Outsourcing’s Wrong and Right (Part 2)

Last time I talked about how Armstrong’s outsourcing of transportation functions to a 3PL in 2007 was probably the wrong decision at the time and one that was destined to fail mainly because it was based on non-vested premises. Eventually Armstrong brought back that function—something it historically was very competent at—in-house and then went on to win a shipper of the year award.

An odd sequence of events that turned out okay for Armstrong (and most likely not for the 3PL) provides a solid lesson that there is right and a wrong way to outsource.    Using the Vested Outsourcing approach to collaboration, trust and mutually beneficial desired outcomes can help a company achieve their desired outcomes and even save lives!.

A good recent example of a “good” 3PL story was described in a recent issue of DC Velocity by Senior Editor Mark B. Solomon. The article, “An inside look at Valeant Pharmaceuticals emergency shipment program”, describes the successful six-year outsourcing relationship between Valeant and Kenco Logistic Services that literally saves lives. Their relationship, according to the article, was recently restructured to accommodate some key changes in Valeant’s DC situation. Almost of necessity this required that their relationship be one based on vested principles of close collaboration, rapid communication and trust.

The article says: “As for what has made the partnership a success, Asha Soto, Valeant’s vice president, supply chain operations says Kenco’s operational abilities are just part of the story. Another part has to do with shared values. ‘Culturally, we have a great fit with Kenco,’ she explains. ‘Their people truly recognize the critical nature of the products we manufacture, and they take seriously the importance of their role in distributing these products. Beyond locations, facilities, and knowledge, it takes dedication to handle these types of shipments. A 3PL must share the same sense of urgency that we have.’”

Shared values and objectives are critical elements of a Vested Outsourcing agreement. In addition there has to be a flexible, insightful governance framework, a cultural fit and a focus on desired outcomes that allows the service provider to do what it does the best without interference or second-guessing and with ultimate trust because lives are at stake and there’s no time or room for that negative stuff. Valeant and Kenco focus together on outcomes, not transactions (Rule 1) and they focus on the what (Rule 2), and on what needs to be done right now.

In essence they have a vested relationship for all the right reasons, right from the start.  My vote?  Valeant should win shipper of the year over Armstong any day of the year!

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