Beware the pitfalls of outsourcing

4 March 2014 | Matt Smith

Matt Smith, head of procurement at Office Depot UK & IrelandWhen businesses are increasingly turning to outsourcing products and services that are outside of their core business offering, it can be difficult to keep control of the supply base and ensure they are meeting their delivery objectives. After all, without implementing and managing a supply chain network in the right way, end-user experience suffers and subsequently, the business suffers.

At a time when opportunities to expand and introduce new revenue streams are coming to fruition, taking a step back to consider how demand will be met in a consistent and efficient manner is vital.

This comes down to ensuring that new products and services are backed-up by robust and reliable supply networks. Although strong relationships may already exist with core suppliers, it is vital businesses develop equally firm links with new wholesale providers to properly streamline buying and delivery processes.  

Control is at the heart of making sure these systems come to bear and, for new suppliers especially, it is essential service levels are understood from the outset. More established relationships allow for this to be delegated to a key account manager. However, the nature of taking on new suppliers means this has to be micro-managed for a limited period to ensure that what’s promised is followed through. But those worth their salt will rapidly seek to prove their capabilities by demonstrating they are able to independently manage their responsibilities without regular input or management.

However, it is a two-way street – business owners seeking to delegate aspects of the supply chain relationship to external partners must ensure they properly familiarise account managers with the way their existing network operates – achieving this helps to streamline processes and ensure conflict is kept to a minimum. This means devising clear service levels that reflect the needs of both providers/ resellers and end users.

The day-to-day control and management of supply chain matters should be a two-way system that properly challenges suppliers to step up and add value. The best laid plans can easily go off course, so it’s well worth looking at internal networks and procedures to ensure last minute problems can be dealt with quickly. Failing to plan means planning to fail – therefore look at the capabilities of suppliers collectively and if any cross over, ensure that if one vendor fails, another can deliver in its place.

For suppliers servicing businesses, an essential part of their credentials should be a transport system that provides on-the-spot back-up if a delivery failure seems likely. For smaller organisations, it would be prudent to have a preliminary arrangement with a third-party supplier as a contingency.

Finally, technology can provide much-needed support in keeping supply chain risk to a minimum.  For instance, cloud-based software can act as a safety net. It is often used to secure and track orders to ensure the latest updates can be picked up on remotely. This means that if there is an issue within one facility, these can be quickly addressed.

For organisations focused on widening the number of products and services they offer to customers, it is essential procurement teams have a measured and detailed plan in place to manage suppliers and logistical challenges. This will keep the entire process less fragmented and create valuable long-term relationships that directly help meet customer needs.

 Matt Smith is head of procurement at Office Depot UK & Ireland

 

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