Wednesday 26th Oct 2016 - Logistics Manager

Maximising the benefits

It is no secret that outsourcing elements of a supply chain can help to significantly improve an organisation’s bottom line. Over the past few years the industry has increasingly seen companies assess how the outsourced supply chain business model can benefit their individual business requirements.

Yet, having managed external supply chains at Royal Mail for five years now, it is becoming more apparent that many are yet to realise the full benefits of outsourcing. While many industry sectors have embraced outsourcing for specific elements of their supply chain, there are still prizes to be won by considering how other areas of an operation may benefit.

The complete outsourcing of supply chain services within an organisation can appear an overwhelming task. Outsourcing by its very nature is such a ‘catch-all’ issue so it is not surprising that many find the job too large to think about. Businesses know there are savings to be made, but the process of analysing this across the organisation is a job no one department relishes.

In many respects it is no surprise that we often hear the phrases ‘it’s someone else’s job’ or ‘cost savings would not benefit my department’ in connection with outsourcing, particularly with some of the less mainstream elements. Silo mentality is prevalent. Organisational silos hinder the progress of outsourcing as many firms fall foul of focusing on their departmental targets and ignoring the potential benefits of looking across their entire operation. At Royal Mail we have been investigating how to help businesses overcome these common barriers.

Our partnership with US e-commerce software company Marketworks shows how retailers can overcome some of their perceived challenges. We are working with Marketworks to enable retailers to create a complete sales proposition on eBay’s platform, from store-front design, item listing and order management through to product warehousing and goods fulfilment. To date, the partnership has been successful in demonstrating the benefits of selling via a new channel to gain a better return on goods without the usual hassle of set-up and on-going management. The retailer simply decides that there are benefits in selling certain items on eBay and instructs the Royal Mail / Marketworks partnership. As well as getting a better price for certain items, such as end of line or refurbished goods, the retailer also benefits from promoting its brand on the global trading platform.

As for the financial services sector, we have further developed our Branch Direct service, originally designed to distribute internal mail between branches for Barclays. The service, now used by a host of leading financial sector organisations including Norwich Union, is another example of a service that demonstrates the benefits of outsourcing.

Royal Mail manages the distribution of all internal mail between branches with tailored timing to cater for the organisation’s requirements. For example, at Barclays we make two deliveries a day to most branches whilst the Derbyshire Building Society requires one consolidated daily delivery and collection solution. For these companies the benefits of outsourcing internal distribution are clear. The Derbyshire has recently announced a 20% reduction in the costs of cheque clearing due to the efficiencies realised using Royal Mail’s distribution systems. Both the Royal Mail / Marketworks partnership and Branch Direct are examples of how dedicated solutions can be tailored to meet business outsourcing needs.

Companies can realise even bigger benefits. They could arrange for all items required by its stores, offices or branches nationwide to be warehoused centrally and delivered to each site in one delivery integrated with their internal mail distribution network.

Simple marketing activity, for example a credit card company that offers a free gift for new customers, could also be outsourced. As a non-core sales channel the gift can be picked, packed and dispatched off-site. Taking it a step further, the credit card company could outsource the print, distribution and fulfilment of the offer as well and the supply chain company could fulfil, as and when needed. Even the outsourcing of inward and outward mailrooms can realise cost and efficiency benefits.

It sounds simple, but it is not, and the industry needs to continue to offer the best balance whereby companies wishing to outsource supply chain activities, whether it be a financial institution, a Government department or retailer, can focus on doing what they do best and use the expertise of dedicated supply chain providers to improve their efficiency and reduce their costs.

Gerry Farwell is head of supply chain at Royal Mail.