One of the things I love about interviewing supply chain professionals on Talking Logistics is that they often raise interesting questions and ideas. Last year, for example, Tony Martins (previously the VP of Strategic Services at Halo Pharmaceutical) presented me with this gem: Are you working in a Company of Yesterday or a Company of Tomorrow?
I love that question, which I now ask audiences whenever I give keynote presentations, because it opens the door to other questions, such as How do you know if you work in a Company of Yesterday? and What are the attributes of a Company of Tomorrow?
A few weeks ago, Chris Cameron, Senior Solutions Architect at Elemica (a Talking Logistics sponsor), came up with another interesting question. To wrap up our conversation, I asked Chris what questions supply chain and logistics executives should ask themselves to determine if their supply chain processes and capabilities are best-in-class. “Number one,” he said, “is they have to ask the question, ‘Have I outsourced or have I dumbsourced?’”
He goes on to explain:
What I mean by that is that to outsource is to move an activity outside your company to be done, as a part of your business, in a way that you’re still managing it. I’ve been involved in companies before where they’ve outsourced [a logistics function] and then lost the knowledge [internally] to the point where they couldn’t even make a shipment without calling the forwarder. That’s a bad place to be in, and if your supply chain is [at the point where] you’ve looked around and started to ask “How do we do something?” and you get, “Well, let me make a call to somebody,” you may be in a dumbsource situation…and you have to look at how [you] bring that knowledge back in-house without bringing all the cost of people, admin, etc. to get the job done back internally…Whenever I go into a client, that’s the first thing in the back of my [mind] I’m looking at, has this client outsourced or dumbsourced, and then that tells me where they need help.
I think the biggest challenge, or what we try to warn new clients about, is the notion that just because you’ve outsourced your warehouse facility, or perhaps a transportation lane, or your complete supply chain, it doesn’t mean that you’ve outsourced responsibility for your supply chain…you still have responsibility for your supply chain, you still have to understand your supply chain, and absolutely, you still need to have control of your supply chain.
When you’re across the table from a potential new client and you’re talking about outsourcing, they’re expecting that they are going to cut all their cost, and that’s not the case, you still need to have that in-house expertise, and again, the successful relationships, the ones we do very well in, [customers] still have a lot of in-house supply chain expertise.
Are Chris and Mike advocating that you should micro-manage your 3PLs? I don’t believe so. That’s another flavor of dumbsourcing — “The Outsourcing Paradox,” as Kate Vitasek, Mike Ledyard, and Karl Manrodt call it in their book Vested Outsourcing — where companies choose to outsource to the “experts” yet they “insist on defining the requirements and work scope so tightly that the outsource provider winds up executing the same old inefficient processes!”
What Chris and Mike are saying is that 3PLs need to provide customers with timely, accurate, and complete visibility to the parts of the supply chain they manage so that customers can make smarter and faster tactical and strategic decisions. If a customer can’t answer basic supply chain questions, such as “How much inventory of X do we have across our network?” without having to call a 3PL (or multiple 3PLs), then that’s not a good situation to be in. The “dumb” in dumbsourcing is being in the dark (or the last to know) about what’s happening in your supply chain.
So, if you’re looking for a question to kick-start your team meeting this week, here it is: Are you dumbsourcing? And if the answer is yes, then what are you going to do about it?