Various factors influence organisations in deciding if they want to maintain their own transport:
Operating cost: In different circumstances either own account or third-party transport might be cheaper.
Capital costs: Capital is always scarce, and even if own account transport seems attractive, an organisation might find it difficult to justify the investment in vehicles.
Customer service: Is the third-party carrier flexible, in control and has good management skills?
This has an organisation using its own transport fleet to move its materials. There are advantages of flexibility, greater control, closer integration of logistics and easier communications. Transport can also be customised/tailored to the organisation’s needs, with the best type of vehicles, fleet size, delivery schedule, customer service, and so on.
The initial costs can be expensive but there are intangible benefits, such as the marketing benefits of vehicles painted in identifiable livery and an impression of reliability and long-term dependability. The organisation should only run its own fleet when it is cheaper than using a specialist third-party carrier.
They usually provide better services, or lower costs than own account transport, and are Large enough to reduce costs through economies of scale. They have the ability to consolidate smaller loads into larger ones and reduce the number of trips and coordinate journeys to give backhauls, where delivery vehicles are loaded with other materials for the return journey.
Most third-party transport is provided by common carriers (which move materials on a one-off basis whenever asked by another organisation).
Known also as Third Party Logistics - 3PL.
Alternatively, an organisation can form a long-term relationship with a contract carrier. This contract carrier then takes over the organisation’s transport for some extended period. Contract transport companies offer a wide range of services, ranging from an occasional parcel collection to running a large, dedicated fleet for an individual customer. This may include school buses for students to and from a school.