We use cookies to provide you with a better experience. By continuing to browse the site you are agreeing to our use of cookies in accordance with our Cookie Policy.
  • ::COVID-19 COVERAGE::
  • INDUSTRY PRESS ROOM
  • ABOUT
  • CONTACT
  • MEDIA FILE
  • Create Account
  • Sign In
  • Sign Out
  • My Account
Free Newsletters
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
    • Mobile Apps
  • TRANSPORTATION
  • MATERIAL HANDLING
  • TECHNOLOGY
  • LIFT TRUCKS
  • PODCAST ETC
    • Subscriptions
    • Podcast
    • Webcasts
    • Blogs
      • Analytics & Big Data
      • Best Practices
      • Change Me
      • Empowering Your Performance Edge
      • The Logistics of Defense
      • Logistics Problem Solving
      • One-Off Sound Off
      • Public Sector Logistics
      • Two Sides of the Logistics Coin
      • Submit your blog post
    • Events
    • White Papers
    • Industry Press Room
      • Upload Your News
    • New Products
      • Upload Your Product News
    • Conference Guides
    • Conference Reports
    • Newsletters
    • Mobile Apps
  • DCV-TV
    • DCV-TV 1: News
    • DCV-TV 2: Case Studies
    • DCV-TV 3: Webcasts
    • DCV-TV 4: Viewer Contributed
    • DCV-TV 5: Solution Profiles
    • MODEX 2020
    • Upload Your Video
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
    • Mobile Apps
  • TRANSPORTATION
  • MATERIAL HANDLING
  • TECHNOLOGY
  • LIFT TRUCKS
  • PODCAST ETC
    • Subscriptions
    • Podcast
    • Webcasts
    • Blogs
      • Analytics & Big Data
      • Best Practices
      • Change Me
      • Empowering Your Performance Edge
      • The Logistics of Defense
      • Logistics Problem Solving
      • One-Off Sound Off
      • Public Sector Logistics
      • Two Sides of the Logistics Coin
      • Submit your blog post
    • Events
    • White Papers
    • Industry Press Room
      • Upload Your News
    • New Products
      • Upload Your Product News
    • Conference Guides
    • Conference Reports
    • Newsletters
    • Mobile Apps
  • DCV-TV
    • DCV-TV 1: News
    • DCV-TV 2: Case Studies
    • DCV-TV 3: Webcasts
    • DCV-TV 4: Viewer Contributed
    • DCV-TV 5: Solution Profiles
    • MODEX 2020
    • Upload Your Video
Home » Making sense of outsourcing
fastlane

Making sense of outsourcing

July 20, 2016
Clifford F. Lynch
No Comments

In one of his brushes with re-engineering, the comic strip anti-hero Dilbert pleaded, "If you let me keep my job, I will do the work of 10 people. Specifically, it will be the 10 people in our strategic planning department. They don't do anything."

When it comes to strategic planning for logistics outsourcing, it's conceivable that Dilbert could do the work of 20 people. In spite of its growth, increased sophistication, and impact on a business's supply chain operations, a surprising number of companies still undertake outsourcing and provider selection with little regard for overall logistics strategy.

That's a downright risky way to proceed. A sure recipe for disaster is to embark on a program that is not suitable, is not understood clearly, or is full of unrealistic expectations. In my experience, outsourcing relationships run a high risk of failure when a company outsources an activity that its own personnel don't totally understand and the provider promises to meet objectives that have not been clearly defined, communicated, or understood.

Outsourcing should always be carefully thought out and measured against the alternative of doing the job in house. To be sure, the analysis process will be tedious and in some cases, downright unpleasant. Collecting data will consume valuable time and resources, and the entire process will require patience, perseverance, and persuasion in dealing with other internal functional groups. This will be necessary, however, to identify the merits and drawbacks of each course of action.

It's also important to include the potential provider in the process from the beginning. But wait. What if the provider hasn't been selected yet? Then, in my opinion, you have the cart before the horse.

In this age of supply chain enlightenment, it's surprising how many companies still buy outsourcing services by traditional methods, that is, essentially the same way they buy pig iron or corrugate. All too often, they assign "professional" buyers with little supply chain knowledge or experience to negotiate for the lowest rate. For these organizations, the usual process is to prepare a request for proposal (RFP) that outlines the task(s) to be performed and lays out requirements for submitting the proposal itself. The RFP is presented to three or more providers, who are asked to submit bids to perform precise tasks in precise ways. The contract is then awarded to the provider who demonstrates the best cost-benefit ratio.

The RFP makes providers' proposals easier to compare and evaluate, but it ignores the basic issue of determining the most cost- and service-effective logistics process. For that reason, I strongly recommend a different approach—one that begins not with the RFP but with the RFI (request for information). Rather than starting out by drawing up an itemized list of tasks, a company will first gather information about potential providers that are known to have experience in the client industry.

Among other advantages, this exercise will help identify a qualified provider to include in the planning process, where it can provide valuable input and collaborate with the client in the analysis and resolution of the logistics objective. Although this method requires the qualifying of logistics service providers (LSPs) before the cost of their services is known, this will be offset by the advantages of bringing the provider into the process early. Almost always, the pricing can be resolved to the parties' mutual satisfaction. Today's LSPs, for the most part, have developed sophisticated technology and analytical capabilities and are well equipped to participate in a collaborative design-based effort to meet the client's needs.

If you're going to enter into an outsourcing relationship, it makes infinitely good sense to leverage the provider's knowledge and expertise early in the process. After all, isn't that what outsourcing is all about?

Procurement Agents
  • Related Articles

    choosing a partner

    Investigate, analyze, and verify

Clifford F. Lynch is principal of C.F. Lynch & Associates, a provider of logistics management advisory services, and author of Logistics Outsourcing ? A Management Guide and co-author of The Role of Transportation in the Supply Chain. He can be reached at cliff@cflynch.com.

Recent Articles by Clifford Lynch

A New Solution for Some Old Problems

The time has come

The continuing saga of driver shortages

You must login or register in order to post a comment.

Report Abusive Comment

Most Popular Articles

  • A look into the future of robotics

  • A primer on warehouse robots

  • Exotec Skypod System Adopted by Gap Inc. to Optimize Returns Process

  • Roadrunner Freight bolsters LTL capabilities with $50 million in new backing

  • Truck driver availability tightens to three-year low, ACT says

Now Playing on DCV-TV

9cddf77b a6f2 40d3 b603 004e451106fb

Dealing with Rapidly Rising Freight Costs

DCV-TV 4: Viewer Contributed
I don’t know if it’s because of our Two Minute Warnings, or the fact that shippers are experiencing the conditions we warned about in our Code Red webcasts, but lately, I’ve heard the same message from several C-Level and supply chain executives: Their companies are experiencing supply chain challenges and their...

FEATURED WHITE PAPERS

  • Special Report: Supply Chain Trends in Retail & Consumer Goods

  • Fortify Your Operational Resilience

  • Cold Storage Automation: Leveraging Advanced Technologies to Meet Increasing Demand

  • The modern warehouse: Maximizing productivity and capacity

View More

Subscribe to DC Velocity Magazine

GET YOUR FREE SUBSCRIPTION
  • SUBSCRIBE
  • NEWSLETTERS
  • ADVERTISING
  • CUSTOMER CARE
  • CONTACT
  • ABOUT
  • STAFF
  • PRIVACY POLICY

Copyright ©2021. All Rights ReservedDesign, CMS, Hosting & Web Development :: ePublishing