Service Supply Chain Management

When to Keep it In-House and When to Outsource

Service supply chain management plays a critical role in the post-sales success of all original equipment manufacturers (OEMs). It involves the management of all activities related to warehousing, distribution, and coordination of all parties involved in this process. Many OEMs struggle with the decision of whether to keep their service supply chain management internal or outsource it to a third-party logistics provider (3PL). There are certainly benefits to each, but we encourage each entity to review the criteria below to determine what steps make the most sense for their specific needs.

When to Keep Service Supply Chain Management Internal

Keeping service supply chain management operations internally can enable an OEM to maintain complete control of their post-sales support. Yet, there are three questions OEMs must ask themselves when making an insource vs. outsource decision.

#1 Do you have the expertise and resources?
If a company has an experienced team with the required expertise and resources to manage the service supply chain, then it can keep the service supply chain management internal. This is especially true for large companies that have the budget to hire and train staff members, both locally and globally.

#2 Is post-sales support a core competency?
If a company’s post-sales support is a core competency and a key differentiator in the market, the OEM should keep it internal. For example, some OEMs may offer advanced post-sales support with 24/7 assistance, in-field experts, and spare and repair parts installation. Again, if this is a key differentiator, outsourcing may compromise this market position.

#3 Is expansion imminent?
Smaller OEMs may choose to keep their service supply chain management in-house because they are able to support their existing market without compromising delivery timelines. If product line or geographic expansion is not something top-of-mind, then partnering with a 3PL likely doesn’t make sense.

When to Outsource
Supply Chain Management

Like keeping service supply chain logistics in-house, there are also benefits to outsourcing to a third party. However, it must make sense. OEMs should review the top three considerations for outsourcing this vital part of their business.

#1 When the company lacks the expertise and resources
If a company lacks the expertise and resources to manage their service supply chain effectively, outsourcing may be a viable option. Outsourcing can provide access to a pool of experienced professionals who can manage the supply chain more efficiently.

#2 When the company needs to reduce costs
Outsourcing supply chain management can help companies reduce costs, especially when the 3PL has economies of scale that can be passed on to the company. This can also help companies focus on their core competencies and reduce overhead costs.

#3 When the company needs to increase flexibility
Outsourcing can help companies increase flexibility in their service supply chain operations. Third-party logistics providers have the resources and expertise to quickly adapt to changes in the market, such as fluctuations in demand, supply chain disruptions, or changes in regulations. In addition, partnering with a 3PL can allow for expedited global expansion by offering in-region warehousing and distribution, IOR and EOR services, and localized experts.

Additional Considerations When Outsourcing Service Supply Chain Management
If outsourcing is what makes the most sense for the OEM, they must find a post-sales solution provider that offers elevated post-sales support. Essentially, the OEM will be relinquishing a substantial amount of control over its post-sales experience to this provider. They must feel confident delivery timelines and customer support will not be compromised. They need a global logistics partner that operates as an extension of the OEM itself.

Conclusion

The decision to keep service supply chain management internal or outsource depends on several factors, such as the company’s expertise, resources, core competencies, and service supply chain needs. Companies should evaluate their options carefully and choose the option that best aligns with their strategic objectives and goals.

Schedule a call with Flash Global to discuss the outsourcing options for your organization, now.