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Put it in Writing: Sharpening Contracts Management to Reduce Risk and Boost Supply

Having great performance from an outsourced supply chain is really not possible without a strategic approach to contracts management. Similarly, true supply chain security requires a more sophisticated contracting methodology. There are five ways to start professionalizing your approach to outsourcing contracts.
By Mark Trowbridge
Mark Trowbridge, CPSM, C.P.M., MCIPS, is a founding principal of Strategic Procurement Solutions LLC, a provider of advanced supply management consulting, employee skills testing, training workshops and webinars, SCM efficiency reviews, and staff augmentation services. The firm also develops contracting tools for leading companies. He can be contacted at .(JavaScript must be enabled to view this email address). For more information, visit http://www.strategicprocurementsolutions.com.
March 1, 2015

Gone are the days of managing supply chain performance without having strong written agreements in place. Handshakes and good intentions and long-term trusted relationships may have sufficed in earlier times, but in today’s frenetic, volatile, global business environment, they leave businesses exposed to significant risks.

The challenges are exacerbated by elevated levels of outsourcing. True, outsourcing as a business practice is not new, but the extent to which it has evolved, and the range of business practices now involved, are what create cause for concern. It is not uncommon for companies to contract with third parties for some or all of their supply chain services, ranging from inventory management and packaging to transportation and logistics management. That’s particularly true when supporting an international customer base.

Indeed, numerous studies have identified outsourcing as a hallmark of successful companies. PwC’s Global Supply Chain Survey 2013, incorporating responses from 500 supply chain leaders in North America, Europe, and Asia, reported on the top-performing companies as follows: “The leaders typically outsource about 60 percent of their warehousing and logistics activities and nearly 50 percent of their manufacturing and assembly activities.”

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Download Article PDF

Gone are the days of managing supply chain performance without having strong written agreements in place. Handshakes and good intentions and long-term trusted relationships may have sufficed in earlier times, but in today’s frenetic, volatile, global business environment, they leave businesses exposed to significant risks.

The challenges are exacerbated by elevated levels of outsourcing. True, outsourcing as a business practice is not new, but the extent to which it has evolved, and the range of business practices now involved, are what create cause for concern. It is not uncommon for companies to contract with third parties for some or all of their supply chain services, ranging from inventory management and packaging to transportation and logistics management. That’s particularly true when supporting an international customer base.

Indeed, numerous studies have identified outsourcing as a hallmark of successful companies. PwC’s Global Supply Chain Survey 2013, incorporating responses from 500 supply chain leaders in North America, Europe, and Asia, reported on the top-
performing companies as follows: “The leaders typically outsource about 60 percent of their warehousing and logistics activities and nearly 50 percent of their manufacturing and assembly activities.”

SUBSCRIBERS: Click here to download PDF of the full article.

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