Put it in Writing: Sharpening Contracts Management to Reduce Risk and Boost Supply

From the March-April 2015 edition of Supply Chain Management Review.

March-April 2015

Anyone who’s ever bought a house knows the realtor’s motto: Location, location,location. It’s the most important factor in determining the value of a property. Based on the press releases that come across my…

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Gone are the days of managing supply chain performance without having strong written agreements in place. Handshakes and good intentions and long-term trusted relationships may have sufficed in earlier times, but in today’s frenetic, volatile, global business environment, they leave businesses exposed to significant risks.

The challenges are exacerbated by elevated levels of outsourcing. True, outsourcing as a business practice is not new, but the extent to which it has evolved, and the range of business practices now involved, are what create cause for concern. It is not uncommon for companies to contract with third parties for some or all of their supply chain services, ranging from inventory management and packaging to transportation and logistics management. That’s particularly true when supporting an international customer base.

Indeed, numerous studies have identified outsourcing as a hallmark of successful companies. PwC’s Global Supply Chain Survey 2013, incorporating responses from 500 supply chain leaders in North America, Europe, and Asia, reported on the top-
performing companies as follows: “The leaders typically outsource about 60 percent of their warehousing and logistics activities and nearly 50 percent of their manufacturing and assembly activities.”

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