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Resources Blog 4 Things To Consider Before Outsourcing All or Part of Your Supply Chain

Introduction

In layman’s terms, outsourcing is a strategic process that establishes a third-party supplier partner to take over management responsibilities of an internal function. Supply chain outsourcing is more than just a trend – it is a strategic decision adopted by a multitude of organizations because it can create significant economic value. But before you decide to outsource all or part of your supply chain activities, you must consider a few things.

At its core, outsourcing is a strategic decision to capture value drivers and enjoy long-term benefits. It shouldn’t come as a surprise that outsourcing comes with a wide range of benefits for both large and small organizations, and many of them have been successful in strategically outsourcing all or part of their supply chain.

 

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Reap the Benefits of Outsourcing Your Supply Chain while Mitigating the Risks

Hallmark benefits of outsourcing supply chain activities include reduced complexity, competitive edge, reduced costs, access to more resources, and improved procurement processes. The right considerations can help you avoid outsourcing risks like communication barriers, quality control issues, delays, privacy concerns, and loss of control. The trick, however, is to choose a reliable and experienced partner with the right incentives to outsource your supply chain activities.

4 Things to Consider Before Outsourcing Your Supply Chain Activities

#1 - Focus on Clear Goals

  1. What ownership stake in the supply chain do you want? You need the decision to be unanimous among your company stakeholders. Do you want to shift part or all of the supply chain activities? Core or non-essential supply chain activities?
  2. What supply chain activities can you outsource to extract value you cannot access on your own? Besides cost, value is a factor of time, quality, resources, and skill sets. Outsourcing can help you make your product faster, improve quality, better mitigate risks, give you agility and alleviate your staff’s burden. SCM can provide a strategic, tactical, and transformational advantage to your organization.
  3. What supply chain activities can you outsource to gain substantive financial benefits? Many organizations want to access the commodities, products, and services they need at a lower cost than they can do on their own. However, another significant value of outsourcing supply chain activities is to improve your overall working capital. Make sure you incorporate this dimension in your decision-making.

Remember, without clear goals in place, you won’t be able to properly align with your partner. The last thing you want is to compromise on the partner's support, approach, process, or flexibility.

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#2 - Measure the Overall Capabilities of Your Partner

The secret to choosing the right partner lies in evaluating the market thoroughly. There is no reason to make this decision in haste. Instead, take your time and take a closer look at the provider’s expertise, scalability, current customer relationships, and collective experience. It is vital to understand the differences among various companies because your needs are unique. For instance, make sure the geographic outreach of the partner aligns with your company’s needs. When evaluating potential partner, ask yourself:

  • Can you partner perform a variety of supply chain tasks effectively? Essentially, analyze their abilities and support mechanisms.
  • Can your partner deliver consistent and high-quality service? You should find out about the approach of your partner, and that means understanding their process, adaptability, and available equipment.
  • Can you partner adequately support you during transition? You will have to prepare, transition, and deploy different outsourcing stages. Your partner should be able to support and execute plans with a talented internal team. Additionally, you should be able to count on your partner to resolve emerging issues, receive guidance, and make a complete transition.

#3 - It’s a Two-Way Street. Ensure Transparency and Collaboration.

it is important to treat your outsourcing partner in a strategic sense. From the onset you want to share and be specific about all your internal requirements. You should openly share as much data as possible: your designs, AVL, BOM, and samples. Utilize an agreement section to ensure protection of your intellectual property. Your partner cannot realistically propose a sound strategy with partial information or hidden facts. Also make sure that you are clear on your organizational compliance and sourcing policies so you can avoid potential reluctance from management later.

Your partner needs to focus on transparency and quality control as well. Focus on long-term commitment and alignment which means review pricing, test standards, required additional specifications, lead time, communication standards, and support level. More importantly, your strategic outsourcing partner should be proactive, provide reports, and highlight the visibility of facilities, documentation, and inventory. The best strategy is to bring everyone on the same page so you can work together effectively for years to come.

It is advantageous for you to start early discussions with a solid NDA in place, and once a factory is identified you will need a non-circumvent agreement.

#4 - Opt for a Balanced Approach

Outsourcing supply chain activities to an expert partner is the most effective way to scale up opportunities, improve in-house capabilities, focus on other important areas of your business, and cut costs. Since you expect your outsourcing strategy to deliver these benefits, you also want your goals to align with those of your partner. You are looking for the provision of an ongoing service rather than a one-off service. Make sure the right incentives and measures are in place for long-term success.

 

Final Thoughts on Outsourcing your Supply Chain Activities

Your decision to outsource your supply chain activities should revolve around your evaluation of current tech trends, strategic alignment, core competencies, and cost-benefit analysis. You are counting on your partner to give you a tactical, strategic, and competitive edge to your organization; so define clear goals, evaluate carefully, be transparent, and have a balanced approach.

 

About Chainlogix

Since first opening its doors in 1988, Chainlogix has been an industry leader in creative, engineered solutions for manufacturers. Our highly experienced supply chain professionals assist in every step of the manufacturing process, from design to production of quality products. Through our strategic partnerships, firm commitment to unsurpassed customer care, worldwide sourcing capabilities and offices in the USA and China, clients achieve a sustainable reduction in their total acquisition costs and build supply chain resiliency.

At Chainlogix, we’ve spent years cultivating relationships with proven suppliers and securing the most competitive prices for our clients.  We proudly offer the best custom-tailored solutions in the business, and with exceptional customer care that places a high emphasis on human relationships and human connections.

We serve clients across a broad range of markets including industrial and consumer electronics, industrial machinery, telecommunication, lighting, and construction.  Our services encompass all areas of the procurement process such as:

Contact our team today at 833-874-6635 to see how we can help with your supply chain management.