Product Management

To Outsource or Not to Outsource: The Challenge for Small Business Fleet Managers

In many ways, it is only natural that small business-owners should be keen to actively pursue growth after the trials of the Great Recession. This is especially true when you consider the recently reported portents for global economic growth, which continue to create positive sentiment and a genuine sense of optimism.

Small business-owners should proceed with caution, however, especially as the current spate of growth is not guaranteed to continue indefinitely. Within the last week, the United Nations has lowered its global economic growth forecasts for the remainder of 2014 and 2015, citing a variety of developing social, political and financial issues throughout the world.

The Importance of Sustainable Growth: Why Fleet Management Costs are so Important

No country best embodies this quandary than the UK, where economic bodies have been reported almost unprecedented levels of growth for the last two financial quarters. This trend is starting to reverse, however, as the soaring property prices begin to place a strain on the economy and restrict potential growth. So while SME’s throughout the UK continue to borrow heavily and aggressively pursue growth, forecasted growth of 2.9% for 2014 raises pertinent questions about the wisdom of such investment.

Although small business owners may argue that investment is crucial if their venture is to grow, it is important that entrepreneurs make sensible decisions on where to spend their capital. Take the maintenance and operation of a commercial fleet, for example, which helps businesses to manage their logistical requirements while also creating a mobile and visible brand. It is also an increasingly diverse business sector that carries considerable costs, so as an entrepreneur you must carefully consider you options before choosing the most profitable and cost-effective solution.

The Benefits of Outsourcing Responsibility for your Commercial Fleet

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Outsourcing is essentially the process of entrusting responsibility for the management of a service to an external party, although this can take many forms in the commercial fleet market. Consider the following benefits of this: –

Improve Efficiency: By outsourcing the management of your commercial fleet, you are effectively creating a structure that helps to optimise each vehicles performance and compliance. This can help to improve efficiency and drive long-term growth.

Remove the Burden of Ownership: On a similar note, your outsourcing agreement will usually relieve of the burden of ownership. This means that you will not be responsible for the organisation and cost of unscheduled maintenance, making it easier to manage finances.

Focus on Business Strategy and Implementing your Vision: The management of your commercial fleet is essentially a day to day operational consideration, which can ultimately distract you from maintaining an overview of your firm. By outsourcing this, you can focus on strategic planning and successfully implementing your business vision.

The Potential Disadvantages of Outsourcing

There are also additional and contrary considerations when outsourcing your commercial fleet, including the following: –

A Lack of Metrics and Measurements: It can be difficult to measure the financial impact of outsourcing, especially with so many commercial vehicle solutions available to business-owners. For independent business-owners with a fleet of just one or two commercial vehicles, for example, it is unlikely that you will enjoy any significant financial benefits from outsourcing.

You may invest in something that you do not own: Rather like renting a property instead of buying one outright, outsourcing your commercial fleet management often requires you to lease vehicles rather than purchase them. This is seen by some business-owners to be a false economy, as it means that you ultimately invest in something that you do not own.

You will be required to Pay a Regular Monthly Fee: An outsourced commercial fleet arrangement quickly becomes a business overhead, as you will be required to pay a monthly fee to your service provider. Those with a relatively tight budget may struggle with this concept, especially as the fee is structured to include potential maintenance costs. If your cars never break down, this may be considered to be a misuse of company capital.

The Last Word for Commercial Fleet Managers

The decision of whether to outsource responsibility for your commercial fleet or keep it in-house is individual to each business-owner, as the number of vehicles that they own, the nature of their business and financial resources will heavily influence the final decision. It is important to also consider the bigger economic picture, however, and factor in the potential for short-term decline or a fall in demand. With the clouds beginning to gather in the current economic climate, business-owners would be wise to consider whether outsourcing their commercial fleet is viable for them.

If you want to explore this in further detail, consider requesting a free white paper on the subject from Hitachi Capital Vehicle Solutions.

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