Logistics Outsourcing

Outsourcing is the most popular business mantra and at the same time most controversial because it eliminates jobs in one economy and creates opportunities in another. I am not going to go into that discussion. My objective is to focus on how outsourcing can help business. In today’s global economy, we need partners and strategic alliances to be successful in the market place. The collaborative approach is the need of the hour and outsourcing is the key element of collaborative approach. Outsourcing is not a fad, it is a strategy and it should be used on need base with clear deliverable defined and agreed by both the parties. Outsourcing starts with simple transactional outsourcing and grows to integration level where systems are integrated to exchange data on online/offline basis. Ultimately the relationship grows and becomes a strategic alliance. In today’s global trade every one needs partner to manage supply chains to meet customer’s needs and also to be competitive in the market place.

The main objective of outsourcing is to save costs, improve lead time to market and to allow organization to focus on core functions.  However, we do hear about outsourcing failures very frequently in business.  In my opinion the main reason for Logistics outsourcing failures is lack of trust and understanding .  Any relationship built on strong understanding; with clear vision and measurable deliverable with trust and faith in each other will be successful.  In a quick fix world no one has a time to forge an alliance with a long term impact on the business.  In general people are looking for a quick gains in the form of cost savings.  It is true that outsourcing delivers cost savings any where between 10% to 20%.  However, it happens only when the outsourcing process is handled efficiently with trusting partners.  Mostly outsourcing fails because lack of understanding, lack of trust, and lack of patience to nurture long term relationships.  As long as it is not a marriage of convenience, it has a great chance to succeed.  Relation ships are often tested and will be successful if trust is the foundation of the relationship.