“Our primary business is serving our stores,” says Jim Parros, senior vice president of logistics at 99¢ Only Stores. “In the past we bought new and used equipment for our fleet but after an extensive review and analysis of our options we found leasing some of our fleet to be a very viable approach and an appropriate way for us to move forward. With leasing we can conserve capital for other investments in our business.”

Founded in 1982, City of Commerce, California-based 99¢ Only Stores operates 309 stores in four states, including 225 in California, and others in Texas, Arizona and Nevada. In addition to offering a wide range of name-brand products, about more than half of the company’s sales come from food and beverages, including fruits and vegetables, dairy, deli and frozen items, and organic and gourmet foods.

The current 99¢ Only Stores fleet includes a group of company-owned 2009 Freightliner Century Class tractors with 14-liter Detroit Diesel engines and Eaton Fuller ten-speed manual transmissions, along with about 220 28- and 53-ft dry van and refrigerated trailers. The retailer also has a small number of 2006 diesel-powered Volvo tractors leased from Ryder System.

Recently, 99¢ Only Stores signed a full service lease agreement with Ryder to supply 2012 Freightliner M2 112 tandem axle, day cab compressed natural gas (CNG) tractors with Cummins Westport 320 HP engines and Allison 3000 HS automatic transmissions. The 40 CNG units are operating in the Los Angeles area making store deliveries and vendor pickups.

Public-private partnership
The natural gas-powered vehicles in the 99¢ Only Stores were made available through Ryder’s natural gas vehicle project agreement with the San Bernardino Associated Governments (SANBAG) project, part of a public-private partnership between the U.S. Department of Energy, the California Energy Commission, the Southern California Association of Governments Clean Cities Coalition, and Ryder. The project includes 202 natural gas vehicles to be deployed into Ryder’s Southern California operations network, upgrades to three maintenance facilities for servicing natural gas vehicles, and the construction of two fueling stations.

“With support from SANBAG to help offset some of the acquisition cost of these vehicles, we’ll have a less expensive, more efficient, cleaner burning and quieter fleet,” Parros says. “We chose Ryder for because of our confidence in its ability to provide a sound maintenance program for the CNG engines, which is particularly critical when dealing with new technology.”

The CNG tractors are replacements for diesel units in the 99¢ Only Stores fleet. “When we looked into the future,” says David Townsend, transportation manager at 99¢ Only Stores, “we needed to consider the cost of meeting AQMD (Air Quality Management District) regulations, which require the majority of our fleet to be upgraded. Two years ago we researched and filed for grant money and received funding to replace one 11 trucks in our fleet at the end of 2012, which expanded to 13 additional grants in December of 2012.

“Ryder initially introduced CNG units as an option for us to test when they provided a loaner for our existing leased trucks,” Townsend continues. “When SANBAG funding became available we knew the CNG engines, which would be just as effective as traditional diesel engines, and would also additionally provide other significant benefits and advantages.”

Perfect fit
The core market of 99¢ Only Stores is in a 200-mile radius of the company’s distribution centers for the Los Angeles basin, Townsend explains further, well within the 300-mile operating range of the CNG trucks. “That’s a perfect fit for the CNG engine, which has more than enough horsepower to pull our typical 80,000-lb loads,” he says.

“At the same time, our distribution centers are in mixed industrial and residential areas and are bordered by neighborhoods, which is also the case in many of the city store locations we service,” Townsend adds. “A cleaner burning, quieter truck is extremely community friendly.”

99¢ Only Stores Tractor Specifications

Model: 2012 Freightliner M2 112 CNG Wheelbase: 182 inches Engine: Cummins Westport ISL 320 HP Transmission: Allison 3000 HS automatic Driveshafts:  Meritor MXL 17T, extended lube mainshaft with half round yokes Front Axle: Meritor MFS-12-143A, 12,000 lb Front Suspension: Taperleaf Power Steering: TRW THP-60 Rear Axle: Meritor M-40-14x R-Series tandem, 40,000 lb Rear Suspension: Freightliner Airliner Wheel Seals: SKF Scotseal Plus XL Brakes: Meritor Q Plus ABS: Meritor WABCO 4S/4M Automatic Slack Adjusters: Meritor Parking Brakes: Fiber Braid Wheels: Accuride Accu-Lite Tires: Bridgestone 295/75R22.5 5th Wheel: SAF-Holland FWS1 ILS Air Slide Air Compressor: Cummins 8.7 CFM Air Dryer: Bendix AD-IP, heated Air Cleaners: Donaldson Fan Clutch: Horton Drivemaster Batteries:  (3) JCI F1150 Group 31, 2100 CCA Starter: Delco 38MT HD Alternator: Delco 160 amp 36-SI Brushless Mirrors: Dual West Coast; heated, remote; 8 in convex Seats: Bostrom Talladega; high back, air suspension Fuel Tanks: 5- SCI Gas Cylinders 3600 PSI, Agility Fuel Control Panel

The 99¢ Only Stores fleet is also anticipating cost benefits from operating and leasing the CNG tractors. “We track their MPG as we would any other unit in our fleet,” Townsend says, “and are pleased to date with what we are experiencing, which is fuel efficiency ahead of projected numbers. While we need more time to assess things like downtime and fueling time, we’re also expecting these trucks to become more cost effective with the availability advent of our new on-site CNG fueling stations, which will be operational in 2013.”

At the same time, full-service leasing is also proving to be the right choice for the 99¢ Only Stores fleet operation. “After analyzing leasing versus the cost of running a considerably older owned fleet we saw there were definite advantages from cost and service perspectives,” Jim Parros states. “We also believed that to do anything other than contract out all of our fleet maintenance and repair work would add to the complexity of our transportation operation and a full-service lease program lessens that complexity.”

Strong ROI
In reviewing all its options for converting the 99¢ Only Stores fleet, the full service leasing option became more attractive.

“With the SANBAG grant, Ryder was able to make our lease of 40 new CNG trucks competitive with similar diesel units,” Parros says. “When we also factored in other cost and other environmental benefits, we developed a very strong return on investment scenario favoring leasing the CNG vehicles.

“Our private fleet’s primary focus is servicing our stores and supporting our supply chain and distribution network,” Parros concludes. “We feel that a private fleet provides us with the control and flexibility we need to meet our growing sales base and our stores’ changing service requirements. With full service leasing and CNG tractors, we can meet those objectives and provide added benefits for everybody in an environmental and community friendly manner.”