Supply Chain as a Service (SCaaS)!

February 5, 2019 Facebook Twitter LinkedIn Google+

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I began my career working in a manufacturing plant within an international company that was completely vertically integrated. From component manufacturing through to subassembly manufacturing and end product assembly they did it all.

Within 10 years the company experienced a number of site closures and declared that manufacturing was no longer a core competency. For the site that I was a part of this meant that closure was an inevitability.

Faced with this stark reality we made the choice to spin off from the parent organization and start our own new company, entering the world of Contract Manufacturing.

This was my first experience with Outsourcing, or what I refer to as “Supply Chain as a Service” (SCaaS).

Most of you are likely familiar with the phrase, Software as a Service (SaaS). According to Wikipedia, Software as a Service is “a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted.” SaaS is also referred to as On-Demand Software.

Virtually every type of software application is offered in a SaaS model, including software to support ERP, TMS, CRM, Inventory Management, and Invoicing applications, all of which are related to Supply Chain.

But beyond just software virtually every other aspect of Supply Chain is available as an outsourced, on-demand service. And in the Digital age companies are going to become more reliant on other expert organizations to perform some or all of their Supply Chain tasks.

It’s time to recognize Supply Chain as a Service (SCaaS)!

Supply Chain as a Service (SCaaS)

There are already a lot of companies out there that provide an outsourcing service for some portion of your Supply Chain. You can outsource your Manufacturing, Distribution, Procurement, Logistics, Accounts Payable, Transportation Management, Systems and more.

The Digital Supply Chain of the future will reinforce the need for companies to outsource, that is, to leverage Supply Chain as a Service.

Why is that so?

In order to leverage all available technologies in the future companies will not have the expertise, resource, and funding to try to do this on their own. Only the largest companies may want to keep this work internal.

The advantage of moving to a Digital Supply Chain will include end to end global electronic connectivity, improved productivity, lower cost, greater service, heightened flexibility and adaptability, and better asset management. Failure to make this progression will result in a lack of competitiveness and financial viability.

Companies will be forced, either due to financial, resource, timing or competitive reasons to outsource more of their Supply Chain activities.

Interestingly there will likely be an opportunity for these Supply Chain services companies to become more vertically integrated in their service offerings. If a company needs to go to different outsourcing companies for every single aspect of their Supply Chain the management of numerous third party organizations will become their biggest challenge.

This will also reinforce the need for everyone to have Control Tower/Command Centre capabilities. Again it is best to let someone else develop and maintain a Control Tower platform, and buy that service. But this technology will make it much easier to manage a variety of suppliers regardless of the services that they all will provide.

Challenges to SCaaS Deployment

In one company I worked at I created and launched a new service capability: Supply Chain Services. We had phenomenal, global capabilities in Logistics and Procurement. It was a natural extension to offer these services to other companies, regardless of whether they did any other business with our company.

Any customer of this service would receive access to our tremendous spend leverage, high level supplier relationships, advanced systems technology, world class processes, industry leading personnel, and superior supply chain performance.

But despite the phenomenal benefits that a potential customer would get if they engaged our Supply Chain as a Service offering it proved to be incredibly difficult to get people to sign up for the service.

The reasons why it was so difficult for me will also prove to be the biggest obstacles to the advancement of SCaaS for any other company in the future.

The first problem was that no matter who we talked to at the company to introduce the service, including CEOs and CFOs, the next step always involved us getting referred to the Procurement department.

I could bring some of the best and brightest subject matter experts in to meet with these Procurement teams but more often than not the following problems always arose:

  • Every customer believes they are an expert and they know more than you do. They take any challenge to their expertise as a personal affront.
  • There is a natural skepticism as to whether you can deliver the benefits that you say you can provide
  • They don’t like the prospect of losing or relinquishing control
  • They invariably are concerned, even though they won’t say so, that this means that they will lose or jeopardize their own jobs
  • No one can possibly understand or handle their situation and what they deal with every day
  • They become focussed more on the margin that you may be making as opposed to the incremental benefits that they could be receiving
  • They haven’t made the intellectual leap that some of this activity is not really a core competency for their company
  • They don’t think about both the tactical AND strategic benefits of outsourcing
  • People don’t like change

It is fair expectation that any services company must demonstrate their ability to deliver on their promise. Performance based compensation programs can help keep these companies on their toes.

But if you don’t recognize and develop action plans to overcome these cultural obstacles you will not progress in offering, or leveraging outsourced Supply Chain services.


The biggest blockade to future progress on Supply Chain as a Service will not be the technology, it will be the people within your customer’s organization.

Dealing with people’s concerns is a legitimate problem. Having the best service offering will not be enough. If you are offering SCaaS and you do not address customer cultural issues you will not make much headway. If you are outsourcing elements of your Supply Chain and you do not address internal employee cultural issues you will similarly not make much headway.

But the reality is that SCaaS will advance regardless. Your competitors will make these strategic moves. If you don’t you will be left behind and you will jeopardize your company’s future.

© Copyright Mortson Enterprises Inc, 2018.  All Rights Reserved.

#digital #outsourcing #supplychainmanagement #procurement #purchasing #logistics #distribution

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