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The Upside of Outsourcing

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When the telecommunications company Alcatel-Lucent started entrepreneur boot camps for its employees several years ago, it insisted that participants form teams including experts in engineering, research, finance, marketing and sales.  The reason?  Company leaders recognized that a variety of skills are vital to taking an idea from inception to a commercialized product — or even to a spinoff company — and that one individual rarely has all of those skills.  Success, they believe, comes through assembling teams of specialists.

At a small-business level, developing a team of strategic partners that provide access to expertise makes even more sense.  As Wendi Nolan, international market development at FedEx, points out, the goal is to help customers become more competitive.

The FedEx Critical Inventory Logistics® program is just one example of how the company does that.  The program is designed to provide customers with access to resources that can optimize distribution and returns of critical inventory through both hub-based central stocking locations and forward-stocking locations.  Benefits to customers include improved inventory management, optimized transportation and the ability to maintain flexibility to support growth.

In addition to focusing on core competencies, Nolan recommends that business owners identify the best way to accomplish secondary functions such as shipping, warehousing and parts supply. Determine whether there is a business justification for performing these functions in-house or whether they should be outsourced to specialists.

In gauging value, consider not just the function itself, but also the benefits of not having to manage that function.  Should you do what you do best — and hire experts for the rest?  Before you decide, Nolan says, consider the potential payback:

Flexibility.  With shared warehousing, for example, companies can base their supply chain logistics strategy around the market rather than around their infrastructure, adjusting forward-stocking locations and distribution hubs according to demand.  Consequently, they become more nimble, responding quickly to changes in market conditions.

• Capital conservation.  “Companies with aggressive growth plans don’t have to pour capital into fixed overhead,” says Nolan.  Accessing a global network of distribution facilities eliminates the need to build or lease dedicated facilities, and frees companies to concentrate on building markets in those regions instead.

• Industry benchmarks.  Through its exposure to multiple industries, FedEx incorporates best practices from multiple industries and regions to its clients, resulting in increased efficiency and cost savings.

• Depth of expertise.  FedEx considers itself a strategic partner.  “Whenever you engage with FedEx, you get exposure to the entire portfolio” of logistics and supply chain expertise and solutions, says Nolan.  “We take a solutions approach, so whatever services are available across FedEx are considered.”

By working with established experts to provide secondary services, companies have gained the luxury of concentrating, without distraction, on the areas in which they excel.  The innovation, products and market share will follow.

Gail Dutton has covered the intersection of business and technology for more than 25 years.  Her articles have appeared in Entrepreneur, Virtual Strategy, World Trade and many other publications.

American Express OPEN and FedEx have teamed up to provide discounts and a comprehensive resource for shipping, business and print services.  To learn more, go to http://www.fedex.com/opensavings.

Source:  Gail Dutton August 9, 2010


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