It may not greatly shock many supply chain consultants or the organisations that use their services to learn that a third of UK companies have experienced significant disruption or complete failure as a consequence of outsourced providers’ actions in the last three years. This was one of the key findings of a new Deloitte global survey on third-party management, which polled 107 UK firms across all sectors.
The survey also showed UK businesses’ increasing reliance on third parties, with the country having one of the highest dependencies on outsourcing. Indeed, Deloitte’s 2016 Global Outsourcing Survey found that companies are motivated to outsource by such factors as cost, capacity issues and a wish to focus more on their core business.
However, it should be of great concern that only 11% of UK companies feel equipped to deal with outsourcing failures during times of uncertainty.
Management processes and technology “not keeping up”
Kristian Park, global extended enterprise risk management partner at Deloitte, commented:
“This year’s survey results demonstrate that third parties are increasingly relied upon, with this trend likely to increase. Unfortunately, management processes and technology that support the oversight of these relationships are not keeping up, creating an ‘execution gap’. While there is clear organisational commitment to address this, it is not being matched by the right skills, processes and technology to achieve intended results. While both political and economic uncertainty has slowed investment and subsequent progress, there is greater appreciation of the related risks.”
With Deloitte estimating that most large organisations take two to three years to develop an integrated third party governance and risk management framework, Park said that he expected to see “significant strides in addressing this issue” during 2017 and into 2018.
However, he said that this would largely depend on individual companies’ priorities, with some likely to focus on such issues as where they will continue to be located, or assessing new talent models, “particularly so during the two-year timeframe in which the UK intends to depart from the European Union.”
What steps can your firm take to achieve better results?
We have first-hand experience of helping organisations to achieve better results with their outsource partners, specifically tackling what has got in the way of forecast productivity gains and/or cost savings being achieved and realising the ambitions of both parties.
Don’t hesitate to contact our supply chain consultants today, to learn more about the work that we can do with your UK organisation to minimise the likelihood of outsourcing failures.