Own or outsourced logistics? Reasons and criteria for decision

Despite the current trend towards outsourcing of logistics activities, we see many situations in which the case was mishandled, delayed positive results to be obtained or resulted in complete failure.

With the strong increase competitiveness, outsourcing happens to involve a wide range of logistics activities, beyond the carriage of cargoes which initially was the most outsourced function.

To develop an outsourcing recommend using the following tips:

1. Reasons to Outsource – how outsourcing is not a mandatory way we have to assess the reasons for the decision:

• In the supply chain of a company which is a party, outsourcing can make an impact on the level of service?
• Dedication to the business itself (“core business”) may make a difference?
• It is important to avoid investments and replace fixed costs with variable costs?
• Improve control of logistics costs and absorb “expertise” is important?

2. A company ready? The process should not be started without the company are responsible for actually prepared for the change:

• Awareness of the need for partnership and a great relationship?
• The field of operations, costs, procedures and indicators from which the third will be evaluated?
• Preparation for transfer and share part of the activities with “strangers”?
• Awareness of difficulties since the transition and support and uninterrupted monitoring of operations?

3. Definition of objectives – there are many reasons that lead to outsourcing, but companies must clearly define:

• Logistics and service level are differential to maintain or gain customers?
• Reduced costs (handling, storage, transport, etc.) is the focus?
• Possibility of improving an operation if it is outsourced?

4. Preparations – after evaluating the reasons, the internal questions and objectives, the company should prepare for the actual start of the outsourcing process:

• Activities are set to outsource?
• There are service providers available and enabled?
• All decision-making bodies of the company are clearly satisfied with aligned goals and interests?
• Well, we are starting engine!

5. Characterization of the contracting company – it is important that the service provider has all the information about the contractor and activities to be implemented:

• Company description (training, capital, size), location (matrix subsidiaries CD’s, etc.), market position, etc.;
• Description of production processes and the main materials and products;
• Distribution channels (direct, wholesale, retail, etc.), destinations;
• Details of the operations being outsourced (processes, indicators, etc.);
• Objectives and criteria of how the selection process will be developed.

6. Prequalification – after the company decided and prepared, opened the external phase of outsourcing:

• Check if there is interest, and send a questionnaire with the following qualification requirements:
• Facilities and equipment available (local areas, partners, equipment list, etc.); managerial and operational staff;
• Training in similar operations, organization, optimization of storage and transportation, etc.;
• Administrative and fiscal responsibility;
• Available IT systems (ERP, WMS, roteirizador, etc.) and support staff (interfaces, customizations and adaptations);
• Project teams and training;
• Availability of facilities that can be shared (apportionment of fixed costs);
• Accept payment by operating activities – “cost-driver” (handling, storage, packaging, etc.);
• List of major customers, and local services;
• Financial references;

- Upon receipt of the information classification should be developed, eliminating unsuitable companies.

7. Competition – is the start of the selection, with the following activities:

• Evidence of information given in the previous phase;
• Invitation to visit the operations to be outsourced and detailed information;
• Request for a specific project with logistical criticisms and suggestions;
• Usually the scope for the development of technical and commercial proposal;
• Clarifications and relay information to all participants
• Receipt of proposals.

8. Evaluation and final selection – this phase is critical to the success of outsourcing:

• Evaluate the proposals and answer questions;
• Evaluate each proposal and simulate the total cost for different scenarios;
• Equalize the technical proposals and solicit new business proposal;
• Sort maximum three companies;
• Negotiate (after equalization);
• As the decision often involves intangible aspects (trust, statement, etc.) must have the participation of the board.

9. Contract, the beginning and the end – is a document that beyond the legal aspects must contain some assumptions about the technical content:

• Clear definition of the scope of services and responsibilities of the parties;
• Definition of teams and channels of communication for routine monitoring and troubleshooting and conflicts;
• Common goals and objectives (measurable / indicators) to be achieved;
• A breach of the contract shall be provided to not interrupt the operation, and ensure separation or reimbursement of resources (human and material).

10. Success or failure of outsourcing – depends on the monitoring of the operation:

• Careful planning of the transition;
• Organizational structure with those responsible for each activity;
• Disclosure of the indicators and targets set in the contract and follow-up meetings;
• Involvement of the entire group and all levels;
• Do not leave any unsolved problem.

Source: http://www.guialog.com.br/

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