Nine benefits of supply chain management outsourcing

What is supply chain management outsourcing and how can it impact my revenue growth?

Supply chain management (SCM) refers to the overseeing of all the design, procurement, manufacturing, transporting, packaging, and redesign components involved in your company’s supply chain process. This process takes place across a number of locations and businesses. It begins with the initial raw components and lasts through the delivery of a final product to the consumer. With so many moving parts, SCM can quickly become overwhelmingly complex.

That’s why so many companies are turning to outsourcing partners as they explore possibilities for SCM. SCM outsourcing involves hiring an outside business or organization to handle either specific parts of your supply chain or the entire process. Doing so can help minimize overall costs, offer greater flexibility, and more readily meet demands. 

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Why SCM gets outsourced

But why are companies increasingly trending towards SCM outsourcing?

We are now living in a time that is more interconnected than ever. Globalization has opened up endless possibilities and options for doing business. Supply chains have become more complex and challenging in today’s global business environment. Think of a company’s supply chain as a web linking its various suppliers: All these players hold a key role in producing and distributing a unique service or product that is critical to the business’s operation, and a business must be able to effectively manage all aspects of the web.

According to a study conducted by Deloitte, companies with superior SCM capabilities significantly outperform on both growth and revenue compared to companies with average or subpar SCM capabilities. In fact, it was reported only 8% of organizations with lower-performing supply chains had above-average revenue growth. As you can see, high-performing SCM is vital.

A number of companies simply don’t have the resources to keep up with their supply chains, or it’s simply inefficient for them to do so. At that point, it’s smart to call in external supply chain logistics and management experts. These experts often have established relationships with a number of suppliers and can leverage these relationships to get clients much better prices. They also tend to offer additional benefits and services that help reduce overhead.

Risks associated with SCM outsourcing

While SCM outsourcing can absolutely make a company more competitive, reduce the possibility of supply disruptions, and free up human and actual capital, there is still a major risk: selecting the wrong partner.

If you’re considering outsourcing your SCM, use our checklist to determine if outsourcing some or all of your supply chain might benefit your organization, and to help gain a better understanding of what to look for in an outsourcing partner.

Nine benefits of SCM outsourcing

1. Improve prices

Often, outsourcing your SCM will result in a lower price for both your business and the consumer.

2. Control costs

It can be more reliable to outsource to the right logistics company rather than perform the operations in-house to control and manage costs.

3. Alleviate quality issues

When you pick an appropriate 3PL or 4PL for your SCM, you gain access to their network, industry experience, and web of resources you would not be exposed to otherwise.

4. Increase redundancy

A lot of different infrastructure is utilized during the SCM process. A third party can properly outsource the appropriate steps in the process rather than handling it all in-house. Benefits to this include improved reliability and resource availability.

5. Manage complexity

If you’re getting lost in the details, it may be time to hand over your SCM. A good 3PL or 4PL can navigate through the complex portions of the process, saving you the headache.

6. Reduce pressure on staff

Rather than bulking up on staff, or straining current employees, it’s more effective to utilize outsourcing. With proper staffing, tasks can be delegated and completed efficiently without impeding other areas of your business.

7. Supplement engineering skillset

Planning, designing, and creating can require expert knowledge your business may not have. Outsourcing can give you access to expert engineering and design knowledge to handle your business needs.

8. Boost efficiency

Increased efficiency leads to meeting customer demands in a more timely and effective manner. Outsourcing some parts of the supply chain process can  save time.

9. Increase your competitive edge

Outsourcing can give you an edge over the competition because you gain expert knowledge and resources that your competition doesn't have access to while relying only on in-house SCM. SCM outsourcing allows you to spend more time focusing on the most important aspects of your business, such as scaling and networking. You can spend more time building stronger customer relationships, offering customer support, and being more present in your business.

Choosing to outsource some or all of your supply chain operations can be a very big decision for your business. If your business is struggling to keep up with the never-ending issues related to SCM, it may be time to pass the baton to an experienced outsourcing partner.

Talk to the experts at NMG about assisting you with your procurement needs so you can achieve a more sustainable competitive advantage and reduce your total acquisition costs. NMG’s end-to-end SCM services cover everything from product development, sourcing, and production to logistics and the information systems needed to coordinate these activities. 

a graphic reading supply chain terms

About NMG 

NMG has more than 85 years of experience partnering with organizations to bring their industrial, IoT, lighting, medical, telecommunications, consumer, and aerospace products to life. We solve your most complex challenges in engineering design, manufacturing, and supply chain management.  

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