Expert Insight: Guest Contribution

By Dawn Salvucci, Vice President Transportation and Logistics Solutions, JDA Software

  June 9, 2008  

Leveraging Supply Chain Optimization and Transportation and Logistics Management Solutions to Manage a Complex Global Environment


The Three Myths of Outsourcing

Salvucci Says:
The manufacturer is ultimately accountable for issues such as quality control, compliance regulations and customer service levels.

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In today’s business economy, global outsourcing plays a pivotal role for many companies. However, forging an effective globalization strategy can be more costly, in terms of time and money, than initially expected. In a recent Aberdeen report, 91% of companies surveyed reported feeling pressure to make changes to their global trade processes because product cost savings were being eroded by unanticipated global supply chain costs. Let’s take a look at common outsourcing myths that often stymie efforts to take advantage of a global economy.

1. Outsourcing is cost-effective, yielding immediate returns:

Outsourcing can be an attractive option, yet savings are often eroded by increased freight, logistics, compliance and inventory costs. Companies are re-examining where and how much they outsource due to longer lead times, excess inventory and larger carbon footprints. Increasingly, there is a shift to “right-shoring” models that integrate onshore, nearshore and offshore components. Sophisticated supply chain modeling and network design tools can analyze various factors to determine optimal supply chain configurations and sourcing plans that are cost-effective.

2. Outsourcing as a “set it and forget it” strategy:

Companies may believe that once an outsource process is in place they can refocus attention on core on-shore activities. In reality, the manufacturer is ultimately accountable for issues such as quality control, compliance regulations and customer service levels. Advanced supply chain and performance management tools provide true visibility into the supply chain, helping companies monitor and measure all order, shipment and inventory flows. When coupled with multi-modal shipment planning and execution capabilities, companies gain real-time insight into their global network allowing for immediate response to disruptions in offshore sourcing or manufacturing.

3. Outsourcing is a tactical decision

The decision to outsource will impact a company’s overall business strategy; adding complexity, fragmented visibility and significant risk to the supply chain. Companies must move away from traditional tools that manage global logistics and trade compliance separately and embrace holistic solutions that address the needs of both international and domestic supply chains. Deploying an integrated international logistics management and trade compliance framework synchronizes the global movement of goods and information and ensures trade compliance, driving smarter decisions faster.

Leading global companies have embraced necessary supply chain and logistics management strategies as they re-think their global outsourcing strategies. These global leaders are succeeding in navigating this complex environment, raising profit margins and service levels while driving down associated expenses.

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