Multi-source Outsourcing in a Global Supply Environment
Arrangements are increasingly complex, with all parties increasingly motivated to acknowledge the needs of a wide network of stakeholders outside their own four walls, beyond themselves. Successful outsourcing no longer simply entails a buyer and a supplier – it needs partners. Many buyers feel their outsourcing efforts fail because they lack experience and skills to achieve the benefits envisaged in the original business case. The 31% who are succeeding are most likely to have honest and transparent business dealings with service providers (including transparency on margins); decide matters of mutual interest jointly; have effective joint governance structures; and share risks and rewards.
Outsourcing Comes of Age:
The Rise of Collaborative Partnering* (PWC 2007) |
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Global sourcing and distribution is by definition a complex, multi-tiered, network comprised of multiple sources and service providers. The likelihood of creating a single source supplier and service provider environment to manage the global supply environment is hugely improbable, if not impossible. Managing the multi-source outsourcing environment requires processes that insure that distant arms’ length relationships can be managed, effectively and efficiently.
As the quote from the PWC study states: having honest and transparent business dealings is critical, if not the most critical, element to being successful in an outsourced world.
While there are tools to support enterprise solutions with global supply chain functionality, most take a narrow view of the entire supply chain. They don’t provide an integrated 360 degree view of multi-tiered global sourcing, procurement and logistics activities necessary to insure high levels of conformance and results. More importantly, they do not provide the execution platform and information repository to support the international supply chain groups in doing their work and managing their outsourced partners. The bottom line is that most global supply chain solutions have had modest success in delivering sustainable competitive advantage to the organizations where they have been deployed.
For an organization that has seen its manufacturing base virtually erode overnight, transitioning from a best-in-class manufacturer to a best-in-class brand owner and global supply chain expert is not really an option. It is now an imperative. This tectonic shift is happening in many industries across North America, and management will adapt or will see the organization become a shell of its former self. Consumer goods, electronics, hi-tech, apparel and furniture are just a few of the industries forced to accept a multi-source outsourcing environment. While dismantling a manufacturing base is highly stressful and fraught with negativity, those organizations that accept, and have the agility to quickly adapt to, the new supply chain-oriented environment stand to reap significant rewards.
The migration from highly asset-based manufacturing to lean non-asset-based brand distribution requires a total restructuring of physical plant and facilities, a different set of skills and expertise, a different financial orientation, and a new technology support structure is needed. The migration requires an enormous shift from one of direct control to one of indirect influence. The topography of a global supply chain is composed of multiple outsourced manufacturers (owned or contract), oversea distributors, 3PL’s, freight forwarders, ocean carriers, customs brokers, and inland carriers. Escaping a multi-sourced outsourcing network is neither practical nor possible.
Creating further complexity is the constant state of change that accompanies global sourcing and distribution networks. The greatest risk to an organization is a significant and meaningful supply chain disruption. Risk is increased in the global arena where geo-political events force an organization to quickly alter its plans. Managers must be sensitive to meaningful disruptions, what the impact will be, what the options are to mitigate the impact (supply, cost, and time), and what levers can be pulled and what options are available to effectively resolve the problems.
Successfully navigating a multi-source, outsourcing global environment requires a comprehensive solution that integrates the right personnel skills and knowledge, optimal supply network design and a technology solution. The solution must support complete planning and execution while providing a fully integrated 360-degree view of the entire cash-to-cash cycle. Visibility, event monitoring and alerting, while important, is only part of the solution. Success also depends on the ability to collaborate with and influence the behavior of third parties in fulfilling their commitments. This, in turn, depends on the highest level of transparency of activity across the entire pipeline and the ability of participants in the supply network to work together to efficiently meet the demands of the market.
A November 2006 study by Aberdeen Group reported that organizations with significant global supply chain activity listed three key challenges to effective management of the global supply chain processes:
o lack of critical supply chain process visibility;
o uncoordinated multi-tier supply chain process; and
o longer lead times and lead time variability.
Other issues raised as high-level concerns were: the ability to manage global operations and distribution networks, loss of operating control and difficulty managing third-party providers, management of customs and other regulatory requirements, and visibility into full landed costs. The report’s findings are as relevant today as when the report was issued.
There are currently solutions that address logistics visibility, regulatory compliance, landed costs, and other global supply chain issues. However, very few information solutions address the global supply chain from a holistic, integrated multi-source outsource perspective and provide a comprehensive, synchronized global view of an entire supply chain. To effectively manage a complex global multi-source outsource global supply chain network, organizations must have solutions that integrate process, visibility, compliance and comprehensive total cost from “n” sources and service providers to “n” destinations. The solutions must enable the organization to manage its outsourced partners and provide the execution platform to increase supplier and service provide performance. This is the only way to deliver the full value potential that global sourcing and distribution promises.
A powerful global supply chain information technology is a critical component of the total solution for a company to transition to a world-class global supply chain capability. The technology solution must support:
- SKU aggregation and visibility from disparate supplier and logistics’ providers across the entire global supply chain;
- Supply/Demand integration coupled with future product position analysis;
- Virtualized warehousing – in-transit product visibility and allocation synchronized with warehouse inventory control;
- Consolidation and Deconsolidation management;
- e-Collaboration, communication and problem resolution with suppliers and logistics’ providers;
- Event management and alerting;
- Regulatory Compliance management: Customs, Government regulatory agencies;
- Landed Cost forecasting, auditing, approval and resolution;
- Documentation management – preparation and tracking;
- Banking and finance management and control; and
- Performance monitors and analytic tools – metric analysis, benchmarking and reporting.
Optimal global supply chain performance will only be achieved when all active participants work together to reduce the levels of waste that occurs through poor process design and execution. The adage that the whole is greater than the sum of its parts clearly applies to a firm’s ability to achieve optimal global supply chain performance. In this case integrated breadth is significantly more important than specialized depth because global supply chain performance is cross-functional and cross-organizational. Optimal global supply performance occurs when organizations have total visibility across the entire supply chain, actionable information, and the people and the execution platform in place to positively influence, monitor and measure supplier and service provider behavior proactively. The “whole” solution delivers the requisite exceptional value-add to the organization and its bottom line.
3rdwave GCM by Blinco Systems Inc.
Blinco Systems Inc. designs and delivers the 3rdwave GCM family of global sourcing, supply chain execution, import/export, trade, global logistics and distribution solutions. Our clients are proven leaders in their respective businesses. We are proud to be their technology partner.
Since 1988, Blinco Systems Inc. (“BSI”) has been a leading developer and solutions provider in Global Commerce Management synchronized global supply chain execution. BSI has provided extensive, in-depth consulting services to companies involved in global trade and commerce. BSI’s clients range from global sourcing divisions of multi-billion dollar companies to SME’s global sourcing, distribution and brand management companies.
BSI’s 3rdwave GCM solutions fully support our client's unique business processes. All 3rdwave solutions ensure clients can execute, manage and control their global environment to constantly improve their available-to-ship/available-to-deliver capabilities at the lowest possible cost and optimize levels of inventory.
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