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Delivery operations: Own it or loan it? Understanding the right choice in 2022.

By Aryaan Sarover 21st July 2022

To set up your own delivery fleet or use a third party delivery service? This has been a critical question for businesses in recent months.

With the rising fuel prices, and increasing competition in delivery times and experience, understanding which delivery model suits your business has become increasingly critical.

We’re going to delve down and understand what both of these delivery models entail, and try to help you choose which could be the best fit for your business.

In-house delivery fleet

To start things off, let’s understand what in-house delivery is and what are the key factors associated with it.

Building an in-house delivery fleet essentially means delivering orders to customers through a fleet of delivery riders employed by you. This seems pretty straightforward, but once you look at the factors to be considered, you might want to check out third party logistics as well to be sure about the right choice.

Factors to consider when opting for an in-house delivery fleet

1. Operating expenses

Creating and maintaining your own delivery fleet comes with some costs attached. First and foremost would be the salary of your delivery riders. With the current market and rate of inflation, this price is not cheap. According to research conducted by indeed.com, the average pay for a delivery driver in the USA is 17$/hr. 

2. Rising fuel prices

With the increase in fuel prices across the globe over the last year, it becomes an important factor to consider, especially when it becomes a cost to be borne by your business while maintaining your own delivery fleet.

3. Rising attrition rates

Opting to keep your own delivery fleet is all about making sure you can meet the delivery requirements and maintain the benchmarks when it comes to delivery timelines. This also means ensuring that you always have a certain number of riders available at all times. With the attrition rates soaring across industries and a high demand for delivery riders, driver retention plays a crucial role in setting up an in-house delivery fleet.

4. Focus on delivery management & optimization

Keeping in mind some of the factors discussed above, delivery management and optimization is a critical factor to determine the success and profitability of your delivery fleet. It also means using certain delivery management platforms and setting systems in place to ensure you don’t waste the resources available at hand.

5. Volume of orders

Another critical factor is the estimated volume of orders. When maintaining your own delivery fleet, it is often hard to scale up drastically in a short period of time. Businesses must get this estimation spot on as it leaves very little room to adjust and drastic steps must be taken if there is a large gap between the volume of deliveries and the capacity of deliveries.

Pros and cons of your own delivery fleet
Pros and cons of your own delivery fleet.

Third party delivery services

Third-party delivery refers to the process of outsourcing delivery logistics to another organization. A third party delivery/logistics service (often called 3PL), essentially takes over and manages your entire delivery operations.

While 3PL might reduce certain headaches and nuances of having your own delivery fleet, it is important to understand some factors before going for this delivery channel to ensure it aligns with your business priorities.

Factors to consider when opting for third party delivery services

1. Service quality

When dealing with a high volume of orders, third-party couriers are encouraged to combine as many trips as feasible. This often leaves your business with little control over the delivery experience being provided to the customer.

2. Initial budget

When setting up delivery operations, it is important to take into account the initial expenditure available in hand. While setting up your own delivery fleet may give greater profit margins in the long run, it requires a substantial amount of capital to start off with. On the other hand, third party logistics are often a cheaper and quicker alternative to go to market.

3. Delivery radius

The geographic radius of your delivery plays a key role in determining your decision to go for third party logistics. While having your own fleet could be beneficial for shorter distances, it may be difficult to set up your own delivery fleet if you wish to have a large geographical coverage.

4. Ownership of Customer Information

Moving towards using third party logistics might need you to give up certain customer information to the delivery riders. In case your business strategy is reliant on keeping customer information to yourself, this could also be a key factor to consider.

Pros and cons of third party delivery
Pros and cons of using third party delivery services

Understanding the right choice for your business.

We’ve discussed the factors, pros and cons of both, adopting an in-house delivery fleet, or using third party delivery. Let’s try to understand which one is better for your business.

Can you use both? 

At the end of the day, it all boils down to one thing. Your business and your priorities. Despite this, many people wonder, is there a way to use both? Since both have their own strengths and weaknesses.

The answer is yes. Infact, it is quite common to use both. It’s called Delivery orchestration.

As the name suggests, Delivery orchestration involves quite literally orchestrating, or creating a balance between your in-house delivery fleet and using 3PL services to get the best out of both. 

Whether you decide to go for adopting an in-house delivery fleet or using third party delivery services, be sure to choose the right delivery management software to get the highest efficiency. In case you’re looking for a delivery management solution, check out Tookan.

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