Why Top Transportation Companies Prefer Not To Own Trucks
This is 2019 and successful players in the Industrial space are now asking a lot of questions about how they can have a better customer satisfaction derived from the consumption of their products and usage of their services. One of such questions that have almost become clichéd is whether shippers should really care if their transportation company owns and make use of their own trucks. Some others don’t even care, just as long as freights are moved efficiently and effectively. The transportation and logistics industry is on a rapid growth, although at the moment, there is still no one-fits-all approach to the movement of freights example LTL. In fact, modern transportation operates in such a way that many top freight companies deliver well without their own trucks.
The argument about to own or not to own is one that can take hours, if not days, with supporters on both sides firing and counter firing points at each other. However, the reality of it all is that most successful transport companies don’t own the trucks they use (at least some). Let’s talk a bit about why.
Transportation Companies That Own Their Own Fleets Will Most Often Deal With Stranded Assets
Of course a fleet can sometimes serve as an investment that generates amazing level of returns, but don’t get deceived thinking that’s all to it, because it often becomes episodes of reoccurring expenditure that just keeps sucking up resources. For a single commercial truck, a carrier company have to set aside up to $200,000 annually for maintenance – of course that includes expenses like fuel, driver cost, insurance, permits, capital cost, tolls, tires, license costs, repairs and other maintenance cost. These are even budgeted expenditures. Of course their are other factors that may cost more than money – like when a delay happens on delivery because a truck is sidelined for malfunction or accident, leading to the damage of customer trust and confidence.
There Are a Lot of Specific Expertise That Needs Developing In Owning There Fleets
To operate a fleet efficiently and effectively, competency is a must. Owning a fleet of trucks require a lot of skills that goes beyond just knowledge of brokerage. The company have to by all standards make the right Investments in equipment and human resources if operation must be as successful as it wants. Many company needs to know how to calculate CBM.
Irrespective of numbers of trucks a carrier chooses to own, it has to as a matter of necessity have an expertise in managing them in relation to the required technology (transport management system), the relationship (nationwide or international networks), the expertise (routes and loads optimization) , negotiation power and more.
Instead of going through all these stress and focusing less on business, outsourcing comes as a readily available option that works. Top transportation companies should learn to do what they can and outsource what they can’t.
It’s Very Difficult To Serve Two Masters
When a carrier owns its own fleet, it gets subjected to serve two masters. That is, it is forced to focus on shippers (its customers) and its own trucks. The attention naturally gets divided between serving shipping requirements and inculcating all the technicalities involved in maintaining a fleet. Of course it becomes a tough question at this point whether a carrier can still stay focused on customer needs when in this situation. Usually when a compny focus on multiple shipment type such as expedited shipping, it make sense to own their own truck.
Here’s a question that helps answer this: if one decides to invest in owning a truck fleet which of course leads to resource diversion, to what extent can one manage change? It may not seem necessary to answer this question because you’re not thinking of change at the moment, but what if you are faced with new conditions like declining demand, changed economic conditions, a need to update business model, an altered customer base, or issues of merger and acquisition. Flexibility is a keyword when it comes to any attempt to achieve success in logistic operations. At this point, one most ask the million dollar question if owning expensive fixed assets, in any way jeopardizes the ability of the carrier to adjust to new changes quickly.
What’s the best answer?
Remember we said how both sides can have really convincing arguments? Well, there’s no right answer to this as every answer is completely relative. It depends on a lot of factors. Choosing a transportation company that uses its own truck fleet vs. Choosing one that requires the services of carriers to move freight for clients should be a strategic decision on its own. One with its answer lying exclusively on the unique circumstances surrounding the shippers case.
The major challenge anyway lies in finding a perfect balance, the best point where carrier assets is best complemented by external resources for the purpose of handling logistics demands in ways that contribute to the company’s goals and is pleasing your customers, who in any case are your most important stakeholders. Using a logistics software helps this companies provide the best services to their customers.
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