Top Five Pitfalls of Outsourcing

For most companies, outsourcing is not a daily event, and can be fraught with potholes for the unwary.
Poorly defined RFP’s, unrealistic expectations and even confusion over how the outsourced activity will be managed are but a few examples of issues that can contribute to an unsatisfactory outcome.

Here are the Top Five Pitfalls that arise when outsourcing, and what you can do to prevent them from sabotaging your initiatives:

  1. Don’t do a formal RFP
    Many times, companies focus on what they believe are the core processes when describing the scope of work to an outside vendor, and neglect to fully articulate all the other activities necessary to make the work complete. Special packing instructions, unique labelling requirements and strict delivery windows can, and will, add to additional costs and delays if not outlined from the outset.
    Make sure you have mapped out all the steps, and their frequency, when framing your tasks for the vendor.
  2. Presume the Outsource Vendor knows your business
    Although there are many common practices among businesses, there are equally many other aspects that makes your business unique. Passing along existing SOP’s and providing a quick walkthrough will likely not provide sufficient information to a new outsource provider. Ensure that there is a formal orientation program built into the implementation phase that allows your vendor sufficient opportunity to expose all their participants to your business needs.
  3. Don’t set up formal performance reviews
    In addition to establishing KPI’s for the outsourcing provider, it is imperative to establish formal review cycles to assess not only performance, but also to share any changes to the relationship that may be in the offing. All too often, vendors are blindsided by new product introductions, promotional incentives and forays into new markets. Make them part of your team.
  4. Don’t assign someone to manage the relationship
    Good personal relationships require work, and the same goes for professional ones. Establishing a clear conduit for communication will ensure that information is exchanged promptly, tasks are prioritized, and problems are resolved quickly. Make sure that an escalation protocol is set up before the contract starts so that any unresolved performance issues can be brought to the attention of the right people.
  5. Don’t think about how information will be exchanged
    You are thinking of sending the orders over by flat file, the outsource vendor is presuming EDI.

It is surprising how often this situation presents itself well into the implementation phase. Any of the transactions that will be performed by the outsource provider need to be discussed and agreement reached by both parties, along with a vigorous testing cycle to ensure that the integrity of the information is maintained, and the two systems can handle the volume.

For more information, contact Rick Green at rgreen@supplychainsystems.com

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2 Comments to “Top Five Pitfalls of Outsourcing”

  1. Misty says:

    Exceptional post however , I was wondering if you could write a litte more on this subject? I’d be very grateful if you could elaborate a little bit more. Thanks!

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