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August 2011 | Angeline Albert
what your organisation does best, and what suppliers can do better is the key
to avoiding the “pitfalls” of outsourcing parts of the supply chain.
Dominy, research director at analyst Gartner, told SM “organisations
must focus on what they can do best and appropriately outsource activities that
value chain partners can do better”.
analysis into the outsourcing of activities such as manufacturing, logistics
and supply chain management has identified a number of best practices that
buyers should adopt. He believes purchasers can prevent future problems by
basing outsourcing decisions on “strategic and tangible factors”, such as the
overall business objectives, and not just cost.
companies that have outsourced a supply chain function such as manufacturing
purely on the basis of direct cost have experienced problems later,” he said. “Some
companies have found that total costs didn't improve as much as anticipated
because customer service suffered and quality problems increased after
addition to a robust analysis of costs, which addresses the question of
retaining or outsourcing the service, companies must also incorporate quality,
responsiveness, past performance of the vendor and risk as part of the
said any outsourcing strategy should be aligned with both the organisation’s
corporate goals and supply chain strategy. It is also crucial to understand how
corruption and intellectual property risks differ by country so these can be
factored into decisions.
major players in the supply chain outsourcing market are expanding their
services into each other's turf. Knowing which services are core and which are
not for each service provider is important when deciding the activities to award
to an outsourcing provider,” he added.
regular flow of data, information and ideas including inventory levels and
customer orders should be shared at least weekly. Any information such as
supplier changes or other decisions that will impact the outsourcing partner
should also be updated and communicated weekly.”
also said the importance of defining and monitoring service levels and set out
key performance indicators should not be underestimated.