Should Manufacturers build In-House Fleet or outsource to Transporters?

April 10, 2019

Introduction

 

Emerging global competition has made it essential for companies to improve their logistics and distribution services. There has been more focus on operational excellence which implies that companies must consistently deliver quality service across all operations. Over the years two main modes of transportation have emerged: in-house fleet or outsourcing to transporters.

 

Some manufacturing companies like to maintain in-house fleet keeping in view their customized requirements while others outsource their logistics in order to remain competitive. They consider third-party specialists to perform activities that are not a part of their core competency. However, both modes of transportation management offer advantages as well as disadvantages. The following sections aim to examine these and propose the best way forward for manufacturing companies.

 

Privately Owned (In-House) Delivery Fleet

 

a. Advantages for Manufacturers

 

One of the advantages of having a Privately Owned (In-House) Delivery Fleet for a manufacturer is dealing directly with customers. Having a company’s own fleet of delivery vehicles can be very flexible as it can be scheduled and accommodated according to the business demands and needs along with the requirements of consumers. For instance, The Coca-Cola Company uses its own inbound delivery fleets to distribute products to its customers.

 

The Coca-Cola Company has a long history of using in-house fleet

 

Modern Coca-Cola truck

 

Another main advantage for a manufacturer is to create brand recognition and awareness through advertising. By using the company's logo/symbol on the fleet delivery vehicles is one of the ways to advertise a brand other than the word of mouth and social media which plays a crucial role these days.

 

Likewise, the manufacturing company can offer personalized delivery services to its customers. For example, Bata Shoes, a footwear retailer, employs its own in-house fleet management system to ensure that consumers get the products to their doorsteps as well as to the retailers on time. The products are delivered to consumers by the company itself instead of relying on any other outside party which may damage the products.

 

b. Disadvantages for Manufacturers

 

Cost is one of the most important factors in any company to run the business and spend the finances accordingly. When taking finance decisions in the organization, cost can be a disadvantage for the company. At the most basic level, the businesses that own and operate private fleet vehicles are liable for acquiring, fuelling, and often maintaining the private fleets. Therefore, owning a private fleet can really be financed drainage for the manufacturers as it includes the cost to recruit drivers, their wages, scheduling, technology implementation, insurance cost, and routing.

 

Not everyone has resources like Amazon to maintain a fleet this big

 

Another drawback of owning a private fleet is that it can be very expensive to maintain and upkeep the private fleet vehicles. Furthermore, quality logistics technology is costly and requires training and time to implement. Private fleet operators need to make certain that they choose the right technologies and methods to keep their end-consumers happy. If you are a manufacturer having an inhouse delivery fleet, you may want to implement innovative transporation management system like Abivin vRoute to optimize your logistics and manage transportation effectively.

 

Contact us today for a free trial of Abivin vRoute - AI-powered Logistics Optimization Platform!

 

Moreover, as easy as it seems the driver's recruitment especially the reliable ones is really hard for the manufacturing organizations. In addition, the logistics and transportation field has been a great deal focus on regulation in the recent past years such as Union Customs Code (UCC), International Convention for the Safety of Life at Sea (SOLAS), Incoterms, AEO certificate “Customs Simplification, Security and Safety” (AEO), etc. The core elements of the industry have been affected by these regulations, from the consecutive number of hours a driver can operate a fleet vehicle to the types of tracing technology used.

 

Outsourcing the Logistics to Transporters, 3PL Companies

 

a. Advantages for Manufacturers

 

By outsourcing the logistics to transporters, manufacturers can be free from the burden of transportation management. The companies then can free up their teams to emphazise on other aspects of the company. It means that transporters can help the manufacturing businesses to focus on their core needs efficiently. This approach is employed by a multinational corporation Adidas which outsources all of its products to worldwide suppliers and contracts with them to supply the goods to the end users.  

 

Manufacturers can utilize electric trucks from Wincanton

 

Another advantage of outsourcing the logistics to transporters is that manufacturers can utilize the technology that transporters already have. Tracking devices, theft alarms, and other safety gadgets might already be installed in the fleet delivery vehicles to ensure the security of products and the progress of delivery.

 

b. Disadvantages for Manufacturers

 

When a company is outsourcing the fleet delivery services and logistics to transporters, there may arise problems like hidden costs, legal issues or the terms and conditions of the transportation which are not specified at first or the incapability of transporter to fulfill manufacturer's particular logistics requirements. For example, food or grocery delivery companies such as Aldi or Tesco have particular requirements and cannot rely on third-party solutions unless customised effectively.

 

Image source

 

Along with that whenever a business outsources recruitment services, logistics services, and HR, it involves a risk of exposing confidential business information along with technological confidentiality to a third-party. There is also the lack of control and security which can lead to losing business functions management control. This means that a company may no longer be able to control deliverables and activities it outsourced to a third-party. However, advance transportation management system like Abivin vRoute can help you manage your transporter, control your data and track closely transporters’ work progress.

 

Contact us today for a free trial of Abivin vRoute - AI-powered Logistics Optimization Platform!

 

Lastly, in the case of outsourcing to the third-parties, they might not give full attention and time to a single business. This may result in inaccuracies and delays in the output of the work. If the main functions are being outsourced, a business can lose its customers as well as reputation in case of negligence.  

 

Conclusion

 

Implementing an efficient delivery fleet and logistics management is an important area for manufacturing companies. However, both solutions come with an equal measure of advantages as well as disadvantages. In the end, it depends on each company’s preference, budget, priority, requirement to choose one of the two transportation methods.

 

References

1. https://www.winnesota.com/fleetoutsourcing

2. https://blog.onfleet.com/outsourced-vs-in-house-delivery-we-did-the-math-d15c67215d80

3. https://www.globaltranz.com/blog/7-advantages-outsourcing-logistics/

4. http://www.husdal.com/2011/05/13/3pl-outsourcing-challenges-and-benefits/

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