Discuss, how outsourcing firms function for smooth flow of SCM? (1.5 Marks)
Businesses that fail to manage their supply networks adequately are likely to experience overwhelming issues in their supply chain (Adams, 2018). Increasing customer orders and an increase in record inventory are two of the many variables that lead to these issues. Other reasons such as changing customer needs, inefficient replenishment, and logistical delivery challenges. Hence, the firms find it difficult to focus on their main operations, improve their market share and client base, and grow their revenues. Due to poor supply chain management, such challenges emerge. Each stage of the supply chain, from inventory management to last-mile delivery, serves a critical function in accomplishing business objectives (Raj, 2007). A well-outlined plan for supply chain management is critical for firms to ensure healthy levels of inventory, provide consistent, prompt fulfillment of customer needs, and promote healthy profit margins.
SCM firms have made it feasible for enterprises to focus on their key abilities instead of investing time and resources in logistics management (Adams, 2018). Outsourcing SCM can realize several key benefits to a professional include that it allows the firm to focus on the supply chain maintenance of a professional third-party logistics provider, create new ideas, plan and implement strategies for future expansion, improve service delivery, and connect with customers besides developing a solid relationship (Trent & Roberts, 2009). In addition to allowing the company to focus on its long-term success, outsourcing to the proper service provider enables the firm to benefit from the competence of SCM experts. The package encompasses competencies, skills, business networks, resources, and technology, all of which include the price.
Each phase of the supply chain, from replenishing and managing inventory through order fulfillment and last-mile delivery, acts as a strategic mechanism for accomplishing the firm’s objectives (Adams, 2018). If done effectively, supply chain management leads to smooth running operations and delighted clients. Since SCM is critical for firms to maintain, they facilitate prompt and reliable satisfaction of customer needs and maintain excellent inventory margins (Raj, 2007). Because organizations delegate some roles to third-party service providers, it becomes easy to focus on critical business functions instead of using much of the time and resources in logistics management. Smart companies outsource SCM to industry professionals to enjoy a variety of critical advantages and position themselves well for long-term success.
Generally, SCM challenges tend to be overwhelming for firms that fail to address their supply networks efficiently, and it could be life-threatening (Adams, 2018). Various issues contribute to some challenges, such as inventory growth, change in customer needs, inadequate replenishment, logistical last-mile delivery issues, among other issues. Accordingly, such firms find t challenging to concentrate on their market share and customer base and increase their revenue, all of which occur due to inefficient SCM.
Evaluate, the reasons for using outsourcing logistics service in Saudi Arabia/any company of your choice. Using some good examples. (1.5 Marks)
The main rationale for adopting outsourced logistics is to limit extra costs that occur as a form of capital and assets resources (Trent & Roberts, 2009). Many employees would not be recruited by the organization because the first stage of the project is provided to a third-party firm. Accordingly, organizations can focus more resources on their main abilities by delegating non-critical duties to third-party professionals. Conversely, firms that outsource their work usually experience in the speech with which operations are completed after an outside party’s first half of activities. After delegating labor to third parties, professionals get more engaged in the task, leading to higher productivity.
There are no time-saving and financial advantages to be considered. One critical benefit of outsourcing is reducing costs (Trent & Roberts, 2009). When businesses engage with third-party providers, they can minimize their employment and storage costs. Reduced number of workers, and reduced invoicing and paperwork, are all critical factors in the growth of a firm. Additionally, outsourcing does not only save costs, but it also saves time, which is a critical advantage. Hence, human resources can dedicate their energy and time to other organizational objectives because they can no longer be burdened with the daily impact of logistics.
When Google was launched, it appeared to be a simple search engine (Hodosi & Rusu, 2019). However, it has transformed into a massive firm that provides both software and hardware services, advertising services, employing people from across the globe. In terms of the internet in contemporary society, Google is the most popular firm, and it’s the most preferred when talking about online searches (Hodosi & Rusu, 2019). It is a technical enterprise, and technology acts as a strength and business for the firm.
Google is one of the top outsourcing firms in the world, exporting non-core responsibilities including information technology and administrative labor for many years. Google recognizes that despite its wide size, it cannot perform everything (Hodosi & Rusu, 2019). Their development work and email support for AdWords, among other products, have been outsourced to accomplish the goal. Google is focused on improving phone support and email assistance. As an outcome of the seamless integration of such employees into the internal support team, customers can enjoy quick response times at a reduced cost (Hodosi & Rusu, 2019). After all these elements are entirely considered, the company is an excellent outsourcing case study that highlights the benefits of outsourcing. It is possible to outsource for different reasons, such as accessing a larger pool of competent employees, improved quality, reduced costs, and managing issues. It is also critical to explore the time-saving and financial advantages. Cost reduction is one of the main outsourcing benefits. Using third-party experts reduces personnel and storage costs for the company (Hodosi & Rusu, 2019). Having fewer employees and less invoicing and paperwork is a key part of the business’s success. Another key benefit of outsourcing is that it does not only save costs but time. As the firms no longer have to deal with the daily weight of logistics, employees feel free to focus on other critical issues in the company.
Reasons why outsourcing logistics arrangement are not always successful? (1.5 Marks)
There are different reasons why outsourcing logistic responsibilities may not be effective. First, the ineffectiveness of third-party service providers might have a severe impact on the operations of a firm (Trent & Roberts, 2009). Based on the following case, a firm can produce goods at the relevant time, although delays in the delivery of goods in the market can result in the goods not reaching the market at the appropriate time. Besides, ineffective research on market trends can trigger the organization to make poor decisions (Hodosi & Rusu, 2019). In most scenarios, the information provided by outsourced logistic firms is the primary source of information used to aid major decisions. Simply, second-hand information is not always reliable and can result in significant losses for a firm.
Outsourcing benefits are many, although the drawbacks tend to be numerous. The expenses associated with the strategy are mostly underestimated; a significant amount of money is spent on outsourcing the work to a third party, which is usually not included in the firm’s overall budget (Trent & Roberts, 2009). Firms that outsource their work from third parties tend to rely on the service providers for their resources as an outcome. Accordingly, they delegate even minor responsibilities to the third-party experts. The organization loses its capacity to perform tasks independently and rely on outsourced individuals to complete them on their behalf. Besides, there is a likelihood that confidentiality is breached because the sensitive organizational data is transferred to a third-party expert, which risks the information from being lost or compromised (Trent & Roberts, 2009). It is also possible that the company that outsourced the assignment can get some critical warnings if a worker in one of these third-party providers takes critical information from the documents.
Human resource management in enterprises is another challenge encountered during logistical procedures (Hodosi & Rusu, 2019). Failure to adopt the most effective outsourcing services can result in significant losses for the company. The benefits of outsourcing can be wide, but the disadvantages are also many. The costs associated with the strategy are somehow underestimated; hence, a significant amount of funds are spent on outsourcing the work to an external service provider, which is mostly not included I the overall budget of the firm. Furthermore, although it might be considered as a cost-reduction approach, it is usually a value-generating decision in reality (Hodosi & Rusu, 2019). The client should fully understand the associated implications on cost as the return on investment can be achieved from the value affecting more than the supply chain’s client.