Vested Outsourcing: Only the Resilient Survive

Vested Outsourcing’s message of true collaboration and partnership to achieve desired outcomes and increase the pie for everyone works over the long term in good times and bad, maybe more so during the latter.

We know that supply chains need to be flexible, agile, collaborative, transparent, fairly priced, efficient and sustainable – both financially and environmentally. We hear those buzz words all the time, but they are easier said than implemented, especially all at once. Those qualities may not seem so vital when the world economy is booming, but if they are in place when things start to turn south, companies and their service providers are better placed to ride out the storm.

The key to this is flexibility, or resiliency – flexibility in dealing with the unexpected aspects that occur as you work together and as you deal together with the vagaries of the market.

This lesson was punched home during the Great Recession and continues during its uncertain aftermath. “As companies struggle to cope with the uncertain global economy in 2010, nurturing resilient supply chains is vital for survival,” says a recent report from the Economist Intelligence Unit. The report, “Resilient supply chains in a time of uncertainty,” published earlier this year, was sponsored by Oracle.

Companies have to stay efficient in order to generate good cash flows and “agile enough to jump-start production and keep customers satisfied as demand rebounds,” the report says.

Even in a slow recovery – which is what’s apparently occurring – “companies cannot afford to sacrifice resilience” for the sake of efficiency. Resiliency is defined in the report as the ability to recover quickly from disruptions.

“Sometimes it’s easier to manage on the way down in a recession than on the way up,” says Brian Hancock, vice president of supply chain at Whirlpool Corp., who was quoted in the report. “It takes quite a bit of effort to bring capacity back on line, and everybody is hesitant to increase capacity in case they don’t see the economy returning to 2006 and 2007 levels.”

As the report points out, efficiency and belt-tightening should not trump resilience when times are uncertain. Rather, strategic objectives should ensure that there is sufficient resilience for a given level of efficiency.

The Economist Intelligence Unit also found that strengthening relationships with suppliers and improving forecasts and planning are strategic changes that help balance the impetus to simply engage in cost-cutting. Vested Outsourcing’s Five Rules speak directly to this: Shift to the ‘What’s in it for We’ mindset; focus together on the what, not the how; agree together on clearly defined and measurable outcomes; optimize pricing model incentives.

In other words playing nice together as a matter of course will lay the foundation for success.

Charles Dickens’ famous opening line in A Tale of Two Cities, “It was the best of times, it was the worst of times,” contains a great message for the business world: It’s often impossible to discern exactly when good times turn bad, or when the bad times will improve. Often there’s no obvious demarcation, or the good and the bad occur simultaneously.

Why fight in the family? Work it out. Understand the data. Plan together for various scenarios. Put the boom or bust mentality aside and foster mutually beneficial relationships. Enlightened companies know the long-term value of cooperation with their partners and of vesting in the success of each other.

Resilient partners won’t break in high winds; resilient chains won’t snap.

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