Outsourcing: Managing Your Contractor Relationship—A Smart Investment - Outsourcing operations can help preserve capital, focus resources, and manage business risk. - BioPharm International


Outsourcing: Managing Your Contractor Relationship—A Smart Investment
Outsourcing operations can help preserve capital, focus resources, and manage business risk.

BioPharm International
Volume 20, Issue 8


In addition to the human resources, supply chain managers of third-party outsourced operations require the appropriate IT and business process infrastructure in order to perform management activities. These IT tools include supply chain visibility, inventory tracking and analysis, production planning, capacity planning capabilities, to mention a few. Even "virtual" companies need to have these tools, despite not having manufacturing capabilities in house. The selected supply chain partners need direction from a central location that has a comprehensive view of what is taking place in the supply chain. Plans are constantly changing within the supply chain; lots fail, schedules and forecasts change, and without the appropriate tools, it is difficult to manage changing priorities.

Often an enterprise resource planning (ERP) system can serve as the transactional backbone for providing many of these capabilities. Standard purchasing modules can help to track what is on order and when it is expected. Planning modules usually track what is being manufactured and when, and the inventory module will track how much product is out there and at what stage of production. The list continues with different areas linking and enabling others. Lot traceability is another capability often provided in an ERP system that will be used as the system of record.

Smaller companies without an ERP infrastructure often use a combination of manual and paper-based processes, with rudimentary custom databases and in-house applications. However, as the company grows, these custom applications will likely not scale and will require replacing. While solutions exist that can provide distributed supply chain visibility without the burden of a full ERP application, it is important to constantly assess the information technology requirements.

Regardless of company size, structuring and managing effective supply chain business processes across companies is critical. There is often a lack of process and role definition in contractor relationships. Are the supply chain partners monitored on a regular basis? Are these results reviewed with the partner on a regular basis? What does the order process look like? What does the invoicing and payment process consist of? How often is the forecast or plan reviewed? These are just a few questions that may help to define some of the business processes required for managing an outsourced supply chain partner. Once these types of processes are established, refining them may also have a positive impact on the business.


No matter what stage of its lifecycle a company is in, outsourcing operations may be a viable means of preserving capital, focusing resources, and managing business risks. The outsourcing model is highly dependent on the company's unique business objectives and situation, and drives relationship management needs that are often ignored. Adequate human resources, information technology, and business process infrastructure should be established with regard to supply chain management, to ensure that the move toward outsourcing is successful. It is an investment that will pay off handsomely.

Todd Applebaum is vice president and operations/strategy practice leader at Maxiom Group, 781.250.4900,
. Nate Ryan is a senior consultant at Maxiom Group.

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