Competitive Advantage increasingly emphasizes logistics and driving value throughout the supply chain. Monitoring, controlling, and evaluating the supply chain has a significant impact on the business model’s alignment, efficiency, and ability to drive value.
Outsourcing of components within the supply chain is only advised when the competencies are not central to the business’ product/ service offerings and thus do not represent a key differentiator in the market. Core competencies that differentiate one business’ product/ service offerings from competitors should not be outsourced as this diminishes the business’ competitive advantage and can create an unhealthy dependency on outside vendors.
Product Supply Chain
If a business’ core competency rests on data as a service (DaaS) the competencies for research, data analysis, collection, and reporting should not be outsourced. Similarly, if a business’ core competency rests on the designing of a specific product this skill set should not be outsourced. Another example includes research; if a business’ core competency rests on a specific research topic expertise than this skill set should not be outsourced.
Digital Services Supply Chain
Outsourcing any of these competencies can diminish the business’ competitive advantage but also lend to these internal competencies diminishing over time. Understanding this is crucial when building a business’ competitive advantage, strategic vision, and asset development efforts. The following criterion and questions can be referenced when deciding if a competency within the supply chain should be outsourced:
- Is the vendor an expert in this area?
- Have they worked (or been affected by) this topical area?
- What is their perspective and is it aligned with your business’?
- Is their product/ service/ information usable as received?
- Or does it need more processing and ‘work’ in order to be incorporated into the business?
- Where is vendor located and how will this impact the supply chain?
- Does their location impact their expertise?
- Does this have an impact on regulatory requirements?
- Does the vendor understand your business culture, values, processes, and priorities?
Cost should not be the primary criterion by which supply chain partners are evaluated. Their location, product / service quality, subject matter expertise (‘lived’ or only ‘read about’), and values can greatly influence the business’ ability to merge the vendor’ ‘inputs’ into the supply chain without error, diminishing quality, and customer satisfaction suffering.
Areas supported by innovation include:
- Error Rates
- Product Development
- Distribution & Schedules
Supply chain calibration is an ongoing process that never ends. Building in outsourced components can help the business to dedicate more resources to the core competencies that create the competitive advantage, increase capacity, decrease distractions, and potentially increase opportunities to explore new product/ service innovations. It’s a win-win as long as the core competencies stay ‘in house.’
What is the structure of your business’ supply chain? What criterion was used to evaluate what components are kept ‘in house’ versus outsourced? Share your comments below.
Travis Barker, MPA GCPM
Syed M. Zubair Bokhari – XDIMENSION SOLUTIONS. (2010, December 3). Retrieved September 08, 2017, from http://www.scdigest.com/assets/FirstThoughts/10-12-03.php