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OUTSOURCING - NIRVANA OR NIGHTMARE?

OUTSOURCING - NIRVANA OR NIGHTMARE?

"What business are you in? - so why dont you focus on that and let us run your logistics / IT / other? This is the business we are in, and we are experts" A compelling argument you think?.........

OK, so we have all had the compelling Outsourcer pitch about what business are we in, and why we should let them, the experts handle it all for us. It is so compelling what is there to talk about?

Well....... I think there is the small matter of your Brand,Your Look, Your Feel and your customer experience....... sound like its important? Its not only important, it's EVERYTHING!

IF we are all going to use AMAZON logistics to ship our products, then we all offer the same servcie level..... and no matter who the client chooses, it is the same experience every time..... so why are they going to use you? If you sell generic products, and you use a generic delivery agent, and a generic IT platform....... where is the difference? where is the reason or reasons for people to buy from you? the only differentiator is price..... and so it is for your competitors...... and you all use price to differentiate, until there is nowhere left to go on price.... and then you start to look where you can add value.......to......differentiate!

Be very, VERY aware that if you decide to use generic or outsourced platforms for any component of your business, you are going to look and feel the same as everyone else UNLESS you are adding value and differentiation elsewhere in the cycle, and it is not just price.

The outsourced 'plug & play' solutions are great if you plan to sell some cheap generic products as a sideline business - the costs and barriers to entry have come down, and this is good for the smaller 'come and go' players who nibble away at a fraction of your market. But for you, a scale and possibly mature player, you need every bit of value, differentiation, innovation and uniqueness you can get your hands on if you are to move ahead of the pack and become the partner of choice for your clients.

I 'get' all the benefits of speed, cost & ease of using outsourced platforms and providers for many components of your business. Just make sure you think it all through before signing up to an outsourced service, for once you are 'in'....... geting out can come at a prohibitvely high cost, and you then have a 're-learning curve' to go through whiuch will disrupt your service levels and cause pain and stress everywhere.

Unless you have a very clear and differentiated value proposition, which you 'own', and which makes you different from every other player in your space, be very, very careful about which components of your business you want to outsource to the generic providers - and remember, these services are very specific and very prescriptive in nature, and do not allow you to 'pick & choose' off the A La Carte menu without great cost.

Selling generic products using generic outsourced plaforms means you have one option to differentiate - PRICE and whilst price is a great sales tool, it only works if it is sustainable...... and it is only sustainable if you are the cost leader (i.e. the lowest cost base player) in your space, and you have real skills in this area that will enable you to always be the lowest cost player.

The trend of outsourcing is finally reversing..... as many companies find that their clients do not like the outsourced services, and also find that the costs of the outsourcers keeps going up and up..... to the point where re-sourcing and taking back ownership of the outsourced component not only becomes cheaper, but affords the opportunity to add back value once lost.

OH YES! times they are a-changing!!!!

 

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