The company faces a difficult decision. It needs to determine whether to maintain its own fleet or turn to a third party company to offer transportation services. Given that this decision will have a significant impact on the firm’s operations, the decision must be made with care and sobriety. In particular, the company should consider such issues as the financial cost of each decision and the impact on its operations.
It is recommended that the company should embrace private transportation and abandon its own fleet. This recommendation is based on a cost-benefit analysis of the two options. Generally, outsourcing services has been found to be highly cost-effective (Wang et al., 2010). By turning to a third party, the company will be able to make massive cost savings. For example, it will be spared the cost of maintaining its fleet. Another benefit that the firm will experience is that it will no longer need to have a dedicated staff that operates its fleet. This benefit is crucial as it will allow the firm’s employees to focus their effort and resources on other tasks. Harnessing the expertise of the third party provider of the transportation services is another benefit that the firm will be poised to experience. It is highly likely that the third party company is better experienced and equipped to provide transportation. Therefore, the firm will receive better services as opposed to its poorer experience with its own fleet. While opting for private transportation is largely advantageous, this choice also comes with some limitations. The main drawback concerns control. When they outsource, companies lose control as they allow outsiders to perform critical functions (Duchman, 2015). While this disadvantage is worrying, it should not discourage the firm from seeking the services of the third party firm.
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In closing, the case discussed above represents the dilemma that firms face when considering outsourcing. On the one hand, outsourcing lowers cost of operating while offering companies access to the resources and expertise of other firms. On the other hand, when they stop performing a particular function and outsource it instead, firms essentially give up control. On the whole, outsourcing is advantageous. Therefore, firms should opt for outsourcing when they determine that it will help to drive their bottom lines.
References
Duchman, Z. (2015). How I used outsourcing during a crucial time, but lost control of my business. Forbes. Retrieved October 13, 2019 from https://www.forbes.com/sites/zalmiduchman/2015/05/19/outsourcing-or-not-how-i-used-outsourcing-during-a-crucial-time-but-lost-control-of-my-business/#4a64ed661865
Wang, E. J., Chen, Y. C., Shang, W. S., & Su, T. S. (2010). Analysis of outsourcing cost-effectiveness using a linear programming model with fuzzy multiple goals. International Journal of Production Research, 48 (2), 501-23.
