“Outsourcing; An Evitable function more than a strategy”
The need of outsourcing is inevitable for all organizations that aim to grow by leaps and bounds. The benefits of outsourcing outweigh its costs to a significant extent. In this way, organizations stay focused on their core strategies and invest all of their resources and time in improving their core competencies. However, the biggest challenge in this course faced by these organizations is the selection of business partners to carry these functions in their best interest. A successful approach in this domain is to keep your business partner well informed with your corporate goals and strategies and to ensure strict control and measures in all day to day tactics and
activities. Some organizations work on exclusive service agreements that restrict their vendors (business partners) to carry similar business or functions from their competition. But these rules vary greatly with nature of business and industry. i.e., it is hard to generalize an outsourcing strategy to an industry, but the underlying purpose of outsourcing is to reap such benefits as cost savings, functional expertise, globalization, scalability, flexibility and growth. Later in the articular, we will illustrate some real time strategies of different organizations that have successfully outsourced some or part of their core functions.
With recent proliferation of technological advancement, it is becoming very difficult for organizations to keep abreast with changing trends while retaining all of their functions inhouse. Hence these organizations are always in need of good service providers, well equipped with latest technology, capable of transforming their week performing elements. On the other end, the abundance of these service providing companies out beats its demand in such a way that these companies are always competing each other. The organizations benefits from this demand-supply gap and find themselves at the dictating front. However, this is not the case if both the organization and service providing companies are of equal capabilities and it paves the inception of 4th Party outsourcing in which organizations fully outsource their functions to service firms. Although an organizations can outsource any function, but we will confine our focus to Logistics and Transportation.
If we talk about consumer goods industry, almost all big companies have outsourced some part of their logistics to regional service providers and have exclusive agreements to restrict their vendors to carry competing brands. This strategy makes a lot of sense as their regional logistic demands can better addressed by local players and it is almost impossible to follow and impose same global standards across the world. One the other side, these multinational giants always struggle to find good working partners capable of carrying fundamental elements of their global corporate philosophy. But overall, we hardly find any consumer good manufacturing company that is performing all of its operations and functions inhouse while working overseas in different regions and countries.
The manufacturing industry is no different than consumer goods industry in terms of outsourcing. The most obvious example set by Automobile manufacturing giant is the introduction of Just in Time (JIT) inventory in which the inventory management is done by vendors. This approach of outsourcing inventory management has been adopted by several other manufacturing companies.
As far as retail industry is concerned, all well renowned retailers have partly or fully outsourced their logistics to different regional or national players. Carrefour have outsourced not only their private levels but also their distribution network to local vendors in different countries it operates. This enables Carrefour to address regional demands and preference without hampering its global corporate sanctity.
IT industry serves the classical example of outsourcing. Almost all IT firms have used this strategy to reap the benefits discussed earlier.
It is quite evident that companies have gained significant benefits by outsourcing some or part of their functions. The need of outsourcing is pivotal for multinational organizations operating in different parts of world. Being a 4PL company, Threesixty Route Logistics is committed to provide innovative turnkey solutions in Logistics and Transportation to different business sectors in North America.