Strategic Supply Chain Management - Supply Chain Online

120 Strategic Supply Chain Management
to focus on their other core competencies—such as research and development,
sales, marketing, and branding.
By jettisoning noncore activities, companies are promised many
benefits: greater focus on remaining activities, economies of scale, buying
power, sophisticated planning tools and systems, and access to state-ofthe-art
production equipment—all without making large capital investments.
But what if what’s left after outsourcing is insufficient to drive
effective performance We refer to this as thinning the core.
In some cases a company becomes increasingly reliant on supply
chain partners, and the remaining core begins to shrink in unintended
ways. The people left within the company may have little personal experience
with core operations processes, such as materials planning, supplier
development and management, and demand management. This can result
in a vicious cycle: The company continues to lose internal operations talent
and becomes less effective. Companies simply may forget how to perform
activities once considered essential for day-to-day operations.
Mike McNamara, chief operating officer at Flextronics, sees many
companies who have allowed their core to become too thin. “It’s important
for us to have people within our customers’ companies with whom we
can ‘talk supply chain,’” he says. “We see a lot of companies who are no
longer capable of performing some very critical activities.” 8
This is an issue for Flextronics when they work with customers to
develop the parameters that will govern the relationship between the two
companies—and when they are attempting to execute on a day-to-day
basis. “If there is no one within the customer’s organization who can
develop a long-term demand plan,” says McNamara, “it’s very hard for us
to get set up in the way that will serve them most efficiently.”
Companies can easily underestimate the complexity and competence
built into their operational processes or misread the ease with which these
capabilities can be transferred to supply chain partners. Maintaining
strong links between newly outsourced operations and those kept in-house
also can be a challenge. Very often the decision to outsource one or more
of your core supply chain processes will require that you develop a new
core competency—the ability to manage partners effectively.
How do you know what your core competencies are or should be
Remember that all essential supply chain processes must exist somewhere
within your supply chain—whether inside your company or
beyond your borders in the extended supply chain (the chain of chains).
Review your company’s basis of competition and understand the process
elements that must be in place to support it. Ask yourself, “Is this activ-