Business strategy tools and frameworks

Risks

Buying a new fleet of trucks is risky because the customer could still leave. If you tell them you’re getting a new fleet that might alleviate their concerns, but ultimately the risk is that you have a brand new fleet of trucks and still lose your best customer. Subcontracting is even riskier, because there is less oversight with subcontractors than there is keeping the trucking function in-house.

The risk of losing the best customer is low, if you communicate with them effectively. The risk associated with a subcontractor is higher, mainly because you have less oversight. Subcontractors still have financial motivation to perform, but that motivation is not existential and oversight isn’t coming from the C-suite of the same company so the consequences of failure are typically lower.

The severity of losing the customer is massive, especially when coupled with buying a new fleet. Leasing the fleet lessens the blow, but the impact of this occurring is severe. A breach with the subcontractor might also prove severe, if indeed the company is on thin ice. Taken as an isolated incident, an issue with the subcontractor might not be catastrophic, but if moving to the subcontractor convinced the client to stay, and then the subcontractor falters, the impact could be just as bad as option 1.

The organization can manage the new fleet risk by leasing, allowing it to walk away from the trucks if it no longer needs them. This form of capacity planning is critical and should be adopted. The subcontractor risk can be managed by putting processes and contracts into place, especially ones that shift most of the risk associated with non-performance to the subcontract itself.