The Benefits of Outsourcing for Small Business, Allbusiness.com, May 12, ... Import Best Practices ... provider to do th
SUCCESSFUL LOGISTICS OUTSOURCE UNCOVER THE STRATEGY
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“Companies that do everything themselves have much higher...expenses, which must be passed on to customers. An outside provider’s cost structure and economy of scale can give your firm an important advantage.” The Benefits of Outsourcing for Small Business, Allbusiness.com, May 12, 2009.
CONTENTS Additive vs. Subtractive Outsourcing
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Collaborative Outsourcing Defined 4 Outsource Model Comparison 6 Top Drivers for Outsourcing 7 Key Performance Indicators 8 Strategic Control Over Your Network
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Sustained Savings in Your Supply Chain
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Choosing an Outsource Provider
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5 Steps to Prepare for an Outsource
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Forming a Cross Function Team
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Measure Outcomes, Not Activities
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Evaluating Your Current Technology
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Choosing Which Functions to Outsource
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Building a Risk Profile 22 Collaborative Outsourcing®
Collaborative Outsourcing®
Preparing for a Successful Logistics Outsource
Gaining Efficiencies Through LTL Outsourcing
Collaborative Outsourcing®
Identifying Opportunities With Your
Inbound Transportation White PaPer
Adaptive, Configurable, Collaborative
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Powerful New Ideas for Freight Management
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Powerful New Ideas for Freight Management®
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ADDITIVE VS. SUBTRACTIVE OUTSOURCING Outsourcing no longer means subtracting operations from an organization and handing it over to a third-party location—which often relinquishes control and creates risk. This is a new approach is to logistics outsourcing. This low- or no-cost strategy allows organizations to add talent, scale technology to drive down costs, improve efficiency, and enhance customer satisfaction.
With additive outsources, shippers maintain strategic control and visibility. They add resources with limited fixed costs or new capital investment.
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COLLABORATIVE OUTSOURCING® DEFINED C.H. Robinson’s Collaborative Outsourcing® is
assignments further up the supply chain. Using
producing exceptional results in transportation
cutting-edge Transportation Management System
networks worldwide. In a collaborative model,
(TMS) technology, outsource providers give shippers
shippers rely on outsource providers to handle
access to real time, mission-critical intelligence
execution in a transportation network—freeing
so they can make better informed, more profitable
up internal staff to focus on more strategic
business decisions.
“The real power of collaborative outsourcing—it increases an organization’s core capacity for change and growth.” The Benefits of Outsourcing for Small Business, Allbusiness.com, May 12, 2009
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Watch the collaborative outsourcing video to learn more.
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Collaborative Outsourcing offers more than traditional outsource models. With a collaborative model, shippers can drive down costs short term and build smarter, stronger supply chains long term. ®
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OUTSOURCE MODEL COMPARISON A side-by-side comparison of traditional and collaborative models clearly shows the additional benefits achieved through a collaborative approach.
TRADITIONAL
COLLABORATIVE Reduce Costs Increase Capacity
Reduce Costs
OBJECTIVES
Increase Capacity
Gain Access to Technology Import Best Practices Train Existing Staff Improve Continuously
Extract Operations and Strategy Move to External location
STRATEGY
Retain Control of Strategy Add Talent and Technology Monitor Metrics in Real Time Innovate Through Collaboration
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TOP GLOBAL DRIVERS FOR OUTSOURCING Reducing operation costs is no longer the sole reason to consider an outsource. As logistics outsourcing become more popular, many more benefits drive the decision to outsource.
Reduce operating costs
77%
Improve global operating/delivery models
60%
Improve financial flexibility
36%
Gain economies of scale
32%
Redirect resources to more strategic activities
32%
Support growth/expansion agendas
30%
Improve process performance
30%
Gain external talent/resources
27%
Reduce future investment costs
9%
Price Waterhouse Coopers. “Outsourcing Comes of Age: The Rise of Collaborative Partnering.” 2007
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KEY PERFORMANCE INDICATORS Successful outsourcing is outcome-based,
improved service levels, overall savings, time-to-
therefore key performance indicators (KPIs) need
market in new geographies, and ultimate customer
to be established for criteria throughout the supply
satisfaction levels. Also, various disciplines
chain. Typical KPIs include efficiency gains in the
throughout your organization must be included in
manufacturing process, on time performance,
defining KPIs and preparing for integration.
Multiple departments within an enterprise will realize the effects of outcome-based logistics outsourcing. CONNECT WITH AN OUTSOURCING EXPERT
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STRATEGIC CONTROL OVER YOUR NETWORK The shipper always retains strategic control in C.H.
as visible, but still critical to the organization’s
Robinson’s Collaborative Outsourcing® approach.
success. And sometimes, the level of control
But how much control is necessary? For some
needed is driven by an organization’s culture
companies, transportation is part of their brand
and business philosophy, internal expertise and
and their reputation is based on speed, reliability,
capabilities, and availability
and quality. For other shippers, transportation isn’t
of resources. SCHEDULE A CONSULTATION WITH AN OUTSOURCING EXPERT
Understanding the differences between high, moderate, and minimal control is the first step in deciding what is right for your needs.
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HIGH STRATEGIC CONTROL MODERATE STRATEGIC CONTROL MINIMAL STRATEGIC CONTROL If transportation is a fundamental part of your brand, you will want high strategic control. An outsource
relationship should provide you with firm control of your transportation strategy. Use an outsource solutions
provider to do the heavy lifting and introduce new ideas— but maintain strategic control.
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HIGH STRATEGIC CONTROL MODERATE STRATEGIC CONTROL MINIMAL STRATEGIC CONTROL If customer relationships depend heavily on your freight network’s effectiveness—but
transportation isn’t necessarily an element
of your brand—you should consider retaining
moderate strategic control. Give your outsource provider more control over day-to-day
decisions while you retain full visibility over key metrics.
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HIGH STRATEGIC CONTROL MODERATE STRATEGIC CONTROL MINIMAL STRATEGIC CONTROL If you simply want to cut costs and offload day-to-day
management of part of your freight network, minimal
strategic control might be best for you. You can stay in
the loop by monitoring key metrics at regular intervals.
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SUSTAINED SAVINGS IN YOUR SUPPLY CHAIN An effective outsource deployment will deliver
• INDUSTRY EXPERTISE. Years of experience and
more than initial savings. It should provide your
broad customer base allows for application of
enterprise with:
best practices across many industries.
• IMMEDIATE COST AVOIDANCE. Achieve
• HUMAN CAPITAL. Add transportation
immediate savings primarily through
department bandwidth without incurring
benchmarking and route optimization.
additional payroll, benefits, or training costs.
•S USTAINED COST AVOIDANCE. Apply process engineering, TMS technology, and best practices for long-term savings. • ACCESS TO TECHNOLOGY. Utilize advanced technology implementation, operation, and maintenance, with no direct cost to you.
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Successful outsourcing typically brings both talent and technology inside the walls of the enterprise, solidifying the organization’s strategic control of its transportation network. START PLANNING WITH A C.H. ROBINSON OUTSOURCING EXPERT
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CHOOSING AN OUTSOURCE PROVIDER
Obtaining the most from a logistics outsource requires a strong provider who not only understands your needs, but can also execute them. Look for providers that deliver: • Performance Metrics • Expertise of Staff • Process Improvement • Advanced TMS Technology • Ready Access to Best Practices • Financial Stability • Multimodal Expertise • Global Coverage • Account Management
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Balance intense pressures to use outsourcing to cut costs quickly with the responsibility of building a solid foundation for the future.
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STEPS TO PREPARE FOR AN OUTSOURCE
BEST PRACTICES COMPILED FROM OUTSOURCE ENGAGEMENTS WORLDWIDE HAVE HELPED IDENTIFY THE FIVE STEPS TO PREPARE FOR A SUCCESSFUL, LONG-TERM OUTCOME.
1. F ORM A CROSS-FUNCTIONAL TEAM—including representatives from multiple disciplines and departments across your enterprise.
2. M EASURE OUTCOMES—rather than solely focusing on activities without regard for how the activity is performed or executed.
3. G RADE CURRENT TECHNOLOGY AGAINST EMERGING NEEDS—does existing technology provide real-time dashboard or reporting capabilities and will it accommodate cloud computing?
4. C AREFULLY CHOOSE WHAT TO OUTSOURCE—determine which processes the enterprise will continue performing and what will be outsourced.
5. B UILD AN INFORMED RISK PROFILE—not all risk is equal and not all providers can fulfill risk obligations. 17
FORMING A CROSSFUNCTIONAL TEAM The first step in preparing for a successful outsource is assembling a cross-functional team that will bring a broad range of expertise and perspective to the table. Eliminate potential silos across departments for successful problem solving and innovative solutions
In the cross-functional team, include colleagues responsible for managing the company’s brand and orchestrating the customer experience. 18
MEASURE OUTCOMES, NOT ACTIVITIES The goal of any successful collaborative outsource is more than just cost reduction. The agreement with your provider is an exception that they will perform certain activities. Also make sure you can measure how your provider conducts those agreed-upon activities. This is how you can determine your level of success.
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EVALUATING YOUR CURRENT TECHNOLOGY Answer the following questions when deciding if your current technology will meet your emerging needs. 1
Does your technology provide real time dashboards or reporting so you can monitor KPIs?
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Are you willing and able to give your provider accurate data?
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Will your technology offer scalability, accessibility, adaptability, and low deployment and maintenance costs?
If your current technology does not offer even one of these things, it may be time to review other technology options.
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CHOOSING WHICH FUNCTIONS TO OUTSOURCE A shipper should determine which processes it will continue to perform and which ones will be outsourced. For example, will you want to manage shipments and route optimization, mode selection, and carrier payment—or will your outsource provider manage them? Also, you’ll need to make similar decisions for • Rate Negotiations • Contract Management • Yard and Dock Management • Track and Trace • Claims Management • Service Level Monitoring RESEARCH YOUR OPTIONS 21
BUILDING A RISK PROFILE Step five in preparing for a successful outsource requires building a risk profile to assess risk factors and potential outcomes. Be aware that not every outsource provider takes on risk the same way.
OPERATIONAL CONCERN External Disruption Lack of Necessary Skills Brand Reputation Systems Failure Process Failure Lack of Knowledge
RISK POTENTIAL Equal. Events are the same for internal or external teams. Equal. Potential for lack of training is the same for internal or external teams. Equal. Potential to lose clients with poor performance is the same for internal and external teams. Typically less with a provider because of cloud computer models. Equal. Although this varies by provider and application of accepted best practices. This can be greater with providers because they depend on knowledge transfer from client.
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Success in today’s increasingly complex, competitive, global markets requires continuous improvement. Create innovative, global solutions with a provider that easily makes the transition from domestic to international shipping as your business grows. 23
ADAPTIVE, CONFIGURABLE, COLLABORATIVE EIGHT KEYS TO OUTSOURCING SUCCESS
1. ADD, DON’T SUBTRACT
5. GAIN ACCESS TO TECHNOLOGY
2. INSIST ON GREAT TALENT
6. CREATE A COLLABORATIVE COMMUNITY
3. LOOK FOR BEST PRACTICE LEADERS
7. THINK GLOBAL
4. SEEK A FLEXIBLE, MULTIMODAL NETWORK
8. SELECT A FINANCIALLY STRONG, HEALTHY PROVIDER
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CASE STUDIES: COLLABORATIVE OUTSOURCING SUCCESS Creating competitive advantages and adding value to your business is possible when you make informed, intelligent business decisions. Discover how other businesses have achieved their goals and found long-term success with a collaborative outsource strategy in these case studies. C.H. Robinson
C.H. Robinson
CASE STUDY
CASE STUDY Nonprofit Complete Outsourcing of Transportation, with
Global Supply Chain Outsource Solutions
LTL Consolidation, Intermodel, and Warehousing
Outsourcing Captures More Nonprofit Donations
Generate Supply Chain Savings with a Global Logistics Outsource CHALLENGE Lacked visibility to logistics operations from Vietnam to Houston. SOLUTION Implement a global collaborative logistics outsource to improve visibility, supply chain processes, and customer service. TOSHIBA ACHIEVED NOTABLE METRICS • $230,000 savings in LTL freight spend • $135,000 reduction in bonded warehouse costs • 90% reduction in shipping damages • 19% decrease in transit miles from RDCs to customers • 14% reduction of line haul rate per carton weight • 98% on time performance
Harvest Time International (“Harvest Time Int’l”) distributes food, clothing, household goods, and medical supplies to over 500 local, national, and international ministries and nonprofit organizations. Harvest Time Int’l has served more than 20 million people since 1991, and has received the “Best in America” seal from the Independent Charities of America.
Toshiba, a world leader in the design, manufacture, and sale of electric motors, outsourced their global logistics to support growth goals, service expanded production systems, and transform their supply chain into a competitive advantage.
Expand distribution to serve more people Harvest Time Int’l’s goal is to say yes to every donation, since the more donations they receive, the more people they can serve. The organization’s Unsaleables Management Program gives Harvest Time Int’l the ability to accept a variety of grocery and non-grocery items, including new, used, out of package, discontinued, scratched, dented, surplus, and out-of-date items, as well as product that might ordinarily be labeled for disposal. In 2009, these donations were transported to the organization’s global headquarters in Central Florida, where they were sorted by volunteers and distributed locally or to one of 500 ministries and nonprofits worldwide.
Lack of visibility to cost and service hindered international supply chain growth goals With a global footprint and production system extending from Japan to China and Vietnam to Texas, the Motor Business Unit (MBU) of Toshiba International Corporation’s (Toshiba) Industrial Division depends on flawless logistics processes. In 2010, Toshiba moved some manufacturing for premium industrial motors from Houston to a factory strategically located near Ho Chi Minh City, Vietnam’s international port. With plans for the new Vietnam plant to ship up to 1.2 million motors a year to the global market, Toshiba needed a highly efficient, collaborative supply chain relationship to support their aggressive growth goals and maintain service and quality standards. Toshiba’s MBU in Houston searched for a solution to resolve cost and service failures with the incumbent logistics provider. With limited tracking and traceability, poorly defined and followed standard operating procedures (SOPs), a narrow focus on inbound
Harvest Time Int’l’s donors are located around the country and value relationships with those organizations that can pick up donations in the quickest, most efficient manner. Response time is critical. If a donor has limited warehouse space, they may dispose of mixed loads of small quantities of items rather than wait for a pickup. To optimize donations, Harvest Time Int’l had to contract with individual transChallenge portation providers and geographically favorable warehouse Harvest Time Int’l’s goal—to increase donations and serve more people—could not be accomplished space—oftentimes a time-consuming and expensive proposition. without an expanded distribution program.
Solution C.H. Robinson developed an outsource solution that includes inbound logistics and customized pickup plans for donations, as well as LTL consolidation, rail and truck transportation, warehousing, and scheduling of donated product shipments.
Result Donations increased 40.5% in first quarter of 2010, compared to first quarter 2009.
Load flexibility is also crucial. One donor partner in Georgia wanted to donate product daily, but the quantities of product varied. Sometimes, they had enough mixed product to fill a truck, but at other times, there were less than 24 pallets. Without a way to consistently and economically accept smaller shipments, Harvest Time Int’l would miss opportunities. To satisfy its donors’ demands for load flexibility and quick response times, Harvest Time Int’l needed a strategy for collecting LTLs within hours of being notified. This required cost-efficient warehousing and
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