Recently, I was speaking to some public sector managers on the evolution of the supply chain in the private sector. Coincidently, my speech occurred just as Royal Bank of Canada made front-page news for their use of foreign workers as a precursor to outsourcing their IT function. While this news caused quite an uproar, the point I made to my audience was that it’s really just the latest example of an evolution that has occurred across many industries (including the public sector) for the past thirty years.
In the private sector, supply chain pertains to anything from the components used in manufacturing products to the delivery of product design services. External supply chain partners can be local or based in low cost geographies such as Asia or Mexico. The objectives of outsourcing are usually to achieve cost efficiencies, improve use of capital or gain access to scarce skills. These objectives are common across a wide range of private and public sector operations.
One thing for sure is that supply chain management has been a dynamic force driving monumental changes in how organizations conduct business. From a supply chain that was traditionally vertically integrated (the organization did everything itself from raw materials to finished goods and internal support), we’ve seen significant externalization through continued outsourcing. Outsourcing, and the ability to effectively manage supply chain partners, is now a strategic attribute of the modern supply chain model that is characterized by flexibility, agility and cost competitiveness.
Executives in leadership roles must develop a strategic roadmap that incorporates the dynamics of (out)sourcing partnerships. This is not a fad but a formidable force of business evolution that can, however, sometimes have unexpected consequences. For example, while lauded for providing consumers with quality low-cost clothing, Loblaw have recently been criticized for their link to the recent tragedy at a garment factory in Bangladesh. For better of worse, globalization, changing technology and increased competition are all factors driving organizational change of which strategic outsourcing is a key element – both in the private sector and the public sector.