Thursday 18th Apr 2019 - Logistics & Supply Chain

Towards smarter outsourcing

Until recently, much of the focus across the supply chain has been on total outsourcing solutions, with the spotlight on major third party providers delivering a wide range of non-core services on big, long-term contracts. Companies have been able to make significant savings through the specialist application of new technologies and ways of working.

And without doubt these will still have a place, as outsourcing providers respond to the business imperatives of (typically large) companies deciding to contract out the complete management of their supply chain. Large outsourcing contracts will continue, but will be fewer in number and the commercial case more difficult to prove.

The world has moved on. In a more mature logistics marketplace, for an increasing number of companies such an ‘all or nothing’ approach does not square with the pressures they face or the gaps in their ability to meet the demands of the supply chain.

A big multinational, for example, may require interim storage in order to supply its markets as it moves production from one country to another: a smaller business, by contrast, may be unable to cope with seasonal demand or have systems which cannot meet the operational requirements of its customers.

In neither case is strategic outsourcing the only answer. Rather, what each company is looking for is a flexible partner who can help it cope with the inevitable pulls and pushes and varying demands of the supply chain.

In my view, this is where the future lies. Companies will be able to retain control of elements of their supply chain – often those where they have particular legacy expertise. Yet in other areas they will gain advantage either through outsourcing or simply by enlisting specialist third or fourthparty help, as and when they need it.

That multi-client warehousing is now widely available reflects a recognition on the part of logistics suppliers generally of the need for a less rigid approach. Much less common however is the extension of such flexibility to other aspects of the commercial offer.

My own company, for example has adopted a ‘pay as you go’ method of billing, enabling clients to select from a menu of services according to their need. Logistics costs therefore will rise and fall directly in line with the level of business at any point in time, without the financial millstone of high fixed overheads.

The level of knowledge, understanding and skills has also increased significantly over this period, with many inhouse logistics teams in larger companies likely to have the same level of expertise today as external providers.

As a result, the opportunities traditionally used to add value are greatly reduced and new methods must be sought – for example resolving such headaches as returns management or the Christmas ‘bulge’ by managing them, in effect, off-line.

We may all accept that no two companies’ needs are alike. The ‘flexible partnership’ approach goes one critical step further however, by responding to an equally essential truth: that for all companies, today’s needs are unlike yesterday’s.

Martin Palmer is business development director for supply specialist, Amethyst Group

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