Co Sourcing Partners Impact Outcomes and Profitability
By Chris Gaffney and Karen Bird
Find the Right Co-Sourcing Partner
Building capability in your supply chain used to be a bright-line distinction: Either you did it yourself or you hired someone else to handle it entirely. In-sourcing versus outsourcing, all or nothing, whether you were looking at planning, execution, or even the physical work of supply chain operations. Today’s complex and ever-shifting environment, though, requires a more nuanced and flexible approach that can deliver both agility and deep expertise at different levels, depending on the situation: Co-Sourcing.
Co-sourcing is an intentional blending of sorts: It’s the shared delivery of a process capability with third-party providers in a collaborative and communicative style of management. Since each contributing partner is empowered to focus on their strengths and unique differentiators, co-sourcing collectively provides a path for you to develop more sophisticated and specialized capabilities.
We’re seeing the co-sourcing model being rapidly embraced across the supply chain landscape, in particular in planning and logistics processes. And for good reasons – which supply chain consultants and talent professionals have been privy to for quite some time. Companies like Profit Point have built Co-Sourcing into their business model from the beginning. The partnership of Profit Point and SCM Talent Group creates a dynamic and full spectrum supply chain talent solution. The most competitive supply chains don’t have a “one size fits all” talent strategy, and co-sourcing with the right people ensures that you’re seeking productive and diverse solutions.
Looking Beyond the Either/Or
There’s always been a level of discomfort with the binary “all-in” or “hands-off” approach. You’re either taking on some responsibilities beyond your core scope, or you’re completely reliant on someone who doesn’t know your specific business operations and needs at the level required to make truly informed decisions. If you become dependent on a partner, your cost structure or competitive position could be at risk in the future.
Taking a thoughtful approach to co-sourcing begins with being able to say “Here’s what we need to be really good at and do ourselves, and here’s something else that we need to be really good at but we can only achieve that with help.” Co-sourcing can be a tremendous added value for a client who says, “I need to get better here, but I can’t get there on my own, and I can’t get there quickly.”
So who do you look for?
- Seek partners who can be agnostic both in their capabilities and motives, so they can play a flexible role.
- Look for partners who are open to a model where the role they play may evolve over time.
- Focus on partners who are exceptional at what they do and who are constantly improving their domain knowledge and technical abilities.
Companies like Profit Point can play a shallower, broad role, or one that runs deep in specific areas. The motive is not to put the clients’ team members out of a job, but to help them improve their supply chain maturity more quickly and effectively.
Co-sourcing and the continuity of institutional knowledge
One major hurdle that co-sourcing can help you overcome is the challenge of retaining institutional knowledge. People who are really good at scheduling, planning, and infrastructure design don’t stay in those positions long. They tend to move up quickly due to these sought after skills. In our experience, after about three “generations,” the knowledge they picked up about new software or processes has diluted or disappeared, requiring teaching the tools all over again. And yet, completely outsourcing a process like network design or optimization becomes a black box where people don’t understand how or why recommendations are made. Now, you’re hesitant to make similar impactful decisions.
At Profit Point, we’ve had several clients for decades: We’ve been with their Supply Chain team planning and scheduling, supporting them in their various journeys and iterations. We know the history of why things were implemented. We know what’s been tried before, what worked and what didn’t, and we can help folks not to repeat mistakes.
Partnering with a third party can also help when there is churn and people change roles, creating gaps in expertise and experience. The transition is made smoother by helping re-educate everyone, from leaders to end users, on why things are the way they are. This ultimately helps get the client to where they want to be, without them feeling like they’ve handed the entire process over to someone else.
A co-sourcing partner is also critical when the problems you need to solve change. Whether it is an acquisition, entry into a new market, or a change in product, process, or go to market strategy a co-source partner can help your team. Models need to be re-built or modified, physical infrastructure may need to evolve, new customer service policies need to be achieved. All these things can be achieved effectively with the right partner who can bring surge-capacity and knowledge to support your internal resources.
Tapping into expertise and experience
Imagine you’re going to do a big software implementation or upgrade: You go out and select the vendor; then you hire an outside company to help you with configuring, teaching, and implementing the software. The right co-sourcing partner gets that. Knowing all the ins and outs of that technology, what tables and background settings need to be populated is what the co–sourcing partner should be doing so clients don’t need to bog themselves down. You don’t need to be an expert at the software and your co-sourcing partner should know that. What is an infrequent occurrence for you is a well understood challenge for the right partner. There is a standard play, resources who have seen the movie before, and available capacity to tap into.
You need a team that’s seen a lot of supply chain transformations across a widely-varied range of industries-people who have been planners and backup schedulers and handled implementation. More than just technical knowledge, your partner needs to have the context to weigh in on the problems to be solved. Domain knowledge is a key differentiator and motive for picking the right co-sourcing partner.
Is Co-Sourcing Right for You?
Ultimately, we urge people to be intentional about the decision to co-source. Is there a compelling reason where you need a uniquely high level of capability and you have to keep it internal? On the flip side, is it a commodity capability you only need periodically, and so there’s no reason not to keep it as an occasional transactional relationship?
For most businesses, neither one of those is the case. Look thoroughly into what your reality is for the capability you’re talking about – particularly in planning. As the last few years have shown us, history is no longer a great guide, and the frequency of re-planning has risen, along with the demand on making really tough decisions in a mid-term time horizon. In addition, with the focus on advanced analytics, the tools and algorithms needed to stay competitive are outpacing the awareness and core competencies of many internal teams.
There are times when you need specialized talent professionals like SCM Talent Group to tap into the right resources and partners -as opposed to more generalized recruiters. A firm that has supply chain expertise will be better equipped to navigate the complexities of the talent sourcing and search that your nuanced team requires. Of course, this would be for more long term, permanent solutions in addition to co-sourcing.
Having the right level of ability to make those decisions is a premium for more and more businesses: Consider the role of a partner and someone who understands and embodies the concept of co-sources as a way to leverage that opportunity.