.. es need to be set by and to achieve this a high level of communication and understanding between firm and service provider must be established. There’s no magic solution, experts agree. But organisations can reduce outsourcing anxiety — and boost their chances for success — by carefully assessing their needs, finding outsourcers that match those needs and, above all, engaging those outsourcers in a functional, committed relationship. More and more, outsourcing deals are not being patterned after the traditional vendor/client relationship but are being forged as intensive, long-term and highly interdependent partnerships in which value and risk are shared.
Another risk outsourcing is the impact of outsourcing on those currently responsible for management of the function is fundamental. If the service is outsourced, the management of the provision of the service from within the organisation is radically changed from management of a function to management of the business relationship with a contractor. The lack of control posed by movement of this function outside of the organisation is often seen as the greatest risk of outsourcing. Therefore, it needs to be carefully planned and managed. In reality, the effect of outsourcing can simply be seen as a shift in focus from managing a function to managing a contractual relationship.
If properly implemented, it need not represent a loss of control. Careful planning together with a contract written to provide for control measures such as performance monitoring, and good contract administration will minimise or negate any lack of control. Outsourcing now commonly includes asset transfers. Examples are transfers of staff, sale of existing equipment, and/or a transfer of existing contracts used in the provision of the service. It is common for specialist outsourcing companies to seek a transfer of existing staff to do the work.
An organisation can facilitate this process by allowing communication between staff and bidders about options for staff. Many staff view the opportunity to work with an organisation that specialises in their field as valuable; others will prefer redeployment or simply a redundancy. Sometimes the sale, lease or sublicense of a site is also involved. It is therefore important that a complete asset valuation is undertaken as part of the process of defining an organisation’s current service and preferred requirements. An examination of relevant documentation should also be undertaken.
The organisation must know what equipment and other physical property it has, including consumables, what contracts are currently used in the provision of the service and relevant details of those contracts. It is common for specialist outsourcing companies to seek a transfer of existing staff to do the work. An organisation can facilitate this process by allowing communication between staff and bidders about options for staff. All these need to be consider when the company decide to outsource its distribution activities to the external agents. As noted, there are many advantages for companies who choose outsourcing as a means of satisfying their logistics need, but just as there are advantages there are also disadvantages.
Outsourcing is based upon fundamental principles and, if those are applied at the outset of a relationship, the parties will most likely have an effective, successful relationship. But if the parties enter into an agreement that is not based on those principles, the result will be an unsatisfactory relationship and, probably, an early termination of the contract. The first of these basic principles is for the buyer to determine the scope of services and the metrics for the performance levels it wants from the supplier. This is the only way a buyer can achieve a comfort level with turning over its process to the supplier and ensuring that it gets what it pays for. This is the only way to ensure accountability from the supplier.
It must be done up-front, before the contract is signed. A certain cause for failure in an outsourcing relationship is for the buyer to let the supplier dictate what the services and performance levels will be. Another sure cause for failure is for the buyer not to completely describe the scope and boundaries of every component of the service. This can lead to a supplier providing something that was not agreed upon and then charging a premium for it or the supplier not providing something the buyer assumed it would be getting for the price it is paying. There’s no magic solution for these problems.
But organisations can reduce outsourcing anxiety — and boost their chances for success — by carefully assessing their needs, finding outsourcers that match those needs and, above all, engaging those outsourcers in a functional, committed relationship. More and more, outsourcing deals are not being patterned after the traditional vendor/client relationship but are being forged as intensive, long-term and highly interdependent partnerships in which value and risk are shared. Another disadvantage of outsourcing is the loss of control, especially when small organisation outsource its distribution service. The way to get around that problem is to be careful when selecting vendors and when crafting outsourcing contracts. For example, contracts should include objective measures of performance and a timetable for meeting those objectives.
Should a vendor’s performance fall below a performance standard or otherwise come up short, the company should have a course of action to take. In addition, the logistic company may be distributing the products, but ultimately the manufactory are responsible for the customer relationship. The customer only cares about receiving the product – not who sent it or how it got there. The company need to monitor and evaluate the work of the third party and need to be firm in its needs as the poor performance from the logistic will lead the firm to loose its customers and eventually loose its market share. Conclusion : A firm should outsource any activity which reduce or distract from its ability to focus on core activities of the firm. If the organisation do everything, it would not have the ability to develop its core competencies and gain competitive advantage.
But there is important point, which is, firms should be careful when they select the company which will provide the necessary service. The relationship between the company and the outsourcing vendor is of the utmost importance. Effective and thorough contractual agreements are the key to a successful distribution outsourcing experience. The specific needs of the organisation should be matched with the supplier’s capabilities during negotiations, to develop a contract around a shared vision. Also, the firm need to check if the provider are capable to do the job in proper way. Most of the failure of outsourcing cause when the third party do not provide the desire service to the firm. Also, the firm should be monitor the third party to check if they are doing the right job Bibliography www.firmbuilder.com www.exel.com www.cnn.com www.ft.com Business.