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Unlocking Big Gains: The Strategic Approach to Outsourcing”
Global supply chain blogs
Vivek Sood: Sydney based managing director of Global Supply Chain Group, a strategy consultancy specializing in supply chains. More information on Vivek is available on www.linkedin.com/in/vivek and more information on Global Supply Chain Group is available www.globalscgroup.com
Vivek is the Managing Director of Global Supply Chain Group, a boutique strategy consulting firm specialising in Supply Chain Strategies, and headquartered in Sydney, Australia . He has over 24 years of experience in strategic transformations and operational excellence within global supply chains. Prior to co-founding Global Supply Chain Group in January 2000, Vivek was a management consultant with top-tier strategy consulting firm Booz Allen & Hamilton.
Vivek provides strategic operations and supply chain advice to boards and senior management of global corporations, private equity groups and other stakeholders in a range of industries including FMCG, food, shipping, logistics, manufacturing, chemicals, mining, agribusiness, construction materials, explosives, airlines and electricity utilities.
Vivek has served world-wide corporations in nearly 500 small and large projects on all continents with a variety of clients in many different industries. Most of projects have involved diagnostic, conceptualisation and transformation of supply chains – releasing significant amount of value for the business. His project work in supply chain management has added cumulative value in excess of $500M incorporating projects in major supply chain infrastructure investment decisions, profitable growth driven by global supply chain realignment, supply chain systems, negotiations and all other aspects of global supply chains.
Vivek has written a number of path breaking articles and commentaries that are published in several respected journals and magazines. Vivek has spoken at several supply chain conference, forums and workshops in various parts of the world. He has also conducted several strategic workshops on various aspects of supply chain management. He received his MBA with Distinction from the Australian Graduate School of Management in 1996 and prior to these studies spent 11 years in the Merchant Navy, rising from a Cadet to Master Mariner.
As a businesses grow and evolve, they often face the challenge of managing increasingly complex operations. One way to address this challenge is through outsourcing some of their operations or departments. By partnering with external service providers, businesses can access specialized expertise and their resources to improve operations, reduce costs, and increase efficiency. However, outsourcing is often treated as a tactical decision rather than a strategic one, and companies may not have a clear understanding of what they hope to achieve through outsourcing. This lack of strategic focus can lead to costly mistakes and wasted resources. In this blog, we will explore the importance of having a well-developed outsourcing strategy, particularly in the context of business transformation. We will examine the risks associated with an ad-hoc approach to outsourcing and discuss how a strategic approach can help businesses achieve their goals while minimizing risks and maximizing ROI.
Outsourcing – A solution to save overheads
Outsourcing has become a popular practice among businesses in recent years. It can offer numerous benefits, such as cost savings, increased efficiency, and access to specialized expertise. However, outsourcing is often treated as a tactic rather than a strategy, which can lead to regrettable decisions and missed opportunities. Business transformation is a prime example of an area where outsourcing can play a crucial role. As companies look to transform their operations, they often seek external support to achieve their goals.
Without a well-developed outsourcing strategy, companies may end up making tactical decisions that do not align with their overall transformation goals.One of the main challenges companies face when outsourcing during business transformation is the fear of cost overruns. This fear can cause companies to focus too much on cost minimization rather than achieving concrete business results. While cost savings are an important consideration, they should not be the only one.
Companies must also consider the impact of outsourcing on their overall transformation strategy and their ability to achieve their desired outcomes. Outsourcing without a strategic focus can be a waste of time and money. Companies that lack a clear understanding of what they want to achieve through outsourcing may end up making short-sighted decisions that do not align with their long-term goals. As a result, they may waste valuable resources on fruitless outsourcing projects that may need to be redone later with a more strategic approach.
To avoid these pitfalls, companies need to develop a well-defined outsourcing strategy that aligns with their overall transformation goals. This strategy should take into account the unique needs of the organization and its transformation objectives. It should also consider the potential risks and benefits of outsourcing and how they align with the company’s overall transformation goals. This requires a deep understanding of the company’s overall goals and how outsourcing can support those goals. Additionally, companies must carefully consider the impact of outsourcing on their existing operations and the potential risks and benefits of the outsourcing relationship.
Main points for successful outsourcing:
n 2018, P&G announced that it would outsource a significant portion of its IT services to IT services company HCL Technologies as part of its plan to transform its IT organization.
The outsourcing agreement involved the transfer of approximately 400 P&G employees to HCL Technologies, who would be responsible for managing P&G’s IT infrastructure, application management, and service desk support. P&G stated that the outsourcing would allow it to focus on more strategic initiatives while also achieving cost savings.
The outsourcing project was successful, with P&G reporting improved efficiency and cost savings. In 2020, P&G extended its outsourcing agreement with HCL Technologies for another five years, citing the benefits achieved from the initial outsourcing project. This is an example of successful outsourcing as it helped P&G to focus on its core business and strategic initiatives while also achieving cost savings through the outsourcing of IT services.
In 2013, Target outsourced its data security and IT management to a third-party vendor named Trustwave. However, in late 2013, Target experienced a massive data breach that compromised the personal information of up to 110 million customers.
It was discovered that the breach was caused by vulnerabilities in Target’s payment system, which had been introduced by the third-party vendor Trustwave. Target had outsourced its IT security and data management to Trustwave, but the vendor had failed to detect and respond to the threats in a timely manner. Trustwave was sued by customers and settled for $10 million in a class-action lawsuit.
The Target example highlights the importance of carefully selecting and monitoring third-party vendors when outsourcing. Companies must conduct thorough due diligence and establish clear expectations and metrics for their vendors to ensure that they are delivering on their promises. In addition, companies must continually monitor and audit the performance of their vendors to ensure that they are meeting contractual obligations and adhering to industry best practices.
Outsourcing can be a valuable tool for businesses looking to transform their operations, but it requires a well-developed strategy that aligns with their overall transformation goals. Cost savings should not be the only consideration, and companies must carefully evaluate potential partners based on their expertise and cultural fit. Developing a comprehensive outsourcing plan and actively managing the project is crucial to ensuring success. Finally, companies must focus on achieving concrete business results and maintain control over critical aspects of their business to ensure a successful outsourcing relationship. By following these main points, businesses can outsource successfully and reap the benefits of increased efficiency, improved quality, and access to specialized expertise.
The global supply chain of products is an immense and complex system. It involves the movement of goods from the point of origin to the point of consumption, with intermediate steps that involve resources, materials and services to transport them. A supply chain encompasses activities such as purchasing, production, distribution and marketing in order to satisfy customer demands. Companies rely on a well-managed supply chain to meet their business goals by providing quality products and services at competitive prices.
Efficiently managing a global supply chain requires considerable effort, particularly when dealing with multiple suppliers located around the world. Complex logistics tracking systems are needed to monitor product movements from one place to another. Technologies such as artificial intelligence (AI) can help companies keep track of shipments across different locations for greater visibility into their processes.
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