Consider the Risks

With their eyes on the bottom line, many executives turned to outsourcing to save money and reduce costs. It was seen as an advantageous strategy. “One of the great initiatives of the ’90s and early 2000s was developing a core strategy of ‘How can...


According to Bureau of Transportation statistics, U.S. shippers spend more than $830 billion annually moving freight, which becomes an area where many top-tier business executives are looking to cut costs.

The impact of transportation on an organization, says C.H. Robinson, will determine how much control you maintain over an outsourced freight process or network. They offer three guidelines:

“High Strategic Control: If transportation is a fundamental part of your brand, you may want to develop an outsource relationship that keeps you in firm control of your transportation strategy. Use your outsource solutions provider to do the heavy lifting and introduce new ideas—but maintain strategic control.

“Moderate Strategic Control: If customer relationships depend heavily on the effectiveness of your freight network, but it’s not necessarily elemental to your brand, you may want to give your outsource provider more control over day-to-day decisions, while retaining full visibility over key metrics.

“Minimal Strategic Control: If you are simply looking to cut costs and offload the day-to-day management of a portion of your freight network, it is likely sufficient to monitor key metrics at regular intervals.”

So, as with every part of the supply chain, global outsourcing needs to be agile and flexible in volatile and rapidly changing times.

“In the early days of outsourcing, say you were buying this widget for $4.50 in Iowa. In China, it’s $2.30,” Lawton says. “Why not buy it there? Did you take into consideration shipping costs? Import duties? Tax implications? Inventory-driven costs? Consumers are fickle. If they ship by sea, rather than by air their tastes may change. Today they want a blue widget, tomorrow a cool red one. Today, they want one hanging on the left side, tomorrow on the right.”

Takeaways:

  • Global trade will total approximately $24 trillion by 2015
  • Consider risk management throughout the end-to-end supply chain
  • Maintain your manufacturing expertise
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