After my recent discussions on the benefits to outsourcing and building a strong and mutually beneficial partnership with a Third Party Logistics provider I thought it would be a good time to discuss your plan to achieve success with an outsourcing transition engagement. The key to success in a supply chain outsourcing engagement is the same as the key to success for an ERP implementation and integration project, careful, and thoughtful, planning and then a ruthless execution and management of the plan. Focus and follow-through are the critical factors to the success of any engagement and a supply chain outsourcing engagement is no different.
So you’ve been thinking about the ‘benefits’ of outsourcing, maybe you’ve even discussed the opportunity with potential partners and even identified a partner with whom you feel comfortable. You’re getting to the point now that you believe you are ready to entertain proposals. I recommend that at this point you step back for 4 to 6 weeks to assess your environment and try to define your objectives and at least some high level requirements. I think it is critical to the success of your potential outsourcing engagement to take a brief ‘breather’ to objectively evaluate your starting point and where you hope to end. It is also critical to develop a conceptual plan and perform some due diligence to objectively define your starting point and realistic goals you would like to achieve.
Now for my friendly warning… Don’t be surprised if you come out of this 4 to 6 week breather period with the realization that you have a lot more work to achieve success than you initially anticipated. In fact, if you don’t come out of this period with that realization there’s a very high probability that you didn’t do it right! Remember my initial explanation in the first paragraph regarding keys to success – careful and thoughtful planning followed by ruthless execution of the plan will dramatically reduce the risk of failure. Here are some important activities and requirements to increase the likelihood of success. First and foremost is an accurate business process model, this will allow you to both provide your partner with guidelines and your requirements along with a means for you to measure and plan the transition and integration requirements. Second is a definition of your service level requirements along with key performance indicators to measure and qualify the service levels. Third is a plan for your partner’s performance management, including an evaluation and revision schedule to ensure that your performance management program is fair and measurable and includes a pre-arrange method to revise on a regular basis.
Your next step then will be a more extensive due diligence phase to analyze and develop requirements, Service Levels and Key Performance Indicators along with a detailed RFP to distribute to your potential partners. I realize that this is a lot of work and these are steps that you must take in order to increase the likelihood of success in your outsourcing engagement. I have found through experience, good and bad, that the more effort you put into your analysis and preparation the higher the likelihood you will be successful.
Now folks please take a moment to provide your feedback. This will become even more valuable with robust participation!
Now for the audience participation portion of this program……
Have you developed business process documentation for your operation? I have found that the business process model can provide the highest value to your organization for developing transformational improvements and also for benchmarking your operation with other organizations.
Do you have documented service levels along with key performance indicators to measure them?