[The Jolt] Finding the right outsourcing partner

Singapore - A downturn often translates into companies outsourcing their supply chain and procurement functions in order to concentrate on their core competencies. ProcurementAsia speaks to AEB on what supply chain directors should consider when finding the right partner to outsource their procurement and supply chain.

First of all the company must know exactly what it wants; goals should be clearly defined, says Dr Torsten Mallee, business development director of AEB.

For the partnership - tasks, competencies and responsibilities must be clearly allocated. Performance must be easily measurable, and for this, the right instruments must be available from the start.  Most of all, for a partnership to be mutually beneficial and successful, the communication throughout the relationship must be open and include regular reviews.

Key characteristics of the right partner:

1) Governance of process: Look for a partner that has the best knowledge about the business processes relevant to yours. Outsourcing to a partner that only has good knowledge of the IT-structure and offers good services will not help in case of problems on the level of the business applications. These cannot be resolved by a standard service technician and the best strategy is to let the applications be hosted by the provider of the applications itself - not all providers offer this option.

2) "Partnerability": One partner often is not only ONE partner. Most outsourcing concepts today are laid out in a collaborative manner.  Many AEB clients have fully outsourced their SCM to 3PLs. Sometimes the client use the software itself, sometimes it lets the 3PL use its system.  Sometimes it is just the other way around - even the contractual partner changes, from the former client to the 3PL.  Not all who offer outsourcing services have the necessary flexibility.

3) Scalability and new innovations: Consider future growth of your operations and the partner's ability to cope with it. The partner must have the ability to adapt to your changes. The same applies for new developments: The outsourcing partner must be expert in IT as well as the business processes. Then it will be in his own interest to offer continuous improvements and adapt to innovations triggered by the outsourcing company.

4) A good contract: SLAs (Service Level Agreements) must be defined and documented precisely. A good outsourcing partner will offer standard SLAs that cover all important aspects. For these he will offer standard processes and trained teams.  Go for these standards (when they are "good") and proceed without specific exclusions as long as you get a well-proven service.

5) Controlling with key figures - and without: The outsourcing company must control the service of the partner with clearly defined performance indicators. Exclusively looking for these however is not enough. Soft factors are important as well. A continuous review between the involved staffs of both companies must be defined and performed - such as regular on site visits.