The fundamentals of strong supply chain outsourcing relationships

[Randy Littleson]

Jane Marshall’s recently released white paper “Structuring the Outsourced Supply Chain Data Model: 10 Critical Data Issues to Consider” should be used by any company considering outsourcing partnerships. Jane covers extremely well the main data challenges faced by companies looking to have full supply chain visibility of highly sophisticated supply chains. In addition, to ensure a smooth integration I believe that another important challenge to consider is the soft side of the partnership fit: Do the brand owner and the contract manufacturer have similar goals? Do they speak the same “business language?”


The current economic turmoil requires companies to take a very integrated business model approach to succeed. Strong collaboration is a survival skill. Conventional outsourcing models promised management the possibility to transfer responsibility to a third party and focus on “core business activities.” In reality, what companies are realizing now is that they are only trading one type of management challenge for a different one, and that new integration skills need to be developed. Traditional supplier-customer relationships will not produce the results expected, and as Jane states in her paper, brand owners “still remain accountable for their brand, quality, customer satisfaction, and answering to the stakeholders.” Given the complexity of new supply chains, there is a need for more integrated planning, execution, and strategizing, instead of pure exchange of goods or services and money. Companies need to take a holistic approach and can’t afford to have partners that don’t share the same goals and aren’t willing to take accountability. It’s the idea of “whole business thinking,” where flexibility is also important: partners need to learn to get together and work through the pros and cons on both sides of the partnership in order to make the better decisions considering the whole business.


There are brand owners that don’t recognize that data gathering and maintenance can be expensive and continue to make requests for additional data that will never be used. On the other hand, some contract manufacturers see the request for detailed data as a way for the brand owner to micromanage their work. Companies with this mindset need to re-evaluate their positions and understand the impact on the outsourcing partnership they are considering. The integrated approach is absolutely required to succeed in the long run. A silos type of organized supply chain will not be agile enough to respond to demand changes in a volatile environment. Also, clear and concise communication has never been so crucial. Those who find the right partner who shares the same goals, speaks the same business language, is willing to take accountability and work together in an integrated approach will develop strong and long lasting relationships. They will also be in a better position to succeed in this unforgiving business environment.


Francini Ortiz is a Business Consultant for Kinaxis, provider of the on-demand RapidResponse service that empowers multi-enterprise manufacturers with the collaborative and integrated demand-supply planning, monitoring, and response capabilities.