Outsourcing: It’s not all or nothing

Dec. 11, 2017
Outsourcing isn't an all or nothing decision. Fleets can pick and choose what it is they need and not pay for more than that. You can choose your outsourcing

When it comes to outsourcing, some people think it’s an all or nothing decision: Either you outsource all of your repair and maintenance or you do it all in-house.

The reality is that in today’s market there are a variety of options when it comes to outsourcing. Fleets can pick and choose what it is they need and not pay for more than that. You can choose your outsourcing arrangement based on your core competencies, keeping things in-house where you have the skills, technicians and tooling to complete the job.

Let’s look at the various options available to a company.

  • Dedicated contract carriage: At one end of the spectrum, dedicated contract carriage is a choice some companies make as a way to get their goods to market. They want to outsource everything, not just trucks, but also drivers, routing, supply chain design and engineering. Dedicated contract carriage is a complete outsourcing of the transportation function, leaving the company to concentrate on its revenue-generating business.
  • Full-service leasing: With full-service leasing, the company keeps drivers on its payroll but outsources the assets (a.k.a. the trucks). This includes outsourcing all the maintenance and all the emergency roadside service for those vehicles.
  • Guaranteed Maintenance Agreement: In this scenario, the fleet procures the trucks but wants an outside service provider to handle the maintenance of those assets. Here maintenance is completed at a guaranteed rate.
  • Variable Maintenance Agreement: In a variable maintenance agreement, costs are pegged at a certain amount and if the actual maintenance exceeds the amount, the fleet gets billed for the difference. If the cost is less than the pegged amount, the fleet would get a refund or credit.
  • PM Service Agreement: This type of plan is well suited for older trucks or ones that are domiciled in one place. Included in the price is the cost of preventive maintenance services, which are scheduled events. Breakdowns or unscheduled repairs are handled on a cost-plus basis. In other words, the fleet pays as it goes.
  • Managed Maintenance Services: In this case, the fleet pays a small fee to be a member and then the service provider gives the fleet a preferred rate on labor and parts when repair or maintenance is needed at any of its facilities. The fleet only pays for what it uses and does so at a preferred rate.

These outsourcing options strike a balance between control and risk. For example, with dedicated contract carriage you give up all control but also have little to no risk. Moving down the list of options you gain more control but also take on more risk. Where you fall on the control and risk continuums will help you figure out which outsourcing option is right for your operation.

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