THERE ARE five major factors which must be considered before strategic decisions are reached on the outsourcing of essential business elements and activities, says Kobus Nieuwoudt, Fast Forward's general manager, strategy and business development.
These are core competence, economic sense, alliances and joint ventures, empowerment of SMMEs (small and medium enterprises) and the advancement of previously disadvantaged people. Each factor, he says, strongly categorises an outsourcing arrangement and each is driven by different arguments.
At Fast Forward we have outsourcing arrangements representing each category, says Nieuwoudt.
Core competency, by definition, excludes activities which may be essential but in which the business is not particularly good. Here longer term vision as to what the core competency of the business should be or can become needs to be taken into account, for an activity which is currently outsourced may be developed into a new business focus and introduce core competency over a period of time.
A good example is the relationship of transportation, warehousing and distribution within the logistical chain. Each is a specialised activity and offers excellent growth potential and future business expansion. Fast Forward, with the bulk of its activities focused on sorting and distribution, currently sources its long distance transportation from another Transnet division.
Another example of non-core activity, which has a tremendous impact on the business efficiency, is Information Technology. This is a highly specialised field that changes and develops continuously. Fast Forward outsources most of its IT activities to an IT provider, but retains full strategic and managerial ownership. It is unlikely that we will develop full in-house IT competencies and would rather remain aligned to leading IT companies for our functional and development needs.
One of the best ways of growing business activity and expanding market share is in joint ventures and alliances, he says. These relationships normally revolve around win-win situations.
A typical arrangement would be to exchange local and international services with counterparts abroad, which relates to outsourcing. Another example comes from engaging smaller niche operators in exchange for bigger network accessibility. Fast Forward has such arrangements with among others TNT worldwide and numerous couriers that operate mostly regionally.
With regard to SMMEs and previously disadvantaged groups, Transnet has adopted a special role and mission in support of these sectors. Transnet business units, such as Fast Forward, therefore have a higher than normal obligation to make use of black service and merchandise providers, even at a premium.
With its large vehicle fleet and its vast distribution activities, Fast Forward has the potential to develop a meaningful owner-driver scheme for its employees. This would contribute sensibly to the development and empowerment of small businesses. This is, however, still an issue that has not gained full support from trade unions and, in view of restructuring, is not a priority at this stage.
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