Three criteria to consider before outsourcing your processes

Three Criteria to Consider before outsourcing your Processes

In today’s logistics industry, business leaders are focusing their efforts on two specific points: to be much more aware of choosing a suitable for their project partner, and consider the advantages of purchasing technology as a service (3PL or third party logistics).

“… Make the right decisions in a supply market that is constantly evolving, where new technologies allow the economy to achieve new synergies and where there is a wider range of options, requires a new way of thinking” Mc Kinsey & Company

Major logistical problems today are less and less related to infrastructure or facilities management. Category managers are focusing on the management and coordination of hundreds or thousands of deliveries per day should conduct their businesses.

This consequently that the processes in supply chains have changed dramatically, mainly due to the massification of online shopping experience and the emergence of e-commerce companies.

Despite this, still many logistical leaders still do not feel fully convinced opt for outsourced services, mainly for fear of losing control of its processes.

However, this idea besides being wrong, is very risky, since companies are facing every day to a much more competitive market, where besides the economy is oriented to the segmentation of processes, products and mainly to customers .

Therefore, the idea of ​​wanting to cover all production areas in a company without an external logistics provider, can be as ineffective as uncompetitive.

What are we talking about?

Outsourcing services, or 3PL, it consists in delegating tasks that are linked with the main purpose of the business, so it is possible to reduce costs and spending more time and attention to what really matters.

This is summarized to an outsourcing -people who are not among the employees of the company- to reach business goals. The idea is to reduce labor costs, fixed costs and operations.

However, the decision to outsource the processes must be carefully considered, since when not measured the pros and cons, the risk of tarnishing the image of the company and even suffer damage you run.

So … when should I turn to outsourcing?

Both micro entrepreneurs as logistics managers, they can count on outsourcing processes for their companies. This means that anyone who has a business, company or SME may choose to hire an additional service without hindrance.

Therefore, different companies, ranging from small businesses to multinational, every day become more involved in making the decision to outsource basis and not only in reducing labor costs or production, but in the possibility of changing them generate added value.

However, companies are looking at the option previously deliver the operation of its activities, as long as this also allows them to go beyond competing for the price, as customers ask for more than that.

To resort to outsourcing, it is necessary to identify whether it is worth having a professional service available full-time sector, mainly as regards the volume of work and costs of service implementation.

Hire a business outsourcing services, it is justified when the company really needs a prompt service, as the end customer, order management, sales support, IT integration, service etc.

Below, we list 3 key points to ponder before making such an important as delivering an activity area or a business process to a third party decision.

1- Do not make the decision thinking only of the cost !: The logistics leaders today are pointing towards the effectiveness of efficiency, this because the most modern and competitive organizations are a step forward in shared services, because they consider impractical the debate between the cost / efficiency but are pursuing quality improvements.

Today’s customers have become so demanding that in the end what matters most to them is what they deliver, not how they do it. In practice, efficiency must not take precedence, but customer satisfaction and achieving business goals.

This is summarized in the motto of the renowned brand Gucci: “Quality is remembered long after the price is forgotten”.

2- Your main focus should be innovation: Before outsourcing, logistics managers should consider the following: If I decide, I should discuss what other benefit can bring my business in the medium and long term.

It is important to evaluate how the candidate has differentiators resources, and to what extent can transfer that knowledge to enhance my business.

For example, if we think of a company that sells tangible products, it is practical to consider that outsourcing delivery services, the company can provide an objective and rational understanding service performance dispatches from an outside perspective context.

Furthermore, the fact of handing over responsibility to an external partner on the complex task that means applying best practices in transportation, will generate a positive impact on the ability of the service delivered to the end customer, which translates into a competitive differentiator.

 

3- Never use outsourcing to solve internal problems:  Fillipo Passerini is the current Officer on Special Assignment for P & G, and when he served as president of Global Business Services in the same company, managed to save USD $ 800 million thanks to a business model unique and revolutionary in the industry shared services.

The key to success according to the same Passerini was in that focused on outsourcing, but once adjusted and optimized internal processes of P & G:

“First we maximize our internal capacity to reduce costs and improve service quality. Through consolidation and standardization of our services, we prepare the way for a smooth transition in which we could take advantage of the large-scale production and the unique experience of our outsourcing partners. So we negotiate attractive and mutually beneficial agreement for both parties. “

Based on these three revised points, the key to any business is to make the decision to outsource their processes based on multiple criteria, and always involving all departments.

Thus, alternatives will be evaluated from different perspectives and not just from cost reduction and / or operational improvements.

The advantages and disadvantages of outsourcing

The importance of technology in today’s economy needs no further explanation, since today’s technological advances are driving new business schemes and even those who challenge old paradigms of traditional companies.

Against this, some leaders believe delegate logistics technology into the hands third involves too many risks. However, the outsourcing of an increasingly sensitive area and has enormous advantages.

Then we will review a list of the pros and cons of outsourcing processes in companies:

Advantage:

– General Cost reduction:  If we observe this benefit from a physical / practical perspective, as is reducing the number of computer servers and equipment, see immediately impacting costs such as electric power and physical space.

In addition, companies working with outsourced services through “the cloud” -Software as a Service (SaaS) – can have the benefits of a group of IT specialists who provide excellent services to the business of each company, so companies also would save having to hire one or more computer bearing its processes, reducing spending only a service with several experts in the field, and 24/7.

– Best practice: only outsourcing enables SMEs to access efficient and advanced software. Thus, the competitiveness gap with larger companies is greatly reduced.

– Internet as the most effective solution (SaaS): the increasingly widespread model of Software as a Service (SaaS) has provided a new way of technological outsourcing for companies expanding.

By requiring virtually no investment in infrastructure and provide compatibility with numerous devices (including smartphones and all kinds of tablets), SaaS is presented as a great option to reduce costs without losing effectiveness.

Considering also that cloud services offer access to a flexible and configurable selection on the demand of what each company is willing to pay for the service you require.

– Control of activity outsourced on behalf of the contractor: Another benefit of having outsourced services is that companies will not have to invest in infrastructure a specific staff for your company, nor should they be worried about the proper implementation and maintenance of the improvements, which would imply a large capital investment for managers in the field.

disadvantages:

– Risk of loss of control of management and administration of the company.

– Possible problems communicating with the service provider.

– labor, legal and tax problems of the contractor

– Risk of hiring an unqualified company, which could tarnish the image and reputation.

Outsource processes, and in this case, have external technological transport services, respond to the solution within companies looking to optimize their efforts, in this case, for the distribution of products and services.

However, we must stress the importance of establishing the processes and tools to properly evaluate the performance of suppliers, who must help collect and analyze all the data necessary to implement operational improvements , according to the expectations and objectives for each firm.

If we analyze the results of a study by AberdeenGroup “Field Service 2012: Mobile Tools for the Right Technician, on average, companies with an outside service for managing transport fleet, are able to communicate to your customers vehicle location 31% of the time, compared to other companies can only do 8%.

We know that in business cost reduction is becoming more difficult, but increase the product value through improved service quality, it is much more profitable and more difficult to imitate for the competition, which adds an indisputable value to the brand, making it much more attractive to its customers.

Working with external transport providers must build a relationship win to win for both parties, where transparency and reciprocity are fundamental values to create a successful and lasting relationship.

 

                                        

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Review these related post:

New Logistics: applied efficiency through technology

Measure the impact of your suppliers of Transportation or 3PL in Your Company

Increases operational efficiency with Fleet Management services Transport

 



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