Amongst
South African business leaders, outsourcing is still something of a dirty word.
For many, it denotes weakness and an inability to properly grow and manage all
the traditional aspects of a successful company. Yet this is an outdated view –
and one that does not take into account today’s complex business and operating
environment. Given the fast pace of change, ongoing technological development,
and prevailing uncertainty, savvy businesses are focusing on their core
activities. They understand the importance of holding strategic functions
close, and then looking to external partners to fulfil those roles where
specialisation is not needed.
In
the 13th annual Barloworld Logistics supplychainforesight programme, which
explored how companies have changed and adapted over the years, the prevailing
attitudes toward outsourcing became clear. The report found that there appears
to be a high adoption rate for both supply chain technology and supply chain
and logistics skills development; however, ‘the full impact or value thereof is
not yet being realised.’ Even though supply chain outsourcing is shown to have
a positive impact for companies, the adoption rate seems to be low. This is
interesting to note and is in contrast to general shifts seen in the market,
both locally and internationally. Moreover, outsourcing also appears to be off
the radar for future strategies - which raises the question: is the true nature
and value of the concept of outsourcing understood?
Based on the report findings, the dominant perceptions seem to be based primarily on the ability to control functions more effectively if run internally as part of the company. If, however, there is a specialised external organisation that can perform certain functions more effectively, efficiently or faster, consideration needs to be given to outsourcing such functions through strategic relationships. Like the outsourcing of manufacturing or IT management, outsourcing of logistics management and logistical activities can - and often are - an essential component of gaining access to specialised skills and creating and sustaining market share…and a competitive edge. Interestingly, the survey reflected willingness to ‘partner’ with external suppliers/providers, but a negativity towards ‘outsourcing’ – which perhaps indicates an entrenched misperception of the concept.
Shift Towards
Specialisation
Today’s
operating environment is undoubtedly far more complex and fast paced than that
of even a decade ago. As a result, there is a marked shift toward
specialisation – and the ability to offer niche products and services. Yet in
order to achieve a high level of specialisation, leadership needs to cede
control of those non-core or non-strategic functions. So, for example, as a
retailer, can you shed your IT department in favour of partnering with a more
agile and nimble cloud-based provider? If there are better IT skills available
elsewhere, then why spend money on maintaining an internal team? The challenge
for leaders is to make this shift – and recognise which strategic functions to
keep internal and prioritise, and which non-core functions would be better serviced
by external partners.
It
is important to note that as this shift takes place, success and sustainability
of the outsourcing model will come down to the quality of relationships. For
leaders, it is critical to understand where the business is at, as well as the
positioning and future trajectory of its key partners and suppliers. While
outsourcing was traditionally perceived as a ‘master servant’ relationship
conducted at arms length, this is no longer the case. True outsourcing today is
about partnering and sharing information around the critical facets of a
business and its moving parts, and conducting a relationship characterised by
trust and transparency.
Contributed by: By
Kate Stubbs, Head of Marketing at Barloworld Logistics
