Transcript Slide 1
Core competence thinking in supply
chains
Core Competencies
Source of competitive advantage
Retain
Complementary Competencies
Support core competencies
Outsource strategically: strategic
alliances
Residual Competencies
Do not contribute to competitive
Outsource competitively, leverage,
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transactional relationship
advantage
The Eighth Cardinal Sin
Outsourcing a core
competence (Cox, A)
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None Core Today Core
Tomorrow
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Core Today None Core
Tomorrow
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None – Core
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Core Today
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Successful Outsourcing
Examples
Unilever IBM global procure-to-pay service
Jaguar Land Rover DHL
NHS DHL -NHS Supply Chain
Motorola Flextronics
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Outsourcing failures
G4S unable to supply 8000 contracted staff for
Olympics games security – taxpayer picked up
the bill £70 million
Boeing
NHS Npfit £7.6 bn overrun
HMRC’s tax Credits, £1.4 bn in overpayments
written off.
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Outsourcing Failures
Sainsbury’s “Business Transformation
Programme” – the new system couldn’t track
stock - cost £500m
Carthage’s First Punic war Hanno the Great
outsourced soldiering but a contract dispute
resulted. Hamilcar Barca settled out of court.
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Risks of Offshore Outsourcing
1.
Reputational risk
2. Underestimating the Total Acquisition Cost of
the transaction
Also dangers from
Supply Chain
Complexity
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Reputational Risk
Threats of mass suicide
Slave labourers freed
100 young women burned to death
Microsoft
Zara
Walmart
Counterfeiting Risk –
quality affects reputation.
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True Cost
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Prof K.W.Platts (University of Cambridge)
Widespread failure to identify all of the associated
costs
Research shows that companies underestimate the
non price costs of sourcing in China (and Far East)
by about 30%
Worst case total cost four time the quoted price.
Underestimating warehousing, storage and
inspection and quality costs.
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(7)Steps to improved outsourcing
(DR Ilan Oshri)
Understand the outsource motive and the
resources available, identity overall goals and
take a systematic approach.
Avoid bandwagoning and outsourcing problems
rather than solving them
Avoid sourcing models that are beyond the
firm’s capability to manage
Draft SLA’s on the basis of benchmarks that
lead to competitive advantage (KSF’s).
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The Relationship Between Supply
Chain Risks (Christopher, M et al. 2010)
Supply
Risk
Process
Risk
Demand
Risk
Control
Risk
Environmental Risk
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The Future
When it is done well it clearly brings many advantages
Globalisation has become a permanent feature of trade
and offshore outsourcing will continue
As organisations learn from their experiences they will
become more cautious and will attempt to avoid the
pitfalls and make more measured decisions.
There is evidence of a trend towards insourcing
(reshoring) with fewer but improved and more rationale
outsourcing decisions.
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Successful Outsourcing
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Definition
White and James (1993) “a contractual
relationship between an external
vendor and an enterprise in which the
vendor assumes responsibility for one
or more business functions of the
enterprise
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