during a. A period of time that can really be up to the contractor. It doesn't have to be just like exactly peak season, but we have a promotional period that we will announce pretty soon.
And, um, within that period, if people apply and put a security deposit down on a truck, once that truck is available, you'll have eight weeks, um, of free lease payments to try to give contractors an opportunity to have the most profitable peak that they possibly can. And. The way that we're shifting that this year, given the inventory constraints, is to honor that promotion as soon as inventory is available.
Okay. So as long as our clients or new clients, prospective clients apply and give their security deposit within that promotional window, then even if the trucks are available in January, February, we'll still honor [00:38:00] that promotion. Okay.
Josh Gregory: Well that's great. That makes sense. I mean, it's a, I mean, you don't have to do it, but that is a, yeah.
A, a pretty huge kind of comfort and reason why you might still be able to move forward.
Grace Bay: Totally,
Josh Gregory: totally. So a, a, a couple of other things that I know are affecting the FedEx space mm-hmm. The buzz on everyone's mind is, uh, network 2.0. Yep. So how do you see that changing fleets, you know, how has that affected how you guys are planning?
Grace Bay: I think that 2.0 is, um. It's rolling out everywhere A little differently. Yeah. Right. And so it's TBD on the overall impact and making any generalizations, but at least at this point I can say it seems like we're seeing a lot of sizing up for vehicles. Yeah. And. Partially, that's 2.0. Partially that's the, uh, larger packages that are coming into the network.
And so those two things happening at once, we're increasing density and we're increasing cubes. Mm-hmm. And so with those two combined, if you've typically run a 1000, a lot of people are considering a 1200. Okay. [00:39:00] And so we have had so many requests for P 12 hundreds over the last six to nine months. And I will say those are the units that.
We're totally wiped out of inventory. Fastest. Yeah. Um, but we actually have some Okay. In inventory right now. So if anybody needs a P 1200, let us know in a hurry. Uhhuh or seven.
Josh Gregory: Yeah.
Grace Bay: So, okay. Uh, yeah.
Josh Gregory: And then I think another big thing when it comes to fleets electric, do you guys ever see that in the cards for HTL at all?
Grace Bay: It's definitely not, not in the cards. Yeah. I'll say that the, the network in general is so far behind. Oh yeah. Being in a position where, um. Any, any substantial number of trucks could be electrified and charged appropriately or efficiently within a FedEx facility. It's just, we're, we're years away from that.
And so, um, since that is the main client pool [00:40:00] for us mm-hmm. We're probably also years behind having a substantial amount of our trucks. BEV. Yeah. Um, but with that said, we're, we're piloting a couple of different locations and we're gonna be ready for that. Yeah. When it comes down the pike and when the electrification efforts start rolling, we'll be ready for it.
Um, but we'll stay, we'll stay kind of small until then.
Josh Gregory: Yeah. That, I mean, that makes sense. I mean, we, we saw recently FedEx saying that they're gonna wait until after all of 2.0 is done before they do any major electric changes. But I, I, I think that's. Going to be on top of everyone's mind. Mm-hmm. Uh, it's just, it's the next thing coming.
Yeah. So I think hearing that like you guys are ready when it comes is, is what's important. We're
Grace Bay: ready when it comes and, and I think it's gonna be such a benefit mm-hmm. To every single contractor that can operate EVs. So we definitely wanna be a part of that.
Josh Gregory: Okay. I, I think I'll, I'll, I'll leave you on a last question.
It's kind of a big question. So you've been in the FedEx industry for 10 years, and you're obviously still very focused on it. Mm-hmm. [00:41:00] Looking back and then looking to today, how do you generally feel about where FedEx is and where FedEx is going? And, and, you know, I'll let you answer that however you choose.
Grace Bay: Ooh,
Josh Gregory: spicy
Grace Bay: last question. Um, you know, I, I think that is a space that experiences a lot of change. Um, it is a space that is rapidly. Evolving. Mm-hmm. And, um, and with that comes good and bad. Yeah. You know, it, it burns a lot of businesses out, but it also opens the door to a lot of opportunity for new businesses to come in and do things differently.
Mm-hmm. And, um, and find efficiencies. So I might limit it there. Yeah. And say, uh, there's pros and cons. Yeah. And, um, and there's a lot of change, but I think there's always an opportunity to find, um. Find some good and [00:42:00] find some additional opportunities in the change. Yeah, and
Josh Gregory: I mean, I think that if you were to say that it's all perfect, then yeah, I think we would know that that's not the reality for any business.
Yeah. And so I think that is, I think that's often how I, I see it and talk about it is yes, this is, there's so much change and there's change in any industry. Yep. This one as well. Yep. Where it's all about keeping up with what's happening. And some people will struggle with that. Some will do very well.
Mm-hmm. And I think it's the goal of companies like yours that for the ones that are struggling and for anyone who has questions, to find the right path forward and be creative and Yep. And build the right solutions.
Grace Bay: Yep. And, and I think that goes back to exactly where we started. Mm-hmm. You know, where if we think that we have it figured out today Yeah.
We're, we're gonna be a moot point tomorrow. Yeah. And so staying in touch with. The evolution of our clients' needs and their businesses has always been our priority, and that's how we've stayed relevant and how we've grown. So, um, so I think that speaks to where the industry is and what it needs and why we've been such a great solution.
Josh Gregory: Perfect. Well, grace, it was so [00:43:00] great to hear about HEA Truck Lease and, and everything you've built in our building. Uh, the last question I always leave people with this is not as hard of one I promise.
Grace Bay: Okay. Okay.
Josh Gregory: Well, some, for some people this is the hard one. Uh, what's your favorite? Either book you're reading or movie you've seen recently.
For some people, this is the hardest question I ask them all day.
Grace Bay: Um, I actually know because I am reading one right now that I really love. This might be controversial because, um, it's a, it's a memoir of a political figure that I don't necessarily align with their politics. Yeah. But just a really interesting story.
Um. Now, I'm gonna forget the name of the book, but I think, I think it's called A Different Kind of Power or a Different Power. It's um, it's written by the former Prime Minister of New Zealand. Okay. And, um, she was the third prime Minister of the third female Prime Minister of New Zealand, but the youngest one ever.
How young and. I think she was in her early thirties. Oh wow. Okay. And she found out that she was pregnant on the night that she found out she was going to be elected Prime Minister. [00:44:00] And their election process was wonky because they had split party systems and then a minority party had to endorse one of the major parties.
Okay. And then that determined who was gonna, so it was like a three week process or something, and she found out on the same night. And so, um. It's, it's a really interesting journey of leadership motherhood. Yeah. How do you balance those two things and where do loyalties lie? And, you know, it's, it's, uh, for me personally, a really interesting story.
But I've been reading that one. Um, and uh, I would definitely recommend it.
Josh Gregory: Okay. Well that is, uh, you know, a going recommendation and it sounds fascinating. Yeah. So, so grace, again, thank you so much for being here, for providing all of that information and, uh, what's the best place for people to go find out more about HTL if they're trying to get ahold of you?
Grace Bay: Yeah, so you can go to hello chuck lease.com. Mm-hmm. Uh, and you can find out everything that you wanna know or pick up the phone and call us. Um, my personal cell phone number is floating around the FedEx community and has been for 10 years. So call me, go to the website. You can find us.
Josh Gregory: [00:45:00] Perfect. All right.
Thank you so much, Grace.
Grace Bay: Thanks Josh.
