The Evolution from ‘Should We Outsource’ to ‘How Much Can We Outsource’
Supply chain complexity is increasing on a near daily basis. Heightened customer expectations, technological advancements, and the continuing need to increase profit margins are predicators warranting these intricate functionalities.
Outsourcing international business and supply chain services are more mainstream now than ever before. The predominance of companies in the global market have forecasted another year over year increase in their logistics outsourcing budget for the 2020 market. We have seen a comprehensive shift from outsource dabbling to outsource necessity. Simply put, your business’s international scalability depends on your ability to collaborate effectively.
If outsourcing is a given, what then can we expect to see in terms of services being outsourced and the impending risks associated with those decisions?
Creative Vision is the New Outsourcing Authority
In the past, ‘outsourcing’ has been directly associated with sub-par standards and domestic job losses but is now approaching critical mass within standard business operating procedures in a 180-degree manner. Not only is the operational need increasing, but the strategic vision has become subject to outsource creativity.
Moving forward, outsourcing will not be implemented to replace existing employees, but rather to supplement them.
Outsourcing is typically observed on a two-tier basis. Tier one is the older more traditional approach based on an outsourced serviced model where the company loosely monitors the contracted work based on infrequent performance evaluations. Offshore collaborations are dominant within this particular tier of outsourcing model.
Tier two looks more like a partnership and can be evolved overtime. We like to call this particular outsourcing model collaborative co-management. You may also hear it being referred to as orchestrated outsourcing. This model is prevalent within the transportation industry – think 3PL (3rd Party Logistics Providers). Third party, in this sense is referencing the collaborative outsourced hires.
The natural progression along the outsourced meter begins somewhere along the lines of monitored outsourcing and then meshes seamlessly into the collaborative co-management model. However, the key to outsourcing success lies within the granular metrics of the company in question. After all, the only way to grow is to know where you are starting. You must know your company in order to fully understand the best route for optimization and streamlined efficiency.
Some companies prefer a more diversified outsourced acquisition focusing on a fused approach. This enables a comprehensive coverage while simultaneously mitigating risk.
Regardless of the industry, all companies are nuanced and run differently, increasing the need for creative, adaptable, and solutions driven co-management capabilities.
“Outsourcing opportunities for consumer package goods companies would be different than automotive manufacturers. For one vertical, the movement of freight from manufacturer to distribution may be an afterthought, while in another industry, it’s a core competency. Some grocery stores, for example, operate their own trucks and distribution centers while also relying on vendors to stock shelves with soda and potato chips. Online-only retailers such as subscription box companies outsource fulfillment while they concentrate on customer acquisition and product curation. Even within industries, each company has its own way of doing business.”
How Do You Chose the Best Outsourcing Size for Your Business?
Holes. First you must identify gaps that are causing critical disconnects within your operations or supply chain. Next look for co-management companies that could not only fill those holes, but provide an immediate return and overall up-shift in your organization.
There are essentially three groupings that justify outsourcing sectors within your business. Those are as follows:
· Inadequate employees or a need to eliminate overhead.
· Procedural innovation via SaaS (Software as a Service).
· Technological advancements creating unmanageable complexities.
If there is a process within your workflow that is well structured and reoccurring – outsource. It will never make scalable business sense to continue with mundane tasks that could be outsourced and essentially turned on with automation. We are all well aware that time is money. This allows for you to refocus your energy and drive profit margin by using a repeatable process.
Outsource supplemental tasks while narrowing in on more mission-critical components. There must be a cohesive trust that flows between collaborative supply chains in order to fully streamline productivity thus directly increasing valuation properties.
“Rapid technological advancements, from robots in warehouses to connected trucks and trailers to warehouse and transportation management systems, are leading companies to look for partners who can help them stay ahead of the curve. For example, Penske uses robotic process automation and is developing expertise in electric trucks and blockchain at a level an individual company couldn’t match.” [Source]
Partnering with a co-management team that you can trust is critical to the overall success of your supply chain. Businesses don’t compete, their supply chains do. Comprehensive outreach and customizable solutions aren’t always easy to come by. Ensuring that your outsourced team is capable of taking creative approaches to problems when they arise can make or break the success of company. Due diligence is essential – outsourcing is not a one size fits all type of approach.
“You’re responsible for the actions and inactions of your outsourced partner.” -Chris Craighead, Professor of Supply Chain Management, University of Tennessee
Properly mitigating risks that can come from outsourced partnerships predominantly lie within the managing company’s scope of responsibilities. Client relationship and brand management cannot and should never be outsourced.
Take the Takata airbag recall as an example here. This product malfunction directly affected most major automotive manufacturers. If you were one of the affected car drivers who had to take their automobiles back in for service, you were frustrated with Honda – not Takata.
While this is one particular example of outsourced risk, they can stretch far beyond this general scope. Strategy development may suffer if too many key sectors are outsourced, thus decreasing the value of your business over time instead of increasing the bottom line.
The future success of your business is both interwoven and equally dependent on your ability to manage and orchestrate all outsourced components of your company. This is where we see the needle move in a favorable direction. How well can you co-manage and measure the projects you have outsourced?
CLN Worldwide takes pride in offering customizable and adaptable solutions to any international transportation operation or global supply chain. Our solutions-first team takes a creative approach to solving stagnate or stifled cash flow issues that may arise as a result of a company’s current international transportation.
We manage a portfolio of complex global supply chains for today’s middle market and emerging growth companies by utilizing a collaborative supply chain to increase profit margins. If you have any questions on how you can leverage our platform to achieve master distributor capabilities in the United States without the infrastructure investment, contact us HERE today.
Eliminate the overhead. Gain the expertise.