The Role of Outsourcing in Streamlining US Supply Chains

The few minutes it takes to read this post should be well worth it if you're in charge of your company's full supply chain and you're just starting to think about outsourcing, maybe to cut costs or improve service Why and what should you hire someone else to do?At this point in time, it's possible to outsource just about any business task, even those that have to do with handling a supply chain. You can outsource everything, but that doesn't mean you should.What can you rent out, and what should you rent out?In fact, I strongly advise you not to outsource any tasks that you see as essential to your business. For example, if your business sells things in stores, hiring sales work is probably not a good idea.

Otherwise, you can give an outside service provider almost any task that directly helps your supply chain work

There Aren't Any Standard Answers to the Outsourcing QuestionFor the purposes of this piece, I will not tell you which parts of your supply chain you should outsource. This is because what works better for one company might not work better for another. Instead, I'm going to talk about how outsourcing can help your supply chain in some situations. You get to choose what those situations are, though.Let's move on right away so I can keep my promise from above. Read on to find out how hiring an outside provider to do some of the work in your supply chain can help it run more efficiently, cost less, and provide better customer service, or all three.Outsourcing to cut down on supply chain costsA lot of business leaders would agree that lowering costs in the supply chain is a good thing. But a lot of people still haven't thought about outsourcing as a way to cut costs in the supply chain.Outsourcing to cut down on supply chain costsAt the same time, many people who hired to save money have made mistakes along the way. So, they found that leasing didn't save them as much money as they thought it would.Without wanting to sound too repetitive, the benefits of outsourcing rely a lot on the business and its supply chain, as well as a number of other factors, such as the contractor chosen. Costs in the supply chain can go down if the right conditions are met and the right contract partner is picked. Let's quickly look at three ways that it can do that.Cutting down on labor costsContract production is one of the best ways to cut down on labor costs through outsourcing. Usually, you will work with a partner in a country where labor costs are lower than yours.

You can still find partners in China that will save you money on manufacturing

assembly, packaging, and other parts of your supply chain that require a lot of labor. However, China is not as popular as it used to be as a place to outsource production. Cutting down on labor costs like ChinaSoutheast Asian countries like Vietnam and Cambodia, on the other hand, are growing as foreign manufacturing hubs. The important thing to keep an eye on is whether the lower cost of labor from offshoring is greater than the rise in the cost of transportation. How far your distribution centers are from the contract manufacturer's country if you do your own distribution will depend on where your markets are and how much you sell. Companies in the US may be very lucky if they can find manufacturers right next door in Mexico, where wages are much cheaper than in the rest of North America.Being able to use economies of scaleYour company may be able to benefit from the economies of scale that expert service providers enjoy and pass on by outsourcing manufacturing, logistics, or other supply chain support tasks like purchasing. Your business could be one of many that a contract partner works with. Because of its size and buying power, the partner will probably be able to get you things or services at a lower price than if you had to do it yourself. A big supplier can also usually spread fixed costs over a higher production volume, which lowers the price per unit.Better efficiency in the supply chainWhen you outsource your manufacturing, a big contract producer that specializes in the products you sell will have the knowledge, technology, and processes to speed up production and cut down on waste, which can save you money.

On the other hand, outsourcing logistics can help you save money on overhead costs because you won't have to buy and keep your own buildings and tools

This is also important to note that while using outsourcing to improve efficiency can help lower supply chain costs, it can also lead to a lot of other benefits that deserve their own part in this article. That's what we'll talk about next.Outsourcing to Save Time and MoneyOutsourcing for Benefits in Streamlining OperationsWe've already talked about how a third-party expert manufacturer can help you make production more efficient, so let's move on to some other ways that outsourcing in the supply chain can help you save time and money. In the first place, hiring is a way to get specialized help. For instance, if you outsource parts of your supply chain like transportation or purchasing, you can use the knowledge and experience of the providers to help you make your supply chain work better. A procurement expert can help you find better sources for raw materials, parts, or finished goods if your business doesn't make them. Working with your procurement partner, you can lower the amount of goods you have on hand, which could mean you don't need as much space in your warehouse.Get access to cutting-edge technologyBy outsourcing, your business can use technology to make the supply chain work better. For example, many logistics service providers have spent money on new technologies like process automation, machine learning, and artificial intelligence. These technologies help their clients run their warehouses and shipping more efficiently and with fewer mistakes.