Advantages And Disadvantages Of The Company Investing On Its Own Delivery Fleet
For the company to increase its profits it is always wise for the company to cut on its operational cost. One of the ways to cut on the operational cost is to assess the best method of shipping goods to and from the company premises. This implies that the company should weigh the options of either owning its own transportation trucks or hiring them from other firms. For the company to invest on the best method of delivery, it is good to research on whether the company should invest on purchasing its own transportation equipment or hire them from other firms. An assessment on the advantages and disadvantages of the company purchasing its own transportation equipments should be carefully evaluated before the decision is made on which method of delivery the company should commit its money.
Now that the company intends or is in the process of investing on its delivery equipments, it is important to evaluate the benefits as well as the disadvantages of owning these delivery equipments. In addition, compare these benefits and disadvantages to the benefits and disadvantages the company derives from leasing the delivery equipments from the leasing companies. From the findings of this evaluation, the concerned parties should be in a position of deciding the way forward as regards investing on the delivery equipment.
Benefits and disadvantages of leasing the delivery equipments
Through leasing the delivery equipments, the company has been benefitting in a number of ways. For instance, the company did not have to plan for a large capital outlay to meet its target on delivery. This is because the cost on delivery has always been spread over the number of years the company has been in operation. This has significantly helped the company to maintain its cash flow, this has been important for smooth running of the company. Another merit the company has experienced through leasing its delivery equipment is security (Constance & Cheryl, 2002). The company has been benefiting from the security provided by the equipment lease company. This has been of great importance in cutting down the company’s operational cost. Another benefit that the company has been enjoying through leasing its delivery equipment from the leasing companies is on budgeting. This can be argued from the perspective that since the leasing agreement has always been on a fixed contract, it has been relatively easy for the company to forecast and budget on delivery costs. This implies that it has been quite easy for the company to budget for a fixed cost than it is to budget for an irregular lump sum cost, that come with owning the delivery equipment. Additionally, through leasing the delivery equipment, the company has been in a position of acquiring the best as well as the most efficient equipment in the market to fit its need. Acquiring of such advanced equipment could be extremely costly to purchase as well as to run and maintain.
Despite the advantages, the company has also been disadvantaged through opting on leasing the delivery equipments. For instance, one of the disadvantages that come along with leasing the delivery equipment is that there is no ownership of the equipment leased. This implies that despite the company being in possession of the equipment to its disposal, the equipment is still the property of leasing firm during the lease period and after the lease period. This has affected the company in that in cases where more advanced equipment has been required the company incurs high expenses of acquiring the new equipment while one is still in their possession. Another disadvantage of leasing the delivery equipment is that of the long-term expenses incurred at the end, yet the equipment is still the property of the leasing firm. The company has for all this long period paid a significant amount to the leasing firms, which has in the long been more expensive than the cost of buying its own delivery equipments. This is in addition, given the fact that the equipments are still the property of the leasing firms. Another drawback to the company has been maintenance of the equipment.
Benefits and challenges of owning the delivery equipments
Now that the company intends or is in the process of owning its own delivery equipments, it is quite important to list some of the benefits that go along with owning the delivery equipments. In addition, to be aware of some of the possible challenges that comes along with owning the delivery equipments. One of the advantages that the company is to derive from owning the delivery equipment is that of the guaranteed equipments. This is drawing from the fact that the company knowing its need will have customized made trucks designed to meet its needs. Another advantage is that of the improved customer service. This is because of the enhanced customer to company flexibility brought by ownership of the equipment. Another of the advantage that the company will enjoy through having its own fleet of delivery truck is the flexibility of scheduling. This implies that the company does not have to wait on the scheduling list because the company is in possession as well as in control of its property. Additionally, the company’s owned trucks can been used for free advertising purposes. This is through plastering advert on the truck as well as having rolling billboards on the truck (Lewis & Roehrich, 2009).
However, despite the advantages, the company is also deemed to encounter some challenges in owning its own delivery equipments. For instance, a large capital outlay will be required to procure the equipments. This initial outlay may have a negative impact on cash flow of the company (Roehrich & Davies, 2009). Another disadvantage regards that of equipment maintenance, upgrading as well as replacement. On the other hand, there is the process of recruiting and retaining additional workforce. For example, the company will have to recruit drivers as well as other personnel. Maintain and retaining these personnel will be an additional cost to the company.
Having assessed the benefits of the company owning its own delivery equipment as well as those of leasing the delivery equipment and the respective challenges on each case to the company, the company should now move on to owning its own fleet equipments. This is given the benefits that outweigh those of leasing, now that that the company has grown. Owning the fleet equipment will assist to solve a number of issues and in addition the equipment remains the property of the company. Additionally, the equipment can be resold once out of use to generate income.
Constance, L. & Cheryl, F. (2002). Personal Insurance Malvern, Pennsylvania: American Institute for Chartered Property Casualty Underwriters/Insurance Institute of America.
Lewis, M. & Roehrich, J. (2009). Contracts, relationships and integration: Towards a model of the procurement of complex performance. International Journal of Procurement Management.
Roehrich, J. & Davies, A. (2009). Procuring complex performance. Journal of Purchasing and Supply Management