Offshore, nearshore, or outsourced? It's a performance matter now
-- Manufacturing Business Technology, 12/5/2007 11:53:00 AM
Boston-based AMR Research says many companies are reconsidering deployment strategies for offshoring services due to performance and management issues of extremely remote providers.According to the AMR report, Time Zones Do Matter: Rediscovering the Americas and Nearshore Delivery, “Dispatching and managing tasks in the same time zone is more forgiving for clients with less process maturity, or for tasks that require more constant communication. Nearshore delivery goes a long way toward addressing the difficulties clients and service providers themselves face with projects delivered from India and China.”
Says AMR Director Dana Stiffler, “Large companies especially need to cultivate both nearshore and offshore service providers," identifying Mexico, Brazil, Chile, and Argentina as key centers of growing competency for nearshore services delivery. “But services in manufacturing is an exception," maintains Stiffler. In complex, manufactured products, a lot of embedded software needs to be industrial-strength, and as yet, you still need to go to India and China for that."
Meanwhile, the convergence of numerous factors is resulting in a growing receptiveness for outsourcing—particularly the logistics function, says AMR.
“It’s really the result of a ‘perfect storm’ of several factors coming together all at once,” says Greg Aimi, AMR director of supply chain research. “We’ve gone through a decade or more of companies looking at costs and core competencies. One factor [surrounding] outsourcing logistics is more executive-level acceptability of outsourcing of other functions, coupled with downsizing in many organizations that result in a dearth of resources for adequately managing the discipline."
Ongoing reliance on third-party logistics providers for cross-border shipments is another factor.
AMR recommends adhering to these critical best practices in moving toward greater logistics outsourcing:
• Evaluate whether it is right for the company. “If it’s a core competency that differentiates you in the market, you shouldn’t relinquish it,” Aimi says.
• Determine what elements should be outsourced, and identify performance expectations.
• Use a well-defined professional process for evaluating and selecting providers.
• Create an agreement that will yield the best results over time. “A simple cost-plus contract isn’t likely to result in improved performance,” concludes Aimi.
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