When To Outsource Your Supply Chain
One question that we are often asked by managers from other companies is, “How do I know when it's time to look for help or outsource some of my supply chain”?
Sometimes these questions are from a start-up company that has been operating out of their basement. Other times the question comes from a large company that is toying with the idea of a large expansion.
As a specialist in supply chain dynamics, Industrial Packaging is uniquely positioned to help you understand when and why you should work with a third party to run your supply chain.
Even if you do not choose us as your third-party supply chain vendor, we can help you to understand the protocols for this process. In this article, we will give you advice on how to approach this project.
Understanding Your Current Capacity
While on the surface, this may seem simple, that is not always the case. You may think this is as simple as asking yourself, If I have a product that I produce, how much can I make? But it goes much deeper than that.
When you think of outsourcing, the partner you’re considering should have capabilities that are significantly more than what you’ve got right now.
You need to understand that you must have the cash to support higher purchases on raw materials to allow your outsource partner to produce larger batches.
If you have maximized your space, but do not feel comfortable signing a long-term commitment to a building, then outsourcing would be a great next step.
Is Your Space Optimized?
Space is at a premium, and often very costly. One benefit that outsourcing gives you is greater availability and flexibility of your current space.
But if you have not optimized the layout of your current space, you may be calling an outsourced partner for space that you don't really need. For the sake of simplicity, I recommend looking at it in cubic feet.
Regardless of whether your facility is your basement or a warehouse, you should look to fill both your floor space, AND your vertical space. Static racking and flow racking can save you a ton of money until you have truly outgrown your current space.
If you have maximized your space, but do not feel comfortable signing a long-term commitment on a building, then outsourcing would be a great next step.
Need Help With Integration On Your Supply Chain?
Focus On The Essentials
When you are looking into supply chain options, your new partner can play a variety of roles for you. They can be a full end-to-end solution where they are ordering goods, producing them, and delivering them to your customers with a single invoice to you.
Or, they can simply be a small piece of that process. If you enjoy a part of your process, or would like to continue to control it, make that known from the get-go.
This will allow you and your new partner to have clear guidelines. Not to mention you get to keep doing the things you like while shifting the things you do not to someone who has the expertise and knowledge to help.
Be Ready To Let Go
Oftentimes, the business owner or manager wants to play a critical part in the everyday business of your supply chain outsource partner. This defeats the purpose of outsourcing.
There are other activities that you could be doing when you outsource. You could be looking for new business, growing your customer base, or developing new products.
If you are not ready to hand over control of all or part of your supply chain and trust it to someone else, it may be too soon for you to start making calls. You will sleep easy at night if you have put in the correct quality checks and articulated the expectations to your new partner.
It's important to remember that once you have chosen your partner, you need to let them execute what you have tasked them with. They are experts in this field and will deliver what you need.
Choosing to bring new companies into your business is not only a practical decision but an emotional one as well. It is not a decision that you should take lightly, rather one you should make when you're ready and feel good about a new partner.
How To Choose A Third Party Supply Chain Partner
If you are considering outsourcing your supply chain to a third party vendor, but are on the fence about the decision, ask yourself a few questions about making the transition. This will help you gauge if it is the right choice for your business.
- Are you ready to give some responsibility to a partner? If you want to be in total control of your operation, then you will not want to outsource.
- Are there supply chain responsibilities you want to relinquish so you can focus on other aspects of your business? If you answered yes, then you might want to consider outsourcing.
- Are you regularly meeting your supply chain KPIs? If not, outsourcing would be a good option.
- Are you OK with your supply chain being managed from a physical location other than yours? If you answered no, then outsourcing is not a good option for you.
- Do you expect your third party to follow your protocols? If yes, outsourcing may not be right for you.
With the conclusions drawn from answering these questions in hand, you will be able to formulate a decision about outsourcing your supply chain. If you are still not sure how to proceed once you have answered these questions, you will want to speak with a third-party supply chain expert.
They will be able to analyze your supply chain and advise you on whether or not it makes sense for you to outsource your supply chain to a third-party vendor.
With the generation of the analysis report (a service we offer), you will have all the data and information required to make a final decision on outsourcing your supply chain.
The packaging specialist will be able to show each and every area in your supply chain where there are opportunities to use outsourcing to improve your overall process.
Industrial Packaging can assist you in finding the right vendor for outsourcing your supply chain, even if we are not the best vendor for your needs. It is our mission to help you find exactly the right third party even if it is not, in fact us.