Outsourcing 3.0


Benchmarking in Outsourcing – Win Big by Proper Deployment

Management in Outsourcing

Benchmarking in Outsourcing - Win Big By Proper Deployment

The Modern Rules Of Outsourcing.

Benchmarks are a peculiarly virulent form of statistics which can be used to make a positive change, or misused to make a dodgy sale.

On one hand a benchmark, such as a world record in 100m race, can motivate an athlete to perform better and better each time they train.

It gives something to aim towards, sets an expectation that if others can do it, then why you cannot, and leads to search for better ways of achieving the results.

Supply Chain Management

But all that happens only if the benchmarks have credibility.

When you find out what Lance Armstrong has been doing to achieve his miraculous results you lose faith in the benchmark, and start suspecting other benchmarks too.

You test every benchmark extremely carefully, and use it sparingly lest you get dodged again.

An example is in freight rates benchmarks. Costs of operating a truck, a train or a ship are, by now, indexed to nth degree.

You Will Never Believe These Bizarre Truth Of Outsourcing.

One can quite easily benchmark prices to these operating costs without any consideration of the local market conditions, your peculiar service requirements, and the balance between the supply and demand -which changes from moment to moment.

When a ship is full, it is full. The only way to get your container on board that ship would be get someone else’s container knocked off.

That will require a lot more price incentive or market power than most buyers are willing to muster.

Business Strategy

This is another way of saying that supply chain infrastructure suffers from highly inelastic pricing paradigm, and as such price benchmarks are useful only to compare the changes in the market conditions from moment to moment.

When analysts start using these kind of benchmarks for performance reviews, or assess cost savings potential – they are not only missing the point, they are really using dodgy statistics to make a sale.

Understanding The Background Of Outsourcing.

In our work, we use benchmarks many times but we are extremely careful to use the right benchmark for the right purpose and state its limitations.

Most executives who are not close enough to the benchmarks or the markets can easily miss the fine print to their regret later.

Here is a lighter view to this discussion (for copyright reasons I will not post the dilbert cartoon directly): https://twitter.com/kristoffer_nord/status/480978589903765504


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Light Humour from Outsourcing 3.0

About the Principal Author of Outsourcing 3.0 - Vivek Sood

Vivek Sood - Author Outsourcing 3.0

Today, Vivek and his partners are among 20-30 people on Earth who have this deep understanding of supply chain systems, practices and tools. CEOs, COOs, executives and Boards call them in the most challenging situations once they know the full potential of supply chain based transformations. Following are key milestones in Vivek’s journey:Started in 1983 as a merchant navy cadet at 18 years age, and worked his way to qualify as a Captain – qualified to take command of any merchant ship, worldwide.

  • Earned a top tier MBA from UNSW at the top of his class.
  • Joined highly regarded strategy consulting firm Booz Allen & Hamilton, consulting to the CEOs, Boards and senior management of global corporations within Australia.
  • To learn and specialise in the supply chain – against all odds, sought out the co-inventor of the supply chain in Germany and convinced him to be a partner in his firm, GLOBAL SUPPLY CHAIN GROUP, launched in January 2000.
  • More than 500 successful blue-chip projects with high impact business transformations in large corporations using the full power of SUPPLY CHAIN MANAGEMENT.
  • 4 Seminal and path-breaking business books IN SUPPLY CHAIN MANAGEMENT – these are available in bookstores and universities, and libraries worldwide.

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