In some circumstances, it might make sense for a company to manufacture a product from sourced raw materials or components. In others, companies might find it more profitable to pay another company to perform the manufacturing process and then sell the finished product. Outsourcing can easily seem like a viable option, saving time, on-site costs, and providing a local level of expertise. But before you can go any further with the decision to outsource or notconsider the biggest risks you could face and plan ahead.
Since the Industrial Revolution, companies have grappled with how they can exploit their competitive advantage to increase their markets and their profits.
In the s and s, the rallying cry was diversification to broaden corporate bases and take advantage of economies of scale. By diversifying, companies expected to protect profits, even though expansion required multiple layers of management.
Subsequently, organizations attempting to compete globally in the s and s were handicapped by a lack of agility that resulted from bloated management structures. To increase their flexibility and creativity, many large companies developed a new strategy of focusing on their core business, which required identifying critical processes and deciding which could be outsourced.
Initial stages of evolution Outsourcing was not formally identified as a business strategy until Mullin, However, most organizations were not totally self-sufficient; they outsourced those functions for which they had no competency internally.
Publishers, for example, have often purchased composition, printing, and fulfillment services. The use of external suppliers for these essential but ancillary services might be termed the baseline stage in the evolution of outsourcing. Outsourcing support services is the next stage. In the s, as organizations began to focus more on cost-saving measures, they started to outsource those functions necessary to run a company but not related specifically to the core business.
Outsourcing components to affect cost savings in key functions is yet another stage as managers seek to improve their finances. Strategic partnerships The current stage in the evolution of outsourcing is the development of strategic partnerships.
Dec 09, · Outsourcing of manufacturing, for instance, is feasible only if it can be separated from other supply chain activities: product development, branding, marketing, distribution, and after sales. GEP offers a comprehensive portfolio of supply chain outsourcing services that help companies drive more value across the enterprise. Supply Chain Strategy. Supply Market Intelligence. RELATED SERVICES. As the global leader in procurement and supply chain services, GEP helps market-leading enterprises worldwide create and . A successful sourcing strategy requires a thorough understanding of a company’s business strategy, the resources required to deliver that strategy, the market forces and the unique risks within the company associated with implementing specific approaches.
Until recently it had been axiomatic that no organization would outsource core competencies, those functions that give the company a strategic advantage or make it unique. Often a core competency is also defined as any function that gets close to customers.
In the s, outsourcing some core functions may be good strategy, not anathema. For example, some organizations outsource customer service, precisely because it is so important. They were quickly followed by dozens of major corporations whose managers had determined it was not necessary to own the technology to get access to information they needed.
The focus today is less on ownership and more on developing strategic partnerships to bring about enhanced results. Consequently, organizations are likely to select outsourcing more on the basis of who can deliver more effective results for a specific function than on whether the function is core or commodity.
Companies have always hired contractors for particular types of work, or to level-off peaks and troughs in their workload, and have formed long-term relationships with firms whose capabilities complement or supplement their own. Why do companies outsource Here are some common reasons: Reduce and control operating costs Improve host company focus Gain access to world-class capabilities Free internal resources for other purposes A function is time-consuming to manage or is out of control Insufficient resources are available internally Share risks with a partner company In earlier periods, cost or headcount reduction were the most common reasons to outsource.
Main factors influencing successful outsourcing The critical areas for a successful outsourcing program as identified are:SCM and Outsourcing, Postponement Decisions Supply Chain Supply Chain (SC) is a network of various organisations involved both through upstream and downstream linkages in different kinds of activities and processes.5/5(2).
Dear Colleagues, On behalf of the program planning committee, please be invited to submit an abstract for the PDA Europe Conference on Outsourcing and Supply Chain.. This newly designed conference will cover the whole supply chain from raw materials to last-mile distribution.
Supply chain management is one of largest costs and has significant service impact to companies. Some contract logistics projects are critical to a company's supply chain and operating success.
Therefore outsourcing consulting should be designed not to fail, especially with supply chain . The team of experts at Logistics Bureau assists companies to determine whether Supply Chain, Logistics, Warehouse or Transport Outsourcing is an appropriate strategy and if required, provides specialist support through to implementation.
(Originally published in the April issue of AFSMI's The Professional Journal.).
By Timothy W. Purkis Many enterprises find that keeping focused on their business strategy can be very difficult, especially when supply chain issues progressively tend to "overwhelm" their operations and administration. The Global Supply Chain Group offers the best value out of outsourcing arrangements.
Our Supply Chain Business Process Outsourcing (BPO) is fully customizable, adaptable framework, implemented by our supply chain veterans.