Markets today are very unpredictable and volatile, thanks to the mortgage rate drops, moratoriums, refinance booms and other such market drivers. Stagnating markets in the developed world and anticipated future marketing shifts of consumer markets are motivating companies to rethink their sourcing strategies. Companies are now turning to scalable co-sourcing strategies to counter the volatility in the markets, especially as mixed service options have led to better workflow competences and offset overflows. Co-sourcing also helps in reducing fixed overhead costs, better manage resources and in keeping services profitable and predictable.
Outsourcing transitions, more often than not, lead to loss of key personnel and control over processes. While co-sourcing cannot be termed as a complete risk elimination program, it helps reduce and rein in the volatility in the sourcing markets to a great extent. All in all, co-sourcing is a very balanced sourcing strategy that leads to a positive contribution. Co-sourcing helps navigate the volatility in the following ways:
Co-sourcing facilitates optimized country selection
Different product types need different levels of service and co-sourcing presents organisation with flexible sourcing options. Companies that co-source allocate production in low cost currencies to balance out their production in high cost locations. A balanced portfolio with an international presence (a mix of high and low cost locations) limits the impact of external events such as political struggles and labor as well as compliance issues.
Enhanced supplier management
Supplier management programs typically identify, develop and retain strategic suppliers. A good co-sourcing partner ensures that systematic evaluations are in place and that there is a locking-in of long term prices. Co-sourcing ensures that your costs are predictable and within your budget.
Better risk management
Co-sourcing addresses risks from within and ensures that the companies get all the benefits of outsourcing without having to bear the attached risks such as operational disruption and the need for improved resource management.
Co-sourcing optimises supplier operations with lean programs. It leverages tools and technology to streamline processes from design to production. It identifies potential savings in the inception stages and ensures that the sourcing company attains end-to-end efficiency.
Companies cannot afford to build unused capacity in volatile markets and hence they prefer to remain profitable by forming conducive relationships with professional service providers and partners who allow the capacity beyond a certain limit to be co-sourced. Co-sourcing offers flexibility across volatile business cycles and markets by converting fixed overheads into variable cost model.