Why Outsourcing Your Supply Chain Network Design Analytics May Be the Best Option

  • June 29, 2023
Management and staff group meeting and using computers to present graphs

Every supply chain organization seeks an optimally designed network to reduce cost while improving efficiency, customer service levels and competitive advantage. Furthermore, organizational leaders understand that changes in demand, service expectations, market costs and reverse logistics, to name a few, can impact the effectiveness of supply chain networks. Therefore, network design must be periodically reevaluated to either confirm design optimization or determine if a restructure is needed. However, this tends to be quite costly.

Bringing in outside expertise from a reputable consulting firm seems like a logical choice, and there are good reasons to do it. The consulting team will have the bandwidth and skills to provide the right network strategy, but once the company identifies the optimal strategy, assumptions and conditions supporting the strategy begin change. Depending on the frequency with which the consultants are re-engaged, a time and revenue gap occurs impacting time to value.

Another approach organizations often consider involves bringing in a consulting firm alongside an internal team that’ll transition into an internal Center of Excellence (CoE) to provide future model adjustments as needed. This approach can certainly work well under the right conditions, but unfortunately, many organizations have found that maintaining a CoE is difficult in the long term.

Factors challenging CoE maintenance

  • Loss of people: Whether it’s promotions or new opportunities, people move in and out of an organization’s CoE and members are often difficult to replace. The unique skill set needed to effectively evaluate, assess and implement the model adjustments required to stay at optimal levels can be difficult to find.
  • Erosion of skills: Expanding on the previous point, every time a CoE team member leaves, the organization loses some of the institutional knowledge necessary to remain effective in its modeling approach. As team members move on to new roles, the understanding behind previous decisions involving network design often leaves with them.
  • Lack of critical mass: Often, when an organization establishes a CoE, the size of the team is too small to provide the peers and mentors needed. These develop and maintain to develop and maintain the skills to successfully evaluate and apply network adjustments. With a limited number of resources available, the inability to acquire a second opinion on detailed aspects of the work can lead to inaccuracies in the design, higher costs, missed savings opportunities or erosion in organizational confidence in the CoE.
  • Loss of support: It isn’t uncommon for a CoE to lose support from upper management due to a confusion about the amount of in value created over time. During the initial network evaluation, the CoE may initially identify double-digit savings, which would please any organization’s leadership. However, as continuous evaluation occurs and the baseline of comparison is improving, identified saving percentages are often lower, causing upper management to question the CoE’s value.

So what’s an appropriate solution? Consider outsourcing the functions of a CoE to a firm that provides an ongoing analytic assessment and develops network adjustments on a recurring basis. This solution allows the organization to maintain an optimized strategy with continuous outputs at a reasonable cost. Instead of intermittent reviews of the supply chain, the outputs continuously provide updated capabilities to optimize the supply chain.

Utilizing an outsourced service allows the existing, internal supply chain organization to focus on day-to day business operations, while providing strategic guidance to the outsourced supply chain design service provider.

— By Jonathan Whitaker

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