Yes, supply chain managers outsource logistics. But the impact will be felt company-wide. When weighing pros and cons of this important operational decision, start with a look in the mirror. Who are you as an organization?
You know how closely you examine potential partners for an outsourcing relationship. You should pursue the same due diligence within your own organization. Knowing where your business stands in key areas can help you decide if the time is right to insource or outsource logistics management.
Here are four things you need to know about your organization – and any of your 3PL logistics partners – to drive your insource/outsource decision.
Do We Have the Supply Chain Talent?
People are the driver behind success. This is incredibly important in today’s supply chain environment. There’s so much change happening in the marketplace, how do you stay on the cutting edge?
It demands experienced people with tons of drive, in terms of learning and bringing innovative ideas to your organization. The talent gap in digital supply chain management is already big, and getting bigger. Companies are fighting for top supply chain talent, and it is difficult competing against companies who offer more promising careers in logistics like Amazon, DHL or Transportation Insight.
Are you confident that your company has the ability and the resources to attract and retain top-tier supply chain managers? If you are a mid-market or small market company, it is not going to be easy.
It’s not just the talent. What is your bench strength? Can your supply chain management resources rise to meet your competitive challenges?
The intelligence and the experience these people have is critical, but it also comes down to raw numbers. If you are a growing organization, maybe at one point, one supply chain manager with the necessary experience and intelligence can effectively do the job.
But as you scale your business, you will need more than one person. In a recent webinar we talked about how possessing the agility to scale up your organization rapidly can make a big difference in the responsiveness you need to deliver on revenue and profit.
Other organizations experiencing their own growth need those same supply chain managers. That exacerbates the talent gap.
Do We Innovate Processes by Nature?
As you continue to scale your business to meet demand, are you confident that you have the processes in place to not only support that, but also innovate within those processes over time? Is that driven by KPIs? Or is your strategy shaped by the people you already have?
Many organizations are not set up to consistently advance innovation and measure that evolution. Companies like Amazon have supply chain process innovation in their DNA, but not all companies do.
The recent pandemic has been a stark reminder: Processes that were sufficient yesterday may not position you to compete tomorrow. Every company needs to evolve to be able to respond rapidly during global economic disruption, or a dynamic shift in consumer behavior, or even a simple operational hiccup.
As you evolve, collecting and monitoring data around process change determines whether you are heading in the right direction or toward more required adjustments.
Do We Have the In-House Technology?
The speed of change in logistics technology is nearly impossible to keep up with unless that is your primary focus. Does your current technology platform support your supply chain management now? Will it continuously evolve with you as your customers’ demands change?
You can build your technology stack, maintain it in-house, and join the race with the Joneses of the technology world like Salesforce, Microsoft and Amazon. This generates a need for ongoing capital investment.
Logistics technology might not be your area of expertise. One of those technology companies will sell you a base solution and customize it at added cost. But you will still have to run it yourself.
Alternately, you can realize cost effective value working
Does this Fit Our Culture?
Culturally, what does your organization look like? How do you make decisions? Is it a top-down, “You’re going to do what I tell you to do,” or a bottom-up, “Hey, I want ideas; bring the ideas.”
Change management is a huge factor when you outsource logistics management, but it can also allow you to redeploy current resources toward supporting your core competency.
Are you seeking internal innovation or are you more focused on your core competency? Do you build or buy to solve challenges? What will your culture tolerate? What will it support? What does it really need?
You have to be honest with yourself, and your company, and your partners. Having this perspective is imperative to the success of any relationship.
Even though Amazon is extremely good at what it does, it also recognizes the areas where it is not good. That is what drove Amazon investment in supply chain improvement opportunities.
Understanding your culture will also help determine how you work with your partners, and whether your organization is in a position to successfully outsource logistics.
Master the Logistics Management Dilemma: Insource vs Outsource
People, process innovation, technology and culture. If you think it might be time to outsource logistics management, develop a clear understanding of these four aspects of your own organization. Keep them in mind when considering potential 3PL logistics partners.
For more insight that can help you determine whether your company is better suited to insource or outsource logistics management, watch our webinar in Transportation Insight’s Supply Chain Masters Digital Event Series.