Experts warn firms losing sight of operations due to supply chain outsourcing
A quick slice of news from Procurement Leaders in the article “Experts warn firms losing sight of operations due to supply chain outsourcing” highlights the “Rule of Unintended Consequences”. In this case, the outsourcing of either or both manufacturing and supply chain activities to 3rd parties was intended to increase efficiency and reduce total cost across the supply chain while relieving the company of supposedly non-core competencies and streamline operations. In theory this works well. However, as many organizations are discovering, without adequate systems in place to provide the capability to command and control an outsourced environment, the unintended consequences often lead to a significant lack of responsiveness and a meaningful increase in inventory and cost across the supply chain.
Outsourcing supply chain activities does not mean outsourcing responsibility for supply chain performance. The issue of visibility is an important (but not the only critical) element in gaining control over the supply chain. However, visibility into outsourced operations is more difficult than it might first appear because of the number of participants that must be monitored and the shear breadth and differences of activities that must be executed across the supply chain.
It is important to realize that in the context of supply chain management, visibility is an outcome of information. Because of the complexity of all but the most simple supply chains, it is virtually impossible to maintain a manual system and achieve a reliable and meaningful level of supply chain visibility. Therefore, it is imperative to have systems in place that can capture the information from all the required sources and put it into a context that is meaningful to the user.
While I fully agree with Andre Pino, Marketing Director of Acsis, that “… new automated data collection and collaboration technologies can provide visibility and restore the management control over their demand-supply networks and minimise disruptions and operational errors”, the effort to achieve world class capability is not simple. To achieve the results that he alludes to implies the ability to:
- collect and validate the information from all participants across the supply chain,
- distribute it seamlessly and make it visibile to the individuals who are responsible for monitoring and managing the supply chain,
- enable real-time collaboration with all required parties (both internal and external) for information sharing and problem resolution,
- and support action as required
True operational visibility across an outsourced supply chain will only be achieved if the organization has systems in place that synchronize information from multiple sources.