There are several purposes to outsource any activity like:

–          Cost savings

–          Lack of in-house resources

–          Lack of in-house competencies

–          Short-term project

Actually the benefits are more. Especially in supply chain which is the largest department in the organization. Supply chain department is the central player in any team – it coordinates and serves the other departments by identifying their needs and fulfilling the required tasks.

Let’s look through the three most important benefits, applicable in supply chain.

1. Supply Chain Competency

This is the most important benefit for the company. If you know what to do and how to achieve it, you have 50% of the task done. The other 50% are for the implementation which is not an issue for competent people.

Lack of competency is the base of failure. Sometimes employees don’t want to learn new things because it’s more convenient for them not to put more efforts. The slogan “I’ve been doing this for years and it works” is very old and unfortunately still used. Sometimes employees want to learn but don’t know what they need.

In such cases help from outside is very appropriate.

Outsourcing activities due to lack of enough knowledge is the wisest step you can take. By doing it you’ll get competent staff which:

a)      to drive your business faster than you can do it

b)      to drive some tasks better than you

c)      to give fresh ideals successfully applied and working in other companies

d)     to propose tough decisions – like changes in personnel, changes in strategy, ect

e)      to apply the best practices from supply chain in your company – supply chain is very dynamic area. Companies providing outsourced services keep their knowledge up to date constantly in order to serve best their customers.

2. Supply Chain Value-added service

Outsourcing starts with analysis of all activities and proposal for improvements. In majority of cases improvements come from change of current process flow. Once the process is put in correct order, the investment for the consultation starts to pay back. This is the beginning of the value-added service – you get more benefits than you paid. Another stream of value-added service is to keep the new status running fast all the time both by staff management and supplier management. The outsourced agent deals with many suppliers which deliver to many of his/her clients, so the agent can easily manage them. And when business environment provides new solutions, the agent can propose and implement them to your company.

3. Economy of scale

You can save resources by outsourcing supply chain activities. Serving several companies, the outsourcing agent uses fewer efforts to achieve better results compared to your staff. For instance, if you need to purchase a product you need to run a tender and evaluate suppliers. But not only your current supplier – you have to invite alternative ones also if you want to keep an eye on the market trends. The outsourced buyer can do this faster than you as he/she knows many suppliers from other industries and his/her approach will be different from yours. There is a big chance the outsourced buyer to negotiate better trade conditions than you because he/she has dealt with these suppliers already.

On other hand, you pay only per work done. E.g. you do not pay a salary to your employee whose working time might not be 100% occupied.

Above we listed the first 3 reasons why to outsource supply chain. Next 3 reasons are coming in Part II.