What to Know Before Outsourcing Supply Chain

𝐑𝐞𝐟𝐥𝐞𝐜𝐭𝐢𝐧𝐠 𝐨𝐧 𝐚𝐥𝐥 𝐭𝐡𝐞 𝐬𝐮𝐩𝐩𝐥𝐢𝐞𝐫𝐬 𝐈’𝐯𝐞 𝐬𝐨𝐮𝐫𝐜𝐞𝐝, 𝐨𝐧𝐞 𝐭𝐡𝐢𝐧𝐠 𝐢𝐬 𝐜𝐥𝐞𝐚𝐫: 𝐩𝐫𝐨𝐜𝐞𝐬𝐬 𝐦𝐚𝐭𝐭𝐞𝐫𝐬. Taking shortcuts can lead to wasted money and a world of headaches downstream. (𝘙𝘢𝘪𝘴𝘦 𝘺𝘰𝘶𝘳 𝘩𝘢𝘯𝘥 𝘪𝘧 𝘺𝘰𝘶'𝘷𝘦 𝘦𝘷𝘦𝘳 𝘣𝘦𝘦𝘯 𝘢𝘴𝘬𝘦𝘥 𝘵𝘰 𝘧𝘢𝘴𝘵-𝘵𝘳𝘢𝘤𝘬 𝘙𝘍𝘗 𝘳𝘦𝘲𝘶𝘪𝘳𝘦𝘮𝘦𝘯𝘵𝘴, 𝘰𝘳 𝘩𝘢𝘥 𝘭𝘦𝘢𝘥𝘦𝘳𝘴 𝘱𝘶𝘴𝘩 𝘧𝘰𝘳 𝘤𝘦𝘳𝘵𝘢𝘪𝘯 𝘴𝘶𝘱𝘱𝘭𝘪𝘦𝘳𝘴, 𝘪𝘨𝘯𝘰𝘳𝘪𝘯𝘨 𝘮𝘢𝘵𝘦𝘳𝘪𝘢𝘭 𝘳𝘪𝘴𝘬𝘴?!) 𝐖𝐡𝐚𝐭 𝐈'𝐯𝐞 𝐥𝐞𝐚𝐫𝐧𝐞𝐝: 💡 𝙁𝙤𝙘𝙪𝙨 𝙛𝙞𝙧𝙨𝙩: Be specific about your needs in RFx docs. If you’re unclear, suppliers will be, too. Before going to RFP, always have quantifiable evaluation criteria finalized and approved by the Spend Owner. 💡 𝙄𝙩’𝙨 𝙣𝙤𝙩 𝙟𝙪𝙨𝙩 𝙥𝙧𝙞𝙘𝙚: The cheapest option often costs the most in the long run. Prioritize value over price. Suppliers who price things materially lower than benchmark norms usually cut corners somewhere to meet margins. 💡 𝘾𝙝𝙚𝙘𝙠 𝙧𝙚𝙛𝙚𝙧𝙚𝙣𝙘𝙚𝙨 𝙩𝙝𝙤𝙧𝙤𝙪𝙜𝙝𝙡𝙮: Source independent references via your network. Past performance tells the real story. Ask the right questions and listen closely to the answers.  💡 𝙏𝙝𝙞𝙣𝙠 𝙖𝙝𝙚𝙖𝙙: Can the supplier grow and evolve with your business? Are they innovative and flexible? Does their company culture and ways of working align with yours?  💡 𝙆𝙣𝙤𝙬 𝙩𝙝𝙚 𝙧𝙞𝙨𝙠𝙨: Most suppliers come with some level of risk, the key is understanding and managing it. Conduct due diligence on short-listed suppliers. Outputs should inform the down-selection process, with material deficiency action items included in the contract. 💡 𝘾𝙝𝙤𝙤𝙨𝙚 𝙥𝙖𝙧𝙩𝙣𝙚𝙧𝙨, 𝙣𝙤𝙩 𝙫𝙚𝙣𝙙𝙤𝙧𝙨: The best suppliers care about your long-term success and aligning with your goals.  Look at proposals holistically, thinking beyond the transaction and into value creation. 𝐇𝐞𝐫𝐞’𝐬 𝐭𝐡𝐞 𝐭𝐡𝐢𝐧𝐠: Looking back, I’ve been at firms in seasons where costs were prioritized over total value, often leading to short-term gains but long-term challenges. There were times I should’ve taken a firmer stance about material supplier risks identified and bias in the selection process.  As procurement peeps, we provide recommendations based on long-term value, risk management, and partnership potential. This includes having the courage to speak up with informed and actionable guidance when things don't pass muster. The goal is to ensure sourcing outcomes build a foundation for success, not just a quick win. 📢 𝙋.𝙎. 𝙒𝙝𝙖𝙩 “𝙨𝙘𝙝𝙤𝙤𝙡 𝙤𝙛 𝙝𝙖𝙧𝙙 𝙠𝙣𝙤𝙘𝙠𝙨” 𝙨𝙤𝙪𝙧𝙘𝙞𝙣𝙜 𝙡𝙚𝙨𝙨𝙤𝙣𝙨 𝙬𝙤𝙪𝙡𝙙 𝙮𝙤𝙪 𝙨𝙝𝙖𝙧𝙚 𝙬𝙞𝙩𝙝 𝙮𝙤𝙪𝙧 𝙮𝙤𝙪𝙣𝙜𝙚𝙧 𝙥𝙧𝙤𝙘𝙪𝙧𝙚𝙢𝙚𝙣𝙩 𝙨𝙚𝙡𝙛?

Sourcing and supply chain, pointers from years of practical experience... 🧵 At The Pant Project we come from a family background of ~50 years of experience in textile manufacturing. As a brand, we work with vendors across India to procure the highest quality materials for our product. What have we learnt in this time about how to manage supply chains? 1. Trust is everything. If your vendors trust you to lift goods, make payments, and honour your commitments, then you are golden. If they don’t trust you, then no amount of legal documentation or paperwork can make the relationship work. Trust is built over time, with consistently honouring your commitments. Trust takes a lot of time to build up, and just a few bad experiences to lose forever. 2. Processes > people. At scale, if you are person dependent, things are bound to break. You need to have set standard operating procedures (SOPs) for everything from raw material inward to pre production processes, mid-line inspection, final quality control, packing and dispatch, else you have no way to control irregularities in quality. You also need a kaizen mindset to continuously make micro-improvements. 3. Cost is just one factor in deciding which vendor to partner with. While it’s important to optimise for the right purchase price, there are a host of other things to consider when choosing a manufacturing partner. Speed of delivery, flexibility on minimum order quantities, and quality of the product matter a lot. So it’s a vendor scorecard of all of the above that determine who wins the right to produce what & how much for your brand. 4. Diversify your supply chain, but not too much. While it’s important to have multiple partners for each critical component or SKU to minimise single party dependency risk, it is also important to give meaningful volumes to select partners so you are a relevant part of their annual operating plan and get the priority service that your brand needs. We see too many brands making the mistake of splitting volumes across too many factories before hitting meaningful scale, and they have no control anywhere. Like with any investment portfolio, while diversification protects against the downside, if you know what you are doing, some level of concentration into high conviction bets (factories) leads to outsized returns. 5. Invest in product R&D, it’s worth it in the long run. Becoming a pure commodity player is a race to the bottom. There are real innovations to be made at a yarn level, fabric technology level and garment design & engineering level, and you have to invest the $$$ upfront to reap the long term benefits. So invest in R&D to stay ahead of the curve, and co-create, collaborating closely with your supply chain partners, or run the risk of becoming irrelevant over time. The strength of your supply chain is the backbone of your brand.

My American customer is an inventor in the sound bar industry. He spent over a year developing a product with a factory in China. Everything looked ready. They reached the DVT stage. A 50-unit pilot order was placed. A mass production order for 5,000 units — worth nearly $1 million — was scheduled. Then everything got stuck. Why? Some components were ordered incorrectly. Others were missing completely. I asked them one simple question: “Did you audit the factory?” They answered: “We visited them before.” That’s the problem. Visiting a factory is NOT the same as auditing a factory. A factory that orders the wrong materials or misses key components is usually showing deeper operational issues: • Weak documentation systems • Poor internal processes • Lack of production control • Weak supply chain management • Ineffective communication between departments Many buyers judge factories by the showroom, meeting room, or dinner table. But real manufacturing capability is hidden behind the scenes. Before choosing a contract manufacturer, you should know: • What does their organization structure look like? • What are their real strengths and weaknesses? • Is their R&D process actually effective? • Do they have a proper quality management system? • How do they handle mistakes, delays, or supply chain disruptions? • Do they even have contingency plans? If you don’t audit your manufacturing partner, you don’t really know who you’re doing business with. And once tooling is made, timelines are committed, and customers are waiting… It may already be too late.

Ever dream about your co-manufacturer? Yeah… me too. I woke up today thinking about manufacturing partnerships. Literally dreaming about it. That’s how you know I’ve been in this game a minute. I don’t own my manufacturing anymore. I did—in the early days of New Primal, I started in a 200 sq ft shared kitchen. We upgraded. Grew a bit. But after 18 months, I realized…owning the facility wasn’t for me. So I started outsourcing. First to one co-man. Then a few more. And let me tell you—there are personalities in the world of manufacturing. I'll leave it at that. Finding the right partner is everything. And in my 12 years of working with co-mans across categories, here’s what I’ve learned you need to get right up front: ✅ Take your time – It’s a courtship, not a quick fling. Don’t rush it. ✅ Enroll them in your journey, just like you would an investor. ✅ Check their references – Just like they’ll check yours. ✅ Always get a contract – No “handshake” BS. Every time. ✅ Define volume expectations – Now and future. You don’t want to get squeezed out. ✅ Mutual respect – If they act like they’re doing you a favor, walk away. ✅ Listen to the stories – If they talk about suing or being sued…red flag. ✅ Understand capacity – Not just what they can do now, but how they’ll grow with you. ✅ Align on goals – Are they expanding? Buying new equipment? Or just filling idle time? ✅ Get clear on terms – Are you buying ingredients? Turnkey pricing? Major cash flow implications. ✅ Work their line – Seriously. Show up. Talk to the team. Make your product with them. ✅ Know packaging limitations – And how they affect your cost and flexibility. ✅ Think logistics – Where they are matters for freight and fulfillment. ✅ Dial in your pricing model – Especially if you’re supplying raws. Know how yield is tracked. ✅ QA is king – Have a process for retain samples and pre-shipment checks. Spell it out in writing. This list is hard-earned. From wins. From pain. From a few blowups. What else should founders lock in early when picking a co-man? Drop your insights—I know a few of you have the scars to prove it.

Outsourcing doesn’t have to be a four-letter word. For most companies, it is. — Cost cuts disguised as strategy — Quality issues — Supplier relationships that feel like hostage negotiations But at the SIG Global Executive Summit in October 2024, I heard a different approach. A CPO shared how their team manages 38 outsourced resources in Bangalore. Year two. Results that outperform almost every BPO relationship in the industry. The secret? Partnership—not punishment. The 4-Step Partnership Playbook: 1. Source for partnership potential—not just price Find a right-sized partner who can grow with you—not just the cheapest bidder. 2. Invest in cultural integration from day one Month-long rotations. Two-way exchanges. Build the relationship before you measure it. 3. Expect friction—build systems for it Escalation paths. Communication cadences. Clear metrics. Plan for problems, not perfection. 4. Measure relationship health—alongside cost Innovation. Trust. Speed. Not just savings. Supplier relationships often reflect internal ones. Culture runs through everything. The 1990s “outsource and squeeze” model is dead. Modern procurement wins through partnership. Tag someone who’s already building supplier relationships this way. They’re probably ahead of the curve.

https://lnkd.in/gHzRnuBw I've been involved in a number of outsourcing projects throughout my career. TLDR: Outsourcing is not a silver bullet. This week's news about Warren Golf & Country Club closing three F&B outlets highlights that while outsourcing can offer organisational benefits, the risks are real and can lead to business disruptions if not managed well. According to the ST article, one main motivation was financial viability. The club's F&B operations incurred a $337,000 deficit in 2024 while the new operator would pay a monthly rental of $15,000, i.e. a substantial financial turnaround of half a million dollars (from -$300k to +$200k). I think this financial projection is too rosy given that F&B outlets in golf clubs cater mostly to members and there's limited upside in attracting new foodies. Furthermore, the new operator would tighten costs to make the P&L work, which entails squeezing wages (as this contributes 30% to 40% of operating expenses in F&B). But that can compromise recruitment efforts, so it's not surprising that the new operator cited manpower challenges as the reason for pulling out at the last minute. Outsourcing need not be a binary process of going from 100% self-operated to 100% vendor-operated. This is risky, especially if the new operator is coming in cold and has no prior experience of the organisational context and business conditions. There are several ways to deal with this, such as a phased transition or outsourcing only certain aspects of operations (e.g. providing manpower while the principal continues to hold the P&L risk). Perhaps the most important thing I’ve learnt is that outsourcing doesn't automatically solve internal problems. If existing processes are inefficient or poorly managed, transferring them to an external vendor means the vendor will inherit the same problems, often leading to higher costs, service degradation and even contractual termination. #Nofreelunch

OUTSOURCING: When organizations outsource, they often believe they’re transferring work. In reality, they’re also transferring risk. And without the right structures, that risk can quietly grow beyond their control. Outsourcing has delivered major advantages over the last three decades: cost reduction, access to expertise, and operational flexibility. But these benefits often come with hidden exposures. Common outsourcing-related risk drivers include: - Geographical dispersion, increasing vulnerability to geopolitical and natural disruptions - Loss of direct control over quality, compliance, and timelines - Visibility gaps, especially across Tier 2 and Tier 3 suppliers - Misaligned objectives between buyers and suppliers The issue isn’t outsourcing itself—it’s the lack of effective risk governance and visibility around outsourced operations. When disruptions hit, these blind spots can quickly become critical vulnerabilities. Proactive identification, assessment, and mitigation are essential, not only for internal operations but for every link in the extended network. At the end of the series, all info will be uploaded onto our website for your viewing purposes: www.thescrmconsortium.com And if you're interested to know more about supply chain risks and how to identify, assess, mitigate and manage them, please visit our education academy, Edukazi, at www.edukazi.com to view our online Supply Chain Risk & Resilience program, consisting of 3 levels.

Thinking about outsourcing? Read this first. As the CEO of a global #outsourcing company, I’ve seen firsthand how outsourcing can transform a business – but only when it’s done with purpose and preparation. Too many companies look at outsourcing as a quick fix to reduce costs. But the real value? It’s in creating space for your internal teams to innovate, move faster, and focus on what matters most. Before you outsource, ask yourself: ✅ Is your internal team stretched too thin or bogged down by repetitive tasks? ✅ Do you know exactly what you want to outsource – and how success will be measured? ✅ Are you choosing a partner based on more than just technical skills? (Hint: communication, security, and cultural fit matter more than you think.) Most importantly – don’t chase the cheapest option. Choose a partner who understands your vision and is committed to long-term success, not short-term wins. When done right, outsourcing isn’t a cost center. It’s a growth engine. #BusinessGrowth #Leadership #CXOInsights

Before you kick off that outsourcing project, systems integration, or digital transformation -- pause and think. Two critical principles will make or break your initiative: - First: Your vendors will sell into the environment you establish during procurement. They'll adapt to whatever culture, processes, and expectations you set, for better or worse. - Second: The best vendors are sitting on millions of dollars worth of expertise and battle-tested insights. When they're genuinely invested in your success, they'll bring that intellectual capital to the table. Most organizations miss the connection: You only unlock that second principle by getting the first one right. And it starts before the RFx goes out. If you don't create an environment of trust and candor from day one, that expertise never shows up. If you treat procurement as a test, your vendors learn to play defense. They'll craft the perfect proposal, say the right things, and then deliver whatever you happen to ask for. But if you approach procurement as a learning vehicle, a chance to drive true alignment, and a genuine two-way discovery process, you signal that you value candor and that partnership matters. That dynamic carries forward and can make or break execution. During execution, this discovery and alignment will result in your new partner bringing its A-game, sharing insights proactively, challenging your assumptions, and investing their best thinking into your shared success. This requires them to be deeply vested in the outcomes, and that takes active, thoughtful engagement. Ask the hard questions. Challenge assumptions. But do it in a way that creates space for candid dialogue. Difficult conversations handled with transparency are worth their weight in gold. This isn't overhead. It's an investment in outcomes for you AND your new partner. Are you maximizing the ROI on your vendor relationships, or sacrificing long-term value for short-term "transaction efficiency"? #TransformationEnablement #NegotiatingForHumans #LobsterSox

You think you're good at outsourcing?  You're probably wrong. New research from Manchester Metropolitan University analyzed outsourcing failures across industries. The key finding? Too many executives skip the critical evaluation factors. And when they do… failure isn’t just expensive, it can be terminal. As the researchers put it: "Failure in respect of outsourcing could have a critical effect on an organisation, leading to losses and ultimately its termination." So what actually determines success? 𝗧𝗵𝗲 𝟳 𝗳𝗮𝗰𝘁𝗼𝗿𝘀 𝘁𝗵𝗮𝘁 𝗺𝗮𝘁𝘁𝗲𝗿 𝗺𝗼𝘀𝘁: 1️⃣ Project management maturity If you can’t manage internally, outsourcing won’t save you. 2️⃣ Core vs non-core clarity Keep core activities in-house. 3️⃣ Contracting experience First-time outsourcers make the costliest mistakes. 4️⃣ True financial impact Hidden costs can destroy budgets. Calculate the total cost. 5️⃣ Supplier due diligence Financial checks upfront = fewer problems later. 6️⃣ Contract specification clarity Vague requirements lead straight to disputes. 7️⃣ Systems compatibility Processes and culture must align, price alone won’t carry the partnership. The research conclusion is simple: Organizations that evaluate all factors succeed. Those that cut corners risk termination. ♻️ Repost if you believe research beats gut instinct. ➕ Follow me, Louis Shulman, for more tactics to stay top of mind and beat the competition. 📧 Join our weekly marketing newsletter: https://lnkd.in/gYGzEeTb