How to Outsource Your Supply Chain More Collaboratively

Nov. 14, 2011
Making the outsource transition can help unlock real value in your supply chain.

If you're among the many companies that believe outsourcing is a dirty word, you may be missing out on significant opportunities for improving your supply chain operations. Supply chain outsourcing isn't about relinquishing control; it's about collaborating to add flexibility to your infrastructure, gaining new market share, entering new regions across the globe and getting products to and from consumers--fast. It is the marriage of your operations with a partner capable of becoming a seamless extension of your business while working with you to achieve your supply chain objectives.

The truth is, there's nothing dirty about outsourcing, you just need a squeaky-clean vision of what you want to accomplish and how you want to get there.

Supply chain collaboration goes beyond transactional relationships in warehouse management and transportation to encompass value-added processes such as demand planning, configuration, postponement, fulfillment and returns management. Some outsource providers even integrate e-business, contact center and customer loyalty programs to create tailored value chain solutions.

The need and openness to outsource supply chain processes can vary by industry. A recent survey on the role of outsourcing in supply chain strategy, conducted by SCM World, reveals that the high-technology industry is most likely to outsource functions across the end-to-end supply chain, compared to industries such as consumer packaged goods (CPG)/retail and healthcare/pharmaceutical. Why? Industry maturity is a major factor, as well as margin pressures that drive a need to consider more innovative means to accelerate supply chain transitions. In fact, more than one-third of the high-tech respondents surveyed say that it is "always appropriate" to outsource postponement processes. This survey also reveals that the consumer-driven CPG/retail industry favors downstream outsourcing activities like postponement, configuration and fulfillment, but is also open to outsourcing returns, repair and e-commerce processes.

No matter what industry you serve, in order to achieve success at outsourcing, you need to start with a clear understanding of what you want to achieve. Then you can start to examine alternative ways to accomplish your goals--either through internal resources or a collaborative outsourcing process:

Step 1: Don't Neglect the Proposal Process
Once you make the decision to outsource, you must find the right partner for your needs. Whether you want to focus on a single market or go global, it is important to remember that the proposal process is a critical first step between you and a potential partner. This is your opportunity to lay the groundwork for an outsource provider to understand your business, supply chain, goals and expectations. To start your partnership on the right track, be upfront about the pain points in your supply chain. If your partner truly knows what you need to solve for, it can be more efficient and cost-effective from the start.

Step 2: Collaborate with Your Partner
The job of an outsource provider isn't to shut you out of your supply chain operations. And if you try to force your internal processes in an outsource environment, you could be impacting your partner's ability to make necessary changes. The key to a successful outsource relationship is collaboration. Similar to the proposal process stage, work with your partner to evaluate the processes you currently have in place to figure out what's working and what's not, as well as what's missing. This will help identify the core problems in your supply chain faster.

Another tip: Find an outsource provider that has consistency within its organization, and don't be afraid to ask questions. From technical support and information technology to project management, manufacturing, logistics and planning, alignment across an outsource provider's major functional groups is critical to the success of your supply chain.

Step 3: Ensure a Painless On-board Transition
On-boarding success is driven by teamwork. Ideally, you should have dedicated project teams on both sides of the relationship that are assigned to specific roles and that mirror each other. You should also determine who will be managing the relationship in a sustaining model and establish these relationships as early as possible. Here are some key best practices for pain-free on-boarding:
* Engage the right people within your organization, people that know the supply chain side of the business.
* Work with a partner that has a dedicated on-boarding team.
* Avoid being "pennywise" when it comes to finding the right solution for your supply chain.
* Beware of the "honeymoon effect" of focusing all your attention on the beginning stages of on-boarding and not the long-term process.

Top 10 Outsourcing Do's

Whether you sell consumer electronics devices or pharmaceuticals, here are the top-10 outsourcing do's to ensure a smooth and successful transition:

1. Do be clear about what issues you want to solve in your supply chain.
2. Do work collaboratively with your outsource partner to define a solution strategy.
3. Do provide as much order, freight and production data as possible.
4. Do think green. Work with an outsource partner that provides sustainable supply chain solutions, such as packaging redesign, carbon footprinting, recycling and asset disposition.
5. Do collaborate with your outsource partner to create a map of your end-to-end supply chain.
6. Do have a cross-functional team of experts at your disposal.
7. Do ensure that your pricing model rewards the right behaviors and aligns with your business objectives.
8. Do ensure that you indentify an executive sponsor on both sides of the relationship capable of removing barriers to success as they arise.
9. Do establish clear expectations of responsibilities, timelines, goals and next steps.
10. Do consider the impact on the reverse supply chain and any e-business processes, and whether to incorporate an outsource program for these activities into the mix.


If you have missing pieces in your supply chain puzzle, you may not be able to cope with changing business requirements, shifts in consumer demand or unstable market conditions. Further, you may be missing out on benefits like cost savings, access to new channels, global expansion and more. According to Gartner Inc., supply chain management business process outsourcing can help companies reduce direct and overhead costs by 5% to 30%. Making the decision to outsource and truly collaborate by working with the right partner can lead to a more robust and flexible end-to-end supply chain that adds value to your business and your bottom line.

Lorcan Sheehan is senior vice president, marketing & strategy, with ModusLink. His team includes a supply chain professional services group that works directly with consumer electronics and communications brands to develop strategies to improve the effectiveness of their global supply chains.

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