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Question answered in Quora - What are the advantages and disadvantages of outsourcing supply chain s

Assumptions

1-Supply Chain does not impact the customer satisfaction level so much for your business, as long as the product gets delivered as per the agreement on certain metrics it is good. Your business is not dependent on wowing the customer on how the product gets delivered. For example Bed Bath and Beyond, Polo Ralph Lauren, Williams Sonoma all these retailers are primarily successful because they focus so much on wowing their customers, there is a saying "you will never forget how some one made you feel" , as a gift receiver once you taste that feeling you want to give that same feeling to your friends and family, so that is why bridal registry business is such a huge business for Bed Bath & Beyond.

2-The portion that is being outsourced is primarily the Outbound Distribution & Delivery, not so much the sourcing & building the product - if you are making a product then I would not outsource sourcing because it is very important that the quality of your components or raw materials are of outstanding quality, if they are not you are digging your own grave by outsourcing

Advantages

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1-You can focus on your product, don't need to waste your time on worrying about Distribution & Delivery because you have a solid partner that can execute that portion of the business really well

2- Less capital intensive and hence less upfront cost to your business

3-You don't need to learn Supply Chain, make sure you have a clear metric that you are going to measure and pay by, to the partner that is delivering these Supply Chain services

4-You don't need to manage the people in this area of your business, that is a major relief, all that energy is well spent in making the best product possible

Disadvantages

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1-You kinda lose control over the processes, so assuming how your product gets delivered doesn't make a big difference in the customer satisfaction measure then it is okay, but if customer satisfaction is significantly impacted by Supply Chain then need to think twice about outsourcing it

2-Integration with your Supply Chain services provider could become painful, especially if your business's picks up and you are scaling up big time,

3-You probably need to have some kind of audit processes to ensure the Supply Chain services provider is delivering well some kind of a customer satisfaction survey for your customers and also is financially stable and is going to be a partner that is delivering in the long run, because this business is tough and these guys go out of business so fast, especially in Distributing food, the margins are so thin, so you really need a solid partner that has slick and lean operations

At a high level these are something I would think about.

Also check out my book Puga Sankara's Supply Chain Blog - that is a must read before spending Hundreds & Thousands of $$$ on your MBA or Masters Degree to get the best ROI or before starting your Entrepreneurial journey.


ABOUT THE AUTHOR 

Puga Sankara is the co-founder of Smart Gladiator LLC. Smart Gladiator designs, builds, and delivers market-leading mobile technology consisting of Smart Gladiator Wearable Scanguns, Tablets, Mobile Tech & Apps for retailers, distributors, and 3PL service providers. So far, Smart Gladiator Wearables have been used to ship, receive, and scan more than 100 million boxes. Users love them for the lightweight, easy-to-use soft overlay keyboard, texting&video chatting ability, data collection ability etc. Puga is a supply chain technology professional with more than 17 years of experience in deploying capabilities in the logistics and supply chain domain. His prior roles involved managing complicated mission-critical programs driving revenue numbers, rolling out a multitude of capabilities involving more than a dozen systems, and managing a team of 30 to 50 personnel across multiple disciplines and departments in large corporations such as Hewlett Packard. He has deployed WMS for more than 30 distribution centers in his role as a senior manager with Manhattan Associates. He has also performed process analysis walk-throughs for more than 50 distribution centers for WMS process design and performance analysis review, optimizing processes for better productivity and visibility through the supply chain. Size of these DCs varied from 150,000 to 1.2 million SQFT. Puga Sankara has an MBA from Georgia Tech. He can be reached at puga@smartgladiator.com or visit the company at www.smartgladiator.com. Also follow him at www.pugasankara.com

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