However, the risk is real, tangible and should not be underestimated. These risks, however, are easily surpassed by the transformational and substantial benefits that professional outsourcing can bring.
This is particularly the case in developing and fast-growing economies, such as those of the UAE and other Middle East countries where growth in market share is all-important to companies seeking to secure a leadership position in their respective business sectors.
Supply chain disruption, or indeed failure, can at best taint a brand and reduce sales and at worst force withdrawal and commercial collapse. There are a number of well-documented case studies but these are far outstripped by stories of success and exponential growth.
Despite the associated risk, more and more businesses across the region are outsourcing their logistics and supply chain activity. It is without doubt one of the primary responsibilities of the third party logistics supplier to reduce the risk to an absolute minimum, and thus to ensure that the very real and sustainable benefits that outsourcing to an expert supply chain organisation brings.
So why is outsourcing in the region on the rise? Because companies are seeking supply chain transformation, operational excellence, flexibility of approach and, of course, increased shareholder or owner value.
Outsourcing releases management time to focus on core activities, improves delivery performance, increase responsiveness to fluctuations and improves product availability, thus improving sales.
Having met and talked to many companies in the region that have decided to take the “risk” and to seek the transformational benefits of outsourcing it is clear to me there are a number of consistent reasons why they make this positive decision.
They are looking for a partner that “can grow with them across the Middle East, that can “provide best in class people and processes”, that can “replicate standards and approaches from around the world”, that have “a cultural and behavioural fit”, and that can “lower the risk” of initial transfer, implementation and the inherent areas of relative weakness within most supply chains.
When planning to outsource, certain key steps can help reduce the risk of transfer significantly. These include the analysis of supply risk, the vulnerability of the supply route and the number of suppliers and their locations; demand risk, the volatility of demand (particularly keen in the fast-growing economies of the Middle East); process risk, the bottlenecks of both information and physical flows; control risk, such as stock policy and environmental risk, including political stability and natural disruption. Within each of these, the main areas of vulnerability must be located, scenarios modelled, responses developed and continually monitored against the external and internal business environment.
- The writer is Regional Managing Director (Middle East) for DHL Exel Supply Chain.