Obviously I am happy about this new trend, because I happen to work for a contract logistics provider. But you might be surprised to know that I'm also a little concerned about it, because outsourcing in and of itself isn't a guarantee of success.

To make an outsourcing venture really work for you, you have to do more than choose the right provider or providers. You also have to be the kind of client that will support, rather than sabotage, the potential success of your outsourced operations.

With that in mind, I'd like to elaborate on five critical mistakes many companies make when outsourcing their logistics.


Neglecting Teamwork
The first mistake is actually an internal organizational issue, but it has huge ramifications for any service provider that ultimately finds itself as part of a client's logistics team.

Too often clients arrange their logistics components into traditional departments like transportation and warehousing, instead of integrating them under a single logistics banner. In addition, they tend to make firm distinctions between their logistics functions and "more important" departments such as marketing or manufacturing.

The result can be chaotic for logistics services providers because we end up getting caught in the difficult position of having to referee conflicts between departments with competing agendas. And that takes time away from our real job of working on logistics challenges. Just as important, it leaves us without the clear mandate we need to get a superior logistics operation up and running.


Not Telling The Whole Truth
Another common mistake companies make when outsourcing their logistics is neglecting to give service providers all the facts — particularly when some of the facts are negative.

To an extent, I can understand why this problem exists. After all, we service providers are "outsiders." And who hasn't heard what a cardinal business sin it is to reveal unflattering details about your own company?

But deceiving an outsourced logistics provider by refusing to be open and honest is a vice, not a virtue. And "forgetting" to share sensitive or embarrassing data could ultimately harm, rather than help, your company.

In our most successful relationships we are intimately involved in the annual and strategic planning for our clients. This planning includes all the details, and it shows in our responsiveness to planned and approved business changes.

If you don't make service providers aware of your company's Achilles heels, they can't do anything to help you compensate for them. And if you aren't candid about what your real goals and objectives are, chances are your service provider won't be able to help you achieve them.


Thinking that Cheap Equals Economical
The third mistake is a deceptive one, because on the surface it appears to make perfect financial sense.

We've all heard stories about people who invest thousands of dollars worth of time looking for ways to save their employers a few cents.

Sometimes outsourcing clients can be just as myopic — especially when they choose service providers based solely on who quotes the lowest price for individual logistics functions.

When they do this, they neglect to take into account the very important issue of how each provider can positively affect a client's total bottom line. As a result, their "economical" logistics providers of choice can actually end up costing their company more, rather than less, money in the long run.

All appearances to the contrary, a cheap logistics service provider isn't always a cost-effective one.


Feeling Threatened
The fourth mistake is a relatively isolated one because it usually only affects people in middle management. However that doesn't mean it's not potentially dangerous.

When clients are transitioning to an outsourced logistics program, many of their logistics managers may view the move with considerable anxiety, thinking of the incoming provider as a foe instead of a friend. Because of this they may create some political roadblocks that could undermine a provider's best efforts.

Ironically these managers' fears are usually unfounded, as most client logistics managers' jobs become even more important once a provider arrives on the scene.

After all, someone at the client company must be responsible for monitoring our work. Someone needs to be available to give us direction. And someone has to interface with the client's other internal teams to ensure optimal integration. Not only that, the synergy between a service provider and middle manager can often yield some very positive results.

After a successful outsourcing project, many a client manager has approached me and thanked me for actually giving him or her time to "think about logistics." This isn't a threat. It's leverage for team members.


Hiring a Consultant When You're Looking for a "Yes Man"
The final outsourcing error touches on the motivation for hiring a service provider in the first place.

A lot of companies say they want a service provider's consulting expertise — and many do. But just as often, what companies truly want is a provider that will echo conclusions they've already reached, no questions asked.

The problem with this is that most good consultants aren't good yes men.

In order to truly get your money's worth from a logistics provider/consultant, you must be prepared for the possibility that they will suggest some ideas that are quite different from your own. I'm not necessarily saying that you have to use a service provider as a consultant or that you should accept everything presented. Many highly successful logistics programs are planned by clients and then implemented by providers who agree to carry those plans out.

But if you expect service providers to create a logistics process for your company that is phenomenally better than the one you currently have, you must at least be willing to listen to a provider's input and consider its merits. Otherwise, you could end up extremely disappointed. And your outsourcing experience won't be the unmistakable success it could be.

Copyright © 2020 by APICS — The Educational Society for Resource Management. All rights reserved.

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