How to achieve effective outsourcing of your International Supply Chain
Ensuring a reliable, sustainable and cost-effective international supply chain is one of the most challenging areas of logistics. There are many barriers and hurdles to achieving this, whether you are importing finished goods, components or raw materials, or exporting your products to overseas markets. These include:
- Multiplicity of logistics partner and service provider options.
- Volatile freight rates, along with numerous surcharges and accessorials.
- Fragmented supply chains relying on many transhipment and handover points
- Numerous trade regulations and import/export permits
- Protectionist measures leading to fluctuating duties and taxes.
- Economic uncertainties related to the changing political backdrop, such as Brexit
What are your core business and service needs related to overseas sourcing or in supplying foreign customers?
An important part of addressing these issues relates to the effective management and outsourcing of transport operations whether global or regional in reach. A useful starting point is to establish what are your core business and service needs related to overseas sourcing or in supplying foreign customers. Based on these conclusions an assessment should be conducted of existing service partners, processes and performance to evaluate whether these needs are met both now and in the future. Typically, the following questions should be asked:
- Have there been major changes in your overseas sourcing needs?
- Has there been significant increases in demand from overseas customers?
- How effective are ‘in house’ resources in managing these supply chains and logistics service partners.
- What information is available to manage the supply chain and monitor performance?
- Have you experienced a deterioration in service or major cost hikes with your current freight partners or forwarders?
- Are you experiencing freight delays due to capacity, port congestion or trade compliance issues?
- Are current contracts due for expiry, and if so, do you have a clear renewal or tendering strategy?
From the conclusions, priorities can be established to address the gaps or shortcomings of the existing supply chain and put an action plan in place.
Logistics Service Providers
One of the key priorities is to ensure your logistics service providers are fully aligned to your service needs and provides a true fit with your business. In essence, service partners that demonstrates the following characteristics:
- A willingness to invest time in understanding your service needs, engage closely at both tactical and strategic level, and to provide effective account management.
- Has experience in your industry, and a track record of applying solutions that will add real value. This includes knowledge of your cargo handling needs, and the regulatory and special handling requirements of products such as chemicals, perishables or pharmaceuticals.
- Strong product management – whether your most frequent shipment mode is just land, or includes air and sea, a clear understanding of the market, and effective management and monitoring of the carrier base is essential.
- The resources and competency to manage the shipment process from end to end, and have the network to effectively support your business, on all the trade lanes that you currently utilise, or might use in the future. This may include expertise to advise on trade management, and resources to assist the uninterrupted flow of imports and exports.
- A commitment to working with you to ensure competitive pricing, and achieve efficient cost management, including ‘ad hoc’ service needs. The market can be very volatile, both seasonally and in certain trade lanes, so sharing market knowledge and providing transparency will provide real benefits.
The Bisham Approach
We have a well proven process, to assist clients in addressing these challenges. The initial phase being a Rapid Diagnostic Review (RDR), which involves an assessment of the current supply chain and establishing an understanding of future business needs. This includes an evaluation of data available on historical shipments and the performance of current service providers.
The next step involves a process of establishing supply chain service needs and reviewing options on the way forward, including re-assessing the market, working with existing logistics partners or taking some or all service requirements out to tender. In this case a recommended programme will then be set out covering the following elements:
- Establishing a tendering strategy, based on the key service components required of logistics partners, including service options, information connectivity, and performance criteria.
- Recommending a tendering process covering key elements, such as Request for Information (Pre-qualification, RFI), Request for Solutions (RFS) and Request for Quotations RFQ. Depending on the perceived strengths of the supplier market, the clarity of service requirement, and the complexity of solutions.
- Design of tendering document that provides clear description and specification of service needs, and a pricing matrix that identifies all key cost elements, to provide complete visibility of cost differentials between bids.
- Managing the tendering process including handling of Q&A clarifications for bidders, agreement of selection criteria and advice on a short list.
- Support through bid clarifications, contract negotiation, final selection, and implementation.
Throughout each step of the process, there is clear communication with the client on progress, and where key decisions need to be made, stakeholder workshops are held to ensure all key considerations are taken into account and there is consensus on the way forward.
Irrespective of the strengths of ‘in house’ resources to manage your international logistics needs, to bring in additional expertise to assist with a strategic review and management of subsequent improvement programmes including tendering processes will provide an invaluable source of market knowledge and experience. The typical costs of such support representing a very small investment compared to the eventual cost savings and service benefits.
There is also the potential to enhance management capabilities, and improve management tools stemming from better information flows, clearer performance reporting and improved supply chain visibility.
Finally, there are clear advantages from securing a logistics advisory partner that provides an independent view of the market that understands your strategic needs and can provide an objective view on the performance of Logistics Service Providers. This is particularly important when considering the complexities of managing the numerous players operating in the international supply chain.