Outsourcing Risk Checklist - Wallenius Wilhelmsen Logistics

Strategic Operational
Leadership changes New management has different
vision for logistics strategy.
Market demand
& sourcing shifts
Changing economic landscape
requires network re-engineering
to meet customer needs.
Brand risk exposure End-Customers hold company
respon sible for performance
of all providers.
Misaligned standards Different levels of acceptance
for moral, ethical, or other critical
ways of working.
1. Clarify Your Strategy
Fear of dependency Relying heavily on one provider
creates operational vulnerability
& risk.
Erosion of internal
competence
Promised benefits
not realised
Lack of continuous
improvement
Skills no longer developed or
maintained within the company
after services outsourced.
Value proposed in sales cycle
not achieved in the execution
of the contract.
Expectations not met to deliver
enhancements and achievements
over time.
Suggestion Description Responsibility
What is your logistics
strategy today?
How many points
of contact do you
want to manage?
Do you want to own
the technology?
How much logistics
competence do you
want to maintain?
What will be your
logistics strategy
in the future?
Checklist
for Increasing Benefits in
Outbound Supply Chain Outsourcing
Why Companies Outsource
1. Reduced cost and better expertise 2. Greater reliability and
increased control
Transfer fixed costs to a variable rate
and access specialised skills through
better economies of scale.
Monitor and manage performance
with fewer points of contact and
standardised metrics.
Factors Affecting Outsourcing Strategy
How to Increase Outsourcing Benefits
People, process, and systems constitute the majority of supply chain costs.
Step one is to plot where your strategy is today on a continuum from 2PL,
3PL, 4PL or beyond.
The more providers you have, the less dependent you are on any one
provider, but the more time and energy you will spend managing the multiple
provider contacts.
Outsourcing supply chain management can transfer fixed logistics systems
costs to a variable cost per unit, but it also connects you to a provider in
a relationship that is not so easy to break.
Similar to technology, competence development costs can be pushed to
a lead logistics provider, but this may erode internal competence.
3. Higher productivity and
faster penetration
Considering your answers to the previous questions, what do you want your
strategy to be in the future? The strategy can vary by source, destination
or outbound flow.
Boost efficiency by focusing on
core business activities and increase
speed to market without the cost
and time of building assets.
Customer
Customer
Customer
Customer
Customer

2. Choose The Right Provider
Suggestion Description Responsibility
Determine provider
relationship type
Determine profile
of provider
Determine payment
structure
Communicate
environmental
requirements
3. Actively Manage The Relationship
Transactional – Usually a short term relationship with no bonding between
you and the provider.
Tactical – Based on a comparatively longer term (normally 1–5 years)
c ontractual relationship. Transaction-oriented but focus on cost reduction
and service improvement.
Strategic – Based on long term (5+ years) cooperation, such as partnership
or joint venture. Common core values and sharing of risks.
Asset or Non-Asset Based – Should the provider own the assets used for
the services or manage other providers?
Global or Regional – How far of a reach should the provider have?
On-Site or Off-Site Personnel – Should the provider be integrated at the
customer location?
Cost Plus – Pass through of all cost elements with a margin.
Management Fee – Cost per unit flat fee charged separately from other
service costs.
Gainsharing – Share risks and rewards based on performance.
Code of Conduct – A broad base of documents relating to corruption, labour,
economics, and environment in which both customer and provider subscribe
to the same principles and ways of working.
Contractual Compliance – Use specific wording in the contract to comply
with regulations and work regulatory risks into the contract.
4-Factor Optimisation – Optimisation model utilizing CO2 emissions along
with time, cost, and quality in the analysis of supply chain performance.
Customer
Customer
Customer
Customer, Provider
Suggestion Description Responsibility
Maintain multi-level
contacts between
organisations
Conduct annual or
semi-annual contract
review meetings
Prepare and send
monthly performance
reports
For more information,
please contact:
To develop a shared view of the state of the contract, maintain multilevel
commercial and operational contacts from analyst to C-Level. Use the
following the generate more tangible feedback:
• 360 Reviews
• SWOT Analysis
Items to cover:
• Company Strategy Alignment
• Performance Review
• Risk Assessment
• Operational Challenges/Issues
• New Business/Improvement Opportunities
Information to include:
• KPI/Metric Reporting
• Root Cause Analysis for Exceptions
• Planned Improvements
• Achieved Benefits
• Issues & Risks Update
Nick Bryan
Vice President
Network Development & Supply Chain Management
email: Nick.Bryan@2wglobal.com
mobile: +47 484 06 923
Please also visit us at www.2wglobal.com
© 2011 Wallenius Wilhelmsen Logistics
Customer, Provider
Customer, Provider
Provider