Outsourcing Business Services: Hiring Company Transport

Cost benefit analysis - Overview 

Cost benefit analysis evaluates the expected benefits of a venture verses the expenses or the costs of implementing the venture or the initiative. In business enterprises, the cost benefits analysis enables the management to do a comparative analysis of several options in terms of the expected outcomes of these options versus the costs of implementing these options and coming up with a solid plan that seems to be more favourable. The implications of a cost benefit analysis is that it gives the business an opportunity to shift between various ideas and select the best idea base3d on the prevailing conditions within the business at that time. This task, I counsel that instead of the company purchasing a van that will offer transport for the staff member, it seems that the outsourcing of the service will be more meaningful and beneficial to the company as compared to purchasing a new van to undertake these services. 

Reduced costs of operations 

As deduced from the costs/benefit analysis, there are significantly reduced operational costs when the company outsources these services. Associated costs of repairing the company vehicle, taking an insurance cover and even the depreciation of the van means that the company may not enjoy the full economies of scale that are associated with owning the van as compared to hiring a van for the same purpose. With high costs of operations for the company, it means that profit margins of the company would be significantly reduced and transferred to the costs of maintaining the van thus negating the principle of frugality within the company. The outsourced system means that as a company, we will be able to transfer these costs that are associated with running the van to a different entity. Any maintenance costs or insurance costs will be effectively handled by a different entity thus enhancing the margins of the company. The company will dissociate itself from the expenses of hiring a driver or even purchasing extra materials that are associated with the maintenance of the car which may significantly cut down on the profits of the business. 

Based on the evaluation of the cost-benefits implications of the venture, it is evident that outsourcing seems to be the most effective in terms of cost. Since this company aims to improve its marginal returns by lowering the costs of operation, it is thus critical that the company proceeds to outsource the transportation for its staff members 

Reduced risks 

There are several risks that are associated with the purchase of a new van and the company is likely to expose itself to these risks suppose it forfeits the chance to outsource and seeks to own its own car. One fact is the van is an asset that depreciates and therefore its value will go down as soon as it is purchased. Such risks will make the outsourcing option better as compared to purchase. Other risks include unexpected events such as thefts and accidents that are likely to expose the company to other inconvenient situations that are likely to interfere with the profit margins of the company. All other risks that are associated with the van are directly passed onto the service provider and this is directly beneficial to the company. If the company adopts the outsourcing strategy, it limits the exposure to these risks. 

Any business process should be as risk free as can be ( Khan & Fitzgerald, 2017 ). Business entities must seek for avenues through which they can eliminate any form of risk that may interfere with the returns of the company. In this regard, it is important that this company considers the option that exposes it less to the various risks that may impair its marginal returns. In this regard, the company ought to consider outsourcing of its products as the most preferred strategy as compared to purchasing the staff van. 

Cost analysis for outsourcing the staff van versus purchasing a new staff van for the company 

Benefit analysis of outsourcing transport services versus purchasing a staff bus for the company 

Innovation 

The scope of the company is not in transport and logistics. The company is thus likely to gain more when it surrenders the transportation services to transportation companies which can handle such issues well. In this regard, any innovative ideas that are envisaged by the transport and logistics company are enjoyed by this company. On a more important, this company will be able to focus entirely on its business mandate without any risk of distraction from other departments that really do not form its business mandate. I therefore urge this company to consider business process outsourcing of the transport services for the staff as compared to purchasing a new van for the service. Out sourcing will ensure that the company staff and management maintain the normal day to day operations without the worry of a new department or alteration to the mission of the firm. The opportunity can be used to learn and gain experience firsthand on operation of the transport fleet should there be need in future to purchase or have transportation done by the company. 

References 

Miller, D., & Patassini, D. (2005). Beyond benefit cost analysis . Aldershot: Ashgate. 

Gerbl, M., McIvor, R., Loane, S., & Humphreys, P. (2015). A multi-theory approach to understanding the business process outsourcing decision.  Journal of World Business ,  50 (3), 505-518. 

Khan, N., & Fitzgerald, G. (2017). Offshore Outsourcing Business Models: An Analysis of Four Cases. In  Global Sourcing of Services: Strategies, Issues and Challenges  (pp. 375-406). 

Lacity, M. C., & Willcocks, L. P. (2013). Outsourcing business processes for innovation.  MIT Sloan management review ,  54 (3), 63.