LTD Management
Logistics & Supply Chain Management Consulting Global Solutions That Work

OUTSOURCING OFFSHORE SUPPLY CHAIN MANAGEMENT -
WHAT IT IS AND WHAT IT ISN'T

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Outsourcing is having work or an activity done by people who are not employees of the company. It is not new in logistics. Outsourcing existed before the topic earned a name and became business chic. Trucking companies were used instead of a company having its own fleet. Public warehouses were used instead of employing bricks and mortar to build a company-owned building. Freight payment services paid bills and collected data.

What has evolved with outsourcing is the growth and amount of functions placed with outside firms and has created new businesses with 4PLs and 3PLs. Initially, the outsourced functions often represented non-core or non-vital activities or some other determinant where the company did not want to invest its own resources--capital, people, technology and facilities. Now outsourcing is seen as a strategic way to align the supply chain with the company direction and to become a leading-edge practitioner. It is also recognized as a tactical way to better manage service and costs.

Offshore sourcing has gotten particular attention as an outsourced activity. This business change has been a driver in supply chain management evolving into a global function and in the outsourcing of the import supply chain.

Global sourcing is now a competitive requirement of doing business. This perceived survival imperative has created an extended supply chain, as to distance and time, which has a menu of supplier and logistics demands. Directing the offshore supply chain, as to costs, performance, inventory, visibility, collaboration, integration and agility is an imperative for corporate success.

Effectively managing the offshore supply chain, as to suppliers, logistics service providers and their coordinated integration from vendor door to final delivery location, has caused companies to assess the utilization of outsourced logistics providers, either 3PL or 4PL. Some firms have seized this outsource opportunity to transform their total import supply chain; they see it as a way to compress cycle time and decrease inventory levels. Others have focused on arranging the transportation part as the outsourced need. Such differences raise discussion as to what is and is not outsourced offshore supply chain management.

We conducted a survey of outsourcing. This survey presents a snapshot of who is outsourcing, why and issues they look at. It is taken from the perspective of the outsourcing services user, the buyer. There were 195 respondents. They were with firms that have strong interest in outsourcing or are active in outsourcing. The survey was broad, both as to industry types and to mix of company sizes, and presents a solid overview of what is happening.

The objectives were to:

  1. Assess the state of logistics outsourcing from the perspective of the outsourcing buyer.
  2. Measure outsourcing development
  3. Determine what companies see as future outsourcing of supply chains
  4. Identify key customer needs

The following points standout from the survey finding:

For our purposes, outsourcing the offshore supply chain -