Markets and Trends
Solutions and initiatives; the procedures; interference; a scalable proposal; etc..
A complex system like logistics demands a modular approach that allows objectives to be achieved in the short term, and does outsourcing perform miracles?
Outsourcing of supplies, if applied extensively, can produce cost savings, unit efficiency and time savings
Increasing profits and reducing costs, acquiring market shares and defending oneself from competition, specializing only in one field and exploring others, improving the efficiency of units and reducing assigned personnel, increasing the efficiency of systems and reducing warehouse stocks, finally obtaining maximum performance from fixed structures and providing flexibility to costs: these objectives are increasingly demanded from business management.
It is obvious that some of these activities are in conflict with each other and represent a decision-making paradox that in its resolution of priorities envisages giving respect to some in relation to others. Carried out using conventional procedural methodology, they are a source of additional costs without satisfying the primary need for cost reduction that generates them, a fact that the market strongly characterizes and that imposes increasingly greater competitiveness.
Solutions and initiatives
The solutions adopted so far have been many and among those that have given the best results we can mention the allocation of territorial and product competencies, the formation of working groups, the transformation and division of areas into cost centers, the institution of the profit center, decentralization as well as the concentration of activities. The means used to achieve these objectives were initially insourcing, that is, all opportunities to improve internal structures were explored to increase efficiency. All of these activities, even when they did not completely meet expectations, provided management with indications to locate dysfunctions and identify improvement objectives, and it is also important to note that the subdivision into independent operational units duplicated some internal functions, also increasing the complexity of communication between agencies.
At the same time as these insourcing initiatives, in the 1970s, in the context of production, the concept of outsourcing was increasingly asserted, after initial distrust. The successes were spectacular, leading to an increase in the number of companies that made use of it and once the initial natural mistrust was overcome, increasingly advanced forms of outsourcing were implemented.
From 1970 to today, many things have changed in the field of large production: in those years some productions were entrusted to external suppliers that were previously carried out in-house. In the 1980s, just in time was adopted for assembly lines.
From 1990 onwards, suppliers built their own plants in the immediate vicinity of the customer. From 1995 onwards, suppliers received spaces within the plants and their production directly feeds the automatic assembly systems. In 2000, suppliers will be required to be in a position to assume the role of active partner in the definition and development of business strategies and contribute to the achievement of economic objectives.
From production to…
The first phase of outsourcing therefore addressed production; We then proceeded with entrusting some internal services to third parties, including: maintenance, material storage, transport, business catering, plant cleaning, some training services and accounting, and management of computer systems. However, such outsourcing is seen today as a natural fact and its increasingly widespread application, especially in companies that wish to free up qualified resources, leads management to consider the opportunity to use similar models also for supply management.
The transfer of supply management to an external partner, especially non-productive materials, on the one hand has the scope of being able to concentrate mainly the best resources on strategic activities and on the other hand obtain economic benefits, making operational costs flexible. The transfer of management also involves the decentralization of most routine work, which contributes to increasing the motivation of the resources that are released, at the same time a greater professionalism is developed in favor of increasing business competitiveness in the market, competing among others to take more intense advantage of the remunerative areas of the market (cash cow).
The procedures
The supply process is made up of a number of sequential activities or procedures that range from the birth of the need to the issuance of the demand, to the payment of the purchased goods. The number of procedures increased over time due to the growth in necessary orders and the continuation of the aliquot origin of members assembled on machines and the tendency to reduce the value fixed in warehouse.
The application of the outsourcing concept, together with a world-leading Turinese company in the field of presses, in particular yearbooks and telephone directories for public users, allowed the reduction of the volume of supplies from private warehouses, also with an economic value of less than 15 times 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 engages employees in their training, taking away precious time that can be used instead 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 required to carry out the supply grows exponentially with the increase in the dimensions of the internal structures involved in the process. At the same time, the risk of procedural errors and informational chaos increases, drastically reducing the degree of efficiency of preliminary agencies. This makes supervision and management very complex, articulated and more expensive. Such costs increasingly often far exceed the value of the object to be provisioned.
Interference
The engagement required for the individual administration of all procedures in the supply process is, however, quantifiable as long as the procedures are linear, that is, as long as there are no interferences in the process flow, a very frequent and underestimated phenomenon when estimating operational costs and which generate a series of support activities that do not directly pursue the business objective, but become an administrative necessity. Procedural interferences are generated from various sources, both internal and external to the plant and can result in a stoppage, causing in the most serious cases the need to restart the sequence of process activities, with the consequences of a repetition of the same administrative activities, production of subsequent documentation and a huge increase in costs for all offices through which the supply procedure passes.
The introduction of administrative outsourcing ends precisely with the drastic reduction in the number of internal administration and control procedures. It is precisely the management of the latter that largely absorbs the resources and means that are highly qualified to carry out many other types of tasks, and it is above all the simplification of these managements that highlights the enormous economic recovery and efficiency. Together with 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 fireproof vehicles, outsourcing was applied to manage the supply of production materials from approximately 70 suppliers, whose annual supply volumes vary from 50 to 95,000 units. This solution made it possible to reduce the number of supplies and therefore invoices in 16 months of activity, from 1,321 to 85, equivalent to 99.93%, and to reduce the number of invoices from approximately 1,000 to 40, equivalent to 99.96%.
When considering the introduction of outsourcing, there is always the fear of losing control of the situation, but when the roles are defined, the areas of competence and the responsibilities of the two contractors are assigned, it is possible to have visibility of the economic convenience: the latter cannot do without a comparison with all the costs borne by the company in supplying, within itself, the services that the possibility of managing in outsourcing is being estimated.
A scalable proposal
For this reason, Unitec has precisely developed a concept devoting particular attention to this aspect and proposing a modular application that allows an immediate economic return, at each step taken towards outsourcing, through a series of proposals and possibilities for its application, based on a model adaptable to business dimensions and needs and, above all, easy to be introduced into existing structures.
The modular introduction of outsourcing, partial or total, with the possibility of working in a similar team and training within the figure of the coordinator, allows the possibility of interruption of the relationship and new independent management to be considered at any time, therefore making the decision less difficult that is made to support by an external partner.
Administrative outsourcing of supplies of non-productive materials Unitec's junior clerk is based on mature experience with companies from several European countries and active in various industrial fields and its own corporate structure also extends to production materials, therefore consolidating and diversifying know-how, factors that represent an important guarantee of operational and reliability over time.
The outsourcing activities carried out by Unitec are supported by the use of an information system, developed and maintained internally, with an internal team of programmers who fully acclimatize operated standards and whose communication allows data transmission with customers and suppliers.
Furthermore, the know-how in the field of information management, acquired in the course of mature experiences with its own clients, allows Unitec to always internally experiment with new IT solutions and data transmissions to propose to the client with the aim of improving communication and greatly accelerating access to information, reducing question and answer times. All taking advantage of the collaboration of qualified and highly professional personnel.
Collaboration with Unitec can be defined with great flexibility, ranging from the simple issuance of orders to the administration of all procedures in the supply process, ranging from the need birth phase to warehouse management and the provision of IT solutions for office automation.
Conclusion
The introduction and application of administrative and supply outsourcing allowed management to definitively resolve the decision-making paradoxes that we mentioned at the beginning and obtain real flexible costs, also recovering the precious resource of time, a fundamental member to dedicate itself increasingly effectively to the company's strategic and primary activities.
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 initiating a virtuous circle of synergy.
Knowing the importance of this result made us understand that if all employees are focused on the core business, the company can perform miracles.