Introduction
Theoretically, a company’s decision
to outsource is taken by the choice to focus on primary competencies, or in a
quest to improve customer support levels, or as the company strives to develop
some more efficient processes. But the reality is, it is mostly driven by cost
and more specifically, a need in order to reduce the recent cost base. Regardless
of the driver, stepping into the world of logistics
service providers can be a challenging exercise who has previous experience
or those who are well prepared.
Establishing the relationship - Key Success Factors
The lack of quality information which
is provided as a part of the tender is one of the greatest frustrations of logistics service providers. This is
important when crossing the line of standard practices. The requirements should
include the provision and throughput data and sufficient supplements. This can
enable the client to prepare a more cost effective response to the
requirements.
The higher the cost, the less data is
likely to be and to cover the uncertainty, the supplier will always add a
premium. The service level expectations should always be clearly articulated.
The most critical factor which
determines the failure or success of an outsourced process is the selection of
the person who will be given responsibility to manage the relationship with the
service provider. While judging, the person’s facilitation, negotiation and
communication should also be carefully considered.
Common Pitfalls
The conventional method to embed the
business requirements in the contract needs to restrict the operational
flexibility of the relationship. Separating terms and conditions from the
business requirements can make it easy to achieve.
The value of assuring the undertaking
of adequate training prior to the transition is mostly underestimated. Also,
not enough effort and time are invested in the planning of the transition. The
plan should not only include the physical aspects, but also items like training
and communication tasks.
Managing and developing the relationship
Developing management techniques can
allow monitoring and measurement of costs and the efficiency of the processes
which are being employed to meet the expectations of service level. The
development of a strong business relationship with the service provider allows
effective collaboration, while implementing and developing strong business
relationships.
Management techniques
It is a process and should be treated
accordingly, which is one of the most important things to remember while
managing a supplier relationship. The customer has to take the responsibility
for the process and should monitor and measure the performance consistently and
diligently.
In the determination of the type of
performance measures, required to manage the relationship, differentiation
between the operational measures and data is extremely important because the
supplier will require to take care of the business and the key measures
required to manage the performance. From
the perspective of a supplier, it is virtually impossible to avoid the
collection of substantial amounts of data and have various operational measures
to run an efficient operation successfully.
