5 Steps of Supply Chain Outsourcing

Freezing temperatures. Record snows. Planes grounded. Factories shuttered. Traffic snarls. Truck movement halted. Shelves are empty. It is a bad winter, and shipments are five to ten days late. Most manufacturers are helpless. They do not know the status of shipments.

On the east coast of the United States, the cadence of the normal supply chain is not business as usual. The rhythm has changed –purchases have changed and trucks are not making their delivery appointments–but the average manufacturer or distributor cannot see. They are blind.

Today, supply chain outsourcing is a reality. Companies are dependent on each other. They flows are more intertwined than ever before.

In a recent study, 90% of manufacturing companies report having some level of outsourcing. Thirty percent outsource 40% or more of their manufacturing. Logistics levels of outsourcing are higher than manufacturing. Fifty-five percent outsource at least 40% of their logistics on a volume basis. So when, the snow falls and traffic snarls, and the cadence of the supply chain shifts, the manufacturer cannot see.

As shown in the future, transportation visibility is a major gap, and the gap between what companies have and what they want is high.

While companies can track small packages through bar code scanning and visibility systems of the overnight shipping companies, the majority of goods sold are moving through trucks, rail cars and boats that cannot be easily tracked.

In these larger shipments, the manufacturing company loses visibility of the shipment when the doors of the vehicle closes. On-time shipments are then dependent on phone, fax and email. In the words of one supply chain leader that we talked to last week, “ It is much like running our supply chains on chewing gum, Band-Aids and bailing wire.”  So, what should a company do?

1. Stabilize ERP Projects. Build a Supply Chain Visibility Capabilities. Today, supply chain visibility projects are taking a back seat to the corporate ERP projects. ERP is taking over 50% of IT budgets and the focus on the use of business networks, mobility and mapping visualization systems to build and execute supply chain visibility systems is lacks focus.
2. Build inter-operability with Third-party Logistics Companies. Select third-party logistics companies based on the ability to inter-connect and share data. If the data is not available, rethink the partnership.
3. Partner with Transportation Carriers with GPS Capabilities. Connect these in-cab devices to business networks to ensure vehicle trucking. Maximize the use of mobility and real-time data to track real-time status.
4. Use Business Network Capabilities. While new and evolving, they are promising. Today, seven percent of trading partner information flows move through new forms of public business networks. Take advantage of this emerging capabilities. Today, these operate as community networks to enable many-to-many signals.
5. Maximize Use of Electronic Data Interchange (EDI). EDI is the workhorse of the extended supply chain powering transactional visibility. PO notifications and Advance Shipment Notifications help. Today, 30% of shipments are received without Advanced Shipment Notification (ASN). It costs more too. When a shipment is received without an ASN, it will cost the average company an additional $78/purchase order to process.

Taking these five steps will help companies to see; and then adapt to the rhythm as the supply chain changes.

Note: Original article published on Forbes

About the Author
Lora Cecere is the Founder and CEO of Supply Chain Insights, the research firm that’s paving new directions in building thought-leading supply chain research. She is also the author of the enterprise software blog Supply Chain Shaman. The blog focuses on the use of enterprise applications to drive supply chain excellence. Her book, Bricks Matter, was published in December of 2012.

Related: How Choices in Supply Chain Management Can Impact Your Corporate Performance