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In the context of global sourcing and new emerging locations, security and safety concerns are becoming the top issue for companies considering outsourcing their IT projects to cost efficient locations offshore. In this respect, the annual research conducted by the Black Book of Outsourcing with the rankings of the most dangerous / safest outsourcing spots around the globe attracts great attention among companies as a reference point for long-term business strategies.

Read the complete article at:

Europe Tops List of Safest Outsourcing Spots.

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Even the article ”

“Top 10 Risks of Offshore Outsourcing”

by ZDNET.COM is already 7 years old, it still contains valuable advice about offshore outsourcing. Many business are doing any of it and are wondering why their offshore outsourcing projects are failing or do not show the expected result or success.

Today while companies are struggling to reinvent themselves it is even more critical to have a structured outsourcing plan in place. A plan that everybody from the top down agrees upon and is able to follow. Not all organizations have the resources and/or skills and experience to do it right the first time around. In today’s economy it is critical that all aspects are considered and only a person with the respective experience can help to make an outsourcing task or project successful. Talk to somebody who has the experience and has this done already  multiple times successfully.


Oliver Schmid has extensive experience in offshore outsourcing to the Philippines, onshore outsourcing to Canada and domestic Outsourcing of matrix oriented call centers.  He is also versified in outsourcing of data center operations and data center monitoring and support. In addition Oliver Schmid participated in various 3PL and Supply Chain outsourcing initiatives.

Call Center Agents (funny)

Being a call center agent can be a very tough business, especially if you have Multiple Personality Disorder Syndrome(MPDS). At times call center agents may be so confused that they have a tough time to keep their different personalities apart and distinguish whether they are calling, are being called or even what client they are representing at a specific call.

The Face of Supply Chain Outsourcing!

Supply Chain outsourcing has changed significantly over the last decade.


Supply Chain Outsourcing to a Third Party Logistics Provider or 3PL started out as having a product stored at an outside warehousing facility and then have the 3PL move the product from one facility to another based on instructions provided with each transaction order.

Today’s 3PL providers offer a range of additional services that range from

  • Physical logistics operations, like shipping and receiving.
  • Provide warehousing.
  • Manage complex operational handling, that may include repackaging, product maintenance, product consolidation
  • Administration.
  • Information Management Systems that integrate into and from a client’s backend ERP System, and automate the flow of transaction data, therefore minimizing human intervention and reducing data errors.
  • Providing customer broker services.
  • International freight forwarding, which may include the creation of all required customs forms and complying with all customs regulations (import & export) as well as providing so-called “Free-Trade-Zones”.

The type and number of services provided by the 3PL are defined during the engagement and contract phase, which also includes Service Level Agreements. These add-on services can quickly multiply and must be considered carefully.

Most important in any new 3PL relationship is not to go overboard and assigning to many services to the 3PL or not enough. Both scenarios can have not only a negative impact on your business but also on the business relationship between a 3PL and its client and, “Very Bad”, the client’s customer.

Why wouldn’t you give away as many business processes as possible right away to the new 3PL? Can it not just be in my interest to reduce my internal processes and labor in order to justify the outsourcing cost?

The danger here is, since it is a new partnership the 3PL is not to familiar with the clients operational processes, its customers and its products. Giving to much control and decision making to a new 3PL will cause friction in the day-to-day business operations between the 3PL and its client due to misunderstandings, lack of familiarity of business processes, and other requirements that were communicated either insufficiently or not at all.
At the same time will the 3PL client’s staff not be familiar with the 3PL’s operations and its issues and challenges. For this reason the client needs to monitor the 3PL’s operations and be able to assist and intervene right away until both sides are satisfied with the final outcome of the processes assigned and its expected results.

Keeping to much control inhouse at the client will have similar effects.
To much back-and-forth communication is required which can lead to misunderstandings and untimely business process fulfillment.
It can lead to friction between both parties due to misunderstood instructions and can be seen easily by the 3PL as being micro-managed.
It can lead to delays in any physical operations as it may pertain to shipping and receiving products into and from the 3PL location or processing and submitting the required paperwork or electronic equivalent transactions.
It is imperative to define responsibilities clearly. It is to nobodies favor to have contract and service level agreements that leaves the agreement up to interpretation by either party.

Any relationship with a new 3PL should be setup in stages with clearly defined time-lines in order for all parties to understand the expectations and responsibilities now and in the future.
Not doing so may lead to increased cost and delay in business processes implementation as well as it can put unnecessary strain on the business partnership.

Having a clearly defined Supply Chain Outsourcing Plan, will be a win-win situation for all parties involved, starting at the manufacturing operation, over warehousing and distribution to the final customers. It can lead for all parties to a reduction in cost and increase profits, since each party can concentrate on their core business processes.


Oliver Schmid has extensive experience in offshore outsourcing to the Philippines, onshore outsourcing to Canada and domestic Outsourcing of matrix oriented call centers.  He is also versified in outsourcing of data center operations and data center monitoring and support. In addition Oliver Schmid participated in various 3PL and Supply Chain outsourcing initiatives.


Disclaimers:

This post was originally posted on the LinkedIn Group “Outsourcing to Ukraine” by Alena Shechkova at the Ainstainer Group and has been republished on this Blog with her consent.

This article is a shortened article of Jérôme Barthélemy “The seven deadly sins of outsourcing

The Seven Deadly Sins of Outsourcing

While outsourcing is a powerful tool to cut costs, improve performance, and refocus on the core business, outsourcing initiatives often fall short of management’s expectations. Outsourcing failures are rarely reported because firms are reluctant to publicize them. However, contrasting them with more successful outsourcing efforts can yield useful “best practices”. Through a survey of nearly a hundred outsourcing efforts in Europe and the United States Jérôme Barthélemy in his article “The seven deadly sins of outsourcing” underlined most failed outsourcing efforts. Here they are:

  1. OUTSOURCING ACTIVITIES THAT SHOULD NOT BE OUTSOURCED. Determining which activities can be best performed by outside vendors requires a good understanding of where the firm’s competitive advantage comes from. Resources and capabilities that are valuable, rare, difficult to imitate, and difficult to substitute for lead to superior performance. Activities that are based on such resources and capabilities (i.e., core activities) should not be outsourced because firms risk losing competitive advantage and becoming “hollow corporations”.
  2. SELECTING THE WRONG VENDOR. Selecting a good vendor is crucial for successful outsourcing. The literature has identified numerous criteria for successful provider choice. A useful distinction can be made between hard and soft qualifications. The first are tangible and can be easily verified by due diligence. Hard qualifications refer to the ability of vendors to provide low-cost and state-of the-art solutions. Important criteria also include business experience and financial strength. Soft qualifications are attitudinal. They may be non-verifiable and may change depending on circumstances. Important soft criteria also include a good cultural fit, a commitment to continuous improvement, flexibility, and a commitment to develop long-term relationships.
  3. WRITING A POOR CONTRACT. Since the 1980s, vendor partnerships have emerged as a model of purchasing excellence. Partnerships replace market competition by close and trust-based relationships with a few selected vendors. The notion that outsourcing vendors are partners and that contracts play a minor role was popularized by a landmark IT outsourcing deal. However, there are pitfalls in partnership management. A good contract is essential to outsourcing success because the contract helps establish a balance of power between the client and the vendor. Spending too little time negotiating the contract and pretending that the partnership relationship with the vendor will take care of everything is a mistake. Drafting a good contract is always important because it allows partners to set expectations and to commit themselves to short-term goals
  4. OVERLOOKING PERSONNEL ISSUES. The efficient management of personnel issues is crucial because employees generally view outsourcing as an underestimation of their skills. This may result in a massive exodus even before an actual outsourcing decision has been made. Firms that contemplate outsourcing must face two interrelated personnel issues. First, key employees must be retained and motivated. A second personnel issue is that the commitment of employees transferred to the vendor must also be secured.
  5. LOSING CONTROL OVER THE OUTSOURCED ACTIVITY. When the performance quality of an activity is low, managers are often tempted to outsource it. If poor performance is attributable to factors such as insufficient scale economies or a lack of expertise, outsourcing makes sense. If poor performance is attributable to poor management, outsourcing is not necessarily the right solution. When an activity is outsourced, it is crucial to retain a small group of managers to handle the vendor. These managers must be able to develop the strategy of the outsourced activity and keep it in alignment with the overall corporate strategy. While vendor management skills are very important, they must also be complemented with technical skills. If no one in the company is able to assess technological developments, outsourcing is bound to fail.
  6. OVERLOOKING THE HIDDEN COSTS OF OUTSOURCING. Outsourcing clients are generally confident that they can assess whether or not outsourcing results in cost savings. However. They are often overlook costs that can seriously threaten the viability of outsourcing efforts. Transaction cost economics (TCE) suggests two main types of outsourcing hidden costs. First, outsourcing vendor search and contracting costs. Search costs are the costs of gathering information to identify and assess suitable vendors. Contracting costs are the costs of negotiating and writing the outsourced contract. Second, outsourcing management costs: monitoring the agreement to ensure that vendors fulfill their contractual obligations, bargaining with vendors and sanctioning them when they do not perform according to the contract when unforeseen circumstances arise.
  7. FAILING TO PLAN AN EXIT STRATEGY. Many managers are reluctant to anticipate the end of an outsourcing contract. Therefore, they often fail to plan an exit strategy (i.e., vendor switch or reintegration of an outsourced activity. Actually, outsourcing relationships can be viewed on a continuum. At one end are large-term relationships where investments specific to the relationships have been made by one or both partners. At the other end are market relationships where the client has a choice of many vendors and the ability to switch vendors with little cost and inconveniences. In this case, there is no real advantage in recontracting with the same vendor.

Oliver Schmid has extensive experience in offshore outsourcing to the Philippines, onshore outsourcing to Canada and domestic Outsourcing of matrix oriented call centers. He is also versified in outsourcing of data center operations and data center monitoring and support. In addition Oliver Schmid participated in various 3PL and Supply Chain outsourcing initiatives.