How to succeed with outsourcing

How to succeed with outsourcing

Moving between direct experience and the results of a recent study on third party logistics, Mark Colombo, vice president of FedEx Supply Chain Services, offers some recommendations for making outsourcing work:

Baselining is critical. A lot of the areas where improvements are achieved come down to setting appropriate goals up front. Target levels should be set jointly.

A single point of contact makes a difference. Implications of a recent study confirm that many outsourcing relationships fail because there wasn’t sufficient trust in the relationship. Logistics executives managing a 3PL relationship need a single point of contact so they know the 3PL is aligned with their goals. In addition, you need to know you can trust what that person is telling you.

Continuous review of goals will ensure that the baseline objectives stay in alignment with changing needs. A typical organization that is not outsourcing has a lot of internal dialogue around operational performance and sets new objectives for managers each year. The 3PL relationship should mimic that structure.

Align peers on goals. Every 3PL supplier has a variation on this subject. Logistics and supply chain management are multi-disciplinary in nature. Operations improvements and especially financial goals don’t respond to functional boundaries. Total cost reduction can require a trade off between logistics and procurement or among other functions.

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October, 2003

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