Risks and Benefits to Expect when Outsourcing Supply Chain Management

This is a guest blog and is written by Catherine Park.  It is very good.

Supply Chain Management Outsourcing: The Good and the Bad

Supply Chain Management (SCM) is a time-consuming task that comes with a lot of responsibilities. Since some of the companies want to devote their asset and resources to the core business process, they decide to outsource their SCM to an organization that specializes in outsourcing management services.

This practice has its bad and good sides. If you want to discover what these are, we have put together the good and the bad of SCM outsourcing.

The Good

As you will see in the next section of the article, outsourcing bears certain risks, but there are also many benefits you will be able to reap from this practice, especially if you join forces with a reliable partner with experience in outsourcing management services.

Invest in Achieving Long-Term Success

As we already stated, SCM can consume many resources, assets and hours of your workforce. When outsourcing it, you can use all of these to focus on the most important aspects of your business. You can leverage this new situation to your advantage to improve products and/or services, marketing or customer support department. All of these will help you to achieve success in the long run.

Cut Down Expenses

SCM will require you to hire more managers. Having experienced professionals on the payroll will cost your organization more money. By outsourcing, you will tap into otherwise unreachable resources of your new outsourcing partner. They will optimize SCM processes so that you get the most out of your investment.

Increased Flexibility and Agility

When outsourcing something such as SCM to a partner, you will be able to experience flexibility like never before. You will be able to build an infrastructure with the help of your outsourcing partner. The flexibility comes from the ability to change something in your infrastructure as the market shifts. With extra resources, you will be able to respond to new market demands very quickly in order to ensure success.

Build Brand Equity

Supplying your customers with products in time is any organization's priority. When you are limited by resources, you won’t be able to meet the increased demand as your resources are spread thin. However, when you outsource SCM, your partner is responsible for estimating the demand and make sure that all customers get what they want and when they want it. By building brand equity, you will set your business on the course for growth and prosperity.

The Bad

Here are some downsides of outsourcing SCM one should be aware of. Knowing these downsides can help you to create strategies that will allow you to prevent or lower their impact on your business processes.

Decreased Quality

If your outsourcing partner is not experienced enough, you can expect the quality of your products to drop to a lower rate. This is why you have to make sure that your new partner doesn’t cut corners. Make sure to check their quality assurance policies before you sign that contract.

Hidden Fees

You should get your company ready for hidden fees that might await you along the road. Cost projections are not always 100% accurate and you should specify actions to be taken if this is the case in the contract with a third party you are outsourcing SCM to.

Integration and Setbacks

Since SCM consists of complex operations, you should get ready to experience minor setbacks during the first period of integration. Make sure to establish good communication with your new partner so that you can solve this quickly.

SCM is a business process definitely viable for outsourcing. We can advise you to do research on your partner before you outsource this valuable process to them.