In the course of my consulting practice, I sometimes get involved in consulting assignments and litigation that involve the breakdown of an outsourcing arrangement. Although there can be any number of causes, it seems that many of these disputes result from a deterioration of the relationship itself. The flawed relationships then lead to poor cost control, loss of efficiency and productivity, lack of communication, and other problems.
Although it’s easy to lay the blame at the feet of the logistics service provider (LSP), a surprising number of the relationship difficulties I’ve observed result from poor governance on the client’s part. Granted, when a company outsources a logistics function, it should feel confident that the task will be managed efficiently. But too often we forget that the relationship requires continuous management and allow ourselves to slip into the “outsource it and forget it” mode. (This problem is further exacerbated when the relationship is treated as a commodity as I discussed in my March blog.)
We talk a lot about partnerships, but the fact is, while a client and a provider should share some common goals in their relationship, each party also has goals of its own. Inevitably, differences in priorities and expectations arise, which is exactly why these arrangements must be managed on a continuous basis. What a number of companies fail to do is separate leadership from management. Many logistics professionals have experience in warehouse operations, transportation, or information technology, yet they lack the leadership ability necessary to manage a relationship.
Several years ago, veteran supply chain consultant Bob Sabath summed up the dilemma with admirable succinctness: “Successful managers of (outsourced) relationships need to be problem solvers, innovators, facilitators, and negotiators who have exceptional people skills and the ability to get things done,” he said. “Most managers who take the traditional logistics career path never have the skills required to be a good relationship manager. Nor do they have an interest in them.”
What makes someone a good relationship manager? To begin with, he or she must be both a logistics problem solver and a leader who can motivate and facilitate superior performance by the LSP. He or she must be accessible, willing to listen, and a good communicator. As supply chain management becomes increasingly dependent on technology and technology professionals, it’s easy to lose sight of what good communications really mean. When a provider has a problem that requires the client’s attention, voicemail messages and e-mail communications simply are not good enough. The manager must be available for a phone conversation, or if necessary, a face-to-face meeting. Unfortunately, too many of us have become so enamored of our ever-more-fun message devices that we lose sight of the messages themselves.
Once contact is made, the manager must be willing to listen carefully to the provider’s questions and concerns and give a thoughtful, researched response. A hasty, uninformed answer will do more harm than good.
Finally, the relationship manager should have a strong sense of integrity. Many times, problems with the outsourced operation are the fault of the client; and too often, client representatives are unwilling to accept responsibility for their own actions (or lack thereof). The manager must be honest and forthright in dealing with issues and be willing to place responsibility exactly where it belongs.
He/she must be able to negotiate and exert influence internally as well as externally. Some internal personnel will be quick to criticize and even undermine; and the relationship manager must have the standing within the organization to counteract these negative forces.
I think almost everyone in our industry would agree that collaboration is the key to successful supply chain management. What is not so clear is whether some firms are staffed to achieve it.