Originally posted on on the e-Sourcing Forum [WayBackMachine] on Thursday, 18 January 2007

According to an article in the Outsourcing Journal back in March titled “Suppliers Face a Changed World As First Generation Outsourcing Deals Expire”, 43% of annualized outsourced contract value that is up for renewal over the next two years face a medium risk of getting restructured. Traditionally onshored deals will be offshored, mega-deals (that included infrastructure, applications, maintenance, and development work) will be unbundled, and individual transactional business process outsourcing will be merged into larger multi-process deals, for example.

However, as per the “Supply Chain Outsourcing” article in the current issue of the Frasers/PMAC article, more choices are only making decisions tougher for the buyer. With so many functions being outsourced and so many third party providers to choose from, it’s now harder than ever for a buyer to align structures, requirements, strategies, and capabilities with a prospective third party’s offerings. Although I’ve written a fair amount about procurement outsourcing in my 5-part procurement outsourcing series here on e-Sourcing Forum and Sourcing Innovation, I liked this article as it concisely addresses the three questions a buyer should be asking, and answering, before she starts down the outsourcing path.

• Am I a good candidate for outsourcing?
  The only guidelines or clues for answering this question are internal problems, pressures, or shortcomings, such as insufficient planning, alignment, or control; limited visibility; poor process integration; or lack of coordination across multiple supply chain channels.
• What function(s) should be outsourced?
  The challenge is to know which function(s) would perform more effectively in an outsourced environment and how the outsourcing of one or more functions would benefit the entire supply chain.
• What kind of organization should handle outsourcing function(s)?
  Outsourcing options used to be limited to third-party logistics providers (3PLs), most of which developed solutions to complement their assets. But another kind of provider has emerged: integrated-services coordinators. These global, ìasset-agnosticî organizations manage clientsí supply chains by synchronizing the services of 3PLs, functional providers, and internal business owners.