Is your supply chain truly resilient, or is it teetering on the edge of collapse?

What if I told you that your supply chain’s resilience is hanging by a thread, dependent on a single decision-maker?

Would you be ready to confront the harsh reality?

Let’s explore the critical importance of supply chain resilience and the role of outsourcing in strengthening it.

#Resilience means enduring and bouncing back from supply chain disruptions. The shorter and shallower the impact of supply chain disruption relative to your competitors, the faster and stronger your organisation will be. The greater will be your resilience.

But what if your resilience strategy isn’t enough?

What if, despite all efforts to diversify and mitigate risks, your entire operation still hangs in the balance, dependent on the decisions of just one individual?

What then?

You’d hunt down the vulnerability.

You’d eliminate single-point sensitivity, just as you’ve diversified your supplier base and spread your finished goods inventory across a network.

But what if that vulnerability was your star performer?

• The Production Planner that you’d be lost without?
• or Procurement Manager?
• or Warehouse Manager?
• or all of them?

You wouldn’t eliminate them.

You can’t clone them.

You can’t ouble your headcount.

Nor cross-train them so that their understudies would know their role as they do.

What if your solution was to set up tomorrow’s supply chain team with just two individuals?

You and one other.

How could such a lean team of two manage the complexities of your organization’s supply chain?

It’s simple.

Outsourcing everyone else.

• Outsource the Production Planner.
• And your Procurement Manager.
• And your Warehouse Manager.

Entrust the critical functions like supply planning, MRP, procurement, warehousing, and distribution to external experts.

Why would you do that?

It’s accepted that there’s one person per role.

One production planner, or multiple production planners each working full-time to manage a piece of the operation.

Same for Procurement Managers.

Same for your Warehouse Manager.

In the same way that a single supplier is a supply chain resiliency risk, so too is your single Production Planner, your single Procurement Manager, and your single Warehouse Manager.

You can add another supplier to remove the risk, but doubling your staff isn’t an option.

Which leads us back to…outsourcing.

Tomorrow’s Outsourcing

Yesterday’s outsourcing was all about cutting costs.

Tomorrow’s outsourcing will be all about strengthening your supply chain’s resilience…

1. spreading expertise and knowledge,
2. reducing vulnerability to disruptions, and
3. boosting agility and responsiveness.

At this point you’re in one of two camps.

1. You think this is a load of nonsense; or,
2. You’re willing to read on.
   1. to see how challenging the status quo may strengthen your supply chain’s resilience for whatever hits come next.
   2. to understand how outsourcing certain supply chain functions can deliver greater resilience,
   3. to understand how it can free up an organisation to focus on its core competencies while leveraging external expertise for specialised support tasks.

The Pros and Cons of Tomorrow’s Outsourcing

Let’s break it down per typical functional area and consider the pros and cons for outsourcing.

Distribution and Warehousing: Third-party logistics (3PL) providers are now part of many supply chains. They’ve been handling warehousing, inventory management, and distribution for decades ensuring efficient storage and timely delivery of products to customers.

Transportation Management: This is another commonly outsourced function. Managing transportation networks, including freight forwarding, shipping, and delivery, are now routinely outsourced to logistics companies to optimize routes, reduce costs, and ensure timely delivery.

Now let’s look at where Outsourcing gets harder…

Procurement: Outsourcing means entrusting sourcing and purchasing tasks to experts who can secure better deals and manage supplier relationships. Unlike a single Procurement Manager, they assemble a team of specialists focused on evaluations, negotiations, risk management, and cost savings.

Inventory Management: Companies can outsource inventory management tasks such as forecasting, replenishment, and stock optimization to third-party providers, who employ advanced algorithms and analytics to minimize stockouts and excess inventory.

Supply Chain Planning: Outsourcing means delegating strategic and tactical planning tasks, such as demand forecasting and production scheduling, to specialized external experts. They can utilize their system or yours. With AI expanding its reach, more companies will see the advantages of outsourcing this function, although it’s currently limited to those who also outsource manufacturing.

So, who is the other individual in the supply chain team of two?

If we are going to consider outsourcing these critical functions to strengthen our supply chain’s resilience, what does tomorrow’s supply chain team look like? In addition to outsourcing key roles like Production Planner, Procurement Manager, and Warehouse Manager, there’s a crucial component that remains alongside you to help in coordination and execution: the Demand Manager.

As we explore the potential benefits of outsourcing, it’s essential to recognize the integral role of the Demand Manager in ensuring seamless coordination and execution within the supply chain.

You already know that demand planning has two parts.

1. The demand forecast – algorithm-driven.
2. Market intelligence – still an in-house role that AI won’t be able to cover.

The algorithm work can be outsourced to specialists, but it needs to be balanced by market intelligence which lies within the knowledge of the organisation. Your offsider – your Demand Manager – will also be your understudy.

You both will oversee the supply chain and its execution by trusted third-party service providers. Using the agreed goals, contracted service level agreements, and master data you maintain, you both provide the necessary guidance to ensure the supply chain delivers.

The future?

Is your supply chain truly resilient, or is it teetering on the edge of collapse? Despite all efforts to diversify and mitigate risks, vulnerability remains a looming threat.

Outsourcing critical functions offers a pathway to bolster resilience, but is it enough?

Are we prepared to challenge conventional wisdom and redefine our approach to supply chain management?

What if your star performer(s) didn’t come back tomorrow?

How hard would it be for you to bounce back?

A final question for you…

Would you consider outsourcing these functions?