Predictability and scale are the keys to supply chain management.
From payroll to distribution, most companies outsource in some way. Indeed, in the automotive industry, outsourcing the complete management of the inbound supply chain is accepted practice.
But on the outbound side, it is more the exception rather than the rule. Why is this? And what is the difference?
How to increase outsourcing benefits was the topic of a recent public webinar, hosted by Wallenius Wilhelmsen Logistics (WWL) in conjunction with Finished Vehicle Logistics magazine. The focus was on how auto and equipment producers can mitigate outsourcing risks and create a more rewarding experience with their outsourcing.
Doug Cooper, Vice President, Product and Business Development, SCM at WWL, explains: “We want to share our experience when it comes to the important business decisions related to the outsourcing of supply chains.”
The experience of outsourcing in the industry is good – around 90 percent of webinar attendees reported a positive experience. It can lead to reduced costs (around 10 percent to 30 percent) and better expertise through access to specialist skills. There are also benefits through greater reliability, increased control, faster market penetration and higher productivity.
“Predictability and scale are the keys to supply chain management,” says Cooper. “If customers can monitor and manage performance with fewer points of contact through standardized processes and precision metrics, then we can improve efficiency and speed to market. We have seen lead-time reductions of up-to 60 percent.”
However, there are barriers to success and the benefits can be elusive. Disruptions in the supply chain can have a devastating effect on corporate performance – “you can’t sell what you can’t deliver” – and companies need to focus on clarifying their logistics strategy, choosing the right partner and actively managing the relationship.
Consistency is a key factor and there are dangers inherent in cycling between outsourcing and insourcing of the supply chain. These changes can be driven by strategic concerns, such as changes of leadership or market demand, or operation concerns, such as erosion of internal competence or a lack of promised benefits.
The first step in reducing the perceived risk associated with outsourcing is to clarify your existing strategy and consider your strategy for the future. This should include consideration of how many points of contact you want to manage and how much control you want to maintain over technology and core competences.
In considering the right provider there are issues such as the relationship type, the profile of the provider and the payment structure. A critical factor in achieving a quality result should be contractual, ethical and environmental requirements.
Finally, the relationship needs to be actively managed by both parties. WWL suggests there should be structured multi-level contacts between the organisations in order to maintain a shared view of the contract and buy-in at all levels. Regular reviews on an annual or semi-annual basis are essential while monthly performance reports can inform key metrics and process improvement.
As a follow-up tool to the webinar, WWL has produced a short briefing document and checklist for increasing the benefits from outbound supply chain outsourcing.
“Auto and equipment makers who want to explore this topic further should contact their account manager or our SCM team. We will be happy to arrange a workshop to explore how you can increase the benefits of outsourcing in the outbound supply chain,” says Cooper.
REDUCING THE RISK – CHECKLIST
Here’s a quick resume of how to increase outsourcing benefits and create a more rewarding experience:
1: Clarify your strategy
* What is your strategy today?
* How many points of contact?
* Want to own the technology?
* Maintain your own competences?
* What will your future strategy be?
2: Choose the right provider
* Determine the relationship type
* Determine the provider profile
* Determine the payment structure
* Communicate the environmental requirements
3: Actively manage the relationship
* Maintain multi-level contacts
* Conduct annual or semi-annual reviews
* Have monthly performance reports
Download a checklist covering the key elements of the presentation (along with the webinar Q&A).
If you missed the webinar (or want to see it again), go here.