A substantial question that every company considers nowadays is whether to rent or to buy. This is evident in everything from printers to property, and trucks are no different.
Every business has some sort of transport requirement, some manage their transportation in-house, others outsource.
To rent or to buy, what is the best option?
The truth is, there are pros and cons of either, one of the pros of managing your transport in-house is control, this is because management take on all of the responsibility, on the contrary, it is difficult and time-consuming.
There are 4 aspects that need to be considered when making a big decision, these are risk, focus, flexibility and finance. It sounds fancy, but here’s the breakdown.
In terms of risk, a business that owns its own vehicles has to manage and implement policies to secure them, such as vehicle tracking systems, solid maintenance programs and extensive Limitation of Liability cover policies. By managing transport requirements in-house, businesses take on the risk of break-downs,hi-jackings and motor accidents, not to mention the risks surrounding the human resource requirements.
By outsourcing, you passing the buck over to professionals who have dedicated loss-control divisions, certified workshop facilities, comprehensive driver-training programs and extensive Limitation of Liability cover policies in place.
In order to explain the ‘focus’ aspect, a hypothetical example is needed.
Take Dave, he owns and manages Company X which manufactures quality furniture. Being a master carpenter, he is actively involved in the manufacturing process. If Dave were to manage his own distribution, he’d have to source and maintain vehicles, human resources, relevant software, adapt his Limitation of Liability cover policies etc. These activities would cost Dave time and energy, taking away from his core focus, which is to produce quality furniture.
By outsourcing, all these activities would be taken care of, allowing Dave to spend more time in his factory, doing what he knows and loves and therefore ensuring his quality standards are kept.
Moving onto the flexibility aspect, let’s say Dave’s manufacturing output had increased due to swollen demand for his products over the summer months. His fleet of 8 vehicles could no longer cope with the delivery requirements and on top of that, 2 of the trucks broke down 600 km from the factory.
Dave was reluctant to buy more vehicles because he knew his manufacturing output would slow during winter, leaving his extra vehicles sitting for half the year.
By outsourcing these services, Dave would have access to Spartan Truck Hire’s fleet of over 1000 vehicles nationwide. Spartan would manage and replace the 2 breakdowns from start to finish and supply excess vehicles during the summer months in order to cope with spikes in demand. So Dave would only need to pay for services as-and-when he needed them.
Looking at the financial aspect, the benefits of outsourcing transport services are tremendous. Firstly, unless your core business is transport, vehicles are not assets, they are liabilities that depreciate over time. If Dave were to manage his own vehicles and supply chain, he would need vast amounts of capital for the purchase, maintenance, security, skills and software required to do so.
By outsourcing his transportation services, he pays a fixed monthly rate which frees up much of his capital enabling it to be spent on his core business.
Vehicles depreciate at a rapid rate, which would weaken Dave’s balance sheet, by going the renting route as opposed to the owning route, Dave’s transport requirements are seen as a tax-saving expense instead of a depreciating balance sheet.
So there it is, if you’re considering to rent or buy, or just re-assessing your transport options, we’d love to chat.
Call us nationwide on 0861 772 7826.