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In your responses to your peers, discuss how management can use these metrics to prevent any problems that could occur with outsourcing.

Student 1:

Outsourcing has become more common for companies over the years. There are risks and benefits related to outsourcing supply chain management (Pratt, 2013). Companies outsource supply chain in order to focus resources and expertise on core business objectives, minimize costs, meet customer demand, and increased flexibility. However, it can lead to unexpected costs, complications, setbacks, integration and quality issues.

In 2016, more than 40 percent of American companies outsourced some manufacturing and 80 percent outsourced transportation (SMX, n.d.). As mentioned, reputation is one of the primary areas that may suffer if the contracted company does not have the same standard of service. For example, online retailer, Zappos, is known for having great customer service. In the beginning, the company chose to outsource its fulfillment and shipping services. Using the selected 3PL company, sales suffered and customer satisfaction ratings declined. Ultimately, the company decided to take over these functions to ensure customer satisfaction could be controlled.

Pratt, M. (2013). The risks and benefits of outsourcing supply chain management. Retrieved from https://www.business.org/software/supplier/the-risks-and-benefits-of-outsourcing-supply-chain-management/

Staffing news & trends. (n.d.). SMX. Retrieved from https://www.staffmanagement.com/are-you-ready-to-bring-supply-chain-in-house/

Student 2:

Outsourcing could have a significant effect on supply chain metrics. There are a multitude of variables influencing which metrics and the degree to which they could be affected, such as whether the company is supplying a product or service, the international supply chain and its corresponding geopolitics, etc. (Hugos, 2018). But, one of the primary issues with outsourcing is a loss of control to a certain degree. For example, a car manufacturer that gets its parts from a configuration of countries has control over how many parts it gets and how often, but it cannot necessarily dictate that originator’s capacity utilization even though stricter control over that manufacturer’s utilization could potentially lower costs. Also, part defects, a common metric, could more than likely turn into contract disputes versus a pure process improvement event (Hugos, 2018).

I would suggest that outsourcing requires even more careful collection of data to understand the recommended supply chain metrics. This gives the customer more grounds to either renegotiate contracts or work to improve the supply chain. At a minimum the customer should track fill rates, order management costs, fulfillment lead times, and return rates, though complexity, configuration, and practice measures should be captured and analyzed as well. Outsourcing would make these metrics a bit more sensitive as the customer has less control (Hugos, 2018).

Reference

Hugos, M. H. (2018). Essentials of Supply Chain Management (4th ed.). Wiley.