Outsourcing 2.0: How supply chains now rule the world

‘Outsourcing’, at least as it has been understood in business for the last twenty years, no longer exists. Instead, we now have ‘Outsourcing 2.0’, an information-enabled network of global business relationships that place the management of flexible and responsive global supply chains at the heart of a new way of doing business. It may be one of the only ways we have of overcoming the challenges facing trade volumes and global business activity in the wake of the recession and the more recent debt-related political turmoil around the world.

Outsourcing used to refer to those activities given to an ‘outside party’ to do on behalf of a business, in the belief that the dispensing of non-core functions would be cheaper and more efficient. But this reflected a belief that businesses were self-contained entities. Our world today, even with the challenges it faces, has evolved to become one huge extended supply and demand network, linked by information technology. Companies are now part of this network, and while commodity functions of a business can still be handed over to someone else to deliver in the more traditional sense, what used to be called ‘outsourcing’ has now evolved too.

Successful businesses today realise that the secret to their competitiveness lies with the success of their supply chains to deliver better – and they realise that other companies exist that can do this better than they can themselves. A partnership approach is vital, one built through a shared strategy and over the long term. This type of outsourcing is far more collaborative than the more traditional idea behind it of getting someone else to perform non-core functions and holding them to a Service Level Agreement.

The skills, experience and expertise that this relationship brings to the supply chain of a global or a local business are vital in it remaining competitive. But this means that even strategic functions and information have to be shared and jointly controlled. These partnership approaches are becoming more widespread as companies look for strategic advantage and realise it can still be had from a better-run supply chain network.

As Barloworld Logistics has discovered from running the supplychainforesight research survey for many years, SA businesses have been slow to form these longer-term partnership relationships with external SC management companies. This ‘localist’ thinking is one of the reasons that we are behind the curve of opportunity when it comes to providing globalised industries with the benefits of an efficient emerging market growth opportunity. Many of our emerging market competitors are dong just this, and we risk being outmanoeuvred as a result. This will form a key focus of supplychainforesight 2012 – what can be done to make SA Inc more competitive in the current global supply chain environment, which is looking to emerging markets for growth? 

Contributed by: Barloworld Logistics