As per this recent article in Canadian Transportation & Logistics on how Canadian firms [are] rethinking logistics business models that summarizes some of the findings from the Global Business Strategy and Innovation: A Canadian Logistics Perspective, in the last five years total annual investment in distribution facilities in Canada has grown from $674 Million in 2005 to $1.39 Billion in 2010, an increase of 106%.
There’s no need to service Canadian operations from US distribution centres. In fact, with lower operating costs in Canada compared to many traditional US hubs, it might even make sense to service the Northern US from Canadian distribution centres. It’s another option, and one that should be consider in your total costs of operations logistics models.
A recent article over on the Sourcing Interests Group Site on Rocks to Turn Over in Outsourcing Arrangements contained a number of questions an organization could ask when looking to maximize value from the relationship. The following six are especially pertinent.
- Do we share information the other party needs to be successful?
One cannot outsource an activity and expect the outsourcing organization to be successful unless all of the information the outsourcing organizations needs to be successful is also shared. For example, if an organization outsources customer support, it must provide the third party with all of its policies, product details, available resolutions and average wait times (for repair, replacement and refund).
- How can we encourage more active planning for, and achievement of, innovation?
An organization that outsources a function and does it right does a process analysis and redesign so that the outsourced organization implements an efficient desired state of the process in place of the inefficient current state. However, while this will be an improvement, it will not necessarily be an optimal implementation of the process. There should be a constant quest for process improvement and innovation.
- Is there commitment and follow-through when decisions are made?
Decisions are ineffective if not acted on.
- Are key leadership roles understood and filled?
Consistent leadership and executive support are necessary for any organizational initiative to be effective.
- Are adequate incentives in place to motivate collaborative behaviour and effective performance?
Chances are that there will be metrics up the wazoo but very little motivation in place to improve them. In order to insure success, there should be incentives in place for the organization to go above and beyond the committed service level.
- Do we trust our counterparts to meet their commitments effectively?
If you don’t trust the outsourcing provider, the outsourcing provider won’t trust you and instead of thinking about how to improve service to your organization, they’ll be thinking about how to make sure they don’t get screwed out of any money they were expecting to get. And instead of spending time trying to innovative and improve a process, they’ll be spending all their time documenting activity and compiling metrics and monthly reports to verify that they met performance commitments and are due to receive (additional) payment.
Outsourcing is not a guaranteed success. In fact, to see any improvement at all, it’s a lot of work. The rewards can be there, but it has to be done right. These are six great questions to ask if an organization wants to determine whether or not it is on the right tracks.