While the demand for virtually all forms of outsourcing has surged in the last several years, many companies remain hesitant to enlist the help of third-party services. A close look at the reasons given for such hesitation, however, often reveals that such concerns are the result of misconceptions about how outsourcing works, how much it costs, and what it can mean for a company’s growth.
To better understand why some companies don’t outsource, Ryder partnered with Inc. to conduct a survey of 385 Inc. readers—representing both small business owners and large company decision-makers. The results revealed a disconnect between the reasons some companies have or have not outsourced, and the substantial benefits achieved by those that do outsource.
In this piece, we’ll take an in-depth look at three of the most commonly cited misconceptions regarding fleet management and logistics outsourcing.
Myth #1: A third-party provider can't execute as well as you can.
Even the best-managed organizations can’t excel at everything. Outsourcing allows a company to focus on the aspects of its business that maximize its internal skill sets, while leaving other elements to third-party vendors who are experts in those areas. In fact, the survey results found that “Access to Functional Expertise” was the number one reason businesses choose to outsource, with 65% of respondents listing it as a deciding factor.
Rather than stretching your internal capabilities too thin by attempting to keep all processes in-house, your business can benefit by leveraging the expertise of outsourcing partners who have the experience and resources that your company lacks— and may have no interest in developing. This in turn allows you to continue to develop the in-house capabilities that give your company its true competitive differentiation.
Myth #2: When you outsource, you lose control of business processes.
Many companies worry that when they outsource elements of their business, they’ll no longer be able to monitor the quality as well as if they were doing it themselves. In fact, “Loss of Control” was one of the main reasons that survey respondents said they avoid outsourcing, with 37% identifying it as a challenge.
However, the ideal outsourcing vendor isn’t just a contractor: When chosen well and managed properly, they become a true business partner. The best client-outsourcer relationships are characterized by a strong line of communication and a set of clearly defined processes tailored to the client's needs. When those factors are present, outsourcing can actually allow businesses to gain even more control, due to the benefits of leveraging the outsourcer's expertise, which enables the client to devote more of its focus to the core issues that will propel its growth.
Myth #3: Outsourcing is more expensive.
Though this is a common belief about outsourcing, finding the right partner can actually save businesses money, often in several different ways. In fact, the survey found that among companies that do outsource fleet management and logistics, almost two-thirds (63%) cited cost reduction as a primary factor in their decision to outsource.
When businesses attempt to manage their own fleets, unexpected costs can multiply: an unforeseen repair is bad enough, but the damage is compounded when the truck sits in the shop, forcing the company to spend additional money on a rental. If late or missed deliveries lead to a drop in customer satisfaction—or the outright loss of a customer—the cost can become catastrophic.
Maintaining your own fleet can also tie up precious capital, which can impede you growth potential. Companies that have outsourced are quick to cite the predictability of vehicle, fuel, and labor costs as one reason, vehicle reliability as another, and the flexibility to increase or decrease their fleet size as demand warrants—something that's virtually impossible to do when fleets are owned and managed in-house.
For Ryder customers, these cumulative savings are generally 20 percent or more. As Ryder Customer Development Manager Jeff Jinkins stresses, companies can get a clear picture of the savings potential right from the start. “Through Ryder’s total-cost-of-ownership tool, we can show companies how leasing can help them improve cash flow and drop real money to their bottom line,” he says.
An Outsourcing Action Plan Outsourcing is a big decision, and before you make it you'll need to do your homework. If you are thinking about outsourcing your fleet management and logistics, here are three things you should do to before making your decision:
Seek out all available information. It’s not uncommon for vendors to showcase thought leadership in the form of white papers, webinars, blog posts, or event presentations. Take advantage of these materials to learn as much as you can about their particular model of outsourcing and consider how well their strengths match your current and future needs. Ask for client references as well, and make time to have substantive conversations with those clients.
Perform a detailed cost analysis. Because the myth that outsourcing is more expensive remains one of the most perpetuated, crunch the numbers for yourself and see what happens. Just be sure to analyze owning your own fleet from all angles, including typically overlooked costs like maintenance downtime (will your truck really be ready to roll again in two days—or will it be two weeks?) or procuring new vehicles in the event that your business grows quickly. “The organization needs to have good quality data on all those costs to be able to really have a clear view and compare to the costs of outsourcing,” Jinkins says.
Consider the advantages of a partnership. Outsourcing is rarely “one size fits all.” Instead, a good vendor will work with you to create a unique solution that fits your needs. A big part of your research should be devoted to understanding, in detail, just how a given outsourcer will work with you to find a custom solution.
By investing the time to explore these common misperceptions about outsourcing you're likely to discover that outsourcing provides a great opportunity to save money, streamline your business processes, and position your company for future growth.
This article was first published in INC Magazine and was re-published with permission.