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Apples to Apples...In-House vs. Outsource Delivery Costs

September 18, 2017

A large debate amongst logistic professionals and consumers revolves around utilizing an in-house fleet or outsourcing delivery to a third party logistics firm (3PL).  While no business wants to overspend on delivery costs, the value of each dollar spent on delivery is hard to ascertain due to the multitude of variables

involved.

 

If one were to assume that a best in class 3PL delivers the same or better service than a well trained in-house fleet, cost becomes the next major descriptor between the two.  To make an accurate comparison, both cost models will assume 10 drivers are needed daily, each driver running 250 miles per day, service needs are Monday through Friday, and each driver requires 1 light duty vehicle (under 10,000 lbs. GVWR) with an initial cost of $20,000.

 

In-House Fleet Monthly Cost

 

Vehicle Costs (10 Vehicles)

Original Cost (Cash) or Loan Payment  $18,040.00

Licenses, Title, Fees & Permits (State and/or Federal)  $200.00

Gas, Oil, & Grease (Based on 12.5 Gallons Per Day)  $6,250.00

Insurance (Liability, Collision, Cargo, Fire, Theft & Legal)  $2,000.00

Actions Not Indemnified by Insurance  $900.00

Normal maintenance (Service, Parts, Tires, Etc. )  $450.00

Washing & Exterior Maintenance  $250.00

Communication Devices  $550.00

Total Monthly Vehicle Expense  $28,640.00

 

Employee Costs (10 Drivers, $12.00 per hour pay rate, 50 hours per driver)

Wages (Including Overtime)  $28,599.99

Social Security Contribution  $2,187.90

Unemployment Compensation Contribution  $228.80

Workman’s Compensation  $2,130.70

Misc. / Adm. Hiring Drug Screen / Training  $314.60

Vacation / Sick Leave  $50.00

Fringe benefits (Medical, Dental & Life)  $2,288.00

Total Monthly Employee Expense  $35,799.99

 

Summary of Costs

Vehicle Total

$28,640.00

Employee Total

$35,799.99

Monthly Grand Total

$64,439.99

 

3PL Monthly Cost

The 3PL cost model assumes the per mile charge for all miles  serviced is $1.20.

 

3PL Costs

Mileage Costs  $60,000.00

Employee Costs  0

Vehicle Costs  0

 

Summary of Costs

Monthly Grand Total

$60,000.00

 

 

Each month a savings of almost $5,000.00 is realized when comparing options.  The 3PL costs are not only lower but less complex and therefor more predictable.  The 3PL model also removes the liability that comes with having company driven vehicles on the road.

 

The in-house model has many auxiliary expenses not shown in the apples to apples comparison above.  A support staff of dispatchers, supervisors, and IT staff are all necessary to keep fleet operations running.  Legal developments must also be monitored as changes form many regulatory agencies can affect the structure of an in-house fleet.  DOT, OSHA, and the TSA are all regulatory agencies that have at least partial oversight of the daily work performed.

 

To summarize, the 3PL model shows a significant reduced cost model along with more predicable billing and less liability.  The in-house fleet cost model is by comparison complicated, subject to multiple regulatory changes, and more expensive.

 

 

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