Outsourcing one’s supply chain to different manufacturers for a single product is a very common strategy. Often it can help the company save time and costs since the work is split among different parties, and often these manufacturers are willing to do these smaller jobs for a smaller and more competitive price.
It is not unusual. The huge plus point of doing this is the ability to shave off costs, and in turn, boost profit margins.
More complexity means less control
However, such a strategy comes with a big risk: companies that outsource have a harder time guaranteeing that the components meet quality standards and get delivered on time. By increasing complexity and engaging external contractors, businesses can lose both visibility and control of their own supply chain—if they don’t have the right partners.
With outsourcing, huge problems can often crop up. For example, because more parties are involved, it can be more difficult to manage strict deadlines of components since the different manufacturers might be working independently. This can cause companies to go well over their initial budgets and result in a (very) late delivery of the product to their customers.
And this is really quite common. Especially since companies might overlook the need for a management system to keep up with the partners they outsource to.
On top of not being very vigilant on partner requirements, some companies are also currently lagging behind with supply chains that are based on a traditional “track and trace” model (which tells you where the product has been and where it is now).
But these very facts present an opportunity. Making use of the latest technology to manage and keep an eye on their partners, as well as one that would offer the opportunity for a company to move beyond track and trace, could help the company well gain a competitive advantage in this area and be the answer to all logistics management problems.
Is having a control tower the answer?
A control tower fully integrates the various moving parts of a supply chain and gives a company full visibility in real time. In effect, it helps a company regain control over its own supply chain, and presents a better system of data management. Agreements can be made with every party in any given supply chain, who in turn feed data back via a centralised “data lake”. Advanced software can then be used to analyse the data and make timely decisions about what gets delivered where and to whom.
Modern business practices make this increasingly important.
- A typical multinational company might outsource production to dozens of factories across Asia
- Another company might make sure that country-of-origin labelling complies with regulations
- Another might take care of taxes and duties
- Yet another might pack productions and another might physically move them
And often, these steps have to be done in a particular sequence, because one set of regulations often requires proof of another.
Keep in simple
Managing your supply chain sounds complex, and frankly it is. Given the complex nature of supply chains, wouldn’t it be nice to have a simple way of knowing which factories have products that are ready to be shipped? Or which items have their customs documentation ready?
A control tower makes this simple. It allows companies to constantly fine tune their supply chain, pinpointing potential bottlenecks and predicting where problems might arise. It gives a detailed overview of a challenging business environment.
It also allows for better accountability. If a contractor is a repeat offender that doesn’t fulfill its orders on time, the system will flag it. And a performance management plan can be implemented to make sure they lift their game.
Often, companies are reluctant to make the initial investment in integrated logistics. In a worst-case scenario, a poorly thought-out investment could possibly end up landing the company in deficit for even what might have seemed like a simple job. With a supply chain control tower, any company can save the time, money, and effort that would need to be wasted on problem-solving—but only if they are bold enough to make the initial investment in integrated logistics.
Sometimes risks are just worth taking; calculated, logical, and well-advised risks. Just like this one.
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