Solutions and initiatives; the procedures; interference; a scalable proposition; etc..
A complex system like logistics requires a modular approach that allows the achievement of objectives in the short term and does outsourcing also produce miracles?
The outsourcing of procurement, if correctly applied, can produce cost savings, process efficiency and time savings
To increase profits and reduce costs, acquire market shares and defend oneself from the competition, specialize in one's own sector and explore others, improve the efficiency of processes and reduce assigned personnel, increase the efficiency of systems and reduce warehouse stocks, finally obtain the maximum return from fixed structures and give flexibility to costs: these are the objectives increasingly required of company management.
It is obvious that some of these activities are in conflict with each other and represent a decision paradox whose resolution in order of priority involves giving respect to secondary objectives. Made according to the conventional procedural methodology, they are a source of additional costs without satisfying the primary need for cost reduction that generates them, an attempt that the market strongly characterizes and which imposes ever greater competitiveness.
Solutions and initiatives
There have been many solutions adopted so far and among those that have given the best results it is useful to mention the allocation of territorial and product skills, the formation of work groups, the transformation and division of areas into cost centres, the establishment of the profit centre, decentralization as well as the concentration of activities. The means used to achieve these objectives were initially insourcing, i.e. all opportunities for improving internal structures were explored in order to increase efficiency. All these activities, even when they did not completely meet expectations, still provided management with indications to locate dysfunctions and identify improvement objectives, and it is worth observing that the division into independent operational units has duplicated some internal functions, also increasing the complexity of communication between agencies.
At the same time as these insourcing initiatives, already in the Seventies, within production, the concept of outsourcing became increasingly established, after an initial period of mistrust. The successes have been sensational, increasing the number of companies that have used it and once the initial mistrust was overcome, increasingly advanced forms of outsourcing have been created.
From 1970 to today many things have changed in the field of large-scale production: in those years some productions were entrusted to external suppliers which were previously carried out internally. The adoption of just in time production for assembly lines occurred in the 1980s.
Since 1990, suppliers have built their plants in the immediate vicinity of the customer. Since 1995, suppliers have been assigned spaces within the plants and their production flows directly into the automatic assembly systems. In 2000, suppliers were required to be able to assume the role of active partner in the definition and development of company strategies and to contribute to the achievement of economic objectives.
From production to…
The first phase of outsourcing therefore concerned production; subsequently we proceeded with the outsourcing of some internal services such as: maintenance, storage of materials, transport, company catering, cleaning of systems, some training and accounting services, management of IT systems. Such outsourcing is considered today as a natural fact and their increasingly widespread application, especially in companies that wish to free up specific resources, leads management to evaluate the opportunity of resorting to similar models also for the management of supplies.
The transfer of supply management to an external partner, especially of non-productive materials, has the aim on the one hand of being able to focus mainly on strategic activities with the best resources and on the other of obtaining economic benefits, making operating costs flexible. In the transfer of management, the majority of routine work is also decentralized, which contributes to increasing the motivation of the resources that are freed. Furthermore, greater professionalism is developed for the benefit of increasing the company's competitiveness in the market, contributing among other things to exploiting the profitable areas of the market more intensely (cash cow).
The procedures
The procurement process is made up of a number of sequential activities or procedures that from the birth of the need and the issuing of the request go up to the payment of the purchased goods. The number of procedures has increased over time due to the growth in necessary orders and the continuation of the multiplication of components assembled in machinery and the tendency towards a reduction in the value held in the warehouse.
The application of the outsourcing concept, at a Turin company that is a world leader in the printing sector, in particular of directories and telephone directories for public users, has allowed the reduction of the volume of supplies with a particular warehouse even with an economic value 15 times lower than the operating costs of the same order.
The development of each procedure that is part of the process generates a volume of documentation and information that involves administrative staff in training procedures, stealing precious time that could instead be used for the development of their specific activities such as the purchase of systems and raw materials, the management of agreements, maintenance and control.
It should be noted that the number of procedures necessary for the implementation of procurement grows exponentially with the increase in the size of the internal structures involved in the process. At the same time, both the risk of procedural errors and information chaos increases, dramatically reducing the level of efficiency of the agencies involved. This makes supervision and management very complex, complex and more expensive. These costs increasingly often greatly exceed the value of the object of supply.
Interferences
The commitment necessary for the individual administration of all the procedures of the procurement process is however quantifiable as long as the procedures are linear, that is, as long as no interference occurs in the flow of the process, a very frequent and underestimated phenomenon in the estimation of operating costs and which generates a series of support activities that do not directly pursue the company objective, but become an administrative necessity. Procedural interferences are generated from various sources, both internal and external to the plant and can imply a stoppage, causing in the worst cases the sequence of process activities to have to restart, with the consequences of a repetition of the same administrative activities, the production of further documentation and with the enormous increase in costs for all the offices through which the procurement procedure passes.
The introduction of administrative outsourcing is aimed precisely at drastically reducing the number of internal administration and control procedures. It is precisely the management of the latter that largely absorbs the resources and highly characterized means in order to carry out many other types of tasks, and it is above all the simplification of these managements that highlights the enormous potential for economic recovery and efficiency. At an Italian company among the first in the world for the construction of transport vehicles and in particular in two German plants for the construction of fire-fighting vehicles, outsourcing has been applied for the management of the supply of production materials from approximately 70 suppliers, whose annual supply volumes range from 50 to 95,000 units. This solution made it possible to reduce the number of supplies and therefore of delivery notes in 16 months of activity, from 1,321 to 85, equal to 99.93%, and to reduce the number of invoices from approximately 1,000 to 40, equal to 99.96%.
When evaluating the introduction of outsourcing there is always the fear of losing control of the situation, but when the roles, spheres of competence and responsibilities of the two contractors are defined it is possible to have visibility of the economic convenience: the latter cannot ignore a comparison with all the costs incurred by the company in the internal provision of the services which the possibility of managing in outsourcing is being evaluated.
A scalable proposal
For this reason Unitec has developed a concept dedicating particular attention to this aspect and proposing a modular application that allows an immediate economic return, at each phase that is carried out towards outsourcing, through a series of proposals and application possibilities, based on of a model that can be adapted to the size and needs of the company and above all easily introduced into existing structures.
The modular introduction of outsourcing, partial or total, with the possibility of operating in mixed teams and training within the figure of the coordinator, allow the possibility of interrupting the relationship and independent management to be considered at any time, thus making the decision less difficult to support when supported by an external partner.
The administrative outsourcing of the supply of non-productive materials provided by Unitec is based on the experience gained with companies from various European countries and active in various industrial sectors and its corporate structure also extends to production materials, thus consolidating and diversifying the know-how, factors which represent an important operational guarantee and reliability over time.
The outsourcing activities carried out by Unitec are supported by the use of an IT system developed and maintained internally, with an internal team of programmers who guarantee compliance with operational standards and which allow the transmission of data with customers and suppliers.
Furthermore, the know-how in the field of information management, acquired during the experiences gained with its customers, allows Unitec to internally experiment with new IT solutions and data transmissions to propose to the customer in order to improve communication and enormously speed up access to information, reducing request and response times. All with the collaboration of qualified and highly professional personnel.
The collaboration with Unitec can be defined with great flexibility, ranging from the single issuing of orders up to the administration of all the procedures of the procurement process, which goes from the stage of emergence of the need up to the management of the warehouse and the supply of IT solutions for office automation.
Conclusion
The introduction and application of administrative outsourcing of supplies have allowed management to definitively resolve the decision-making paradoxes we mentioned at the beginning and to obtain flexible operating costs, also recovering the precious resource of time, a fundamental element for dedicating oneself more effectively to the strategic and primary activities of the company.
With the recovery of time spaces in all areas of the plant, the level of internal efficiency immediately increases, allowing better visibility of resources and starting a positive spiral of synergies.
The awareness of the importance of this result made it clear that if all collaborators focus on the core business, the company can work miracles.