Investment vs. Expense

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Investment vs. Expense

in·vest·ment [inˈves(t)mənt]
1. the action or process of investing money for profit or material result.

ex·pense [ikˈspens]
1. the cost required for something; the money spent on something.

One of the skills for excellent business acumen is identifying good investment opportunity. The danger, of course, is that there will be a poor return.

It is also important to assess expenses that do not produce a return but are necessary to the operation. Without these costs vital components of the business would be lacking and jeopardize sustainable success.

Your core business, be it scrap metal; chemicals; paper products; aggregate or any of the myriad commodities, involves transportation to and from various locations. Many of you have already discovered the benefits of rail but let’s peer deeper into how rail can be further used to drive profitability by investment, not expense.

Carrier vs. Shipper

The average shipper uses equipment provided by the carrier, essentially “renting” the car on a per-trip basis. This presents unique challenges for the shipper [See The Have and The Have Nots for details].

You can mitigate several issues by committing to purchasing or leasing equipment.

One major benefit is full control of your fleet. A well-managed private fleet can produce more trips annually than relying on carrier equipment. An experience logistics partner can analyze and determine optimal allocations on an ongoing basis to increase the ROI and shipper reliability.

Another benefit is freight savings. Most carriers offer two rates for each move: one that applies to carrier-owned equipment and another that applies for private equipment only. The savings per-ton can be significant and could be the commercial advantage that allows you gain a contract over the competitor.

A third benefit is having a car that best fits your needs. When is shipper uses carrier equipment they are dependent on whatever supply is available. This means they may not receive the best equipment to fit the order and the lost capacity will result in lost revenue. Owning your own fleet means you always have the right car for the right shipment. Again, using an experience logistics partner to maximize fleet efficiency will assist in this.

Lease vs. Purchase

Economic trends are indicating that this is the perfect time to explore this possibility. Don’t allow hesitation to turn your investment opportunity in to an expense.

Several nuanced factors must be considered before making the decision to lease vs. purchase and I encourage you to click THIS LINK to contact our experts to help you evaluate your fleet potential.

By | 2018-08-15T10:37:45-04:00 August 15th, 2018|FYI, logistics, railcars, Transportation|0 Comments

About the Author:

Eric Wilmot has held the position of Director Marketing & Technology since January of 2016. Eric grew up in the Cleveland area and attended Full Sail University in Orlando, FL, where he graduated with a AA in Film & Video Production. After working on films, television and music videos Eric was Director Event Technology for PSAV Presentation Services before joining Iron Horse in 2011 as Logistics Analyst. He has also held positions as Logistics Account Manager and Manager Support Services prior to his recent appointment. Eric and Justine have three daughters- 10, 7 and 20 months- and one son age 5.

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