OUTSOURCING SERVICES

Distribution in outsourcing (even only of a part of it) shall not be considered as a simple purchase of logistic services, it must be experienced as a strategic choice with important impacts on operation costs and service level provided to costumers. Success depends on company specific peculiarities, on the precision of the outsourcing project and on how the supply tender is carried out.

DISTRIBUTION OUTSOURCING MAY INCLUDE:

  • Transport
  • Warehouse (housing and handling)
  • Manual labour activities in the warehouse (the assets belong to the company: the outsourced portion only include the human resources involved and this is generally entrusted to co-operatives work providers)
  • All the physical distribution process of the goods (housing, handling and transport)

Simco, thanks to its more than 30 year experience, has developed a well-established logistic tender management approach that allows our customers to realize successful outsourcing processes.

Simco method is divided in six steps:

1. An audit to understand the costumer’s needs

The first step is to carry out a Distribution Audit whose aim is to define exactly the real situation in terms of incurred costs and service levels. In the beginning data are collected (flows, stocks, costs, service level) in a complete, detailed and reliable way. After that, all data are understood and verified to be analysed and embodied (in tables, charts and dashboards easy to be understood).

2. The choice of the right supplier

The next step is the screening of suppliers through a precise sector study to identify the list of the partners to be involved in the tender. Suppliers’ Audit, both corporate (references, geographic coverage, corporate structure, etc.) and logistic (specialization, quality/size/warehouse location, network coverage, etc.), are carried out to draw a comparative and weighted Scorecard.

3. The “technical and logistic specification dossier”

The “technical and logistic specification dossier” is the exact and complete description of the service involved in the tender. This step is very important because on one side it helps the supplier to understand what the features and the peculiarities of the service are, on the other side it aligns all the offers to the specific requirements of the customer. The more detailed this part is, the more the operator can formulate a co-operation proposal, relevant to the client expectations.

4. Pricing structure and side costs

The fourth step involves the choice of the pricing structure to be adopted. According to the previous point (and to the Audit) we study the most suitable cost drivers (delivery note, lines, number of pieces, pallets, weight, volume, etc.) for the logistic service type (handling, housing, transport, etc.) needed. This pricing structure will be used by the tenderers, so that the several offers will result easily comparable. The price structure shall be the easiest, simplest and most controllable possible.

5. Service Level Agreement definition

The fifth step provides the definition of the minimum service levels that the supplier shall grant during the supply period and therefore quote in the offer (these “SLA” will be introduced in the “Technical specification dossier”, in “Rewards and Penalties” section). The most important features shall be, among others: inventory alignment, picking quality, “dock to stock” speed and order assembly, delivery time, cargo tracking, shipping tracing, delivery timeframe respect, the maintenance of the cold chain, etc.

6. Economic simulations and supplier’s choice

The choice of the right partner is the last step. Once the bids are all collected, we develop a simulation that compares logistic costs, obtained from the several proposals of the tenderers. The results obtained from this last analysis together with those from the suppliers audit will give the costumer all the elements to choose the most reliable and cost-effective partner.

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