Question

The world’s largest retailer, Walmart, owns and manages its own fleet of trucks. The company has often received praise for its distribution capabilities. The practice, however, seems to represent a stark contrast to the practice of outsourcing not only shipping, but other logistics operations to third-party logistics providers. Please address the advantages and disadvantages of these different policies. Under what conditions would it make sense for a firm to own and manage its own trucking operation?

Answer 1

Advantages of owning a delivery fleet:

1.Flexibility : Owning a fleet allows the owner to tailor their schedule to accommodate customer requirements.

2.Advertisement : A fleet of vehicles serve as free advertisement .The companies can get more exposure by adhering advertisements to the outside of each vehicle.

3.Time constraints : For businesses like bakeries or floral shops it is better to own vehicles  rather than relying on outside service to deliver their fresh products on timely manner.

4.Personal touch : Some companies prefer their own delivery service simply because it provides their customers with a more personalized experience when their products are hand delivered by the company itself.

Disadvantages of owning a delivery fleet :

1.Cost of purchasing a new delivery fleet : The capital towards owning a fleet can be crushing. It costs quite a bit to purchase an entire fleet of new vehicles.

2.Vehicle maintenance : In a perfect world, when purchasing new vehicles it should be expected that the vehicle will last a while before needing any serious repairs. Unfortunately, new vehicles break too. A company looking into owning a delivery fleet needs to budget for vehicle mechanical and cosmetic maintenance.

3.Storage : Finding a place to store a fleet presents another issue.

Advantages of outsourcing :

1.Swiftness and Expertise: Most of the times tasks are outsourced to vendors who specialize in their field. The outsourced vendors also have specific equipment and technical expertise, most of the times better than the ones at the outsourcing organization. Effectively the tasks can be completed faster and with better quality output.

2.Concentrating on core process rather than the supporting ones: Outsourcing the supporting processes gives the organization more time to strengthen their core business process.

3.Risk-sharing: One of the most crucial factors determining the outcome of a campaign is risk-analysis. Outsourcing certain components of your business process helps the organization to shift certain responsibilities to the outsourced vendor. Since the outsourced vendor is a specialist, they plan your risk-mitigating factors better.

4.Reduced Operational and Recruitment costs: Outsourcing eludes the need to hire individuals in-house; hence recruitment and operational costs can be minimized to a great extent. This is one of the prime advantages of offshore outsourcing.

Disadvantages of outsourcing :

1.Risk of exposing confidential data : When an organization outsources HR, Payroll and Recruitment services, it involves a risk if exposing confidential company information to a third-party.

2.Synchronizing the deliverables : In case you do not choose a right partner for outsourcing, some of the common problem areas include stretched delivery time frames, sub-standard quality output and inappropriate categorization of responsibilities. At times it is easier to regulate these factors inside an organization rather than with an outsourced partner.

3.Lack of customer focus : An outsourced vendor may be catering to the expertise-needs of multiple organizations at a time. In such situations vendors may lack complete focus on your organization’s tasks.

  Depending on the industry, investing in a fleet makes absolute sense and can be a success with the correct planning and budgeting strategies.Also an industry with substantial better financial position and availability of feasible labor can only have its own delivery fleet. However, weighing the advantages and disadvantages of owning a delivery fleet is important as it comes with high responsibility. As a way to avoid the hassle of starting up, owning, and operating a delivery fleet, some companies opt for subcontracting their deliveries to outside courier services. As a result, they save time and money, allotting for both to be invested back in the business instead.