Question

How can a company economically justify owning a private fleet given the potential costs associated with empty backhauls.

Answer 1

In logistics & supply chain management process, some of the firms appoint third parties to fulfill their obligations and transportation related activities. Most of the firms chose third parties for this function due to different reasons. One of th reason is owning and maintaining heavy trucks will be leads to high fixed cost to the firm, and managing the load also become difficult. Instead of this, the firm chose third party for this activity and pay some commission or fee based on the volume of transactions. Even thogh it occurs material cost, but easy to maintains and by doing this, the firm can focus strongly in its core activities.

Some of the times, the trucks may be sent back empty, when there is no stock for shipment or transportation, still we need to pay to the party for their services. Most of the people thinks that it is wastage of payment, why should we pay unnecessarily. But here the thing is that, we may receive orders any of the time, we do not know the exact timings. Hence, it is a part of our regular activities and we may need to pay for this. and do not consider as additional or waste of money.