Why Outsourcing Has NOT Brought Us Holiday Cheer!

I like this image. It is cheerful, and connotes that we can put things together through cut and paste strategies. As supply chain leaders have worked on labor arbitrage strategies--sourcing low cost labor for call centers and procurement to take advantage of lower labor costs--they have believed it also. However, the more I study supply chains, the less I believe that outsourced supply chain strategies work. Let me tell you why:

Call Center Technologies and Outsourcing Is a Nightmare. As I place holiday orders online, or try to work through customer service systems like voice recognition, and telephone prompts, I long to talk to someone. When I hear someone that can barely speak English with a strong accent, I hang up the phone. What happened to customer service? I feel that we, in our quest for labor efficiency, have done anything but service the customer. I refuse to call United Airlines customer service. It is just too painful.

3PLS Have Not Stepped Up to the Challenge. Third-party Logistics firms (3PLs) were created to help shippers to meet peak demand, enter new markets, and provide new capabilities. Increasingly, I find this is not the reality. The churn of 3PLs, and the lack of experience of the providers, is causing many of my clients holiday headaches. Somehow in the building of 3PLS we have lost the focus on client service. Good luck with your shipments this holiday! Most of my clients are struggling with port issues, and the lack of equipment. I think that when the dust settles post-holiday, most companies will find that they are too dependent on substandard 3PLs.

Procurement Is a Mess. I am also busy closing my year as a small business and am focused on working through contract terms with major manufacturers. Many have outsourced procurement to third-parties. It is the running joke of my clients of how bad their outsourced procurement services are. The clients joke on how many errors they will see in the final contract terms. One even laughs at the probability of reaching anyone that speaks English. As I work through these processes, I scratch my head. How did we make procurement such a mess? And, how would these people feel if they had to do business with themselves?

Employment Services Low Quality. I use a third-party human resource outsourcing firm. What I did not know before I hired the firm was the level of skill and the amount of turnover. Recently, one of my employees left for a better position. I celebrated her new role, but was dismayed when the agency overpaid the employee. I am even more dismayed that it has taken us eight weeks to find the amount of the overpayment to be over $1500.

So, as you raise a glass this holiday, and welcome in the New Year, please stop and think. Have we gone too far? I think that we as supply chain leaders cannot cut and paste positions and chase low-cost labor. Instead, I believe that the supply chain is about giving reliable services to our customers and fair treatment to our suppliers. Good people matter. I think in our rush to take advantage of low-cost labor, that we have become overzealous. I would encourage all companies to try to do business with themselves and then rethink the role of outsourcing.