Smart Partnerships: The New Face Of Outsourcing

Companies are evolving their business models from outsourcing for cost effectiveness to forming strategic partnerships with key suppliers or customers to drive innovation and growth. Outsourcing used to refer to non-core functions taken over and run by an external party in the belief that this would be cheaper and more efficient. But this reflected the view that a company was a self-contained entity, which is no longer the case, because globalisation and the rise in technology have created a new playing field.

Companies today are interconnected through their supply chains, which often extend across a number of continents. This trend is evident in the UAE, which is fast emerging as the premier global logistics hub. The UAE’s world-class transport and logistics infrastructure such as Dubai World Central, the world’s first-of-its-kind aerotropolis, have opened unprecedented opportunities to connect the UAE to global markets. Nonetheless, as much as this creates opportunities for cost savings and access to new products and services, global connectivity also means that companies are vulnerable to changes taking place throughout the global community.

Staying ahead of the game in an unpredictable and constantly evolving business environment while at the same time managing risk requires a new approach. Successful businesses have realised that the secret of competitiveness lies in their ability to continually innovate and partner with the right companies to respond effectively to volatile market conditions.

Companies are acknowledging that other companies exist that are better equipped and more focused to perform certain functions or serve specific market needs. There is also a growing realisation that the traditional arms-length outsourcing relationship is no longer appropriate and that a partnership approach is vital.

So, as the nature of global business has changed, outsourcing and the relationships between companies throughout the value chain are evolving towards smart partnerships. Smart partnerships are not just about relationships. They are strategically selected partnerships with key players across the supply chain built on shared strategies and mutual goals.

Companies are beginning to view this approach as effective in gaining access to other skills, processes and new markets. Respondents to the 2013 supply chain foresight survey, recently published by Barloworld Logistics, ranked collaboration and partnering as one of the key drivers of innovation.

There are many good examples of companies both locally and internationally that have leveraged partnerships with other industry players to take their own products and services to a new level.

This is supported by the 2013 GE Global Innovation Barometer. Up to 87 per cent of the 3,000 executives in 25 countries responding to the survey said they were confident that their companies could be more innovative and successful if they collaborated or partnered with other businesses and 68 per cent said they had already done so. The GE report says the key reasons for collaborating were accessing new technologies and new markets.

On the other hand, many still fear they may lose critical skills or intellectual property by opening up their businesses to other companies. But these concerns are being overridden by the volatility of market conditions and the ever increasing competitive environment. Smart partnerships are seen as a means of optimising business processes and expanding into new markets. Strategic partnerships are driving innovation at lightning speed in emerging nations as they leapfrog development with the latest technologies. This is clearly the case in the UAE, which has channelled enormous investments to develop its logistics and transport infrastructure and technologies, aiming to drive growth and innovation by empowering strategic partnerships among local, regional and global companies.

For supply chain collaboration to develop and mature, it requires a relationship of intense trust between companies and their suppliers. They have to open their operations to each other and effectively operate as a single entity to fully integrate business processes and organisational structures across companies throughout the value chain.

The extent to which a company’s supply chain extends across borders and interlinks with other companies’ supply chains dictates how important supply chain management and smart partnerships are to a business. It also determines the need for disaster recovery management or continuity planning, should anything go wrong in the supply chain. The concept of viewing an entire business as one single supply chain is becoming increasingly relevant.

Some companies today deal with their supply chains not as individual companies but as a single entity, including key suppliers – even competitors – in their strategic planning and change management processes.