AS CONSUMER markets become more and more sophisticated and demanding, companies are under increasing pressure to focus resources on core competencies – like product development, sales, marketing and financial management. And to do this effectively, they need someone else to handle their non-core activities like supply chain management. “Supply chain outsourcing is an extremely fast-growing business throughout the world,” says Thore Saether, director UPS Supply Chain Solutions (SCS) at UPS SCS South Africa. “Companies like UPS are able to devote more time, manpower and expertise to a client’s supply chain than they could generally do themselves. It almost inevitably means better focus and greater efficiency on the tasks at hand,” says Saether. And it’s not only companies that gain advantage, he says. Ordinary customers are reaping the benefits in terms of companies being able to produce a greater variety of better-manufactured goods and deliver faster, more efficient services. “Supply chain excellence makes the world a better, more dynamic place,” says Saether. “Non-core management can be very expensive if not done right,” he points out. “Supply chains are becoming ever more elongated, with many different links, and a specialised company like ours is able to couple the various parts together into a well-functioning whole.” Internationally, such outsourcing to a third-party has seen the emergence of what is sometimes known as the Lead Logistics Provider (LLP), who acts as a “master contractor” managing all transportation, logistics and distribution globally. Pulling the supply chain together in this way provides greater visibility of the process, often exposing potential savings and potential new revenue sources. Having a global view, an outsourcer can even make its clients more responsive to market dynamics. Value for money “Clients can usually see immediate value for money,” says Saether. “For them it’s not simply a matter of losing a burdensome area of management control.” The world’s leading LLPs are in a position to provide all the key service elements of supply chain, both globally and locally, from collection of cargo and dispatch to warehousing, deconsolidation and checking and monitoring. Saether says an obvious advantage of supply chain outsourcing is the avoidance of fixed costs in the form of staff and equipment. “By providing common facilities for a number of clients, UPS SCS ensures each of them expertise, complex software systems and sophisticated hardware like forklifts, jacks and warehousing in which they would probably not invest individually,” says Saether. Flexibility Another major advantage is the flexibility that is possible. Saether cites the modern fashion industry as a good illustration of the benefits of supply chain efficiencies in meeting customer needs. “Fashions change very quickly nowadays and people are demanding greater choice, so it’s essential for clothing firms to be able to move stock quickly. By supplying door-to-door co-ordination, we are able to meet that need. Customers have never had so much choice in fashion, and it’s all thanks to improvements in supply chain management,” he added. A further advantage is the opportunity it offers for intensive content review. “UPS SCS does stocktaking and cycle-counting for certain clients on a daily basis – a far cry from the monthly stocktaking that was once the retailing norm.” An important factor in the rapid rise of supply chain management outsourcing has been the combination of traditional warehousing skills with new information technology that allows companies full visibility of their stock. Saether says clients, particularly in the retail sector, rely heavily on UPS’s systems to monitor and maintain control over the movement of their goods to meet market demands on delivery time, warranty promises and on-site service. “Some of our large clients say that without all the details available to them through the UPS system, the cargo doesn’t actually mean very much in terms of real-time strategising.”
