Outsourcing: Make it successful
There can be many good reasons to choose to outsource all or part of your production. Whatever the reasons, a well-functioning outsourcing will create both flexibility and scalability in your organization.
One of kaastrup|andersen’s global customers had decided to outsource the production of a critical component to two global suppliers. The aim of the project was to define the collaborative processes between the parties in the Supply Chain and ensure a global implementation. The project succeeded, among other things, through a sharp focus on handling the many stakeholders from different cultures across the entire value chain and, not least, maintaining control throughout the project.
Read the entire case description below.
In connection with the development of a new, large product range, kaastrup|andersen's global customer had decided to outsource the production of a critical component to two global suppliers. Outsourcing was chosen as the customer did not have the production facilities to produce the component themselves. At the same time, the customer did not want to invest in additional production facilities due to the size of the component. The two suppliers are globally located with production facilities in Europe, Asia, and the USA.
The customer had signed a contract with the two suppliers where it was agreed that the customer would be responsible for handling both the inbound and outbound logistics: Making sure that the elements and materials were delivered to the supplier (upstream). The customer was also responsible for retrieving the end products after production. The suppliers' task thus consisted solely of assembling the critical component.
The development of the critical component took place while the outsourcing process was being defined and established. This placed special requirements for the cooperation with vendors in relation to both the logistical setup and in terms of defining roles and responsibilities in the many logistical processes. The customer was used to outsourcing, but until then it was exclusively for products that had already been developed and put into series production.
The project was underway when the customer asked kaastrup|andersen to take over the project management. At the time of the hand-over to kaastrup|andersen, the requirements for setting up the Supply Chain were not defined, ownership in relation to the final daily operation was not clarified and the cooperation with the suppliers was deficient: there was a need for control, management and execution of the entire project process.
The task was in its essence a business development task and the main purpose was to define cooperation between the parties in the Supply Chain. At the same time, a global implementation at the supplier’s was required.
The Project Manager from kaastrup|andersen set out to define several different work areas and initiatives:
- To ensure the involvement of the right stakeholders, the decision on where to place the ownership of the future daily operation in the customer's organization was central.
- The requirements of the customer had to be collected and developed in relation to the entire set up of the Supply Chain. Guidelines for collaboration and processes were drawn up for the most important areas of the Supply Chain.
- Several IT interfaces (ERP to/from ERP) between the customer and supplier were defined in order to ensure an overview of all materials for use in production. This work took place in close cooperation with the suppliers.
The aforementioned work areas were all characterized by a great need for communication and collaboration, both internally in the customer's organization and with the two suppliers. Internally in the customer's organization, the Project Manager's collaboration stretched across the value chain, from R&D to production and Supply Chain. At the same time the Project Manager worked very closely with suppliers and their respective organizations defining and creating guidelines and processes for cooperation.
The project achieved the desired results, including:
- Ensuring placement of ownership and anchoring of the responsibility of daily operation in the customer’s Supply Chain organization
- A well-defined collaborative model between the customer and the two suppliers
- A newly developed approach for the inbound and outgoing logistics that satisfy the requirements for both flexibility and scalability
The customer and kaastrup|andersen cooperated to define the Supply Chain of the customer and to integrate the suppliers in the Supply Chain. The success of the project was due, among other things, to the successful management and involvement of the many diverse stakeholders and the continuous control and management throughout the project process.
Thorough documentation, clearly defined requirements to the Supply Chain as well as tangible and specific plans provided all the parties involved with a clear picture of the direction and goals. It motivates the customer's organization to create and drive the changes needed to make the collaboration work in the long-term operation.
Is your capital tied up in your Supply Chain so that it inhibits the growth potential of your business? We have extensive experience from Supply Chains in various companies, where we have helped to reduce the throughput time and thus reduce the total tied- up capital. At kaastrup|andersen, we focus on what creates value for the customer in your Supply Chain.