Define a comparable operating contract
Inputs and assumptions to record
- Same deliveries, geography, service level and period. (not complete)
- Owned fixed vehicle, labour, insurance and system commitment. (not complete)
- Owned route-variable and management cost. (not complete)
- Current carrier quote, surcharge, minimum and claim terms. (not complete)
- Internal carrier coordination and failure scenarios. (not complete)
option cost = committed fixed cost + volume-variable cost + retained handling/exception cost + expected service-failure cost
- committed fixed cost
- Vehicle lease/depreciation, insurance, base labour and systems committed for the period (CU per period) — contract, payroll and asset record
- volume-variable cost
- Fuel/energy, maintenance, per-delivery carrier and other activity cost (CU per period) — invoice, meter and route record
- service-failure cost
- Explicit failure, claim, redelivery and customer-service scenario (CU per period) — comparable record or scenario
Use one currency, indirect-tax basis, attribution rule and time horizon. All numbers below are invented currency units (CU), not forecasts or benchmarks.
Worked example: Own Vehicle vs Third-Party Carrier
Invented monthly 600-delivery comparison: own fixed 5,400 CU + 5 CU/delivery + 500 CU exceptions; carrier 12 CU/delivery + 900 CU retained handling.
| Line | Calculation | Result |
|---|---|---|
| Own cost | 5,400 + 600 × 5 + 500 | 8,900 CU |
| Carrier cost | 600 × 12 + 900 | 8,100 CU |
| Carrier advantage | 8,900 - 8,100 | 800 CU |
| Simple crossover | (5,400 + 500 - 900) ÷ (12 - 5) | 715 deliveries after rounding up |
| Case | Changed input | Result |
|---|---|---|
| 400 deliveries | Own 7,900; carrier 5,700 | Carrier lower 2,200 CU |
| 600 deliveries | Base | Carrier lower 800 CU |
| 800 deliveries | Own 9,900; carrier 10,500 | Own lower 600 CU |
Use the result without hiding uncertainty
- Freeze service scope and order mix.
- Build complete owned fixed/variable cost.
- Build complete carrier and retained-work cost.
- Compare low/base/high volume.
- Stress service failures and capacity steps.
- Plan transition, review and exit conditions.
- Comparing fuel with carrier price.
- Spreading ownership over theoretical full use.
- Omitting internal carrier management.
- Using different delivery promises.
- Treating a linear crossover as permanent.
Questions before committing
- Should vehicle resale value be included?
- Use a supportable period ownership cost and show residual-value assumptions separately.
- What about a hybrid fleet?
- Model it as a third option with base owned capacity and carrier overflow, including coordination and minimums.
- Does lower cost decide?
- No. Service control, resilience, safety and strategic requirements remain explicit non-price criteria.
Sources and methodology
- Own Vehicle vs Third-Party Carrier: primary calculation methodology — Margin101: Owns editable calculation, units, assumptions and validation boundaries.
- Vehicle Cost Calculator — U.S. Department of Energy Alternative Fuels Data Center: Vehicle cost-component context; no ownership or utilisation default is adopted.
Model the next decision
- Fulfilment Cost Comparison Planner
Compare self-fulfilment and third-party cost contracts at a chosen order volume
- Rent vs Own Equipment Comparison
Compare user-entered hire and ownership economics at expected utilisation
- Capacity Constraint Profit Planner
Choose the highest-contribution use of a constrained operating resource