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The decision to outsource in whole or in part is more often than not to allow businesses to focus on their core competencies, increase service levels and to reduce costs but these outsourcing relationships seldom last longer than 5 years.

Your outsource partner is a partner in the true sense of the word and the relationship between the company and it’s outsource partners need to be constantly evaluated and attended to. The single biggest cause of failed outsourced logistics partnerships is that the company’s core competency does not extend to relationship management. Business after all is said and done is about relationships.

The number one reason for the relationship to suffer is the availability, transfer and sharing of information required during the initial planning stages.

Some of the reasons may be obvious for a company not to share because they may want to secure a lucrative contract at any cost with the expectation of improving processes that may not be required or in deed in place until such time as the contract is awarded. If we consider that outsourced logistics amounts to about 14% of revenues of the companies actively outsourcing to reduce costs and deliver best in class logistics practises, the benefits of spending on information and network infrastructure to improve visibility are a worthy investment. The relationships are easier to manage when there is good visibility with the company easily able to identify demand and supply side trends, react timeously to unexpected events and maintain stock levels that allow the company to best serve the demand side.

The next most important factor, which stems from the lack of information, is that there expectations are unclear. In order for the selection process and contract awarding to be a successful exercise, the company needs to follow a thorough outsourcing process from analysis through to award the contract and relationship management in a 6 stage process.

Strategic Analysis: Understanding the business goals and determining the companies core competencies and capabilities. We are assuming here that the companies weakness lies in logistics functions, be they transport, warehousing etc, hence the need for the Outsourcing study.

Partner identification: Identify industry players that present the lowest risk opportunities.

Outsourcing Requirements: This is a critical phase of the process where requirements are very clear, have been thought through and are a complete set of requirements where deliverables can be measured.

Partner selection: At this stage the possibilities have been narrowed down to 2 or 3 possibilities and the areas that need to be analysed are the overall capabilities of the outsource partner, how it fits in with the company culture. Do not underestimate the need to share goals like quality of service, cleanliness and a host of other vital expectations. During the selection process, discussions need to be around the scope of the contract in great detail, detailing the expectations and nature of services.

Transition: Once the contract is awarded the transition process is arguably the most important part of the process. Responsibilities of staff on both sides to manage and maintain the process are critical as there will be changes from the initial agreement. These changes need to be documented and agreed upon. As problems occur, they must be dealt with immediately and the effect on the expectations if any recorded.

Managing the relationship into the future: The process has taken a long time, resources have been used a new direction for the company plotted. Manage the relationship well and the benefits on both sides will be enormous. Allow the relationship to flounder and you run the risk of losing market share and having to redo the process.