Outsourcing for Supply Chain Expertise

Trends that persist

I have worked in the manufacturing supply chain information technology (IT) field for more years than I care to admit. A sleepy-eyed dinosaur stares back at me from the bathroom mirror each morning. Over the course of my career, more than a few trends have emerged. Many of them, perhaps most of them, have turned out to be short-lived fads rather than lasting trends. Obsolete acronyms clutter my memory.  My tenure in this field has also afforded me the opportunity to notice that even technology has its cycles. Today’s hot new trend often bears a striking resemblance to yesterday’s big idea, wrapped up in a brand-new set of buzzwords. Maybe I am just getting cynical in my old age… ‘Get off my lawn!’

Of course, not all trends are fads. Some persist. Some change the way we do business. Outsourcing is such a trend. Although not a new concept at the time, it was during the 1990’s that outsourcing gained momentum as a core business strategy. Many companies started by outsourcing their customer service function to external call centers. Once the benefits became clear, organizations began looking for opportunities to broaden its use. Around the same time, we also witnessed the widespread implementation of Enterprise Resource Planning (ERP) systems and the emergence of a handful of software vendors as dominant players in that space. The resulting demand for vendor-specific ERP skills, coupled with the enthusiasm for outsourcing, gave rise to a group of IT service providers. These are the companies that today handle outsourced support for a large percentage of companies running Tier 1 ERP systems.

Supply Chain Solutions vs. ERP

This IT outsourcing model has been the subject of much debate, but its steady growth in the last couple of decades is indication that it is providing business value. Most large companies are now outsourcing support of their software systems to some degree. It seems that IT outsourcing is here to stay. The challenge is doing it the most effective way. The mistake companies make is to assume that the outsourcing partner that has made a market-based decision to support ERP systems, is also the right partner to support all other business-critical applications. The appeal of single sourcing the software support function is understandable. It is a nice idea which rarely works out well, particularly when it comes to supply chain expertise and the associated planning systems.

ERP systems are broad in scope, designed to handle the full range of business processes across a wide variety of commercial sectors. The main skill required to support them is an understanding of the vast array of available configuration options. The resources supporting ERP systems rarely have or need a deep understanding of a company’s business. ERP systems are no longer about competitive advantage. ERP skills have largely become a commodity and cost is typically a key consideration when selecting an ERP support outsourcing partner.

Supply chain solutions, on the other hand, are about differentiating yourself in the marketplace. The resiliency necessary for differentiation has never been more important than it is right now! There is a critical need for agile supply chains. Having nimble supply chain planning systems in place supported by resources who, not only have competency with the technology, but also fundamentally understand how the business works is critical to achieving this agility. The competitive advantage of partnering with a service provider that specializes in supply chain solutions – with core competencies in that domain – should be carefully weighed within the context of an overall outsourcing strategy.

About Scott Rollins

Scott Rollins has over 25 years of experience with a wide range of supply chain operations with a focus on production scheduling and manufacturing execution.

Contact Us

Have a Question? Get in touch. Profit Point is here to answer any questions you may have, help you with information, and create an effective solution for all of your supply chain needs.
Contact us here