Eight Best Practices in Supply Chain Outsourcing - Slide 5

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Make outsourcing decisions based on strategic and tangible factors, not just cost.

Numerous companies that have outsourced a supply chain function, such as manufacturing, purely based on direct costs have experienced problems later. Some companies found that total costs didn't improve as much as anticipated because customer service suffered and quality problems increased after outsourcing. In addition to a robust cost-service analysis capability that addresses make/retain versus buy/outsource, companies must incorporate quality, responsiveness, past performance and risk as decision criteria.

Surviving as a 21st-century supply chain requires operating as a demand-driven value network, according to Gartner, Inc. Orchestrating these value networks means supply chain executives must understand and adopt best practices in selecting, onboarding and managing supply chain outsourcing partners. Therefore, Gartner has identified eight best practices in supply chain outsourcing.

"Supply chain executives are starting to apply more comprehensive analysis to outsourcing decisions, such as factoring in agility, responsiveness and cost," said Michael Dominy, research director at Gartner. "Companies must focus on what they can do best and appropriately outsource activities that value chain partners can do better. This often means using one or more logistics, manufacturing or business process outsourcing (BPO) partners, instead of performing these supply chain activities themselves."

"Successful supply chain executives must be able to manage outsourcing partners. That's what we hear from our supply chain clients," Mr. Dominy said. "Based on this feedback and other Gartner research, we have identified eight key best practices that companies should leverage when outsourcing logistics, manufacturing or supply chain management business process outsourcing (SCM BPO). These best practices can help companies avoid some of the key pitfalls associated with supply chain outsourcing."

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