Service providers in the supply chain management (SCM) space play an important role in helping enterprises more efficiently plan and execute supply chain strategies. With companies looking to source and sell products in emerging, global consumer markets, their supply chains are growing exponentially more complex. This complexity is rooted in multi-tiered sourcing and contract manufacturing in regions in which low costs and high margins can come at the expense of lower safety, quality and service standards. The dynamics of higher customer expectations, greater demand variability, longer lead times, tighter environmental regulations and unpredictable disruption risk all drive the need for SCM consultants to help manage scale and complexity. These factors, combined with heightened C-level awareness that their supply chains can be a source of competitive differentiation, add up to increasing numbers of companies seeking assistance in better aligning their supply chains with their overall business objectives.
Choosing a service provider can be a risky decision as many companies report missed expectations and failed projects. Given these downfalls, choosing the right SCM service provider requires careful consideration of the unique challenges that face your organization and an understanding of which skills will have the greatest impact on the project's success. Although these general characteristics can help identify a shortlist of potential partners, enterprises must evaluate each firm individually to find the right one for their needs.
SCM service providers can be categorized into the following four groups, with each group's capabilities varying greatly with respect to depth of knowledge and processes supported:
- Offshore technology specialists: Primarily headquartered in Asia but delivering globally, these firms provide custom coding, testing and IT outsourcing services.
- Management consultants: This group typically provides strategic planning advisory services as well as high-level process design. Niche providers specialize in specific areas such as performance measurement or network design.
- Global systems integrators: Large, multinational systems integrators provide services across process design, application configuration, project management and testing.
- Application vendors: Application vendors naturally support their own product lines but are increasingly also offering value-added services, such as best practice consulting and benchmarking.
Spending on SCM services will continue to grow because of the growing complexity of global networks, the mashing up of SCM operations with new mergers and acquisitions and the high-profile sustainability issues that push SCM up to the C-level agenda. Companies should avoid disappointment by understanding these key characteristics of the SCM service providers and selecting a consultancy that closely matches their needs.
Patrick M. Connaughton is a Senior Analyst at Forrester Research (www.forrester.com), where he serves Sourcing & Vendor Management professionals. He is a leading expert on the selection, design and implementation of e-purchasing and supply chain management software and consulting services. His upcoming research areas include spend analysis, risk mitigation and vendor consolidation.