Every company considering setting up their own transport operation or contracting their existing operation to an outside transport company will have different circumstances to consider but, when a business reaches a certain scale, the managing diresctor should face the question – is it better to invest in their own account transport operation or to contract the work out to a haulage transportation company?
Stick to Your Knitting?
If the business is profitable and whose limited resource is lack of available management time and availability, it would make sense that any spare time and effort should be focused on developing the core business, as opposed to becoming a transport manager.
If the business already has a transport operation and is considering outsourcing, the decision should be more straightforward, assuming that all the costs of the existing operation are taken into account, from management time.
What is involved in Setting up Your Own Account Transport Operation?
The regulations surrounding vans under 3.5 tonnes GVW are relatively loose, and drivers are readily available. However, as soon as trucks are involved things become more complicated. It is unlikely that a business will be able to set up an operation involving more than a couple of trucks without the recruitment of a professional transport manager. Here’s a (non-exhaustive) list which outline why this is the case:
Operator’s Licence
If you are planning to use any vehicles over 3.5 tonnes GVW (larger than a typical Transit van) then you will need an Operator’s licence (O-Licence). This is similar to a planning permission application, but it determines whether the company (people) and the location are suitable for the operation of the number of vehicles requested. Not everyone wants a whole load of trucks parked next to their house, for example. This can be a drawn-out process that can take up to seven weeks and must be completed prior to buying any vehicles.
For example, you need to advertise your application in a local newspaper in the traffic area your business operates in and demonstrate that you have sufficient funds to operate.
Certificates of Professional Competence (CPC)
If you are running trucks, you will require a transport manager’s CPC that requires you to pass two exams. So, if you are not planning to recruit a transport professional, you will need to factor this into your workload or that of the member of staff nominated for the role.
Buying the Trucks
If you are thinking of buying or leasing new trucks for the operation, the amount of time required for getting the O-Licence and CPC pales in comparison to the waiting list for a new truck chassis and the body to be built. Lead times of six months are not uncommon.
There is always an opportunity to buy a used truck – there are always plenty of used trucks for sale at Truckpages, for example. This process is not without complications – you may need to compromise on the size of the vehicle or the ancillaries that are attached. Plus, you may need to kiss a number of frogs before you find the Prince Charming of trucks.
Truck Driver Recruitment
So, you have taken the plunge, have the correctly trained staff in place, O-Licence received and some shiny trucks sitting on site. What can possibly go wrong? Ask any transport operator – there is plenty of room for headaches.
Truck driver recruitment has been an issue for many years, exacerbated by the departure of many overseas drivers during Covid and since Brexit. Good drivers are very hard to come by, but as an own account operator, you may have a better chance of attracting drivers than haulers who may need their pound of flesh more than you will.
Ongoing Management of Transport Operation
It goes without saying that you have to keep staff on board and recruit for new drivers when required, but there are plenty of additional areas to consider. Unlike cars and vans, trucks have to be inspected every six weeks and records kept of the inspections. In addition to this, the vehicles will require routine maintenance.
Breakdowns and accidents occur, which means that plans should be in place for alternative arrangements – especially if your products are time critical. This means that there should be some redundancy in the design of your operation – having spare vehicles and drivers would be an extreme example.
Summary of Costs
- Insurance
- Contract hire payments
- Driver salaries
- Fuel & Adblue
- Tolls & fines
- Maintenance
- Admin/management costs
- Training Costs
- Cost of space required
Why Contract out your Transport?
The short answer is that it is much more straightforward to get an outside contractor to carry out your transport needs than doing it yourself, giving you the time and space to run your own business. A transport company has the same cost structure as an own account operation. They still have to lease the vehicles, pay the insurance, wages, fuel etc. but a professional transport operation will have the benefit of economies of scale.
This means that they will buy fuel in bulk at cheaper rates, negotiate lower rates for contract hire and maximise vehicle optimisation. A transport operation with many customers is more able to avoid running empty compared to an own account operator. In the event of a breakdowns or accidents, they are more likely to have alternative arrangements than for a smaller own account operation.
Of course, the company will try to make a profit and a return to the shareholders, and this will be reflected in the price of the services provided.
What is important is to obtain a number of competitive quotes for the work and ensure that the details or the work required are thorough and any rates increases are agreed in advance. Transport operations will add a ‘fuel surcharge’ clause to agreements to cover them in case the price of fuel increases significantly during the duration of the contract.
Our View
Whilst it may be cheaper to operate your own transport in the long run, it is important that all factors are considered before taking the plunge. Working with a professional transport company should free you to focus on your own business.