A new report offers advice to help firms re-establish control

Supply-chain outsourcing has some drawbacks but smart investment in IT can fix problems, according to new report in The McKinsey Quarterly.

McKinsey analysts said the trend for outsourcing has made it harder to manage supply-chain data. Outsourcing has reduced costs but restricted access to data regarding product quality, supply and manufacturing output.

“Companies must work closely with suppliers, logistics providers, distributors, and retailers to collect and manage information about customer demand, sales orders, distribution schedules, production planning, manufacturing, sourcing, and product design,” the report’s authors said. “But this task has become even more complex because outsourcing has stretched supply chains around the globe.”

Capacity and inventory information can be lost because of the sheer number of supply-chain elements, McKinsey said. “Reconnecting the dots isn't easy, given the widening range of players in the supply chain and their divergent interests and incentives.”

The consulting giant concluded, “Without access to accurate and timely data, companies will struggle to adapt their supply chain networks to support newer products, geographies, and changes in the supplier base. They will also find it burdensome to comply with regulatory requirements, such as the US Sarbanes-Oxley regulations, as well as with international tax laws when they have fiscal responsibility for materials and transactions occurring beyond their organisational walls.”

McKinsey suggested the solution lies in consolidating critical data, deploying monitoring tools and taking a panoramic view of the supply chain.