Outsourcing and the Need for Increased Supply Chain Visibility

By Evan Puzey, Kewill



Despite the fact that the supply chain community continues to discuss the nearshoring trend, outsourcing still reigns supreme – and that’s a problem for organizations that don’t have complete visibility into their supply chain.



A recent survey by Transport Intelligence reveals that outsourcing outnumbers nearshoring in the logistics industry 2:1. In addition, only 16.7% of respondents stated they are outsourcing fewer logistics processes today than they were three years ago.



That’s no surprise, as outsourcing offers a lot of benefits: a reduction in workforce, expertise by the external organization, a reduction in back-end operational costs, potential for greater geographic coverage, reduced supply chain cycle times, improved responsiveness and an overall shift in responsibility and risk from the company to the third-party provider. Since today’s manufacturing and shipping world is all about speed, supply chain organizations can particularly benefit from the improved response and cycle times that outsourcing provides.



Of course, outsourcing is not without its challenges. A lot of risk goes into handing over operations to a provider. Some of the potential issues include a reduction in quality, an inability to regulate, contractual problems with international partners, and even slower cycle times depending on geography. Plus, partners may not always be completely focused on the parent organization’s needs since they usually work with multiple companies.



However, the biggest risk – and one that many fail to consider – is that outsourcing reduces logistics providers and shippers’ visibility into their supply chain. Modern supply chains cross international borders and often extend into emerging markets where supply chain management practices may be less sophisticated and less regulated than in more developed countries. That means that today’s multi-national enterprises are even more on the hook for their outsourced suppliers’ and partners’ activities.



With outsourcing on the rise, visibility is a bigger issue than ever. Many logistics service providers and shippers still do not have full visibility into their supply chain. The Transport Intelligence survey indicated that not having supply chain visibility was the number one challenge for logistics stakeholders in 2014, with only 16.9% of respondents saying that they currently feel they have end-to-end visibility into their supply chain covering all partners and links in the chain. The same strikingly low percentage stated that visibility within their supply chain is poor.



Adding to the issue even further, a little more than 28% of respondents have visibility only within their own organization, while only 37.6% have visibility of their own organization that extends to partners. Again, end-to-end visibility is of the utmost importance, as the organization must be able to manage the supply chain beyond its own boundaries.



So how can supply chain businesses get to 100% visibility?



The key is more sophisticated operational procedures and technology that are integrated, cloud-focused and thorough. Businesses need analytics tools that allow for risk management, offer hard performance data on transportation partners, modes of transport and lanes and offer the flexibility to analyze impact on margins. Those that use outdated technology will not be able to properly capture, filter and leverage the relevant supply chain data.



LSPs and shippers in particular need to invest in systems that enhance visibility through increased insight into the tracking and tracing of shipments. In fact, more customers these days are requiring increasingly detailed tracking and reporting data from their logistics providers. Plus, with more technology moving to the cloud these days, supply chain businesses would benefit from tech that allows them to reduce up-front software costs and extends visibility into their multi-national partners. Most importantly, these organizations need to integrate existing systems and bring the supply chain into step with their other processes to allow for collaboration and adaption to customers’ changing needs.



Some are already working toward this: 53.5% of the survey respondents are planning to invest in additional IT to improve supply chain visibility. Increasing visibility is not just good for the organization’s insight into supply chain operations, it also brings cost savings. Having visibility into performance, especially when it comes to different modes of transport and trade lanes, can have a great impact on revenue and profitability. It also allows supply chain businesses to better monitor partners’ schedule compliance and performance against service-level agreements, which if left unattended could contribute to management headaches and even revenue loss.



Gartner predicts that the deployment of end-to-end supply chain visibility solutions will increase up to 50% by 2018. If that comes to fruition, supply chains around the world will be much more integrated, transparent and streamlined in the years to come, avoiding some of the common risks associated with outsourcing.



Evan Puzey is chief marketing officer of Kewill, a Francisco Partners portfolio company, a global leader in multimodal transportation management software, providing organizations with a comprehensive end-to-end platform for managing the complexities of transportation, logistics and trade compliance. He can be reached at [email protected].