Business needs to focus on their core business process to increase production and effectiveness of the process. Outsourcing other services enable the business to meet its target of production. Some of these services that can be outsourced include supply chain management services through third-party logistic services. There are benefits are risks that are associated with the outsourcing of services through the model.
Financial risk is a risk that many companies are facing. For business continuity, the companies do not showcase their actual financial performance attracting many clients to hire them for their logistics services. When the accurate picture of strenuous nature comes to play, there are many parties that may fall victim to the trap. Any company that seeks to deploy the 3PL model needs to evaluate the outsourcing company deeply to realize its challenge to ensure its services are not paralyzed by the financial strain of the outsourced company. After having a warehouse mess, HD suppliers had to close a modern warehouse due to financial strains as a result of the loss brought by the mess.
Lowed standard is one of the most significant risks that are likely to happen when services are outsourced from a third party. The outsourced company’s motivation is profit and meeting the contract terms, and there is no focus on the business processes. The company culture of quality service may not be a share value thus can be a risk to the company’s reputation. Lack of focus on the customer might lead to warehouse mess. HD supplier, a supplier of construction material, had a warehouse mess that delayed the delivery of products for a number of weeks, creating a negative image to the investors.
Insourcing is vital for an organization to have a stable and complete supply chain model. Insourcing requires an organization to have the capacity in terms of cost and human resources to manage the process. The organization must also have the processes wholly initiated in the business process to ensure seamless integration. Amazon has its own insourcing, which has made it increase the efficiency of its operations. The company has the resource to manage, and the process is fully integrated.
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