The choice of ownership depends on the following factors.
- Operating costs
In different circumstances, either own account or third party transport might be cheaper and they should consider other benefits before an organization moves away from the cheaper option.
- Capital costs
This is the initial cost of acquisition. Organization must weigh the initial cost of investing in vehicles and compared to hiring.
- Customer service
Organization must choose the mode of transport that provides acceptable customer service in the best possible way. Sometimes it is impossible to get a third party carrier and therefore own account will be the best option.
The structure and operation of a private fleet are fairly rigid as you cannot make quick adjustments to allow for changing circumstances. If there is a certain peak in the demand, you cannot increase the size of the fleet for a few days and then reduce again when the peak passes. Common carriers therefore can make these adjustments faster.
- Management skills
Managing transport needs specialized skills which are not readily available in most organizations. This therefore makes third party carrier to be ideal, since management team with specialized skills.
An organization clearly has greater control over transport and therefore wider operations if it runs its own transport. However, this control might be costly and contract companies might offer equivalent services but without the overheads and inflexibility of private fleet.