Collaborative Outsourcing – Efficiencies & Savings

Just the phrase sounds very corporate-speakish, and readers will be excused if their eyes start to glaze over contemplating a post on this subject. But truth be told, once you get beyond the admitted geekish name, “collaborative outsourcing” is one of the most interesting trends to hit the boardroom in some time.

What exactly is collaborative outsourcing? We’re all familiar with outsourcing, whereby a business offloads its manufacturing, or its transportation, or maybe even its procurement department to a third party, as a way to reduce headcount and streamline operations. In the process though, a business often gives up control – products are suddenly manufactured and delivered on someone else’s schedule.

While traditional outsourcing works well for some businesses, collaborative outsourcing is increasingly becoming the option of choice for businesses not willing to cede that control. Instead, collaborative outsourcing allows a business to take on external “partners,” who perform specific functions for the business, but as part of an overall strategy and under guidelines set by internal staff members.

With regard to managing a transportation network, this means that a shipper may outsource labor-intensive functions including contract management, route optimization, returns management, and shipment management. In a collaborative model though, shippers can then reallocate staff to more strategic assignments, while the outsourcing partners provide real-time updates and access to pertinent data. “

The collaborative approach can have positive and measurable effects on a business’ bottom-line, including:

• Cost savings. Cutting costs is a primary objective in outsourcing business functions. Obvious areas to cut costs include headcount, physical assets and operational support. Specific to the transportation function, a business could achieve immediate savings by outsourcing the freight management function, generally due to route optimization and consolidation.
• Greater expertise. By engaging the services of external “experts,” an organization will benefit from having greater brainpower at the table, presumably offering state of the art insights and recommendations for each subject area.
• Best Practices: Another benefit of bringing together experts from various functional areas is to garner insights and “best practices” that can be folded into a business’ strategic plan.
• Greater control: Unlike traditional outsourcing models, collaborative outsourcing allows internal employees to steer the discussion and serve as the project leader. This ensures that an outsourced project is synced with overall business strategies, and that all possible synergies are considered.

Not surprisingly, there can be downsides to a collaborative approach, especially if outside vendors are not managed properly:

• Make sure all parties are on the same page. SupplyChainBrain reported recently on the need for all outsourcing relationships to be built on a common understanding that each party has a vested interested in a project’s success. “We see the most successful companies not just managing the supplier with supplier relationship management tools, but managing the business with their suppliers using an insight-vs.-oversight governance philosophy.”
• Partner with Care. This seems like an obvious point, but many businesses have learned the hard way that transportation or logistics partners that sound good on paper, or that can “talk the talk” during the screening process, are unable to produce when the time comes to perform. Don’t assume that a potential partner has the experience or expertise that they claim to have. Take the time to do your homework and conduct a thorough screening of all potential partners.
• Set clear, measurable objectives. Business Week reported on the most common mistakes that companies make in their outsourcing relationships: The need to clearly outline, define – and get buy in – with regard to the scope of work, assignments, and deadlines. “Without these elements in place, key project components can be delayed and the overall goal of the engagement overshadowed by missed deadlines and added expenses.”
• Technology Compatibility – Move to the Cloud? What good is your carefully crafted network of external suppliers, if you are all operating on different technology platforms? If incompatible systems make it impossible to share data and engage in online project management. An obvious solution may be to upload pertinent data to a cloud provider, thereby giving every member of your team immediate and joint access to key materials.

The economic recession was a hard lesson for many businesses that found themselves faced with high overhead costs, little flexibility, and few options for innovation. Today though, as businesses seek to regain their economic footing, collaborative outsourcing is an increasingly attractive option for streamlining processes and improving productivity.