Outsourcing supply chain functions to third-party providers has become a popular practice among companies across the globe. There are many benefits of sourcing to low cost regions. However, over the past several years, businesses have become increasingly expected to improve supply chain visibility and transparency, which has forced managers to restructure their networks and operations in a way that offers them better control.
In a recently published report, Supply Chain Digest explored some of the challenges and strategies companies experience today when it comes to supplier integration and supply chain outsourcing. The agency surveyed a number of professionals spanning a diverse range of industries to gain a more comprehensive understanding of the current state of outsourcing practices. Some would expect, given the rapid demand for improved transparency throughout the supply chain, that outsourcing may be on the decline.
However, the study found that this is not the case: nearly 42 percent of organizations said that they plan to increase the number of suppliers they outsource to and 26 percent indicated they already have a robust outsourcing model. Put simply, the majority, or approximately 70 percent, of survey respondents will outsource more processes in the near future, with just 14 percent saying they plan to reduce them.
Obviously, one of the most essential aspects of managing supplier relationships and reviewing their performance is communication. When it comes to collection of supply chain data, the survey participants revealed that the most popular form of communication companies use to get supplier data is email, followed by EDI, spreadsheets, phone and fax. Only about 29 percent of organizations utilize remote ERP software; however the findings showed that the majority of businesses have achieved at least some electronic integration with suppliers.
On the other hand, the study also found that most of the methods of communications being used by supply chain leaders are manual ones, which can certainly impact the timeliness and accuracy of data. This is why SCDigest said "that in general, companies have a long, long way to go to achieve high - let alone near universal - connectivity to their suppliers, even as the trend is towards more supply chain processes being outsourced rather than managed in-house."
When asked about the issues companies face with suppliers, respondents named receiving inventory status as the biggest one, followed by accurate advanced ship notices and lot/batch tracking. The source suggested that it wasn't the processes themselves that were at fault for these challenges but, rather, the lack of efficient data communication. Many of these inefficiencies could be improved with greater supply chain visibility, which highlights the need for better integration. And this is something many companies seem to agree with. About 61 percent of organizations said they believe that this could lead to significant operational and cost advantages, and 19 percent agreed that it might result in at least some benefits.
So what is preventing companies from improving their supplier integration? SCDigest found a handful of reasons, which included:
- Concerns about data security
- Limited access to third-parties
- Complex systems
- Lack of supplier skills and capabilities
- Problems with system training
- Integration is not a priority
Since the majority of companies indicated that they plan to increase the number of outsourced processes they use, uncovering strategies for achieving better supplier integration is critical. There are a variety of ways organizations can do this, some of which were highlighted by CIPS. Primarily, it is essential for companies to ensure there are clear channels of communication for both internal and external operations. To facilitate such connectivity, supply chains must leverage technological tools and systems that enable the simple and seamless sharing of important data, documents and information. Also, the source noted, it is important that there is a healthy amount of trust between suppliers, as this is necessary for businesses to feel like they can increase their levels of transparency with suppliers.
In their efforts to become more integrated with their suppliers, supply chain and procurement professionals must make investments in the software and technology that allow consistent and clear communication. Furthermore, these systems will heighten not only the timeliness of data, but the accuracy of it as well, ultimately leading to more efficient outsourcing practices.